IRIS Financial Overview IRIS Board of Directors Orientation May 11, 2015

Financial Overview Topics Financial Services Staff IRIS Awards Audits/Reviews Financial Statements Indirect Cost Recovery Unrestricted Funds/Investments Budget & Finance Committee

Financial Services Staff Candy Shin, CFO Travel expense reports Dave Fillebrown, Accounting Manager Financial Statements, GL Josephine Aka, A/P Manager Checks, ACH Robert Austin, Purchasing Staff Acct Purchase Orders Dee Mann, A/R Staff Acct A/R, Rebills Robin Morris, Project Cost Controller Budgets, Subaward/Contract Invoices * Effective 2/1/14 Email: <admin@iris.edu>

FY15 IRIS Awards Active IRIS awards (7/1/14-6/30/15)

IRIS Awards – Accounting Codes Award Number PI Start End Budget 2005-xxx EAR-0733069 USArray C.A. Woodward 10/1/08 9/30/14 $76,244,193 1005-xxx EAR-1261681 SAGE C.A. Detrick 10/1/13 9/30/18 $57,873,116 1080-xxx EAR-1063471 Core C.A. 10/1/11 12/31/14 $30,569,736 1081-xxx OCE-1112722 OMO C.A. 2/1/12 1/31/17 $19,333,767 1082-xxx ICER-1343709 EarthCube Ahern 9/15/13 8/31/15 $1,783,919 1071-xxx EAR-1040292 CHILE 9/15/10 $1,000,000 1083-xxx PLR-1337861 GEOICE 9/30/16 $636,426 1078-600 PLR-1304011 GLISN 2 9/1/13 8/31/18 $461,020 1075-700 EAR-1156739 REU Taber 6/1/12 5/31/17 $377,991 1085-400 LLNL B610206 Tajik Hafner 9/22/14 9/30/15 $146,286 1079-xxx ICER-1321600 SAVI $138,193 1084-700 EAR-1425893 EC Workshop 5/1/14 4/30/16 $73,801 1086-xxx JPL Subcontract1507934 NASA 9/23/14 6/30/15 $65,000 1066-700 UNAVCO RESESS 9/15/09 $43,857 1065-700 DUE-0942559 CCLI 8/31/14 $32,609 15 awards + x other contracts/ agreements, etc. 12 Current active awards = 9 NSF + 3 non-NSF

IRIS Audits & Reviews What do you call an accountant with an opinion? Answer: an auditor! What do you call an accountant with an opinion?

Audits/Reviews OMB Circular A-133 Audit IRIS/McGladrey LLP Desk Reviews NSF BFA - contractors Proposal Reviews Indirect Rate Proposal/Rate Agreement NSF CAAR (DIAS) Business Systems Review NSF BSR Team (LFO) Management Review NSF Program Program Review IRIS/NSF Program Property Control System Review NSF Property Mgmt (DAS) Incurred Cost and Accounting System Audit NSF OIG – DCAA BFA = Office of Budget, Finance, and Award Management DIAS = Division of Institution and Award Support LFO = Large Facilities Office DAS = Division of Administrative Services (Office of Information & Resource Management)

A-133 Audit OMB has consolidated its grant guidance for recipients into a single document 2 CFR Part 200. OMB Circular A-133, “Audits of States, Local Governments, and Non-Profit Organizations” Non-Federal entities that expend $500,000 or more in Federal awards in a year  increased threshold to $750,000 Audit of financial statements Tests of internal control over the Federal program Procedures to determine whether the auditee has complied with laws, regulations, and provisions of grant agreements McGladrey LLP Tom Sneeringer, Partner FY2001 – FY2014 OMB Circular A-133 “sets forth standards for obtaining consistency and uniformity among Federal agencies for the audits of states, local governments, and non-profit organizations expending Federal awards.”

FY14 Audit Report

Balance Sheet Assets FY14 FY13 Cash & cash equivalents $ 545,086 $ 545,086 $ 246,035 Receivables 4,873,294 4,844,367 Prepaids, advances, & other assets 285,095 315,461 Investments 2,182,880 1,155,047 Leasehold improvements, net 105,278 119,616 Total assets $ 7,991,633 $ 6,680,526 Liabilities Accounts payable & accrued expenses $ 1,779,942 $ 1,890,228 Subawards payable 3,165,691 2,119,001 Deferred rent and other liabilities 311,625 291,437 Total liabilities $ 5,257,258 $ 4,300,666 Net Assets Unrestricted $2,709,725 $2,355,410 Temporarily restricted 24,650 24,450 Net assets $ 2,734,375 $ 2,379,860 See Page 3 of Financial Statements

Temporarily Restricted Net Assets These funds have donor-imposed restrictions that can be fulfilled by one of two ways - passage of a defined period of time (time restriction) or by performing defined activities (purpose restriction). IRIS Example (beginning in 2009): John C. Lahr Educational Seismology Fund FY09 Contributions $25,980 FY10 Contributions $775 FY10 Purchase 4 AS-1s <$2,605> FY11 Contributions $300 FY14 Contribution $200 Balance as of 6/30/11 $24,450 Balance as of 6/30/12 $24,450 Balance as of 6/30/13 $24,450 Balance as of 6/30/14 $24,650

Revenues Awards/Grants Membership Dues Interest/Dividends Cost-reimbursable awards Indirect cost recovery limitations Management fees Fixed-price awards Program Income Membership Dues Interest/Dividends Realized/Unrealized Gain on Investments Contributions/Donations

Statements of Activities Revenues Revenue: FY14 FY13 Federal awards $38,127,768 $32,911,215 Program income 355,880 616,132 Sale of ocean cable 248,500 1,066,000 Investment income 240,377 130,688 Contributions 148,399 Membership dues 7,500 Total Revenue $39,128,424 $34,731,535 FY13 Sale of ocean cable = Accrued contract value $1.3m – Allowance for adjustments to base contract amount (20%=234k) = Net FY13 Revenue Recognition $1.066m In FY13, McGladrey recommended breaking out program income. FY13 program income = EARN services, GSN State Dept PO + Vulcan contract FY14 Contributions = Innovation Fund, Noble Energy, Nodal Seismic ($10k), Lahr ($200)

Innovation Fund Donations Month Online Contributions Checks Amount April 1 (test) $5.00 May 21 7 $17,955.00 June 11 13 $15,238.81 Winston Chan - commitment $100,000.00 FY14 Donations Revenue $133,198.81 Total Innovation Fund Donations as of 3/31/15 = $141,180.81

Expenses FY14 FY13 Program services: PASSCAL (+ Polar) $ 5,904,131 $ 5,904,131 $ 3,711,749 GSN 3,477,339 3,268,411 Data Services 4,377,151 3,544,944 Education & Public Outreach 1,336,565 930,580 Community Activities 461,170 237,918 Instrumentation Services Mgmt 945181 495,088 Transportable/MT Arrays 4,624,349 EarthScope - USArray 7,586,865 15,118,351 OBSIP Management Office 6,272,765 2,589,122 Chile MRI 37,954 49,165 Chile RAPID 19,559 Other - Unallowable Expenses 153,857 108,778 Indirect Expenses 3,596,582 3,449,122 Total Expenses $ 38,773,909 $ 33,522,787

Indirect expenses DC Office Overhead DMC Office Overhead G&A What are indirect costs? Indirect costs represent the expenses of doing business that are not readily identified with a particular grant, contract, project function or activity, but are necessary for the general operation of the organization and the conduct of activities it performs. In theory, costs like heat, light, accounting and personnel might be charged directly if little meters could record minutes in a cross-cutting manner. Practical difficulties preclude such an approach. Therefore, cost allocation plans or indirect cost rates are used to distribute those costs to benefiting revenue sources. DC Office Overhead DMC Office Overhead G&A

Data Management Center Office Overhead Pools IRIS Headquarters Washington, DC Data Management Center Seattle, WA Description FY14 Office Manager Salaries/Fringe $ 67,203 Rent Suite 400 (11,536 sq ft) 543,138 Supplies 14,211 Other (equipment leases, postage, internet, telephone, water, misc.) 74,937 Total FY14 Expenses 699,490 Description FY14 Office Manager Salaries/Fringe $ 89,900 Rent Suite 200 (6,409 sq ft) UWA computer space 180,387 Supplies 4,975 Other (equipment leases, postage, internet, telephone, water, misc.) 28,084 Total FY14 Expenses $ 303,346 Moving to Suite 400 (11,536 sq ft) 13% increase Annual AAAS rent = $562,779 ($46,897/month) (straight-line) actual current monthly rent = $50,017 FY14 DC Office O/H Expenses: 2% increase from FY13 FY14 DMC Office O/H Expenses: -3.6% decrease from FY13 Office Overhead Base = $1,959,894 DC Office O/H Rate = 35.69% Office Overhead Base = $1,824,762 DMC Office O/H Rate = 16.62%

General & Administrative (G&A) Pool All other allowable general and administrative costs (costs that benefit all programs and cannot be identified to a specific program) are allocated to programs, grants, etc. using a base that consists of total costs less equipment, participant support costs and subaward costs exceeding $25,000 per subaward per year. OMB Circular A-122 General & Administrative Expenses G&A Base = _____ %

FY14-15 G&A Budgets Expense Actual FY14 Proposed FY15 Salaries/Fringe Max. Provisional Rates FY14-15 G&A Budgets Expense Actual FY14 Proposed FY15 Salaries/Fringe $ 1,924,438 $ 2,002,808 $ 2,159,035 Supplies 33,069 25,000 Travel/Meetings 166,757 207,000 182,500 Professional Services 421,742 346,000 352,600 Other 47,519 55,000 85,000 DC/DMC Office O/H 435,960 434,029 433,845 Total $ 3,029,484 $ 3,069,837 $ 3,237,980 G&A (MTC) Base $12,113,849 $12,406,304 $13,039,006 G&A Rate 25.01% 25% Revised FY15 SMT G&A Budget Estimate = $3,014,417

G&A (Indirect) Personnel Labor FY15 Revised Salaries $1,251,640 Fringe Benefits 700,918 Office O/H 443,806 Subtotal $2,396,364 Management/Administration (100%) Detrick, President Linn, Executive Assistant Willemann, Director of Planning Woolley, Director of Program Support Turner, HR Generalist/Administrative Sobel, Award & Procurement Administrator <open> Sr. Contracts Administrator Business Office (100%) Aka, Staff Accountant - A/P Austin, Staff Accountant – Purchasing Fillebrown, Accounting Manager Mann, Staff Accountant – A/R Morris, Senior Project Accountant Shin, CFO Split-charged (budgeted under G&A 25-50%) Baranowski, Meeting Planner (50%) Dorr, Public Outreach Manager (20%) Joseph, Web Developer (25%) 79% of total G&A revised budget $3,014,417

G&A – Professional Services Description/Vendor FY14 Expenses FY15 Revised Budget % of Total G&A Budget Consultants (e.g., Muco) $29,496 $20,000 0.66% HR - Insperity $207,782 $240,000 7.96% Audit $39,300 $40,000 1.33% Legal Services $34,379 Misc. (e.g., recruiting, editing, IT) $87,280 $44,900 1.49% Corporate Insurance (Moodys) $23,505 $34,260 1.14% Subtotal $421,742 $399,160 13.24% 22% over budget ($346,000) Presidential recruiting (R. William Funk) = $60,625 Xykon = $21,497

G&A – Travel and Meetings Description FY14 Expenses FY15 Budget % of Total G&A Budget Staff Travel (Domestic) $60,768 $60,000 1.99% Staff Travel (Foreign) $8,442 $10,000 0.33% Committee Travel $42,823 $28,500 0.95% Board of Directors (9) CoCom (2 BoD) Planning Committee Instrumentation Committee Int’l Development Seismology Misc. Travel $24,108 Subtotal - Travel $136,141 $98,500 3.27% Meetings $30,616 $36,000 1.19%

Other G&A Expenses

G&A Base

Indirect Rate Agreement – signed 3/12/15 Actual and Proposed Rates Submitted by IRIS: Indirect Pool FY11 Actual FY12 FY13 FY14 Proposed FY15-16 DC Office O/H 28.66% 37.38% 33.90% 37% 35.69% 36% DMC Office O/H 15.84% 18.89% 16.30% 20% 16.62% 19% G&A 23.14% 22.04% 23.29% 25% 25.01% Rates offered by NSF (3/4/15) and accepted by IRIS: FY16 ICR Proposal – submitted 12/23/14 IRIS proposed the same rates for FY16 as FY15 CAAR – FY12 Indirect Rates Allowability Determination FY12 Disallowed Expenses G&A Travel $ 7,316 G&A Meetings $12,127 ------------------------------------------------ Total Disallowed in FY12 $19,443 Indirect Pool FY11 Final FY12 FY13-FY15 Maximum DC Office O/H 28.66% 37.38% 37% DMC Office O/H 15.84% 18.89% 20% G&A 23.14% 21.89% 25%

Current Rate Agreement

Unrestricted funds Morgan Stanley Portfolio Unallowable Expenses

Revenues Awards/Grants Membership Dues Interest/Dividends Cost-reimbursable awards Indirect cost recovery limitations Management fees Fixed-price awards Program Income Membership Dues Interest/Dividends Realized/Unrealized Gain on Investments Contributions/Donations

Unrestricted Funds PNC Bank Account balances as of 3/31/15 Unrestricted Account $367,409 Innovation Fund Account $125,384 Morgan Stanley Portfolio 12/31/14 beginning balance = $2,174,605 Portfolio balance as of 3/31/15 = $2,224,945 2015 YTD Change (2% increase) = $50,340

Morgan Stanley – IRIS Portfolio Account Balance 12/31/02 – 3/31/15 $2,224,945 4/2/14 transfer to Morgan Stanley $802,770 (Subsea Cable) 5/5/05 Personal Portfolio inception $965,025 Feb/Mar 2010 Distributions <$50,000> 2/28/12 Distribution <$25,000> 11/22/11 Distribution <$25,000> 1/19/05 transfer to Morgan Stanley $107,779 (Iguaçu) 11/02 transfer to Morgan Stanley = $649,742

Select UMA Proposal – Portfolio Changes Implemented August 2013

“Other” includes: investment fees, donations/gifts, staff meals, unallowable travel/meeting and promotional expenses

FY15 Unallowable Expenses -to-date 7/1/14 - 3/31/15

Budget & Finance Committee The IRIS Budget & Finance (B&F) Committee is charged with assisting and providing recommendations to the Board of Directors on its financial management responsibilities, and serving as the liaison between the Board of Directors and IRIS staff, or external parties, on such issues. The Budget & Finance Committee will: oversee the indirect pool budgets and development of the annual indirect rate proposal, oversee IRIS unrestricted funds and its investment portfolio, accept and review reports provided by external auditors, recommend the firm that will provide the next year's audit, review the annual Form 990 (Return of Organization Exempt from Income Tax) submission.