This email addresses a few items that have been raised related to accounting and gift issues. Estimated Annual Expenditures The initial expendable amount will be around $46K (after spending $100K in year 1). This is because the gift will be expended fully by the end of the 25 or 30 year period. Thus, it is not accounted for, nor is it expended, in the same manner as an endowment. It is expended on a schedule which exhausts the account at the end of the term, taking into account earnings and expenditures. In accounting terminology, the gift will be a temporarily restricted item, not a permanently restricted item. The attached Excel sheet is a proforma which estimates income and expenditure over the 25 or 30 year period. There are a few key assumptions made : -- Year 1 expenditure is $100K to fund some greater-than-normal investments in the lab and to pay initial costs associated with paragraph #12 items. -- Annual earnings are assumed to be 6% and inflation is assumed to be 3%. You can change these assumptions as noted below. -- Year 2 expenditure is a rounded amount that will make the final balance be approximately zero. -- Expenditures in year 3 and beyond are automatically increased by the assumed inflation rate to provide for an inflation-adjusted expenditure amount. This helps to ensure steady spending power over time. -- Earnings are calculated on the ending balance of the prior year and no earnings are assumed on the up-front $250K. Since payments are received at the beginning of the year, this approach, in effect, does not assume any earnings on the annual inflows in the year of receipt. This provides for a very conservative earnings estimate. If you want to play around with differing assumptions, you can (a) change either or both of the earnings rate and inflation rate in cells B4 and B5 and (b) change the initial expenditure in year 2 to a number which causes the final balance (cells F33 or J38) to be approximately zero. Since we will not know, with certainty, whether the term will be 25 or 30 years, we would initially expend $46K, increased by inflation over time. If the principal were to be paid early we would then switch to the 30 year schedule and adjust the payout accordingly. Timing of receipt of payments In the fundraising world, it is very common for gifts to be paid over time, particularly as the gift amount increases. One reason (but not the only one) is that there are annual limits on deductibility of charitable contributions based on income (I realize there are carryforward provisions, but those have limits too). Limits exist for both individual or corporate donors. The payment schedule in the document was arrived at through negotiation. If a condition of the gift is that the entire $1m be provided up-front, the gift will not occur. Paragraph 12 expenditures Any expenditures for items in paragraph 12 will be paid by the gift or earnings thereon, not from general funds. Further, the real cost of these items, in their entirety, is a very small fraction of the gift. The cumulative effect of the conservative earnings estimate in the attached proforma is more than enough to cover any paragraph 12 expenditures. Rick, K7GM Dr. Frederick (Rick) Niswander, Ph.D., CPA, CGMA Vice Chancellor for Administration and Finance Spilman 106 East Carolina University Greenville, NC 27858 252-328-6975 252-328-4835 (FAX) From: arrl-odv-bounces@reflector.arrl.org<mailto:arrl-odv-bounces@reflector.arrl.org> [mailto:arrl-odv-bounces@reflector.arrl.org] On Behalf Of Sumner, Dave, K1ZZ Sent: Friday, May 30, 2014 3:50 PM To: arrl-odv Subject: [arrl-odv:22762] CONFIDENTIAL Proposed Gift Agreeement for Re-naming of ARRL Lab CONFIDENTIAL ARRL Directors: On behalf of the Administration & Finance Committee I am pleased to forward the attached Gift Agreement for your review and consideration. The Gift Agreement with Paul Sergi, NO8D, calls for a $1,000,000 donation to the ARRL in return for naming rights to the ARRL Laboratory. It has been reviewed by the attorneys for both parties. The following explanation comes from A&F Committee Chairman Greg Widin, K0GW: “The agreement in principle was approved by A&F, and is acceptable to HQ management as well as ARRL Laboratory personnel. Further development of the specific wording involved Mary Hobart, Rick Niswander, Chris Imlay and me. “The agreement is contained in the file named ‘Sergi ARRL Gift Agreement-final-May27-14.’ The second attachment is a listing of high-level ‘deal points’ concerning the agreement, and the benefits and protections included. “In recognition of this contribution, the agreement will re-name the ARRL Laboratory as the ‘DX Engineering Laboratory at ARRL Headquarters’ for a period of 25-30 years. Regardless of the re-naming, the agreement provides protections for the continuing independence of ARRL Laboratory, its operations, and related editorial matters. Please review the relevant clauses in the agreement. The ‘deal points’ indicate the specific paragraphs in the Agreement related to maintaining the independence of the Lab. “The A&F Committee believes that this agreement is as good a deal as can be negotiated and it is in the best interests of the ARRL. We also believe this agreement will not only provide significant funding to support the Lab for decades, but it also will also encourage further contributions to the Second Century campaign.” While naming opportunities have been envisioned for several years this is the first to proceed to the point of an actual agreement. The re-naming of the ARRL Lab is a policy issue that rightfully belongs before the full Board. Fulfilling the terms of the agreement require that it be completed prior to the Centennial National Convention, which is before the next in-person meeting of the Board. Article 6 of the Articles of Association gives the Executive Committee the discretion to submit proposed resolutions to the Board for mail or electronic vote. At this time the Executive Committee has not considered the matter; only the members of the Administration and Finance Committee have had that opportunity. Because the issue ultimately will be considered by the full Board, in the interests of timeliness and efficiency President Craigie and I feel that it is appropriate to place the information concerning the agreement before the full Board now rather than engaging in a two-step process. Therefore, all Board members are invited and requested to review the attachments carefully and to pose questions to the A&F Committee and management, on the understanding that it will be the prerogative of the Executive Committee to authorize the actual vote by the Board. An appropriate resolution at that time would be along these lines: RESOLVED, that in accordance with the recommendation of the Administration & Finance Committee and management, the ARRL Board of Directors approves renaming the ARRL Laboratory in the manner and for the time specified in the Gift Agreement between ARRL and Paul D. Sergi, NO8D. Finally, please note that this matter is CONFIDENTIAL until such time as both parties are able to make the announcements specified in the Gift Agreement. 73, David Sumner, K1ZZ, Chief Executive Officer and Secretary