NATIONAL RIFLE ASSOCIATION OF AMERICA FINANCIAL STATEMENTS as of December 31, 2016 and 2015 AND REPORT THEREON NATIONAL RIFLE ASSOCIATION OF AMERICA TABLE OF CONTENTS Egg Report of Independent Auditors 1 Financial Statements: Statements of Financial Position 2 Statements of Activities 3 Statements of Cash Flows 4 Notes to Financial Statements 5 - 23 I - Read of independent Auditors To the Board of Directors and Members of the National Ri?e Association of America RSM Us 1 LP Report on the Financial Statements We have audited the accompanying financial statements of National Rifle Association of America (NRA), which comprise the statements of ?nancial position as of December 31, 2016 and 2015, the related statements of activities and cash ?ows tor the years then ended, and the related notes to the ?nancial statements. Management?s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these ?nancial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of ?nancial statements that are free from material misstatement, whether due to fraud or error. Auditor?s Responsibility Our responsibility is to express an opinion on these ?nancial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the ?nancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the ?nancial statements. The procedures selected depend on the auditor?s judgment, including the assessment of the risks of material misstatement of the ?nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal centre! relevant to the entity's preparation and fair presentation of the ?nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity?s internal control. Accordingly. we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of signi?cant accounting estimates made by management, as well as evaluating the overall presentation of the ?nancial statements. We believe that the audit evidence we have obtained is suf?cient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the ?nancial statements referred to above present fairly, in all material respects, the ?nancial position of National Rifle Association of America as of December 31, 2016 and 2015, and the changes in its net assets and its cash ?ows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1 to the ?nancial statements, the accompanying ?nancial statements are those of National Rifle Association of America only and are not those of the primary reporting entity. The consolidated ?nancial statements of NRA and its af?liates have been issued as the general purpose ?nancial statements of the reporting entity and should be read in conjunction with the parent-only statements. Our opinion is not modi?ed with respect to this matter. 25? as LAP McLean, Virginia Match 8, 2017 Hit. POWER OF AUDIT TAX 1 CONSUHING in '1-i FEW: :4 .- NATIONAL RIFLE ASSOCIATION OF AMERICA STATEMENTS OF FINANCIAL POSITION as of December 31, 2016 and 2015 ASSETS 2016 2015 Cash and cash equivalents 3 13,218,701 18,707,822 Investments 56,680,153 65,358,771 Pledges receivable, net 1,516,303 1,758,682 Accounts receivable, net 49,547,980 39,489,708 Due from af?liates 27,404,135 24,602,838 Inventories and supplies, net 17,209,123 10,878,594 Prepaid expenses 3,788,017 5,207,830 Notes receivable, net 3,000,000 3,004,582 Property and equipment, net 37,336,030 38,887,064 Other assets 7,436,145 6,943,734 Total assets 6 217,136,587 214,839,625 LIABILITIES AND NET ASSETS Accounts payable 3 35,188,474 5 22,146,154 Accrued liabilities 63,570,736 61,044,607 Note payable and line of credit 42,838,124 29,417,379 Deferred revenue 39,424,563 26,873,323 Total liabilities 181,021,897 139,481,463 Net assets: Unrestricted: Undesignated net assets 25,182,037 65,618,318 Cumulative pension liability (40,035,180) (37,815,604) Total unrestricted net (de?cit) assets (14,853,143) 27,802,714 Temporarily restricted 7,743,947 7,349,401 Permanently restricted 43,223,886 40,206,047 Total net assets 36,114,690 75,358,162 Total liabilities and net assets 5 217,136,587 The accompanying notes are an integral part of these ?nancial statements. 2 214,839,625 Revenue and 0m Support Members' dues Program fees 3 il 1 I . . Membet sales Shows and 91th Investment hoome, net Insurance aaninista?on lees Rental hoome Other Assets rebased from restrictions Total revenue and other support Expenses: Program services: Legislative programs Pubiica?ons Pub?c ahaws Shows and exhibits Compe??ons Education and training Hunbr services Field amines Law enlamement Recreaional shooting Member services and acquisition Whiswahe Executive of?ce Fundraising Total expenses Change in net assets before other charges Unreaiized gain (loss) on hveslnenu, net Unrealized gain on derival?we Ne! loss on pension obiga?an Change in net assets Net ewes (de?cit), beginning of year Net asses (de?cit), emf 01 year NATIGIAL REE ASSOCIATION OF AMERICA STATEIEITS (F ACTIVITIES for the years ended Decanter 31, 2016 and 2015 Umeshblad 163,517,961 12,256,731 104,095,484 27,075,345 4.692.861 22,955,395 (196,700) 1 1,527,769 1.433.726 6,935,031 20,537,574 374,831,167 83,913,732 37,820,356 54,839,356 19,433,011 5.649.690 11,101,147 4,213,594 12,696.15 4,099,027 7,928,714 241,866,763 86,509,528 10,613,154 31,062,974 47,065,536 419,1 51$? (44,326,700) 3,004,602 885,617 12,219,576! (42,655,857) 27,802,714 Temporarily Reshcled 20,678,620 1 17,472 (93,048] (20,537,574) 165,470 165.470 229.076 394,546 7,349,401 5 Permanently Resricied 7012i 5 163,517,961 12,256,731 127,791,943 27,075,345 4,692,661 22,955,395 (79,228) 1 1 527,759 1,433,726 6.641.983 3,017,839 3,017,839 378,014,476 83.91 3,732 37,620,356 54,839,356 19,433,011 5.649.690 1 1 .101 147 4,213,594 12,896,136 . 4,069,027 - 7.928.714 241,886,763 66,509,528 10,613,064 31,082,974 47,065,538 419,157,867 {41,143,391} 3,233,570 - 335.017 - 13,219,576) 3.017.039 139,243,472) 40,206,047 75,358,162 43,223,000 5 36,114,690 3,017,839 the aeoompmying notes are an inlegrai par! of these ?nancia statements 3 Unrestricted 5 165,664,978 9.526.357 70,909,759 25,598,508 6.71 1,547 21,396,991 169,884 12,154,667 1,351,081 7,590,232 21,605,665 342,681,689 35.091191 35,503,312 29.303214 19.201094 5,693,353 11,823,358 2.134.792 12,554,017 3.012.399 1,947,473 152,255,130? 66,111,624 9,167,679 26.208834 46,423,624 312,166,369 30,513,320 (1,946,395) 715.591 (466.016) 28,816.54? 1,013,786 27,602,714 Temporan?ly Restn?cbd 21 . 1 46.477 22.599 14,804 (21,605,685) (421,305) (421,805) (227.1177) (648.812) 7.996.213 5 7,349,401 2015 Pennanenvy Resricaed 4,590,750 4,590,750 4,590,750 Total 5 165,664,978 9.526.357 96.646366 25,596,508 6.71 1,547 21,398,991 192,483 12,154,667 1,351,061 7,605,036 346,850,634 35,097,191 35,503,317 28,388,214 19,201,694 5.693.353 11,823.356 2,134,792 12,654,617 3.812.399 7.947.473 162256.606 66,1 1 1 .624 9,167,679 26,208,834 46,423,624 312,168,369 34,682,265 (2,173,402) 715,591 4,590,750 35,615,297 5 (466,016! 32,758,436 42.599124 NATIONAL RIFLE ASSOCIATION OF STATEMENTS OF CASH FLOWS tor the years ended December 31, 2016 and 2015 2016 2015 Cash ?ows from operating activities: Change in net assets 5 (39,243,472) 5 32,758,438 Adjustments to reconcile change in net assets to net cash (used in) provided by operat'urg activities: Depreciation and amortization 4, 797,889 4,263,424 Provision for losses (gains) on pledges receivable 135,924 (299,588) Provision for losses on accounts receivable 4,802,427 5,788,891 Provision for losses on inventory 150,000 358,000 Contributions permanently restricted for long-term investment (3,017,839) (4,542,750) Net unrealized and realized (gain) loss on investments (2,202,751) 3.009.958 Unrealized gain on derivative instrument (885,817) (715,591) Net loss on pension obliga?on 2,219,576 466,016 Net loss on disposal of assets 106,397 53,155 Changes in assets and liabilities: Decrem in pledges receivable 106,455 701,451 Increase in accounts receivable, net (14,860,699) (11,948,945) Increase in due from af?liates (2,801,297) (385,427) (increase) decrease in inventories and supplies, net (6,480,529) 4,549,565 Decrease ('aicrease) in prepaid expenses 1,419,813 (955,852) Increase in other assets (492,411) (220,363) increase in accounts payable 13,042,320 47,913 increase (decrease) in accrued liabilities 1.192.370 (533.980) Increase (decrease) in deferred revenaa 12,551,240 (17,818,417) Total adjustments 9,783,068 (18,182,540) Net cash (used in) provided by operating activities (29,460,404) 14,575,898 Cash ?ows from investing activities: Sales of investments 38,503,808 21,093,303 Purchases of investments (27,622,439) (24,894,706) Purchases 01 property and equipment (3,353,252) (4,660,924) Principal collections on notes receivable 4,582 14,417 Net cash provided by (used in) investing activities 7,532,699 (8,447,910) Cash ?ows from ?nancing adivities: Principal payments on note payable (973,451) (917,979) Principal payments on lines of oedit (108,396,472) (118,885,949) Draw downs on lines 01 credit 122,790,668 112,828,724 Contributions permanently restricted for long-term investment 3,017,839 4,542,750 Net cash provided by (used in) financing activities 16,438,584 (2,432,454) Net (decrease) increase in cash and equivalents (5,489,121) 3.695.534 Cash and cash equivalents at beginning of year 18,707,822 15,012,288 Cash and cash equivalents at end of year 8 13,218,701 3 18,707,822 Supplemental disclosure of cash ?ow information: Cash paid during the year for interest 5 1,449,598 5 1,511,085 The accompanying notes are an integral part of these ?nancial statements. 4 1. NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES The National Ri?e Association of America (NRA), founded in 1871, is a not-fonpro?t corporation supported by the membership fees of public?minded citizens and clubs. Its primary purpose is to protect and defend the Constituh'cn of the United States of America, especially the poiitical, civil and inalienable rights of the American people to keep and bear arms as a common law and Constitutional right of the individual citizen. The NRA's Board of Directors formed the Institute for Legislative Action (ILA) in 1975 as an internal division of the NRA. The purpose of ILA is to prevent the passage of laws and regulations restricting ?rearms ownership. as well as pursuing changes to existing restrictions imposed by federal, state and local governments. ILA is supported principally by contributions from NRA members. Basis of Presentation The NRA publishes ?nancial statements in the NRA's annual report that include the ?nancial statements of certain af?liated entities, which are its primary ?nancial statements for the years ended December 31, 2016 and 2015. These ?nancial statements for the years ended December 31. 2016 and 2015 are not intended to be the general purpose ?nancial statements of the NRA and have been prepared in conformity with accounting principles that would otherwise be considered a departure from accounting principles generally accepted in the United States of America because certain af?liated organizations are not consolidated. Af?liates of the NRA whose ?nancial activities are not included in these ?nancial statements of the NRA include the foltowing: the NRA Foundation, Inc. (Foundation), the NRA Civil Rights Defense Fund (CRDF), the NRA Political Victory Fund (PVF), the NRA Special Contribution Fund (SCF) and the NRA Freedom Action Foundation (FAF). The preparation of ?nancial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the ?nancial statements and the reported amounts of revenue and other support and expenses during the reporting period. Actual results could differ from these estimates. Classi?cation of Net Assets To identify the observance of limitations and restrictions placed on the use of the resources available to the NRA, the accounts of the NRA are maintained in three separate classes of net assets: unrestricted. temporarily restricted, and permanently restricted, based on the existence or absence of donor-imposed restrictions. Unrestricted net assets represent resources that are not restricted. either temporarily or permanently, by donor?imposed stipulations. They are available for support of the NRA's general operations. NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS Temporarily restricted net assets represent contributions and other inflows of assets whose use by the NRA for its programs are limited by donor-imposed stipulations. These restrictions are temporary in that they either expire by passage of time or can be ful?lled and removed by actions of the NRA pursuant to those stipulations. Permanently restricted net assets represent endowment contributions and other in?ows of assets whose use by the NRA are limited by donor~imposed stipulations that neither expire by passage of time nor can be ful?lled and removed by actions of the NRA pursuant to those stipulations. Cash and Cash Eguivalents Highly liquid investments, consisting principally of money market funds, under the control of the NRA's investment managers, are considered investments. However, the NRA considers any other investments with an original maturity of three months or less at the date of purchase to be cash equivalents. The NRA generally invests these excess funds in repurchase agreements for US. govemmenl securities. The maturity date of these repurchase agreements is the next clay of business. Due to the short-term nature of these agreements, the NRA does not take possession of the securities, which are instead heid by the NRA's principal bank from which it purchases the securities. The carrying value of the investments approximates fair value because of the short maturity of the agencies. The NRA believes that it is not exposed to any signi?cant risk on its investments in repurchase agreements. Substantially all the cash and cash equivalents were held at one ?nancial institution in Virginia at December 31, 2016 and 2015. Concentrations of Credit Risk The NRA maintains a cash balance in excess of federally insured limits in an interest bearing account. The policy is to deposit funds only in ?nancially sound institutions. Nevertheless. these deposits are subject to some degree of credit risk. Investments are maintained in financial institutions. Concentrations of credit risk with respect to accounts receivable that are not collateralized are limited due to the large number of members comprising the NRA's membership base and their dispersion across many different geographies. The NRA invests in a professionally managed portfolio that primarily contains money market funds, equity securities. ?xed income securities, and hedge fund of funds. Such investments are exposed to various risks, such as market and credit. Due to the level of risk associated with such investments, and the level of uncertainty related to changes in the value of such investments. it is at least reasonably possible that changes in risk in the near term would materially affect investment balances and the amounts reported in the ?nancial statements. lnvestrnents Investments consist primarily of money market funds, equity securities, ?xed income securities, and alternative investments. lnvestrnents in money market funds, equity securities and fixed income securities are carried at fair value as determined by an independent market valuation service using the closing prices at the end of the period. in calculating realized gains and losses, the cost of securities sold is determined by the speci?c- identifrcation method. To adjust the carrying value of the investments, the change in fair value is included in other changes in the statements of activities. interest income and dividends are recorded on the accrual basis. ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS investments in investment partnerships are valued at fair value based on the applicable percentage ownership of the underlying partnerships? net assets as of the measurement date, which is a practical expedient, as determined by the NRA. In determining fair value, the NRA utilizes valuations provided by the fund manager of the underlying investment partnerships. The underlying investment partnerships value securities and other ?nancial instruments on a fair value basis of accounting. The estimated fair values of certain investments of the underlying investment partnerships, which may include private placements and other securities for which prices are not readily available, are determined by the general partner of the respective other investment partnership and may not re?ect amounts that could be realized upon immediate sale, nor amounts that ultimately may be realized. Accordingly, the estimated fair values may differ signi?cantly from the values that would have been used had a ready market existed for these investments. The fair value of the investments in other partnerships generally represents the amount the NRA would expect to receive it it were to liquidate its investment in the investment partnerships excluding any redemption charges that may apply. Pledges Receivable Pledges receivable due in more than one year have been recorded at the present value of estimated cash ?ows. An allowance for uncollectible pledges receivable is provided based upon management?s judgment of potential defaults. Accounts Receivable Membership dues, advertising and other accounts receivable are recorded at the invoiced amount and do not bear interest. Membership contributions receivables are recorded when received. The allowance for doubtful accounts is the best estimate of the amount of probable credit losses in existing accounts receivable. The NRA determines the membership dues accounts receivable allowance based on the aging of accounts receivable, where three or more or quarterly invoices are past due. The NRA determines all other allowances based on historical write~off experience and speci?c identi?cation. The allowances for doubtful accounts are reviewed and accounts receivable balances are written off against the allowance when the NRA feels probable the receivable will not be recovered. inventories and Supplies Inventories and supplies are stated at the lower of cost or market, with costs determined using the first-in, first- out method. Provisions are made to reduce the inventories to net realizable value in cases of obsolescence. Progrty and Eguigment Property and equipment are stated at cost, less accumulated depreciation. Donated assets are recorded at the appraised or estimated fair value at the time of donation. Expenditures for maintenance and repairs, which do not prolong the useful lives of the assets, are expensed. Depreciation is computed on the straight-line method over the assets' estimated useful lives. Buildings and improvements are depreciated over useful lives ranging from 20 to 45 years, other property and equipment is depreciated over two to ten years. The NRA capitalizes complete desktop and laptop computers greater than $500 and all other ?xed assets greater than $1,500. Members' Dues A portion of members' dues that represents the present value of the cost of the magazine that is a bene?t of membership for the given membership term is deferred and amortized over the life of the membership. The portion considered a contribution is recorded as dues revenue when the membership is received. NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS Contributions Unconditional contributions, whether unrestricted or restricted, are recognized as revenue when received and classi?ed in the appropriate net asset category. When the temporary restrictions are met by the NRA which were speci?ed by the donor. temporarily restricted contributions are released from restriction and are recognized in the unrestricted net asset category. Rave?Mam Program tees, advertising, member sales, shows and exhibit sales, and insurance administration fees are recognized as revenue when earned. Rental income is recognized on a straight-line basis over the term of the lease. Derivative Financial instruments interest rate swaps are entered into to manage interest rate risks associated with the NRA's borrowing. interest rate swaps are accounted for in accordance with the Financial Accounting Standards Board Accounting Standard Codi?cation (the Codi?cation) topic. Derivatives and Hedging, under which the NRA is not allowed to use cash ?ow hedging. Therefore, the interest rate swap is recorded in the statements of ?nancial position at fair value with fair value changes recorded as an unrealized gain on derivative instrument on the statements of activities and statements of cash flows (Note 8). Valuation of Long-Lived Assets Long-lived assets and certain identi?able intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by a comparison of the carrying amount of the asset to future undiscounted net cash ?ows expected to be generated by the asset. if such assets are considered to be impaired, die impairment to be recognized is measured by the amount by which the canying amount of the assets exceeds the estimated fair value of the assets. Assets to be disposed of are reportable at the lower of the canying amount or fair value. less cost to sell. The NRA had no impairments of long-lived assets during 2016 or 2015. Outstanding Legacies The NRA is the bene?ciary under various wills and other agreements, the total realizable amounts of which are not presently determinable. The RA's share of such amounts is not recorded until the NRA has an irrevocable right to the bequest and the proceeds are measurable. Functional Allocation of Exmnses The costs of providing program services and supporting activities have been accounted for on a functional basis in the statements of activities. Accordingly, certain costs have been allocated among the program services and supporting activities. Pending accounting pronouncements in July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of inventory. The amendments in the ASU require entities that measure inventory using the ?rst-in, ?rst-cut or average cost methods to measure inventory at the lower of cost and net realizable value. Net realizable value is de?ned as NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO STATEMENTS estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. This ASU will be effective for NRA for ?scal years beginning after December 15, 2016. In February 2016, FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the statement of ?nancial position for all leases with terms longer than 12 months. Leases will be classi?ed as either ?nance or operating, with classi?cation affecting the pattern of expense recognition in the statement of activities. The new standard is effective for ?scal years beginning after December 15, 2019. In August 2016, the FASB issued ASU No. 2016-14, Entities (Topic 958): Presentation of Financial Statements of Not-for-Pro?t Entities. The amendments in this ASU make improvements to the information provided in ?nancial statements and accompanying notes of not-for-pro?t entities. The amendments set forth the FASB's improvements to net asset classi?cation requirements and the information presented about a not. for-pro?t entity's liquidity, ?nancial performance and cash ?ows. The ASU will be effective for ?scal years beginning after December 15, 2017. Earlier adoption is permitted. The changes in this ASU should generally be applied on a retrospective basis in the year that the ASU is ?rst applied. In May 2014, the FASB issued ASU No. 2014-09. Revenue from Contracts with Customers (Topic 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in generally accepted accounting principles in the United States of America (US. GAAP) when it becomes effective and permits the use of either a fuli retrospective or retrospective with cumulative effect transition method. in August 2015, the FASB issued ASU No. 2015-14, which defers the effective date of ASU No. 2014-09 one year, making it effective for annual reporting periods beginning after December 15, 2018. NRA has not yet selected a transition method and is currently evaluating the effect that the standard will have on the ?nancial statements. Tax Status The NRA is exempt from federal income taxes under Section 501(c)(4) of ?re lntemal Revenue Code and from state income taxes. The NRA activities that cause imposition of the unrelated business income tax provision of the Code result in no signi?cant tax liability. The NRA follows the accounting standard on accounting for uncertainty in income taxes, which addresses the determination of whether tax bene?ts claimed or expected to be claimed on a tax return should be recorded in the ?nancial statements. Under this guidance, the NRA may recognize the tax bene?t from an uncertain tax position only if it is more-Iikely-than-not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax bene?ts recognized in the ?nancial statements from such a position are measured based on the largest bene?t that has a greater than 50% likeiihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also addresses de-recognition, classi?cation, interest and penalties on income taxes, and accounting in interim periods. Management evaluated the NRA's tax positions and concluded that the NRA had taken no uncertain tax positions that require adjustment to the ?nancial statements to comply with the provisions of this guidance. Generally, the NRA is no longer subject to income tax examinations by the US. federal, state or local tax authorities for years before 2013, which is the standard statute of limitations look-back period. NATIONAL RIFLE ASSOCIATION OF AMERICA Subseguent Events NOTES TO FINANCIAL STATEMENTS The NRA evaluated subsequent events through March 8, 2017, which is the date the ?nancial statements were available to be issued. INVESTMENTS Investments as of December 31, 2016 and 2015 consist of: 2016 2015 Money market funds 3 612,527 1,460,652 Equity securities 40,289,738 49,270,250 Fixed income securities 3,766,355 3,580,103 Alternative investments 7,962,585 7,325,905 Other 4,048,948 3,721,861 56,680,153 65,358,771 investment income (loss) for the years ended December 31, 2016 and 2015 includes the following: 2016 2015 Realized losses, net 5 (1,030,927) (836,556) Dividends and interest 951,699 1,029,039 (79,228) 192,483 Unrealized gains (tosses), net 3,233,678 (2,173,402) 3,154,450 (1,980,919) Interest income of $120,000 and $120,000, earned from notes receivable for 2016 and 2015, respectively, is included in dividends and interest. PLEDGES RECEIVABLE At December 31, 2016 and 2015, donors to the NRA have unconditionally promised to give amounts as follows: 2016 2015 Within one year 675,413 707,830 One to ?ve years 317,531 449,031 More than ?ve years 747,194 770,466 1,740,138 1,927,327 Less: discount of pledges receivable (20,851) (26,585) 1,719,287 1,900,742 Less: allowance for uncollectible pledges (202,984) (142,060) 1,516,303 $1,758,682 Pledges due in more than one year have been recorded at the present value of estimated cash ?ows, discounted by rates ranging from 0.77% to 2.22%. 10 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS ACCOUNTS RECEIVABLE Accounts receivable as of December 31, 2016 and 2015 consist of: 2016 2015 Membership 8 58,292,353 45,295,298 Contributions 3,421,398 3,633,565 Advertising 2,686,484 2,676,217 Other 1,626,608 1,489,126 66,026,843 53,094,206 Less: allowance for doubtful accounts 16,478,863 13,604,498 49,547,980 39,489,708 Following are the changes in the allowance for doubtful accounts during the years ended December 31, 2016 and 2015, respectively: 2016 2015 Allowance at beginning of year 13,604,498 11,675,771 Provision for losses on accounts receivable 4,802,427 5,788,891 Write-offs, net of recoveries (1,928,062) (3,860,164) Allowance at end of year 16,478,863 6 13,604,498 INVENTORIES AND SUPPLIES Inventories and supplies as of December 31, 2016 and 2015 consist of: 2016 2015 Sales inventories 4,389,535 4,822,459 Supplies: Magazine paper 1,960,513 1,653,551 Ful?llment and promotional materials 11,784,041 5,183,029 Other 112,363 106,543 18,246,452 1 1,765,582 Less: obsolescence allowance 1,037,329 886,988 17,209,123 10,878,594 NOTES RECEIVABLE Notes receivable as of December 31, 2016 and 2015 consist of: Interest Rate 2016 2015 NRA Special Contribution Fund 4.0% 3,000,000 3,000,000 Shooting range loans 0.0% - 4,582 3 3,000,000 6 3,004,582 The note receivable from the SCF is a emand note, collateralized by a ?rst deed of trust on approximately 33,300 acres of land south of Raton, New Mexico. During the years ended December 31,2016 and 2015, interest in the amount of $120,000 and $120,000 res remaining at December 31, 2016 and 2015, respectiv statements of ?nancial position. 11 pectively, was received. The total interest receivable ely, is $3,639,073 and is included in other assets in the NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS PROPERTY AND EQUIPMENT Property and equipment as of December 31, 2016 and 2015 consist of: 2016 2015 Land 6 5,380,792 5,380,792 Buildings and improvements 53,865,603 53,469,880 Furniture, ?xtures and equipment 18,563,070 16,828,934 77,809,465 75,679,606 Less: accumulated depreciation 40,473,435 36,792,542 37,336,030 5 38,887,064 Depreciation expense for the years ended December 31, 2016 and 2015 was $4,797,889 and $4,263,424, respectively. NOTE PAYABLE AND CREDIT AGREEMENTS At December 31, 2016 and 2015, $19,827,125 and $20,800,577, respectively, was payable under a credit agreement with a bank, which expires on October 1, 2019. Under the terms of this agreement, the NRA pays a ?xed rate of 6.08% This credit agreement incorporates an interest rate swap agreement. This swap agreement is recognized on the statements of ?nancial position in accrued liabilities at its fair value of $2,128,702 and $3,014,519 as of December 31, 2016 and 2015, respectively. The NRA maintained an $18,500,000 line of credit agreement which was amended to increase the maximum principal amount to $25,000,000 on January 21, 2015, and expires on September 30, 2017. Under the terms of this agreement the NRA makes interest payments on the daily outstanding principal at a variable rate based on the 30day rate, plus 0.60%. At December 31, 2016 and 2015, $23,010,999 and $8,616,802 was payable under the agreement at interest rates of 1.37% and 1.03%, respectively. On the $25,000,000 line of credit agreement, the NRA has pledged as collateral $45,042,632 at December 31, 2016, in cash and investments held in certain custodial accounts by the bank. For the credit agreement, the NRA has also pledged as collateral a Deed of Trust on the NRA Headquarters Building. The NRA is subject to ?nancial covenants associated with the credit agreement and lines of credit agreements. The NRA must maintain minimum cash and investment balances. The annual minimum payments related to these obligations at December 31, 2016 are as foilows: 2017 24,050,942 2018 1,107,009 2019 17,680,173 Total minimum future payments 5 42,838,124 Interest expense for the years ended December 31, 2016 and 2015, was $1,357,731 and $1 ,438,430, respectively. 12 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS FAIR VALUE MEASUREMENTS The NRA follows the Codi?cation on Fair Value Measurement, which de?nes fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly de?ned as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy are described below: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the to access at the measurement date. Level 2: Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly; and fair value is determined through the use of models or other valuation methodologies. Level 3: Inputs are unobservable for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value are based upon the best information in the circumstances and may require significant managementjudgrnent or estimation. In certain cases, the inputs used to measure fair value may fall into different levets of the fair value hierarchy. In such cases, an investments level within the fair value hierarchy is based on the lowest level of input that is signi?cant to the fair value measurement. The NRA's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors speci?c to the investment. In determining the appropriate levels, the NRA performs a detailed analysis of the assets and liabilities that are subject to fair value measurements. At each reporting period. all assets and liabilities for which the fair value measurement is based on signi?cant unobservable inputs are classi?ed as Level 3. The estimated fair values of the NRA's short-term ?nancial instruments, including receivables and payables arising in the ordinary course of operations, approximate their individual carrying amounts due to the reiativeiy short period of time between their origination and expected realization. The carrying value of the note payable and credit agreement approximates fair value as the interest rate on the credit agreements underlying instruments ?uctuate with market rates. 13 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS The tables below present the balances of each class of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy. Available-foresale equity securities: Consumer discre?onary Consumer staples Energy Financial services Healthcare lndustrials lnfonnation technology Materials Mule-strategy mutual funds Total available-for-sale equity securities Available-for-sale ?xed income securities: Matti-strategy bond funds Alternative investments: Mule-strategy lundof-funds [measured using a net asset value per share (or its equivalent) practical expedient] Money market Investments at fair value Other investments Total investments Other assets - mum-strategy mutual funds: Deferred compensation plan Supplemental executive retirement plan Total other assets Total assets lnterest rate swap Deferred compensation liability Supplemental executive retirement liability Total liabilities As of December 31, 2016 Total Level 1 Level 2 1,427,080 1,427,080 6 - 899,575 899,575 - 1,187,684 1,187,684 680,788 680,788 1,508,080 1,508,080 1,217,127 1,217,127 4 2,961,364 2,961,364 2,060,591 2,060,591 28,347,449 28,347,449 - 40,289,738 40,289,738 - 3,766,355 3,766,355 7,962,585 - 612,527 612,527 - 52,631,205 $44,668,620 - 4,048,948 56,680,153 2,417,588 2.417.588 - 1,081,914 1,081,914 3,499,502 3.499.502 60,179,655 $48,168,122 - (2,128,702) - (2,128,702) (2,408,659) (2,408,659) (1,078,054) (1,078,054) (5,615,415) - (5,615,415) 14 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS Availabie-for-sale equity securities: Consumer discretionary Consumer staples Energy Financial services Healthcare lndustrials Information technology Materials Multi-strategy mutual funds Total available-for?sale equity securities Available-for-sale ?xed income securities: Mum-strategy bond funds Altemative investments: Mum-strategy fund-of-funds [measured using a net asset value per share (or its equivalent) practiml expedient] Money market Investments at fair value Other investments Total investments Other assets - multi-strategy mutual funds: Deferred compensation plan Supplemental executive retirement plan Total other assets Total assets Interest rate swap Deferred compensation liability Supplemental executive retirement liability Total liabilities As of December 31, 2015 Total Level 1 Level 2 2,704,930 8 2,704,930 1,045,251 1,045,251 373,628 373,628 707,031 707,031 2,486,999 2,486,999 1,188,264 1,188,264 3,325,083 3,325,083 1,922,120 1,922,120 35,516,944 35,516,944 49,270,250 49,270,250 3,580,103 3,580,103 7,325,905 - 1,460,652 1,460,652 61,635,910 $54,311,005 - 3,721,861 65,358,771 2,037,386 2,037,386 - 971,420 971,420 3,008,806 3,008,806 - 68,367,577 57,319,811 (3,014,519) 8 (3,014,519) (2,026,348) (2,026,348) (968,665) (968,665) (6,009,532) (6,009,532) 15 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS Money market funds, equity securities and ?xed income securities are classified as Level 1 instruments as they are actively traded on public exchanges. Deferred compensation plan and supplemental executive retirement plan assets are based upon the fair market value of those assets, which are observable inputs and classi?ed as Level 1. The deferred compensation liability is not publically traded and is, therefore, considered Level 2. The swap agreement is valued based on quoted values stated by the bank's mark-tomarket estimate using stated ?xed rate and LIBOR interest ratings. The interest rate is observable at commonly quoted indexes for the full term of the instrument and is, therefore, considered a Level 2 item. The table below presents additional information regarding the alternative investments. Redemption 2016 2015 Unfunded Redemption Notice Fair Value Fair Value Commitments Frequency Period Multi~sttategy fund-of-funds $2,257,494 5 2,054,326 - quarteriy 65 days Mufti-strategy fund-of-funds 2,237,032 1,612,012 - quarterly 36 days Mufti-strategy semi- tund-cf-funds 2,635,782 2,746,490 - annually 105 days Multi-strategy fund 832,277 913,077 daily 1 day 7,962,585 7,325,905 - This class invests in hedge funds that pursue multiple strategies to diversity risks and reduce volatility. The hedge funds' composite portfolio for this class includes investments in long, short equity portfolio funds (investments in emerging markets and multiple sectors), directional macro strategy funds (investments in trade futures, options, futures and foreign exchange contracts, and diversi?ed markets), event driven portfolio funds (investments in risk arbitrage, distressed and special situations, and opportunistic investing), relative value portfolio funds (investments in arbitrage, commodity trading advisers and market neutral strategies), and global asset allocation portfolio funds (investment in currencies, bonds, global equities and equity indices). The fair value of the investments in this class have been estimated using the net asset value per share of the investments. This class invests in hedge funds that pursue multiple strategies to diversify risks and reduce volatility. The hedge fund-cf-funds' composite portfolio for this class includes investments in private investment companies (investment in global, distressed/credit, domestic healthcare and other) and securities (common stock). The fair value of the investments in this class have been estimated using the net asset value per share of the investments. This class invests in a managed futures product that pursue multiple strategies to diversify risks and reduce volatility. The multi-strategy fund composite portfolio for this class includes investments in private investment companies (investment in currency, bonds, interest rates, commodities and other) and securities (common stock). The fair value of the investments in this class have been estimated using the net asset value per share of the investments. 16 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS 10. TEMPORARILY AND PERMANENTLY RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes: 2016 2015 Legislative programs 3 1,851,049 2,441,410 Education and training 1,495,330 1,205,253 National Firearms Museum 1,403,886 1,170,530 Recreational Shooting 708,022 370,334 Hunter services 109,761 337 Field services 105,630 105,067 Competitions 97,743 65,289 Law enforcement 61,503 51,169 Community outreach 53,536 105,021 Public relations - 613,636 Other 271,993 218,881 Other, passage of time 1,585,494 1,002,474 Totai 7,743,947 7,349,401 Permanently restricted net assets are restricted to investment in perpetuity, the income from which is expendable to support: 2016 2015 Legislative programs 17,735,887 16,462,070 National Firearms Museum 7,802,467 7,797,617 Hunter services 4,698,122 3,870,205 Education and training 4,438,382 4,332,893 Recreational Shooting 2,610,338 2,995,222 Competitions 1,401,044 1,395,174 Law enforcement 608,541 608,541 Field services 145,138 145,138 Community outreach 16,289 16,289 Other 3,767,678 2,582,898 Total 43,223,886 40,206,047 The NRA follows the Codi?cation subtopic Reporting endowment funds. The Codi?cation addresses accounting issues related to guidelines in the Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA), which was adopted by the National Conferences of Commissioners on Uniform State Laws in July 2006 and enacted in the Commonwealth of Virginia on July 1, 2008 and by the State of New York on September 17, 2010. The Management of the NRA has interpreted UPMIFA as requiring the preservation of the fair value of original donor-restricted endowment gifts as of the date of the gift absent explicit donor stipulations to the contrary. As a result of this interpretation, the NRA classi?es as permanently restricted net assets the original value of cash gifts donated to permanent endowment and the discounted value of future gifts promised to permanent endowment, net of allowance for uncollectibie pledges. The remaining portion of donor-restricted endowment funds not classi?ed in perrnanentiy restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the NRA in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with the NRA considers the following factors in making a determination to appropriate or accumulate donor~restricted endowment funds: . The duration and preservation of the fund 17 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS General economic conditions The possible effect of in?ation and de?ation Other resources of the NRA The investment policies of the NRA The purposes of the NRA and donor-restricted endowment fund The expected total return from income and the appreciation of investments The NRA has adopted investment and spending policies for permanently restricted endowment assets that attempt to provide a predictable stream of fundi ng to the programs supported by its endowment while seeking to maintain purchasing power of the endowment assets. The investment policy of the NRA is to achieve, at a minimum, a real (in?ation adjusted) total net return that exceeds spending policy requirements. Investments are diversi?ed both by asset class and within asset classes. The purpose of diversi?cation is to minimize risk and to provide reasonable assurance that no single security or class of securities will have a disproportionate impact on the total portfolio. The amount appropriated for expenditure ranges from 1% to 5% of the endowment fund's fair value as of the end of the preceding year, as long as the value of the endowment does not drop below the original contribution(s). All earnings of the endowment restricted net assets until appropriated for expenditure in the form of program spending. are re?ected as temporarily The NRA's endowment is composed solely of donor restricted funds. The changes in endowment net assets for the years ended December 31, 2016 and 2015 are as follows: December 31, 2016 Temporarily Permanently Unrestricted Restricted Restricted lie! Endowment net assets, beginning of year 3:155-932 M0205.047 542331-470 interest and dividends, net - 698,691 - 698,691 Net appreciation - 2,005,704 - 2,005,704 Contributions - - 3,017,839 3,017,839 Amount appropriated for expenditure - (1 ,484,178) - (1,484,178) Other changes (389,138) 389,138 - - Endowment net assets, end of year ,420,647) 4,766,287 $43,223,886 $46,569,526 December 31, 2015 Temporarily Permanently Unrestricted Restricted Restricted 191g Endowment net assets, beginning of year 5 (32.427) 4,4793% $35,615,297 540.012.7713 interest and dividends, net - 804,141 - 804,141 Net depreciation - (1,549,892) - (1,549,892) Contributions - - 4,590,750 4,590,750 Amount appropriated for expenditure - (1,526,305) - (1,526,305) Other changes (949,082) 949,082 - - Endowment net assets, and of year 1,031,509) 3,156,932 $40,206,047 $42,331,470 The related assets are included in due from af?liates, investments and pledges receivable. 18 11. NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENT From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires the NRA to retain as a fund of perpetual duration. in accordance with accounting principles generally accepted in the United States, de?ciencies of this nature that are reported in unrestricted net assets as of December 31, 2016 and 2015, were $1,420,647 and $1,031,509, respectively. The de?ciencies in the donor?restricted endowment funds at December 31, 2016, resulted from unfavorable market ?uctuations and the continued appropriation of endowment assets, which was deemed prudent by the NRA. RETIREMENT PLANS Certain NRA employees participate in a non-contributory, de?ned bene?t retirement plan (the Plan). Bene?ts under the Plan are generally based on years of service and ?nal average pay. The NRA's policy is to fund pension costs as accrued. Effective January 1, 2008, the NRA amended the Plan so that empioyees hired on or after January 1, 2008, will not be eligible to participate in the Plan. The primary investment objectives of the Plan are to provide a long-term, risk?controlbd approach using diversi?ed investment options. The NRA may consider all asset classes allowed by the Employee Retirement Income Security Act of 1974 and other applicable law as acceptable investment options. The net periodic pension costs for the years ended December 31, 2016 and 2015 consist of the following: 2016 2015 Service cost - bene?ts earned during the year 3,375,329 3,640,523 Interest cost on projected bene?t obligation 5,644,489 4,890,607 Return on plan assets (6,168,124) (6,296,518) Recognized net actuarial loss 2,905,363 2,806,967 Net amortization and deferral 78,741 85,464 Net periodic bene?t cost 5,835,798 5,127,043 Other changes 2,219,576 466,016 Total recognized in statements of activities 5 8,055,374 3 5,593,059 The following table sets forth the changes in the de?ned bene?t pension plan?s funded status and the amount of accrued pension costs for the plan years ended December 31, 2016 and 2015 (utilizing a measurement date of December 31): 2016 2015 Change in bene?t obligation: Projected bene?t obligation at beginning of year 127,548,095 5 125,777,849 Service cost 3,375,329 3,640,523 interest cost 5,644,489 4,890,607 Actuarial toss (gain) 4,155,647 (3,791,211) Bene?ts paid (3,671,686) (2,969,673) Projected bene?t obligation at end of year 137,051,874 127,548,095 19 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS 2016 2015 Change in plan assets: Fair value of plan assets at beginning of year 80,267,170 81,539,983 Actual return on plan assets 5,120,091 (853,140) Employer contributions 5,117,000 2,550,000 Bene?ts paid (3,671,686) (2,969,673) Fair value of plan assets at end of year 86,832,575 80,267,170 Accrued pension costs re?ected in the statements of ?nancial position in accrued liabilities (50,219,299) (47,280,925) Accumulated bene?t obligation (121,767,299) (111,407,887) Amounts recognized in unrestricted net assets: Total net loss 5 39,371,012 37,072,695 Prior service cost 684,168 742,909 Total 40,035,180 37,815,604 The total net loss and prior service cost for the de?ned pension plan that will be amortized from net assets into the net periodic bene?t cost over the next year are $3,137,631 and $71,429, respectively. The following weighted-average assumptions were used in calculating the above bene?t obligations, net periodic bene?t cost and fair value of plan assets at December 31 2016 and 2015: 2016 2015 Discount rate used to determine bene?t obligation 4.15% 4.50% Discount rate used to determine net periodic bene?t cost 4.50% 3.95% Rate of compensation increase 4.00% 4.00% Expected return on plan assets 8.00% 8.00% The basis used to determine the overall expected long-term rate of return on assets utilizing the target asset allocations established within the plan is based on historical returns. The asset allocation strategy is based on several factors including: - The relationship between the current and projected assets of the Plan and the projected actuarial liability stream; . The historical performance of capital markets adjusted for the perception of future short- and long-term capital market performance; - The perception of future economic conditions, including inflation and interest rate assumptions. The asset allocation strategy shall identify target allocations to eligible asset classes and, where appropriate, suitable ranges within which each asset class can ?uctuate as a percent of the total fund. Each asset class is to remain suitably invested at all times in either cash (or cash equivalents) or permitted securities within each asset class. The asset classes may be rebalanced from time to time to take advantage of tactical rnisvaluatlons across major asset classes or investment styles, or to align the current asset mix with strategic targets. 20 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS Following is a description of the valuation methodologies used for assets measured at fair value at December 31,2016 and 2015. Mufti-strategy mutual funds and Pooled separate accounts: Primarily valued at the net asset value (NAV) per share based on quoted market prices of the underlying investments as reported by the investment advisor using the audited ?nancial statements of the underlying investments. The individual annuities invest in separate accounts, which track the performance of the specific underlying mutual funds. A valuation agent is selected for each mutual fund and PSA. The valuation of the net assets is calculated on each open market day. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or re?ective of future fair values. Fur?iennore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain results in a different fair value measurement at the reporting date. lnvestrnents measured at net asset value (or equivalent) have not been classi?ed in the fair value hierarchy. The amounts of investments are included below. At December 31, 2016 and 2015, the fair value and the asset allocation of the NRA's pension plan assets was as follows: 2016 2015 Asset category: Motif-strategy equity Mutual funds/PSAs 53,763,515 62% $50,450,340 63% Mufti?strategy ?xed income Mutual, fundsl PSAs 30,791,748 35 24,915,403 31 Cash 2,277,312 3 - - Real estate 4,901,427 6 86,832,575 100% $80,267,170 100% The NRA contributes to the plan based on actuarially determined amounts necessary to provide assets suf?cient to meet bene?ts to be paid to plan members. NRA annually funds the minimum required contribution. Expected contributions for the plan year ending December 31, 2017 are The following plan year bene?t payments, which re?ect expected future service, as appropriate, are expected to be paid over the next 10 ?scal years: 2017 4,490,000 2018 4,820,000 2019 5,280,000 2020 3 5,670,000 2021 6,150,000 2022 - 2026 (total) 3 35,800,000 in addition, in 1997, the NRA established a 401(k) plan for employees. The plan, available to all employees after 90 days of service, permits participants to contribute a portion of their salary on a pro-tax basis. The NRA matches participant contributions based on plan provisions. Participants are 100% vested in employer contributions after three years of service. The vested balance is available to participants at termination, retirement, death, disability, hardships or through eligible loans. Employer contributions to the 401(k) plan totaled $2,470,309 and $2,270,904 for the years ended December 31, 2016 and 2015, respectively. 21 12. NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS The NRA also maintains a deferred compensation agreement (the Agreement) for certain of?cers and employees. The Agreement is offered at the sole discretion of its Board of Directors, which may amend or terminate the Agreement at any time. The Agreement is funded through whole life insurance policies on the plan beneficiaries. The NRA is the policy owner and bene?ciary. Currently, several key employees are enrolled in the Agreement. Management believes that no unfunded liability exists under the Agreement. At December 31, 2016 and 2015, the NRA had assets relating to the cash surrender vaiues of the whole life insurance policies of $4,048,948 and $3,721,861, respectively. The NRA had an accrued postretirement liability of $232,873 and $190,569 at December 31, 2016 and 2015, respectively. Deferred compensation expense for the years ended December 31, 2016 and 2015 was a ($176,783) and $26,612, respectively. The NRA has established a 457(b) deferred compensation plan for the bene?t of certain employees. This plan is employee funded, and therefore, the NRA did not contribute to this plan during the years ended December 31, 2016 and 2015. At December 31, 2016 and 2015, the NRA held assets, and had related obligations, relating to this plan of approximately $2.4 million and $2.0 million, respectively. The NRA has also established a 457(f) supplemental executive retirement plan for the bene?t of certain executives. At December 31 2016 and 2015, the NRA held assets, and had related obligations, relating to the plan of approximately $1,078,000 and $969,000, respectively. The NRA incurred deferred compensation expense of $206,700 and $206,700 for the years ended December 31, 2016 and 2015, respectively. For both plans, the assets are included in other assets and the liabilities are included in accrued liabilities on the statements of ?nancial position. RENTAL OPERATIONS AS LESSOR The NRA leases a portion of its headquarters building and adjacent property to tenants under various operating leases. These leases include renewal options and escalation clauses and require that the tenants pay for their prorated share of the building operating expenses. The following is a schedule of minimum future rentals on non-cancellabie operating leases as of December 31, 2016: 2017 1 ,1 56,447 2018 939,505 2019 686,677 2020 412,341 2021 297,007 2022 69,627 Totai minimum future rentals 3,561,604 Total rental income for the years ended December 31, 2016 and 2015 was $1,433,726 and $1,351,081. respectively. 22 13. 14. NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS OPERATING LEASES AS LESSEE The NRA leases warehouse, of?ce space and equipment under non-cancellable operating leases with terms expiring through 2022. The lease agreements for various of?ce space include renewal options and escalation clauses and require that the NRA pay for shared operating expenses. The annual minimum payments related to these obligations as of December 31, 2016 are as follows: 2017 673,434 2018 419,879 2019 388,942 2020 344,603 2021 328,479 2022 194,912 Total minimum payments required 5 2,350,249 Total lease expense for the years ended December 31, 2016 and 2015 was $965,272 and $1,067,907, respectively. RELATED PARTIES The NRA is af?liated with the Foundation, the CRDF, SCF and the FAF by virtue of the control vested with the NRA's Board of Directors to appoint the Board of Trustees of each af?liate. The PVF is a separately unincorporated political action committee of the NRA whose ?ve of?cers are NRA employees. The NRA provides certain bene?ts to the af?liates at no cost, among which are the use of of?ce space and other administrative and support services. Management has determined that the fair value of these bene?ts is minimal, and accordingly, no amounts are re?ected in these ?nancial statements. The Foundation reimburses the NRA for certain expenses, such as salaries, bene?ts, and general operating expenses, paid by the NRA on the Foundation?s behalf. As of December 31 2016 and 2015, $27,124,532 and $24,333,886 respectively, was owed to the NRA and included in due from af?liates for reimbursements and pass through funds still held by the Foundation. In addition, certain quali?ed NRA programs were funded by Foundation grants totaling $19,276,495 and $18,985,029 for the years ended December 31, 2016 and 2015, respectively. The CRDF reimburses the NRA for general operating expenses paid by the NRA on the CRDF's behalf. As of December 31, 2016 and 2015, $23,549 and $3,801, respectively, was owed to the NRA for general operating expenses and included in due from af?liates. All permanent employees of the SCF are maintained as employees of the NRA and the SCF reimburses the NRA for the total employee costs including bene?ts. The SCF reimburses the NRA for certain other expenses paid by the NRA on the SCF's behalf. As of December 31, 2016 and 2015, $256,054 and $265,151, respectively, was owed to the NRA for salaries, insurance and bene?ts net of certain other expenses owed by the NRA to the SCF and included in due from af?liates. The NRA paid administrative and fundraising expenses 01838762499 and $4,892,637 for the years ended December 31, 2016 and 2015, respectively, on behalf of the PVF. 23