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Fair-Value Measurements at Dec. 31, 2010, using Quoted Prices in


Active Markets for Identical Assets (Level 1)


Assets: Benefi cial interest in trust Money market accounts


U.S. government obligations Mutual funds


State and municipal bonds Corporate bonds


$


5,719,553 82,557,253 59,641 - -


Signifi cant Other Observable Inputs


(Level 2) - $


- -


- -


5,856,333 14,537,963


The tables below present a reconciliation and statement-of-activities classifi cation of gains and losses for all assets measured at fair value on a recurring basis using signifi cant unobservable inputs (Level 3) for the years ended Dec. 31, 2011 and 2010:


Benefi cial Interest in Trust Beginning balance, Jan. 1, 2011


Change in value of split-interest agreements Ending balance, Dec. 31, 2011


Beginning balance, Jan. 1, 2010


Change in value of split-interest agreements Ending balance, Dec. 31, 2010


NOTE 6 – PROPERTY AND EQUIPMENT


The Legion’s property and equipment, and the related accumulated depreciation at Dec. 31, 2011 and 2010, are as follows:


2011


Washington, D.C., real estate Land


Building Construction in progress


Indianapolis real estate Land


Building Construction in progress


Furniture, fi xtures and equipment National Headquarters, Indianapolis Washington, D.C.


Less accumulated depreciation $ NOTE 7 – LONG-TERM DEBT


In 2003, the Legion refi nanced its long-term debt on its facility for Emblem Sales, Information Technology and Member Benefi ts. This debt is payable in monthly installments of $25,213, including interest, beginning July 30, 2003, with a stated rate of 5.3 percent and fi nal payment due Aug. 1, 2018. The outstanding balance on the long-term debt is $1,678,367 and $1,885,963 for 2011 and 2010, respectively. The future maturities of the long-term debt are as follows:


2012 2013 2014 2015 2016


Thereafter Total


$ 217,907 229,740 242,217 255,371 269,239 463,893


$ 1,678,367


$ 80,000 5,257,798 3,698


389,264


3,851,186 1,442


6,236,955 804,316


16,624,659 (10,452,788)


6,171,871 $ 2010


$ 80,000 5,232,998 -


389,264


3,775,509 -


6,234,413 830,922


16,543,106 (9,851,065)


6,692,041


Depreciation expense for the years ended Dec. 31, 2011 and 2010 was $1,063,977 and $1,072,930, respectively.


$ 336,597 (19,699)


$ 316,898 Benefi cial Interest in Trust


$ 351,492 (14,895)


$ 336,597


Signifi cant Unobservable Inputs


(Level 3)


$ 336,597 -


- - - -


$ 88,336,447 $ 20,394,296 $ 336,597


Interest expense was $94,961 and $105,654 for the years ended Dec. 31, 2011 and 2010, respectively.


NOTE 8 – LEASES


The Legion has several noncancelable operating leases, primarily for facilities, computer equipment and copiers that expire at various dates through the year 2015. Rent expense under these leases for the years ended Dec. 31, 2011 and 2010 was $494,348 and $480,469, respectively.


Minimum lease commitments are as follows: 2012


2013 2014 2015 Total


$ 475,889 373,816 356,100 350,350


$ 1,556,155


In addition, the Legion has a lease with the State of Indiana, for rental of the National Headquarters building in Indianapolis, which expires on June 30, 2013. The lease can be renewed at the option of the Legion for four additional four-year periods. According to the terms of the lease, the Legion is required to maintain the interior of the building, and provide adequate insurance on the building, in lieu of lease payments. The cost of maintenance for 2011 and 2010 was $906,400 and $837,900, respectively. Insurance coverage is included in the Legion’s general insurance policy.


NOTE 9 – PAID-UP-FOR-LIFE MEMBERSHIP FUND


The National Executive Committee approved the establishment of a life-membership plan available to any member of a participating department. In accordance with the plan, the assets of the Paid-Up-For-Life (PUFL) Membership Fund are included in unrestricted, board- designated net assets and segregated in a trust account from which funds equal to the annual dues of life members may be withdrawn for current operations each year. In 2011, the annual dues amount was not withdrawn from the trust account. The trust agreement provides that the Legion has the right to withdraw part or all of the assets of the trust account and to modify or terminate the trust agreement at its discretion.


Under the terms of the PUFL program, a participating member’s national, state and local dues are paid by the Legion for the remainder of the individual’s life. Management has estimated and recognized a liability for the future payments to state and local Legion organizations. Likewise, management has deferred recognition of the national-dues portion of the member’s payment. Deferred PUFL dues are recognized in annual amounts equal to the national dues in eff ect each year. The liability and deferred-revenue amounts are estimated by the Legion’s actuaries using PUFL membership summaries and discount rates comparable to the Legion’s recent investment performance.


NOTE 10 – RESTRICTED AND RESERVE DESIGNATED FUNDS


The restricted fund is designated for use by the National Finance Commission and National Executive Committee, and reported as unrestricted, board-designated net assets. Earnings of the restricted fund, along with the principal, can be expended only upon recommendation of the commission and a two-thirds affi rmative vote of the committee at two successive meetings. It is the policy of the Legion to transfer 10 percent of the prior year’s defi ned net income from operations to the restricted fund. The Legion made no transfers to the restricted fund in 2011 and 2010.


The reserve fund is also designated for use by the National Finance Commission and National Executive Committee, and reported as unrestricted, board-designated net assets. However, earnings of the reserve fund may be used for the general operations of the Legion. The principal can be expended only by action of the Legion at its national convention, or by a two-thirds affi rmative vote of the committee in two successive meetings not less than 60 days apart.


2012 | T e American Legion Annual Report 49


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