NATIONAL RIFLE ASSOCIATION OF AMERICA FINANCIAL STATEMENTS as of December 31. 2017 and 2016 AND REPORT THEREON NATIONAL RIFLE ASSOCIATION OF AMERICA TABLE OF CONTENTS Report of Independent Auditors Financiai Statements: Statements of Financial Position Statements of Activities Statements of Cash Flows Notes to Financial Statements Report of lndeoendentAuditors RS RSM US LLP To the Board of Directors and Members of the National Ri?e Association of America Report on the Financial Statements We have audited the accompanying ?nancial statements of National Ri?e Association of America (NRA), which comprise the statements of ?nancial position as of December 31, 2017 and 2016, the related statements of activities and cash ?ows for the years then ended, and the related notes to the ?nancial statements. Management?s Responsibility tor 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 lntemal 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 seiected 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 control 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 financial position of National Ri?e ?Association of America as of December 31, 2017 and 2016, 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 Ri?e Association America only and are not those of the primaryreporting ?nancial statements of NRAand 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 LLP McLean, ngnia March 7, 2016 THE POWER OF BEING UNDERSTOOD AUDIT I TAX I CONSULTING 1 mom llt' orientate-lump isms \?tLll new 1'5 Litres! 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NATIONAL RIFLE ASSOCIATION OF AMERICA STATEMENTS OF FINANCIAL POSITION as of December 31, 2017 and 2016 ASSETS 2017 2016 Cash and cash equivalents 17,123,743 13,218,701 Investments 48,702,736 56,680,153 Pledges receivable, net 1,184,593 1,516,303 Accounts receivable, net 36,129,175 49,547,980 Due from affiliates 30,731,975 27,404,135 Inventories and supplies, net 13,639,054 17,209,123 Prepaid expenses 3,277,662 3,788,017 Notes receivable, net 3,000,000 3,000,000 Property and equipment, net 34,475,160 37,336,030 Other assets 7,861,583 7,436,145 Total assets 196,125,681 217,136,587 LIABILITIES AND NET ASSETS Accounts payable 29,837,446 35,186,474 Accrued liabilities 62,814,166 63,570,736 Notes payable and line of credit 47,121,100 42,838,124 Deferred revenue 31,402,766 39,424,563 Total "abilities 171,175,478 181,021,897 Net assets: Unrestricted: Undesignated net assets 1,477,285 25,182,037 Cumulative pension liability.._ (33,256,864) . - (40,035,180) - Total unrestricted net de?cit" (31,779,579) (14,853,143) Temporarily restricted 11,398,618 __7,743,9_47 Penna?nantly restricted 45,330,964 43,223,886 Total net assets 24,950,203 36,114,690 Total liabilities and net assets 196,125,681 217,136,587 The accompanying notes are an integral part of these ?nancial statements. 2 NATIONAL RIFLE ASSOCIATION OF AMERICA STATEMENTS OF ACTIVITIES forlha years ended December 31, 2017 and E16 2017 . Pennanan?y Umeslricted Rasticbd Tohl Total Revenue and 011197 support Members'dues 128,209,303 - - 128,209,303 Program fees 10,081,009 - - 10,061,009 Contributions 77,730,379 22,053.89 2.1 07.076 101 .891296 Advertising 20,344,743 I - - 28,344,743 Member sales 3,756,416 - - 3,756,416 4,692,661 Show and exhibits 21,204,275 - - 21,204,275 22.955.39.51 1 103,517,961 1mm: income (loss). net 4.544.301 271.355 - 4.015.055 (190.700) 117.472 - (79.22312.256131 20,678,520 127.791.9411 . 27,075,345 Insurance 30011an fees 14,563,405 - 14.551405 11,527,759 Rental income 1,255,235 - - 1,255,235 Other 7.205.826 772,800 - 7.976.626 Asset-'1 released from 76511100005 . 20,230,694 (20,230,894) - - Totalrevenue andothersupport 317. 27,788 1 2,867,100 2,107,078- 32,101,966 374,831,167 155,470 376,014,476 - - 1.433.726 (93.048) - 6.841.983 120-53715") - . - . .- Expenses: 1 Program servim: . . Legislative programs 36,740,357 - - 36,740,357 63,913.73 - - 63,913,732 Pub?ca?ons 36,904,077 - - 36.904077 .355 - - 37,820,356 P0001: a?a?n 47,754,179 - - 47,754,170 54,839.356 - - 54,839,356 Shows and 6111111115 16,909,415 - 18,909,415 1 - - 19,433,011 Compe??ms 4.702.453 4.702.453 . .690 - - 5.549.690 Educa?on and Raining 7,506,318 - - 7.606.310 11,101,1 - 11,101,147 Hunts services 3.950.334 - - 3,958,334 4,213,594 - - 4.21334 Field services 11,882,064 - 11.662064 12,0961 - 12,896,136 Law enforcement 3.805.344 - 3.805.344 - 4.039.027 Recrea?onal shoo?ng 7.200.332 . - . 7.2113332 A 7,928,714 179,542,873 - - 179.542.1373 241,686,763 27 4 763 Memberservioes and acquisi?m 76,545,402 - 76,546,402 60,509,528 - 80,509,528 064 Administrative 10,125,100 - - 10,125,180 - - 10,013,054 Executiveo?ioe 32.077548 - - 32.077548 31.08297 - 31.082974 Fundraising 44,965,825, - - 44.965.825_ 47,055,530 - - . 47,065,538 Total expenses 343,257,028 - 1 - 343,257,626 . . . 419,157,657 . - 419,157,667 Change in net assets before other changes (26,130,040) 2,867,100 2,107,078 (21,155,062) (44,326,700) (41 .143.391) Unrea?zed gain on investments, net 1,472,290 767 .771 - 2.260.051 3.0041502 . 3,233,678 Unreaiized gain on derivative instrument 952.998 - - 952.998 8657017 - - 885,817 N01 gain (loss) on pension obligation 6,778,316 - 6.776.316 . (2.21 9.5761 - {2.219% Change in netassers (16,926,435) 1 3,654,871 2.107.076 (11,164,467) (42,655,657) (39,243,472! N91 assets (de?cit). beginning of year (14,853,143) 7,743,947 43.221865 36 114.690 27,602,714 75,356,162, Nerassers (de?cit), end ofyear 131,779,579} 5 11,398,818 5 45.330954 5 24,950,203 . . 36,114,090 1 1 The accompanying 00130 are an mega! 3 NATIONAL RIFLE ASSOCIATION OF AMERICA STATEMENTS OF CASH FLOWS for the years ended December 31. 2017 and 2016 Cash ?ows from operating activities: Change in net assets Adjustments to reconcile strange in net assets to net cash used in operating activities: Depreciation and amortization Provision for losses on pledges receivable Provision for losses on accounts receivable Provision for losses on Inventory Contributions pennanentiy restricted for long-tenn investment Net unrealized and realized gain on investments Unrealized gain on derivative instrument Net (gain) loss on pension obligation Net loss on disposal ofessets Changes in assets and liabilities: Decrease in pledges receivable Decrease (increase) in accounts receivable, net masses in due from af?liates Deceaee (increase) in inventories and supplies, net 03119333 in prepaid expenses Increase in ctirer assets (Decrease) increase in accounts payable Increase in accrued liabilities (Decrease) increase in defened revenue Total adjustments Net cash used in operating activities Cash ?ows ircm investing activities: Sales of investments Purchases oi investments Purchases of property and equipment Principal collections on notes receivable Net cash provided by investing activities Cash flows from ?nancing activilies: Principal payments on note payable Principal payments on lines of credit Draw downs on lines of credit and proceeds'cn note payable Proceeds from life insurance policy leans Contributions permanently restricted for long-lam investment Net cash provr Net increase (decrease) in cash and cash 353.11 {Len Castrand cash enviveients at beginnina Direar Cash and cash equivalents at end at year Supplemental disclosure of cash ?ow Cash paid during the yearfcr interest 'ded by ?nancing activities 101? (11,164,487) 2016 5 (39,243,472) 4.713.295 4.797.939 7.711 135,924 5,324,502 4.302.427 330,392 159,009 (2.144.164) (3.017.839) (6.313.424) (2.202.751) (952.993) (335.317) (3.773.313) 2.219.573 31.495 103.397 323.999 193,455 7,094,143 (14,330,399) (3,327,349) (2.391.297) 3,209,377 (5,439,529) 510,355 1,419,913 (425.433) (492,411) (5,351,923) 13,042,320 3,974,743 1,192,370 (3,921,797) 12,551,249 (3,759,532) . 9.733.933 (14,924,019) (29.459404) 27,222,671 39,503,909 (13,431,939) (27,322,439) (1,333,929) (3.353.252) - 4.532 3,901,921 7,532.69? (1,939,944) (973,451) (132,737,519) (193,393,472) 139,930,439 122,790,369 3,509,090 - 2,144,154 3,917,339 9,927,140 15,433,534 3.905.942 -2 13,213,791 13,707,322 W, 3 17,123,743 5 13,213,791 1,339,243 a 1,449,593 The accompanying notes one an integral part of these ?nancial statements. 4 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-for-pro?t corporation supported by the membership fees of public?minded citizens and clubs. Its primary purpose is to protect and defend the Constitution of the United States of America, especially the political, 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 govemments. ILA is supported principally by contributions from NRA members. Basis of Presentation The NRA publishes ?nancial statements in the annual report that include the ?nancial statements of certain af?liated entities, which are Its primary ?nancial statements for the years ended December 31. 2017 and 2016. These ?nancial statements for the years ended December 31. 2017 and 2016 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 following: the NRA (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 those estimates. Q?ssi?cation of Net Assets "3 To identify the ?nance of limitations and restrictions placed on the use ofmth'e' ms?es available to the NRA, the accounts?cfthe?NRA are maintained in three separate classes of net assets: unrestricted, temporarily restricted, and-pennanently 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. Temporarily restricted net assets represent contributions and other in?ows 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 oftime or can be ful?lled and removed by actions of the NRA pursuant to those stipulations. NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS Pennanentiy restricted net assets represent endowment contributions and other in?ows of assets whose use by the NRA are limited by donor-imposed stipuiations 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 Equivalents 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. govemment securities. The maturity date of these repurchase agreements is the next day of business. Due to the short-term nature of these agreements. the NRA does not take possession of the securities, which are instead held by the 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. 2017 and 2016. Concentrationsof Credit Risk The NRA maintains a cash balance in excess of federally insured iimits 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 ?nancial 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. "fr'ihvegmij; ?Ti" - - lnvestments-ccnsistprimarily cfmoney-marketfunds, equitysecurities. fixedincomesecurities. and alternative investments. Investments in money market funds, equity securities and ?xed income securities are canted 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- identi?cation method. To adjust the canying 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. Investments in investment partnerships are valued at fair value based on the applicable net asset value per share 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 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS by the general partnerof 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 NRA's 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 net realizable value, with costs determined using the ?rst-in, ?rst-out method. Provisions are made to reduce the inventories to net realizable value in cases of obsolescence. Property and Equipment - Prbperty and equipment are stated at cost. less accumulated depreciation. Donated assets are recorded at the ?apprajsed or estimated fair value at the time of donation. Expenditupes_tm maintenance and repairs, which do :mT?t-prolong the useful lives of the assets; are expe?s?d. Depre5ciati?-isi?computed on the straight-line method" mover the assets' estimated useful lives. Buildings and improvements?are depreciated over useful lives ranging ?whom-20 to 45-years, other property and?equipment is-depreciated over-twoto?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 defened and amortized over the life of the membership. The portion considered a contribution is recorded as dues revenue when the membership is received. 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 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS were speci?ed by the donor, temporarily restricted contributions are released from restriction and are recognized in the unrestricted net asset category. Revenue Recognition Program fees, advertising, member sales. shows and exhibit sales. and insurance administration fees are recognized as revenue when eamed. 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 ?ows (Note 8). Valuation ofJLon'oLIJved 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 ls measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired. the 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 impainnents of long-lived assets during 2017 or 2016. Outstanding Lgacies The NRA is the bene?ciary under various wills and other agreements, the total realizable amounts of which are not presently determinable. The NRA's share of such amounts is not recorded until the NRA has an In'evocable right to the bequest and the proceeds are measurable. Functional Allocation of Expenses of providing prog ram-services andsupponing 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 March 2017, the FASB issued ASU 2017-07, Compensation Retirement Bene?ts (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Bene?t Cost. ASU 2017?07 requires that an entity report the service cost component of net periodic pension and postmtirement cost in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The remaining components of net bene?t costs are required to be presented in the statement of activities separately from the service component and outside a subtotal of revenue from operations, it one is presented. The amendment further allows only the service cost component of net periodic pension and NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS postretirement costs to be eligible for capitalization. ASU 2017-07 is effective for annual periods beginning after December 15. 2017, and the interim periods included within those annual periods, with eariy adoption permitted. ASU 2017-07 will be effective for NRA beginning on January 1, 2018. 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 pattem 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, Not-fcr-Pro?t 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- tor-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 transier cf 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 full 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. 201409 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 the Internal 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 awoun?ng?standard?n' accessing?for uncertainty in income taxes, which address??s?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-likely-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% likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also add resses de?recogniticn, 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. NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS Subsequent Events The NRA evaluated subsequent events through March 7. 2018. which is the date the ?nancial statements were available to be issued. INVESTMENTS Investments as of December 31. 2017 and 2016 consist of: 2017 2016 Money market funds 8 640.820 612.527 Equity securities 38,484.411 40,289,738 Fixed income securities 3,056,353 3.766.355 Alternative investments 5.874.330 7.962.585 Other 646.822. 4.048.948 48.702.736 56,680,153 investment income for the years ended December 31. 2017 and 2016 includes the following: 2017 2016 Realized gains (losses). net 4.053.363 (1.030.927) Dividends and interest 762.293 951.699 4.815.656 (79.228) Unrealized gains. net 2.260.061 3.233.678 7,075,717 3,154,450 Interest' income of $120,000 and $120,000. earned from notes receivable for 2017 and 2016. respectively. is included In dividends and interest PLEDGES RECEIVABLE At December 31, 2017 and 2016. donors to the NRA have unconditionally promised to give amounts as follows: 2017 2016 Withinoneyear .- . - ?197.286--. Oneto?veyears 7 298.006 3?1,7531mf??f' _More than ?ve years 753.169 747.194 1.248.461 1.740.138 Less: discount of pledges receivable (18.595) (20.851) 1.229.866 1.719.287 Less: allowance for uncoilectible pledges (45.273) (202.984). 5 1.184.593 1,516,303 Pledges due in more than one year have been recorded at the present value of estimated cash ?ows, discounted by rates ranging from 0.88% to 2.22%. NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO STATEMENTS 4. ACCOUNTS RECEIVABLE Accounts receivable as of December 31, 2017 and 2016 consist of: 2017 2016 Membership 40,354,236 58,292,353 Contributions 3,119,379 3,421,398 Advertising 3,412,352 2,686,484 Other 1,353,358 1,626,608 48,239,325 66,026,843 Less: allowance for doubtful accounts 12,110,150 16,478,863 35,129,175 $49,547,960 Following are the changes In the allowance for doubtful accounts during the years ended December 31, 2017 and 2016, respectively: 2017 2016 Allowance at beginning of year 16,478,863 13,604,498 Provision for losses on accounts receivable 6,324,662 4,802,427 Write-011s, net of recoveries (10,693,375) (1,928,062) Allowance at end of year 12,110,150 16,478,863 5. INVENTORIES AND SUPPLIES Inventories and supplies as of December 31, 2017 and 2016 consist of: 2017 2016 Sales inventories 3,667,792 4,389,535 Supplies: Magazine paper 1,650,439 1,960,513 Ful?llment and promotional materials 9,048,870 11,784,041 Other 63,664 112,363 14,430,765 18,246,452 Less: obsolescence allowance 791,711 1,037,329 $13,639,054 1312,3123 - 6. NOTESRECEIVABLEJ 7, . -. Notes receivable as of December 31, 2017 and 2016 consist of: interest Rate . 2017 2016 NRA Special Contribution-Fund 4.0% 3,000,000 3,000,000 The note receivable from the SCF is a demand 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, 2017 and 2016, interest in the amount of $120,000 and $120,000 respectively, was recorded. The total interest receivable remaining at December 31, 2017 and 2016, respectively, is $3,639,073 and is included in other assets in the statements of ?nancial position. 11 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS PROPERTY AND EQUIPMENT Property and equipment as of December 31, 2017 and 2016 consist of: 2017 2016 Land 5,380,792 5,380,792 Buildings and improvements 54,253,187 53,865,603 Furniture, fixtures and equipment 17,994,728 18,563,070 77, 628, 707 77,809,465 Less: accumulated depreciation 43, 153, 547 40,473,435 34,475,160 37,336,030 Depreciation expense for the years ended December 31, 2017 and 2016 was $4,718,295 and $4,797,889, respectively. NOTES PAYABLE AND CREDIT AGREEMENTS At December 31, 2017 and 2016, $18,787,182 and $19,827,125, 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 $1,175,704 and $2,128,702 as of December 31, 2017 and 2016, respectively. The NRA maintained a $25,000,000 line of credit agreement which expires on September 30, 2018. Under the terms of this agreement, the NRA makes Interest payments on the daily outstanding principal at a variable rate based on the 30-day LIBOR rate, plus 0.60%. At December 31, 2017 and 2016, $23,333,918 and $23,010,999 was payable under the agreement at interest rates of 2.16% and 1.37%, respectively. During 2017, the NRA entered a secured loan agreement with the Foundation where the NRA's accounts receivable served as collateral, which expires on February 2, 2018. Under the terms of this agreement, the NRA makes annual interest payments of 7. 00%. in January 2018. the agreement was amended to extend the loan to June 2, 2018 with interest to be paid At December 31, 2017 000, 000 was payable under the agreement . a H. -F- ms?! On the $25, 000, 000 line o_f_ credit _agreement, the NRA _has pledged as collateral $28, 424, 067 at December 31, NRA has also pledged as collateral a Deed of Trust on the NRA Headquarters Building. The NRA is subject t9 ?nancial covenants associated with the credit agreement and lines of gredit agreements. The NRA must maintain minimum cash and investment balances. NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS The annual minimum payments related to these obligations at December 31. 2017 are as follows: 2018 29,440,926 2019 17,680,174 Total minimum future payments . 47,121,100 Interest expense forthe years ended December 31, 2017 and 2016, was $1,585,858 and $1,357,731, respectively. 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 ability 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 signi?cant managementjudgment or estimation. In certain cases, the inputs used to measure fair value may fall intodifferent levels of the fair valuehierarchy. 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 assessment of the signi?cance of a particular input to the ?fairgvahre measurement in its entirety requires judgmentgand considers factgg investment. In determining?the appiopriate levels, the NRA performs a detailed analysis of the assets and?liabilities that are "subject to fairvalueme?asurements. At each?reporting?period, all'a's?s'ets and liabilitieder" Which th'? fair? 'value measurement is based on signi?cant unobservable inputs are classi?ed as Level 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 canying amounts due to the relatively short period of time between their origination and expected realization. The carrying value of the NRA's note payable and credit agreement approximates fair value as the interest rate on the credit agreements underlying instruments fluctuate with market rates. 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 recuning basis by level within the hierarchy. As of December 31. 2017 Total Level 1 Level 2 Available-for-sale equity securities: Consumer discretionary 312,920 312,920 Consumer staples 583,095 583,095 Energy 441,004 441,004 Financial services 21 .721 21 ,721 Healthcare 355,704 355,704 Industrials 347.757 347.757 lnfonnalion technology 1,356,506 1 356,506 Materials 1,837,405 1,837,405 Mum-strategy mutual funds 33,097,623 33,097,623 Telecommunications 130,676 130,676 Total available?lor-sale equity securities 38,484,411 A 38,484,411 Available-for-sale ?xed income securities: Multi-strategy bond funds 3,056,353 3,056,353 Altemative investments: MultI-strategy fund-of-funds [measured using a net asset value per share (or its equivalent) practical expedient] 5,874,330 - Money market - 640,820 840,820 Investments atfairvalue 48,055,914 42,181,584 Other investments _.646,822 Total investments 48,702,736 2 Other?sgts multi-strategy mutual funds: . ,m A plan 2,886,533 Supplementetexsgu?vs retirementplan 7,156,982? Total other assets 4,043,515 4,043,515 - Total assets 52,746,251 346,225,099 5 - Interest rate swap (1,175,704) (1,175,704) Deferred compensation liability (2,886,533) (2,886,533) Supplemental executive retirement liability (1,156,982) . (1 .156,982) Total liabilities 5 (5.219219) $7 35 (5,219,219) NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS Available-for-sale equity securities: Consumer discretionary Consumer staples Energy Financial services Healthcare lndustrials Information technology Materials Mum-strategy mutual funds Total available-for?sale equity securities Available-for-sale ?xed income securities: Multi-strategy bond funds Alternative investments: Multi-strategy fund-of-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: Szlgefemed compensation plan ":Suppiemental executive r?tirement plan ""?Total??ther? assets Total assets interest rate swap Deferred compensation liability Supplemental executive retirement liability Total liabilities As of December31, 2016 Total Level1 Level 2 1,427,080 1 ,427,080 - 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 - 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 - 1,081,914?? 1,081 ,914 - 3,499,502 8 60,179,655 8 48,168,122 - 8 (2,128,702)? (2,128,702) (2,408,659) (2,408,659) (1,078,054) - 11,078,054)- .(5,615,415) (5,615,415) 15 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS Money market funds, equity securities and ?xed income securities are classi?ed 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 defensd compensation liability Is not publically traded and is, therefore, considered Level 2. The NRA's swap agreement is valued based on quoted values stated by the bank's mark-to-market 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 2017 2016 Unfunded Redemption Notice Fair Value Fair Value Commitments Frequency Period Multi-strategy . fund-of-funds 2,408,648 2,257,494 quarteriy 65 days Multi?strategy fund-of-funds - 2.237.032 quarterly 36 days Multi-strategy semi- fund-of-funds 3,043,894 2,635,782 annually 105 days Multi-strategy fund 421,788 832,277 - daily 1 day _s5,sr4,3so $7,962,585 - This class invests in hedge funds that pursue multiple strategies to diversify 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 advisors and market neutral strategies), and global asset allocation portfolio funds (investment in cunencies, bonds, global equities and equity indices). The fair value of the investments in_th_is_class have been estimated using the net asset? value per share of the - sue?mew - This class invests in hedge funds that-pursue- multiplestrategies todiversify risks and-reduce volatility. The hedge fund-of-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. enacted in"the Comr?nonwealth?bf'Virginiai on bY?the?State of New York on 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: 2017 2016 Legislative programs 3,693,020 1,851,049 National Firearms Museum 2,331,687 1,403,886 Education and training 2,157,671 1,495,330 Recreational Shooting 655,051 708,022 Hunter services 583,321 109,761 Competitions 164,752 97,743 Field services 138,284 105,630 Law enforcement 104,250 61,503 Community outreach 45,374 53,536 Other 733,135 271,993 Other, passage of time 792,273 1,585,494 Total 11,398,818 7,743,947 Permanently restricted net assets are restricted to investment in perpetuity. the income from which is expendable to support: 2017 2016 Legislative programs 19,195,883 $17,735,887 National Firearms Museum 7,808,167 7,802,467 Hunter services 5,185,764 4,698,122 Education and training 4,484,291 4,438,382 Recreational Shooting 2,615,338 2,610,338 Competitions 1,317,235 - 1,401,044 Law enforcement 608,541 608,541 Field services 145,138 145,138 Community outreach 16,289 16,289 Other - . s. 3,954,318 3,767,678 Total 6 45,330,964 $43,223,886 The NRA follows the_ funds. The Codi?cation addresses accounting?, . .. issues related to guidelines in the Uniform of institutional Funds Act of 2006 which was adopted by the National Conferences of Commissioners on Uniform State Laws in July 2006 and 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 uncollectible pledges. The remaining portion of donor-restricted endowment funds not classi?ed in permanently restricted net assets is classi?ed as temporarily restricted net assets until these amounts are appropriated for expenditure by the NRA in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the NRA considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: I The duration and preservation of the fund - The purposes of the NRA and donor-restricted endowment fund 17 NATIONAL RIFLE 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 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 funding 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 restricted net assets until appropriated for expenditure In the form of program spending. 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 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, 2017 and 2016 are as follows: December 31, 2017 Temporarily Permanently Unrestricted Restricted Restricted Endowment net assets, beginning of year $(1n420?47) 4.755237 ?3.223.336 $45.559.525 Interest and dividends, net - 1,725,921 - 1,725,921 Net appreciation - 3,279,468 3,279,468 Contributions - - 2,107,078 2,107,078 Amount appropriated for expenditure - (1,791,995) - (1,791,995) Other changes 1,023,911 (1 ,023,91 1) - - Endowment net assets, and of year (396,736) 6,955,770 $45,330,964 $51,889,998 December 31, 2016 Temporarily Permanently Seamed Em Endowment net assets, beginning of yes? ?1331509) 5 3.155.932 5540205947 ?23311470? ?Interesta?d 698,691 Net appreciation - 2,005,704 - 2,005,704 Contributions - - 3,017,839 3,017,839 Amount appropriated forexpenditure_ - (1,484,178) - (1,484,178) Other changes (389,138)" 389,138 - - Endowment net assets, and of year $(1,420,647) 4,766,287 $43,223,888 $46,569,526 18 The related assets are included in due from af?liates, investments and pledges receivable. NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS 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, 2017 and 2016, were $396,736 and $1,420,647, respectively. The de?ciencies in the donor-restricted endowment funds at December 31, 2017, resulted from unfavorable market fluctuations 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 accmed. Effective January 1, 2008, the NRA amended the Plan so that employees 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-tenn, risk-controlled 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, 2017 and 2016 consist of the following: 2017 2016 Service cost - bene?ts eamed during the year 3,303,061 3,375,329 Interest cost on projected bene?t obligation 5,648,941 5,644,489 Return on plan assets (6,244,120) (6,168,124) Recognized net actuarial loss 3,450,270 2,905,363 Net amortization and deferral 98,035 78,741 Net periodic bene?t cost 6,256,187 5,835,798 Other changes (6,778,316) 2,219,576 Total recognized in statements of activities (522,129) - 8,055,374 The following table sets forth the changes in the de?ned bene?t rpension plan' 5 funded status and the amount 2017-?- Change to bene?t obligation: Projected bene?t obligation at beginning of year 137,051,874 127,548,095 Service cost 3,303,061 3,375,329 Interest cost a 2 5,648,941 5,644,489 Actuarial loss 5,519,857 4,155,647 Bene?ts paid (3,771,868) (3,671,686) Plan amendments 205,397 Projected bene?tobligation atend ofyear 147,957,262 137,051,874 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS 2017 2016 Change in plan assets: Fair value of plan assets at beginning of year 86,832,575 80,267,170 Actual retum on plan assets 15,199,385 5,120,091 Employer contributions . - ?5,117,000 Bene?ts paid (3,771,868) (3,671,686) Fair value of plan assets at end of year 98,260,092 86,832,575 Accrued pension costs re?ected in the statements of ?nancial position in accrued liabilities (49,697,170) (50,219,299) Accumulated bene?t obligation (132,178,862) (121,767,299) Amounts recognized in unrestricted net assets: Total net loss 32,485,333 39,371,012 Prior service cost 771,531 664,168 Total 33,256,864 40,035,180 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 $2,450,084 and $94,340, respectively. The following weighted-average assumptions were used in calculating the above bene?t obligations, net periodlc bene?t cost and fair value of plan assets at December 31, 2017 and 2016: 2017 2016 Discount rate used to determine bene?t obligation 3.90% 4.15% Discount rate used to determine net periodic bene?t cost 4.15% 4.50% Rate of compensation increase 4.00% 4.00% Expected return on plan assets 8.00% 8.00% The'basis used to deterrnine the overall expected long-tenn rate of return? on assets utilizing the target asset allocations established within the plan is based on historical returns. The?asset'allocationt??gy is-based on several factors including: The relationshipbetween the-current and projected assets of the Planand the projected-actuarial liability-? stream; - The historical periorrnance of capital markets adjusted for the perception of future short? and long-tenn capital market performance; - The perception of future economic conditions, including in?ation 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 ?ie 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 misvaluations across major asset classes or investment styles, or to align the current asset mix with strategic targets. 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. 2017 and 2016. 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 adviser using the audited ?nancial statements of the underlying investments. The individual annuities invest in separate accounts, which track the performance of the speci?c 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. Furthermore, 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. Investments measured at net asset value (or equivalent) as a practical expedient have not been classi?ed in the fair value hierarchy. The amounts of investments are included below. At December 31, 2017 and 2016, the fair value and the asset allocation of the NRA's pension plan assets was as follows: 201? 2016 Asset category: Multi-strategy equity Mutual funds/PSAs 61,965,743 63.0% 53,763,515 61.9% Mul?-strategy ?xed income Mutual fundsl PSAs 36,014,604 36.7 30,791,748 35.5 Cash 279,745 0.3 2,277,312 2.6 98,260,092 100.0% 8 86,832,575 100.0% 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, 2018 are $7,800,000. - The following plan year bene?t payments, which re?ect expected future service, as appropriate, are expected tops paid ngrithe __n__ext ?scal years: . . .- - 2018 4,772,920 2019 2020 5,641 ,086 2021 6,180,041 2022 6,393,532 2023?2027 (total) 8 37,859,220 "n 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 pre-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 $2,430,068 and $2,470,309 for the years ended December 31, 2017 and 2016, respectively. 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 bene?ciaries. 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, 2017 and 2016, the NRA had assets relating to the cash surrender values of the whole life insurance policies of $4,182,192 and $4,048,948, respectively. At December 31, 2017 and 2016, the NRA had leans against the whole life insurance policies of $3,535,370 and respectively, with the net included in investments on the statement of ?nancial position. The policies serve as the underlying collateral for the loans and interest on the loans is accrued at rates between 4.20% and 4.25%. The NRA had an accrued postre?rement liability of $275,795 and $232,873 at December 31, 2017 and 2016, respectively. Deiemed compensation expense for the years ended December 31, 2017 and 2016 was $71,973 and 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, 2017 and 2018. At December 31, 2017 and 2016, the NRA held assets, and had related obligations, relating to this plan of approximately $2.9 million and $2.4 million, respectively. The NRA has also established a 457(t) supplemental executive retirement plan for the bene?t of certain executives. At December 31, 2017 and 2016, the NRA held assets, and had related obligations, relating to the plan of approximately $1,157,000 and $1,078,000, respectively. The NRA incurred deferred compensation expense of $206,700 and $206,700 for the years ended December 31, 2017 and 2016, respectively. For both plans, the assets are included in other assets and the liabilities are included in accnred liabilities on the statements of ?nancial position. RENTAL OPERATIONS AS LESSOR The NRA leases aportion 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. is a schedule of minimum future rentals on non?cancellabli??'erating leases as of December 31, 2017:? 8?2 2018 2019 1,114,534 2020 989,732 2021 896,112 2022 688,983 2023 Thereafter 2,874,114 Total minimum future rentals 7,930,402 Total rental income for the years ended December 31, 2017 and 2016 was $1,255,235 and $1,433,726, respectively. NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS 13. COMMITMENTS AND Leases 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, 2017 are as follows: 2018 1,412,210 2019 1,423,678 2020 838,767 2021 462,875 2022 194,912, Total minimum payments required 4,332,442 Total lease expense for the years ended December 31, 2017 and 2016 was $1,298,089 and $965,272, respectively. Litigation and claims From time to time, the NRA may be subject to various legal proceedings, which are incidental to the ordinary course of business. In the opinion of the management of the NRA, there are no material pending legal proceedings to which the NRA is directly 3 party. 14. RELATED PARTIES The af?liated with the Foundation, the CRDF, SCF and the FAF by virt?e 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 ?fprovides-certain bene?ts to the af?liates at use of- of?ce space and other . administrative and support services. Management has determined that the fair value of these bene?ts is amounts are reflected in these ?nancialstatements. a, a 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. These expenses totaled $6,017,801 and $8,862,322 for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017 and 2016, $29,542,563 and $27,124,532 respectively, was owed to the NRA and included in due from af?liates for reimbursements and funds still held by the Foundation. In addition, certain quali?ed NRA programs were funded by Foundation grants totaling $18,812,141 and $19,276,495 for the years ended December 31, 2017 and 2016, respectively. The CRDF reimburses the NRA for general operating expenses paid by the NRA on the CRDF's behalf. As of December 31, 2017 and 2016, $1,040,733 and $23,549, respectively, was owed to the NRA for general operating expenses and included in due from af?liates. NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS 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, 2017 and 2016, $148,679 and $256,054, 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. See also Note 6. The NRA paid administrative and fundraising expenses of $2,968,011 and $38,762,499 for the years ended December 31, 2017 and 2016, respectively, on behalf of the PVF.