Winner! - International Brotherhood of Electrical Workers

Report of Independent Auditors
TO THE INTERNATIONAL EXECUTIVE COUNCIL OF THE
INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS,
WASHINGTON, D.C.
We have audited the accompanying consolidated
statement of financial position of the
International Brotherhood of Electrical
Workers and its subsidiary (collectively the
“International Union”) as of June 30, 2003
and the related consolidated statements of
activities and of cash flows for the year
then ended. These financial statements are
the responsibility of the International
Union’s management. Our responsibility is
to express an opinion on these financial
statements based on our audit. The
International Union’s 2002 financial statements
were audited by other auditors,
INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
JUNE 30, 2003 AND 2002
2003 2002
Unappropriated Appropriated Total Total
ASSETS
Cash and cash equivalents $ 717,170 $ —- $ 717,170 $ 1,629,358
Receivables
Loans and advances to chartered bodies 471,544 – 471,544 599,214
Per capita tax receivable 6,985,153 – 6,985,153 6,309,321
Due from Trust for the
IBEW Pension Benefit Fund 2,408,544 – 2,408,544 2,683,142
Accrued interest and dividends 2,520,016 – 2,520,016 2,596,155
Security sales pending settlement 1,571,727 – 1,571,727 1,061,264
Other 1,041,286 – 1,041,286 367,746
Total receivables 14,998,270 – 14,998,270 13,616,842
Investments—at fair value 339,105,545 82,946,030 422,051,575 348,730,946
Cash collateral held for securities on loan 27,202,305 – 27,202,305 38,451,314
Property and equipment—at cost
Land, building and improvements 49,394,424 – 49,394,424 49,937,150
Furniture and equipment 12,886,559 – 12,886,559 11,098,600
62,280,983 – 62,280,983 61,035,750
Accumulated depreciation (16,325,942) – (16,325,942) (15,848,799)
Net property and equipment 45,955,041 – 45,955,041 45,186,951
Other assets
Prepaid pension cost – – – 6,259,978
whose report thereon dated August 22,
2002 expressed an unqualified opinion on
those statements.
We conducted our audit in accordance with
auditing standards generally accepted in the
United States of America. Those standards
require that we plan and perform an audit
to obtain reasonable assurance about
whether the financial statements are free of
material misstatement. An audit includes
examining, on a test basis, evidence supporting
the amounts and disclosures in the
financial statements. An audit also includes
assessing the accounting principles used
and significant estimates made by the
International Union’s management, as well
as evaluating the overall financial statement
presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the 2003 financial statements
referred to above present fairly, in all material
respects, the consolidated financial position
of the International Brotherhood of
Electrical Workers and its subsidiary as of
June 30, 2003, and the consolidated changes
in their net assets and their consolidated
cash flows for the year then ended, in conformity
with accounting principles generally
accepted in the United States of America.
August 22, 2003, except for Note 4, as to
which the date is September 16, 2003
2003 2002
Unappropriated Appropriated Total Total
Other prepaid expenses 397,378 – 397,378 378,807
Deferred lease incentives 1,167,416 – 1,167,416 1,180,762
Inventory of merchandise
and office supplies, at cost 2,085,693 – 2,085,693 2,171,950
Deposits 207,845 – 207,845 177,845
Other 688,761 – 688,761 537,578
Total other assets 4,547,093 – 4,547,093 10,706,920
Total assets $ 432,525,424 $ 82,946,030 $ 515,471,454 $ 458,322,331
LIABILITIES AND NET ASSETS
Liabilities
Bank overdraft $ 751,625 $ — $ 751,625 $ —
Accounts payable 1,735,357 – 1,735,357 2,650,433
Payroll deductions 90,752 – 90,752 93,138
Accrued net periodic pension cost 1,753,449 – 1,753,449 -
Accrued postretirement benefit cost – 82,946,030 82,946,030 76,298,246
Security purchases pending settlement 43,814,986 – 43,814,986 2,615,807
Deferred per capita tax revenue 3,866,109 – 3,866,109 3,908,699
Liability to return cash collateral on loan 27,202,305 – 27,202,305 38,451,314
Other 144,259 – 144,259 38,662
Total liabilities 79,358,842 82,946,030 162,304,872 124,056,299
Unrestricted net assets 353,166,582 – 353,166,582 334,266,032
Total liabilities and net assets $ 432,525,424 $ 82,946,030 $ 515,471,454 $ 458,322,331
See accompanying notes to consolidated financial statements.
INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF ACTIVITIES
YEARS ENDED JUNE 30, 2003 AND 2002
2003 2002
Unappropriated Appropriated Total Total
Operating revenue
Per capita tax $75,461,087 $ — $75,461,087 $77,122,527
Initiation and reinstatement fees 1,290,945 – 1,290,945 1,541,380
Rental income 3,490,734 – 3,490,734 3,660,979
Sales of supplies 1,021,938 – 1,021,938 1,511,594
Other income 3,773,926 – 3,773,926 3,967,242
Total operating revenue 85,038,630 – 85,038,630 87,803,722
2003 2002
Unappropriated Appropriated Total Total
Program services
Field services and programs 53,139,193 7,003,134 60,142,327 50,322,981
IBEW Journal and media relations 4,522,436 232,662 4,755,098 4,920,159
Industry trade program 8,887,130 1,332,260 10,219,390 8,544,341
Per capita tax expense 6,404,624 – 6,404,624 6,200,827
Legal defense 2,590,320 – 2,590,320 2,763,739
Convention and exposition – – – 15,729,194
Total program services 75,543,703 8,568,056 84,111,759 88,481,241
Supporting services
Governance and oversight 4,696,377 598,382 5,294,759 5,345,007
General administration 5,819,907 1,279,629 7,099,536 7,691,062
Total supporting services 10,516,284 1,878,011 12,394,295 13,036,069
Total operating expenses 86,059,987 10,446,067 96,506,054 101,517,310
Change in net assets from
operations before investment income (1,021,357) (10,446,067) (11,467,424) (13,713,588)
Investment income (loss)
Interest and dividends 13,745,744 – 13,745,744 15,289,109
Net appreciation (depreciation)
in fair value of investments 17,040,423 – 17,040,423 (16,901,196)
Note 1.
2003 2002
Unappropriated Appropriated Total Total
INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2003 AND 2002
2003 2002 2003 2002
Cash flows from operating activities
Net increase (decrease) in cash (912,188) 1,409,877
Cash flows from
Affiliated chartered bodies $77,225,808 $79,426,822
Cash and cash equivalents
Beginning of year 1,629,358 219,481
Interest and dividends 13,821,883 15,628,064
End of year $717,170 $1,629,358
Rental income 3,490,734 3,660,979
Reimbursement of expenses
Reconciliation of change in net assets to net
allocated to related entities 3,856,860 3,642,845
cash provided by operating activities
Other 3,247,608 1,623,921 Change in net assets $18,900,550 $(16,973,164)
Cash provided by operations 101,642,893 103,982,631 Noncash charges (credits) included in income
Cash paid for
Depreciation of property and equipment 1,865,002 1,731,592
Salaries, payroll taxes, and employee benefits (48,535,587) (44,136,550)
Net (appreciation) depreciation
Service providers, vendors and others (30,357,684) (47,443,627)
in fair value of investments (17,040,423) 16,901,196
Per capita tax (6,404,624) (6,200,827)
Loss (gain) on sale of property and equipment (23,293) (11,968)
Currency translation adjustment (192,478) 1,141,466
Cash used for operations (85,297,895) (97,781,004)
Changes in accruals of operating assets and liabilities
Net cash provided by operating activities 16,344,998 6,201,627
Receivables (870,965) (2,294,552)
Cash flows from investing activities
Other assets (100,151) 1,890,716
Purchase of property and equipment (2,654,249) (2,065,145)
Accounts payable (915,076) 780,364
Purchase of investments (746,362,079) (315,733,472)
Accrued net periodic pension
Proceeds from sale of property and equipment 44,450 25,627
cost/prepaid pension cost 8,013,427 2,259,885
Proceeds from sale of investments 737,816,286 311,885,575
Accrued postretirement benefit cost 6,647,784 747,494
Net short-term cash investment transactions (6,921,120) 1,095,414
Deferred revenue (42,590) 220,118
Bank overdraft 751,625 -
Payroll deductions and other liabilities 103,211 (191,520)
Net cash used for investing activities (17,325,087) (4,792,001) Net cash provided by operating activities $16,344,998 $6,201,627
Effect of exchange rate changes on cash 67,901 251
See accompanying notes to consolidated financial statements.
INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2003 AND 2002
Summary of Significant Accounting Policies
Nature of Operations—The International Brotherhood of Electrical Workers
is an international labor union established to organize all workers for the
moral, economic and social advancement of their condition and status. The
significant portion of the International Union’s revenue comes from per capita
taxes of members paid by the local unions.
Basis of Presentation—The consolidated financial statements include the
accounts of the International Brotherhood of Electrical Workers and its wholly-owned
subsidiary, Headquarters Holding Company, Inc., which holds title
to real estate. All interorganization accounts and transactions have been eliminated
in consolidation. The International Union maintains an appropriated
fund designation for internal tracking of postretirement benefits.
Method of Accounting—The financial statements have been prepared using
the accrual basis of accounting in accordance with U.S. generally accepted
accounting principles.
Investments—Generally, investments are carried at fair value. Changes in
fair value of investments are recognized as unrealized gains and losses. For
the purpose of recording realized gains or losses the average cost method is
2003 2002
Unappropriated Appropriated Total Total
Investment expenses (610,671) – (610,671) (506,023)
Net investment income (loss) 30,175,496 – 30,175,496 (2,118,110)
Currency translation adjustment 192,478 – 192,478 (1,141,466)
Change in net assets 29,346,617 (10,446,067) 18,900,550 (16,973,164)
Unrestricted net assets
at beginning of year 334,266,032 – 334,266,032 351,239,196
Appropriation for postretirement
benefit costs (10,446,067) 10,446,067 – –
Unrestricted net assets at end of year $353,166,582 $ — $353,166,582 $334,266,032
See accompanying notes to consolidated financial statements.
used. Purchases and sales are recorded on a trade-date basis. The purchases
and sales pending settlement are recorded as either assets or liabilities in the
consolidated statement of financial position. Pending sales represent amounts
due from brokers while pending purchases represent amounts due to brokers
for trades not settled. All pending transactions at June 30, 2003 and 2002 settled
in July 2003 and July 2002, respectively.
Property and Equipment—Building, improvements, furniture and equipment
are carried at cost. Major additions are capitalized. Replacements, maintenance
and repairs which do not improve or extend the lives of the respective
assets are expensed currently. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets,
which are as follows:
Building and improvements 10-50 years
Furniture and equipment 2-10 years
Inventory—The International Union maintains an inventory of supplies for
use and for resale to local unions and individual members. Inventory is stated
at average inventory cost which approximates the selling price of items
held.
6 IBEW JOURNAL, DECEMBER 2003
IBEW JOURNAL, DECEMBER 2003 7