American Medical
Association and
Subsidiaries
Consolidated Financial Statements as of and for the
Years Ended December 31, 2018 and 2017, Schedule
of Expenditures of Federal Awards for the Year Ended
December 31, 2018, and Independent Auditors’
Reports in accordance with Government Auditing
Standards and the Uniform Guidance

 AMERICAN MEDICAL ASSOCIATION AND SUBSIDIARIES
TABLE OF CONTENTS

Page
INDEPENDENT AUDITORS’ REPORT

1–2

CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE
YEARS ENDED DECEMBER 31, 2018 AND 2017:
Statements of Activities

3

Statements of Financial Position

4

Statements of Cash Flows

5

Notes to Consolidated Financial Statements

6–18

INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN
AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH GOVERNMENT AUDITING STANDARDS

19–20

INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL
PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE
REQUIRED BY THE UNIFORM GUIDANCE

21–22

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS:

23

Schedule of Expenditures of Federal Awards for the Year Ended December 31, 2018

24

Notes to the Schedule of Expenditures of Federal Awards for the
Year Ended December 31, 2018

25

SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE
YEAR ENDED DECEMBER 31, 2018
SUMMARY SCHEDULE OF PRIOR-YEAR AUDIT FINDINGS FOR THE
YEAR ENDED DECEMBER 31, 2018

26–27
28

 Independent Auditor’s Report
The Board of Trustees of
American Medical Association:
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of the American Medical Association (the
“AMA”) and subsidiaries, which comprise the consolidated statements of financial position as of December 31,
2018 and 2017, and the related consolidated statements of activities, and cash flows for the years then ended, and the
related notes to the consolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial 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 consolidated
financial 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 consolidated financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of America and
the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller
General of the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the AMA’s preparation and
fair presentation of the consolidated financial 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 AMA’s internal
control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of significant accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
consolidated financial position of the AMA and subsidiaries as of December 31, 2018 and 2017, and the results of
its activities and changes in its equity and its cash flows for the years then ended in accordance with accounting
principles generally accepted in the United States of America.

-1-

 Emphasis of Matter
As discussed in Notes 3 and 12 to the consolidated financial statements, the AMA has changed its method of
accounting for leases in 2018 due to the early adoption of Accounting Standards Update 2016-02, Leases. Our
opinion is not modified with respect to that matter.
Other Matters
Other Information
Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole.
The schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200,
Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented
for purposes of additional analysis and is not a required part of the consolidated financial statements. Such
information is the responsibility of management and was derived from and relates directly to the underlying
accounting and other records used to prepare the consolidated financial statements. The information has been
subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain
additional procedures, including comparing and reconciling such information directly to the underlying accounting
and other records used to prepare the consolidated financial statements or to the consolidated financial statements
themselves, and other additional procedures in accordance with auditing standards generally accepted in the United
States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated, in all material
respects, in relation to the consolidated financial statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated February 15, 2019 on our
consideration of the AMA’s internal control over financial reporting and on our tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is
solely to describe the scope of our testing of internal control over financial reporting and compliance and the results
of that testing, and not to provide an opinion on the effectiveness of the AMA’s internal control over financial
reporting or on compliance. That report is an integral part of an audit performed in accordance with Government
Auditing Standards in considering the AMA’s internal control over financial reporting and compliance.

February 15, 2019

-2-

 American Medical Association and Subsidiaries
Consolidated Statements of Activities
Years Ended December 31

(in millions)
 

2018
Revenues
Membership dues
Advertising
Periodical print subscription revenues
Periodical online revenues
Other publishing revenue
Books, newsletters and online product sales
Royalties and credentialing products
Insurance commissions
Investment income (Note 4)
Grants and other income
Total revenues

$

36.4
14.9
4.7
28.5
13.9
30.5
172.6
36.2
13.3
10.3
361.3

2017
$

37.9
14.1
5.2
26.2
12.8
31.8
162.3
35.8
11.0
10.5
347.6

Expenses
Cost of products sold and selling expenses
Contribution to general and administrative expenses

27.7
333.6

28.2
319.4

General and administrative expenses
Compensation and benefits
Occupancy
Travel and meetings
Technology costs
Marketing and promotion
Professional services and consulting
Other operating expenses
Total general and administrative expenses

191.6
19.7
15.3
24.2
13.4
25.4
20.9
310.5

171.0
18.4
14.4
23.0
20.0
28.7
21.8
297.3

Operating results before income taxes
Income taxes (Note 9)
Net operating results

23.1
5.1
18.0

22.1
8.3
13.8

Non-operating items
Net (loss) gain on investments (Note 4)
Other
Total non-operating items

(39.7)
(39.7)

45.3
0.1
45.4

(21.7)

59.2

10.8
(10.9)

11.4
70.6

0.3
(0.3)
(10.9)
559.7
$ 548.8

0.3
(0.2)
0.1
70.7
489.0
$ 559.7

Revenues (less than) in excess of expenses
Changes in defined benefit postretirement plans, other than periodic
expense, net of tax (Notes 7, 8 and 9)
Change in association equity
Change in donor restricted association equity
Restricted contributions
Net assets released from restriction
Change in association equity – donor restricted
Change in total association equity
Total association equity at beginning of year
Total association equity at end of year
See accompanying notes to the consolidated financial statements.

-3-

 American Medical Association and Subsidiaries
Consolidated Statements of Financial Position
As of December 31

(in millions)

2018
Assets
Cash, cash equivalents and donor-restricted cash
Fiduciary funds (Note 2)
Accounts receivable and other receivables, net of an allowance for
doubtful accounts of $0.2 in 2018 and $0.1 in 2017
Inventories
Prepaid expenses and deposits
Deferred income taxes (Note 9)
Investments (Note 4)
Property and equipment, net (Note 6)
Operating lease right-of-use assets (Notes 3 and 12)
Prepaid pension costs (Note 8)
Other assets (Note 5)

Liabilities, deferred revenue and association equity
Liabilities
Accounts payable, accrued expenses and other liabilities
Accrued payroll and employee benefits (Notes 7 and 8)
Insurance premiums and other fiduciary funds payable
Income taxes payable (Note 9)
Operating lease liability (Notes 3 and 12)
Deferred tenant improvement allowances (Notes 3 & 10)
Deferred rent obligations (Notes 3 & 11)

Deferred revenue
Membership dues
Subscriptions, licensing, insurance commissions and royalties
Grants and other

Association equity
Donor-restricted association equity
Total Association equity

See accompanying notes to the consolidated financial statements.

-4-

$

41.3
20.7

2017
$

48.0
20.1

56.7
2.2
6.2
3.7
655.1
46.2
60.7
7.1
$ 899.9

59.6
2.3
5.9
4.4
653.4
47.1
1.1
6.8
$ 848.7

$

$

15.6
134.1
20.6
1.2
99.2
270.7

16.7
135.9
20.5
1.9
17.1
22.5
214.6

16.1
61.7
2.6
80.4

17.0
54.4
3.0
74.4

547.1
1.7
548.8
$ 899.9

558.0
1.7
559.7
$ 848.7

 American Medical Association and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31

(in millions)

2018
Cash flows from operating activities
Change in total association equity

$

Adjustments to reconcile change in association equity
to net cash provided by operating activities
Depreciation and amortization
Pension and postretirement health care expense
Net loss (gain) on investments
Noncash credit for changes in defined benefit
postretirement plans other than periodic expense, net of tax
Other
Changes in assets and liabilities
Accounts receivable and other receivables
Fiduciary funds, net of payable
Inventories
Prepaid expenses and deposits
Deferred income taxes
Accounts payable, accrued liabilities and income taxes
Deferred rent obligations and tenant improvement allowances
Deferred revenue
Net cash provided by operating activities
Cash flows from investing activities
Purchase of property and equipment
Purchase of investments
Proceeds from sale of investments
Net cash used in investing activities
Net change in cash, cash equivalents and donor restricted cash
Cash, cash equivalents and donor restricted cash at beginning of year

(10.9)

2017
$

70.7

12.1
8.5
39.7

11.9
8.3
(45.3)

(10.8)
0.3

(11.4)
0.4

2.7
(0.5)
0.1
(0.3)
(0.1)
0.2
0.6
6.0
47.6

(19.5)
0.9
0.1
(0.6)
(0.6)
1.4
1.2
22.5
40.0

(12.9)
(412.6)
371.2
(54.3)

(10.3)
(331.7)
321.1
(20.9)

(6.7)
48.0

19.1
28.9

Cash, cash equivalents and donor restricted cash at end of year

$

41.3

$

48.0

Noncash investing activities
Accounts payable for property and equipment additions

$

0.3

$

0.7

See accompanying notes to the consolidated financial statements.

-5-

 1.

Nature of operations

amounts of assets, liabilities, revenues and expenses as
reflected in the consolidated financial statements.
Actual results could differ from estimates.

The American Medical Association (AMA) is a
national professional association of physicians with
approximately 250 thousand members. The AMA
serves the medical community and the public through
standard setting and implementation in the areas of
science, medical education, improving health
outcomes, delivery and payment systems, ethics,
representation and advocacy, policy development, and
image and identity building. The AMA provides
information and services to hundreds of thousands of
physicians and includes journal and book publishing,
physician credentialing, database licensing, insurance
and other professional services for physicians.

Cash equivalents
Cash equivalents consist of liquid investments with
original maturities of three months or less and are
recorded at cost, which approximates fair value.
Fiduciary funds
One of the AMA’s subsidiaries, the AMA Insurance
Agency, Inc. (Agency), in its capacity as an insurance
broker, collects premiums from the insured and, after
deducting its commission, remits the premiums to the
underwriter of the insurance coverage. Unremitted
insurance premiums are invested on a short-term basis
and are held in a fiduciary capacity. The AMA also
collects and holds contributions on behalf of a separate
unincorporated entity with $2.6 million and $2.4
million held at December 31, 2018 and 2017,
respectively.

The AMA classifies all association results as revenues
and expenses in the consolidated statements of
activities, except non-operating items. Non-operating
items include net realized and unrealized gains and
losses on investments and other non-recurring income
or expense.
Donor-restricted equity includes contributions for
physician liability reform and scope of practice. These
funds are restricted for use to areas such as national
tort reform campaign efforts and are not available for
general use within the AMA.

Inventories

2.

Property and equipment

Inventories, consisting primarily of books and paper
for publications, are valued at the lower of cost or
market.

Significant accounting policies

Property and equipment are carried at cost, less
accumulated
depreciation
and
amortization.
Depreciation is computed using the straight-line
method over the estimated useful lives of the assets.
Equipment and software are depreciated or amortized
over three to 10 years. Leasehold improvements are
depreciated over the shorter of the estimated useful
lives or the remaining lease term.

Consolidation policy
The accompanying consolidated financial statements
include the accounts of the AMA and its subsidiaries
(collectively, the AMA). In 2015, AMA established a
for-profit subsidiary, Health2047, Inc. (Health2047)
designed to enhance AMA’s ability to contribute to
improvements in the U.S. health care system and
population health. In 2017, Health2047 established a
for-profit corporation, Akiri, Inc. (Akiri), designed to
improve the securing, sharing and use of trusted health
data. In 2018, Health2047 established a second forprofit corporation, First Mile Care, Inc. (FMC), that
intends to create a platform, tools and support to
combat pre-diabetes in the community. As of
December 31, 2018, Health2047 has consolidated the
operations of both Akiri and FMC. All intercompany
transactions have been eliminated.

Revenue recognition
Revenue is recognized upon transfer of control of
promised products or services to customers in an
amount that reflects the consideration that AMA
expects to receive in exchange for those products or
services. AMA enters into contracts that generally
include only one product or service and as such, are
distinct and accounted for as separate performance
obligations. Revenue is recognized net of allowances
for returns and any taxes collected from customers,
which are subsequently remitted to governmental
authorities.

Use of estimates
Preparation of financial statements in conformity with
accounting principles generally accepted (GAAP) in
the United States of America requires management to
make estimates and assumptions that affect reported

-6-

 Prepaid dues are included as deferred membership
dues revenue in the consolidated statements of
financial position. Prepayments by customers in
advance of the subscription, royalty or insurance
coverage period are recorded as deferred
subscriptions, licensing, insurance commissions and
royalty revenue in the consolidated statements of
financial position.

Nature of Products and Services
Membership dues are deferred and recognized as
revenue in equal monthly amounts during the
applicable membership year, which is a calendar year.
Dues from lifetime memberships are recognized as
revenue over the approximate life of the member.
Licensing and subscriptions to periodicals, site licenses,
newsletters or other online products are recognized as
revenue ratably over the terms of the subscriptions or
service period. Advertising revenue and direct
publication costs are recognized in the period the
related periodical is issued. Book and product sales are
recognized at the time the book or product is shipped
or otherwise delivered to the customer. Royalties are
recognized as revenue over the royalty term. Insurance
brokerage commissions on individual policies are
recognized as revenue on the date they become
effective or are renewed, to the extent services under
the policies are complete. Brokerage commissions or
plan rebates on the group products are recognized as
revenue ratably over the term of the contract as
services are rendered.

Income taxes
The AMA is an exempt organization as defined by
Section 501(c)(6) of the Internal Revenue Code and is
subject to income taxes only on income determined to
be unrelated business taxable income. The AMA’s
subsidiaries are taxable entities and are subject to
income taxes.
Reclassifications
Subsequent to the issuance of the 2017 financial
statements, management adopted Accounting
Standards Update (ASU) No. 2016-14, Presentation of
Financial Statements of Not for Profit Entities which
changed the presentation within the Functional
Expense note. As a result, management conformed the
2017 amounts to the 2018 presentation.

Contract Balances
Timing of revenue recognition may differ from the
timing of invoicing to customers. AMA records a
receivable when revenue is recognized. For agreements
covering subscription or service periods, AMA
generally records a receivable related to revenue
recognized for the subscription, license or royalty
period. For sales of books and products, AMA records
a receivable at the time the product is shipped or made
available. These amounts are included in accounts
receivable on the statements of financial position and
the balance, net of allowance for doubtful accounts,
was $54.7 million and $58.3 million as of December
31, 2018 and 2017, respectively.

3.

New accounting standards update

In May 2014, the Financial Accounting Standards
Board (FASB) issued ASU No. 2014-09, Revenue
from Contracts with Customers. This requires 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. Under the standard, revenue is
recognized when a customer obtains control of
promised goods or services in an amount that reflects
the consideration the entity expects to receive in
exchange for those goods or services. In addition, the
standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows
arising from contracts with customers. The ASU
replaces most existing revenue recognition guidance in
U.S. GAAP. The FASB deferred the effective date of
the new recognition standard and it is now effective
for the AMA for years beginning after December 31,
2018. Early adoption is permitted and AMA adopted
this standard in 2018. Adoption of the new standard
did not have a material impact on AMA’s consolidated
financial statements. See Note 2 for additional
information.

The allowance for doubtful accounts reflects AMA’s
best estimate of probable losses inherent in the
accounts receivable balance. The allowance is based on
historical experience and other currently available
evidence.
Payment terms and conditions vary by contract type,
although terms generally include a requirement of
payment within 30 to 60 days. Some annual licensing
agreements carry longer payment terms. In instances
where the timing of revenue recognition differs from
the timing of invoicing, we have determined our
contracts generally do not include a significant
financing component.

-7-

 other components of net benefit costs will be
presented in the income statement separately from the
service cost component and outside a subtotal of
income from operations. ASU No. 2017-07 is effective
for the AMA for years beginning after December 15,
2018, but early adoption is permitted. The AMA
estimates that there will be no impact on pension
expense due to the expected plan termination in 2019,
and approximately $0.4 million of postretirement
healthcare expense will be reclassified from operating
expense to a separate line outside of income from
operations. Amounts on the statement of financial
position sheet will be unchanged. See Note 7 for more
information on the expected plan termination.

In February 2016, the FASB issued ASU No. 2016-02,
Leases. ASU No. 2016-02 requires a lessee to recognize
a liability to make lease payments and an asset
representing its right to use the underlying asset for the
lease term in the statement of financial position for
both operating and capital leases. Topic 842 was
subsequently amended by ASU No. 2018-01, Land
Easement Practical Expedient for Transition to Topic 842;
ASU No. 2018-10, Codification Improvements to Topic 842,
Leases; and ASU No. 2018-11, Targeted Improvements.
The new standard establishes a right-of-use (ROU)
model that requires lessees to recognize a ROU asset
and lease liability on the balance sheet for all leases
with a term longer than 12 months. AMA adopted the
new standard on January 1, 2018 and has used that
date as the date of initial application. Consequently,
financial information will not be updated and the
disclosures required under the new standard will not be
provided for periods before January 1, 2018. Adoption
of this standard as of January 1, 2018 resulted in (1) the
recognition of $61.4 million in new ROU assets and
$101 million in lease liabilities on AMA’s consolidated
statements of financial position for office and
equipment operating leases; (2) the derecognition of
$22.5 million in liabilities for deferred rent expense;
and (3) the derecognition of $17.1 million in liabilities
for tenant allowances received by AMA from landlords
as lease incentives. There is no material impact on the
consolidated statements of activities. See Note 12 for
additional information.

In October 2018, the FASB issued ASU No. 2018-15,
Customer’s Accounting for Implementation Costs Incurred in a
Cloud Computing Arrangement That Is a Service Contract.
This aligns the accounting for costs to implement a
cloud computing arrangement that is a service with the
guidance on capitalizing costs for developing or
obtaining internal-use software. The new standard is
effective for the AMA for years beginning after
December 15, 2020. There will be no material impact
on the AMA’s financial statements upon adoption.
4.

Investments

Investments include marketable securities and a private
equity investment that are carried at fair value.

In August 2016, the FASB issued ASU No. 2016-14,
Presentation of Financial Statements of Not for Profit Entities.
This reexamines existing standards for financial
statement presentation by not for profit entities (NFP),
focusing on improving net asset classification
requirements and information provided in financial
statements and notes about liquidity, financial
performance, and cash flows, as well as enhancement
of disclosures about governing board imposed
restrictions. ASU No. 2016-14 is effective for the
AMA for years beginning after December 31, 2017.
The adoption of this standard expanded certain
footnote disclosures but did not have an impact on
AMA’s consolidated financial statements. See Note 13
for required disclosure on availability of financial assets
and liquidity and Note 16 for an analysis of expenses
by both natural and functional classifications.

In determining fair value, the AMA uses various
valuation approaches. The FASB’s ASC Topic 820,
Fair Value Measurements and Disclosures, establishes a
hierarchy for inputs used in measuring fair value that
maximizes the use of observable inputs and minimizes
the use of unobservable inputs by requiring that the
most observable inputs be used when available.
Observable inputs are inputs that market participants
would use in pricing the asset based on market data
obtained from sources independent of the
organization. Unobservable inputs are inputs that
would reflect an organization’s assumptions about the
assumptions market participants would use in pricing
the asset developed based on the best information
available in the circumstances. The hierarchy is broken
down into three levels based on the observability of
inputs as follows:

In March 2017, the FASB issued ASU No. 2017-07,
Compensation Retirement Benefits (Topic 715): Improving the
Presentation of the Net Periodic Cost and Net Periodic
Postretirement Benefit Cost. This requires an employer to
report the service cost component of retirement
benefits in the same line item or items as the other
compensation costs arising from services rendered by
the pertinent employees during the period while the

Level 1—Valuations based on quoted prices in active
markets for identical assets that the organization has
the ability to access. Since valuations are based on
quoted prices that are readily and regularly available in
an active market, valuation of these products does not
entail a significant degree of judgment.

-8-

 Level 2—Valuations based on one or more quoted
prices in markets that are not active or for which all
significant inputs are observable, either directly or
indirectly.

quotations (where observable) or bond spreads. If the
spread data does not reference the issuer, then data
that reference a comparable issuer are used. Corporate
debt securities are generally categorized in Level 2 of
the fair value hierarchy.

Level 3—Valuations based on inputs that are
unobservable and significant to the overall fair value
measurement.

Foreign and state government securities are valued
using quoted prices in active markets when available.
To the extent quoted prices are not available, fair value
is determined based on interest rate yield curves, crosscurrency basis index spreads, and country credit
spreads for structures similar to the bond in terms of
issuer, maturity, and seniority. These investments are
generally categorized in Level 2 of the fair value
hierarchy.

The availability of observable inputs can vary from
instrument to instrument and is affected by a wide
variety of factors, including, for example, the liquidity
of markets and other characteristics particular to the
transaction. To the extent that valuation is based on
models or inputs that are less observable or
unobservable in the market, the determination of fair
value requires more judgment.

Investments also include investments in a diversified
closed end private equity fund with a focus on buyout
opportunities in the United States and the European
Union, as well as investments in a venture capital fund
focused on companies developing promising health
care technologies that can be commercialized into
revolutionary products and services that improve the
practice of medicine and the delivery and management
of health care. The investments are not redeemable
and distributions are received through liquidation of
the underlying assets of the funds. It is estimated that
the underlying assets will be liquidated over the next
four to ten years. The fair value estimates of these
investments are based on NAV as provided by the
investment manager. Unfunded commitments as of
December 31, 2018 totaled $32.8 million.

The AMA uses prices and inputs that are current as of
the measurement date, obtained through a third-party
custodian from independent pricing services.
A description of the valuation techniques applied to
the major categories of investments measured at fair
value is outlined below.
Exchange-traded equity securities are valued based on
quoted prices from the exchange. To the extent these
securities are actively traded, valuation adjustments are
not applied and they are categorized in Level 1 of the
fair value hierarchy.
Mutual funds are open-ended Securities and Exchange
Commission (SEC) registered investment funds with a
daily net asset value (NAV). The mutual funds allow
investors to sell their interests to the fund at the
published daily NAV, with no restrictions on
redemptions. These mutual funds are categorized in
Level 1 of the fair value hierarchy.

The AMA manages its investments in accordance with
Board-approved investment policies that establish
investment objectives of real inflation-adjusted growth
over the investment time horizon, with diversification
to provide a balance between long-term growth
objectives and potential liquidity needs.
The following table presents information about the
AMA’s investments measured at fair value as of
December 31. In accordance with Subtopic 820-10,
investments that are measured at fair value using the
NAV per share (or its equivalent) practical expedient
have not been classified in the fair value hierarchy. The
fair value amounts presented in this table are intended
to permit reconciliation of the fair value hierarchy to
the amounts presented in the statements of financial
position.

U.S. government securities are valued using quoted
prices provided by a vendor or broker-dealer. These
securities are categorized in Level 2 of the fair value
hierarchy, as it is difficult for the custodian to
accurately assess at a security level whether a quoted
trade on a bond represents an active market.
U.S. government agency securities consist of two
categories of agency issued debt. Non-callable agency
issued debt securities are generally valued using dealer
quotes. Callable agency issued debt securities are
valued by benchmarking model-derived prices to
quoted market prices and trade data for identical or
comparable securities. Agency issued debt securities
are categorized in Level 2 of the fair value hierarchy.
The fair value of corporate debt securities is estimated
using recently executed transactions, market price

-9-

 2018

2017

Level 1 – Quoted prices in active
market for identical securities
Equity securities
$ 271.0
Fixed-income mutual funds
15.7
286.7

$ 312.1
15.6
327.7

Level 2 – Significant other
observable inputs
Debt securities
Corporate
U.S. government and
federal agency
Foreign government
U.S. state government

Level 3 – Significant
Unobservable inputs
Other investments measured
at NAV – Private equity and
venture capital funds
Investments

89.3

90.4

238.5
25.9
0.2
353.9

200.7
30.0
0.3
321.4

-

-

5.

Other assets

Other assets include investments in mutual funds
maintained in separate accounts designated for various
nonqualified benefit plans that are not available for
operations. Mutual funds are open-ended SEC
registered investment funds with a daily NAV. The
mutual funds allow investors to sell their interests to
the fund at the published daily NAV, with no
restrictions on redemptions. These mutual funds are
categorized in Level 1 of the fair value hierarchy. The
investments totaled $5.9 million and $6.8 million at
2018 and 2017, respectively.
Expenses related to the development of custom
applications pursuant to a customer contract have been
deferred until completion of development and
recognition of the revenue under the contract. These
costs were deferred in 2018 and total $1.2 million.
6.

Property and equipment

Property and equipment at December 31 consists of:
14.5
$ 655.1

4.3
$ 653.4

2018

Interest and dividends are included in investment
income as operating revenue while realized and
unrealized gains and losses are included as a
component of non-operating items.

Leasehold improvements
Furniture and office equipment
Information technology
hardware and software

Investment income consists of:

Accumulated depreciation
and amortization

Investment dividend
and interest income
Management fees

2018

2017

$ 15.8
(2.5)
$ 13.3

$ 13.5
(2.5)
$ 11.0

7.

Realized gains on
investments, net
Unrealized gains on
investments, net

2017

$ 15.2

$ 12.0

(54.9)
$ (39.7)

33.3
$ 45.3

$ 37.6
18.7

$ 35.9
18.2

97.9
154.2

99.4
153.5

(108.0)
$ 46.2

(106.4)
$ 47.1

Retirement pension and savings plans

The AMA has a defined benefit pension plan covering
eligible salaried and hourly employees. The plan is
designed to pay a monthly retirement benefit that,
together with Social Security benefits, provides
retirement income based on employees’ earnings, age
and years of service. Other employers participate in
this plan and assets and liabilities are allocated between
the AMA and the other employers.

Non-operating items include:
2018

2017

The AMA amended the pension plan to freeze pension
benefits as of December 31, 2002. After that date, no
individual can become a participant in the plan and no
further benefits accrue under the plan. Individuals not
vested as of that date were credited for future years of
service for vesting purposes only. As a result, the
projected benefit obligation is equal to the accumulated
benefit obligation for this plan.

- 10 -

 In June 2018 the AMA adopted plan amendments that
terminated the pension plan effective October 31,
2018 with an expected distribution of all plan assets in
mid- to late-2019. Plan participants will be given the
option to accept either a lump-sum payment,
immediate annuity or deferral of payment until
retirement through a group annuity contract purchased
from an insurance company selected by AMA. The
benefit obligation as of December 31, 2018 includes
actuarial assumptions regarding the payment of lump
sum distributions in 2019 and the cost of purchasing
an annuity contract for participants deferring receipt of
payment until retirement.

2018
Actuarial losses
Prior service cost

$ 36.7
1.6
$ 38.3

Change in benefit obligation
Benefit obligation
at beginning of year
Interest cost
Benefits paid
Plan amendments
Actuarial (gain) loss
Benefit obligation
at end of year

The weighted-average assumptions used in
determining the December 31 benefit obligations were:

Change in plan assets
Fair value of plan assets
at beginning of year
Return on plan assets
Benefits paid
Fair value of plan assets
at end of year

2018
Discount rate

2017

$ 124.0
4.0
(10.9)
1.6
(1.2)

$ 123.6
4.5
(6.6)
2.5

$ 117.5

$ 124.0

$ 125.1
(0.7)
(10.9)

$ 119.5
12.2
(6.6)

$ 113.5

$ 125.1

Fair value of plan assets
Projected benefit obligation
(Accrued) prepaid pension costs

$ 113.5
117.5
$ (4.0)

2017

4.1%

3.4%

The AMA recognizes pension expense in its
consolidated statements of activities. The provisions of
ASC Topic 958-715 require the AMA to recognize
settlement charges based on the lump-sum benefit
payments in 2018 and 2017. The components of
pension expense are:
2018
Interest cost
Expected return on plan assets
Lump-sum settlement charges
Recognized actuarial loss
Pension expense

$

4.0
(6.5)
2.7
3.6
$ 3.8

2017
$

4.5
(6.9)
1.4
3.9
$ 2.9

Pension-related changes, other than periodic pension
expense, that have been included as a charge or credit
to unrestricted equity consist of:

The funded status and amounts recognized in the
AMA’s consolidated statements of financial position at
December 31 are:
2018

$ 37.0
$ 37.0

Due to the anticipated distribution of pension assets in
2019, both amounts will be included as a component
of pension expense in 2019.

The changes in benefit obligation and plan assets were
as follows:
2018

2017

2018
Actuarial (losses) gains arising
during period
Prior service costs for
plan amendments
Reclassification adjustment for
losses reflected in periodic
pension expense
Change in unrestricted equity

2017
$ 125.1
124.0
$ 1.1

In accordance with ASC Topic 958-715, Employers’
Accounting for Defined Benefit Pension and Other
Postretirement Plans, all previously unrecognized actuarial
losses are reflected in the consolidated statements of
financial position. The pension plan accumulated
losses and prior service costs not yet recognized as a
component of periodic pension expense but included
in accumulated other comprehensive loss at
December 31 are:

- 11 -

$ (6.0)

2017
$

(1.6)
6.3
$ (1.3)

2.8
-

$

5.3
8.1

 Fixed-income securities include primarily investment
grade corporate bonds of companies from diversified
industries and U.S. Treasury or Agency securities and
foreign government securities, either through direct
investment in bonds or through common trusts, as
well as an allocation to high-yield U.S. corporate
bonds, with a target of 4 percent of the portfolio.

Actuarial assumptions used in determining pension
expense were:
2018
Discount rate
Expected long-term return on
plan assets

2017

3.4%

3.8%

5.5%

5.75%

The following fair value hierarchy tables present
information about the AMA pension plan investments
measured at fair value as of December 31.

To develop the expected long-term rate of return on
plan assets for the pension plan, the AMA considered
the current level of expected returns on risk-free
investments (primarily government bonds), the
historical level of risk premium associated with the
other asset classes in which the portfolio is invested
and the expectations for future returns of each asset
class. The expected return for each asset class is then
weighted based on the target asset allocation to
develop the
expected long-term rate of return on assets assumption
for the portfolio. The AMA’s investment strategy
reflects the expectation that equity securities will
outperform debt securities over the long term. Assets
are invested in a prudent manner to maintain the
security of funds while maximizing returns within the
plan’s investment policy guidelines. The strategy is
implemented utilizing actively managed assets from the
categories listed below.

2018
Level 1 – Quoted prices in active
markets for identical securities
U.S. equity securities
$ 31.6
International mutual funds
Fixed-income mutual funds
56.6
High-yield fixed income
mutual fund
88.2
Level 2 – Significant other
observable inputs
Debt securities
Corporate
U.S. government and
agency
Foreign government

The investment goal was to provide a total return that,
over the long term, increases the ratio of plan assets to
liabilities subject to an acceptable level of risk. This was
accomplished through diversification of assets in
accordance with the investment policy. Periodic
rebalancing occurred after the end of each calendar
quarter, as required by the policy.

Level 3 – Significant
unobservable inputs
Marketable investments – all
levels

The target allocations for plan assets were 45 percent
equity securities, 50 percent corporate bonds and U.S.
Treasury and Agency securities, and 5 percent in cash
and cash equivalents as of December 31, 2017. During
2018, plan assets have been liquidated and transferred
to short-term investments and the liquidation and
transfer to short-term investments will continue over
the next six to nine months in anticipation of the
distribution of plan assets.

2017

$ 45.8
9.5
37.1
5.1
97.5

8.9

9.8

15.4
1.0
25.3

16.7
1.1
27.6

-

-

$ 113.5

$ 125.1

The AMA currently anticipates making a contribution
to the pension plan in 2019, as plan assets are less than
plan liabilities as calculated for the expected
distribution. This estimate is based on current tax laws,
plan asset performance and liability assumptions,
which are subject to change. Any shortfall in plan asset
performance from the expected rate of return, or
increase in plan liabilities due to the distribution will
cause contributions to increase.

Equity securities include investments in large-cap, midcap, and small-cap companies primarily located in the
United States and large- to mid-cap companies outside
the United States through investments in mutual
funds.

All pension benefit payments are expected to be paid
in 2019 via lump sum payments or by the purchase of
annuities on behalf of the plan participants.
The AMA also has a 401(k) retirement and savings
plan, which allows eligible employees to contribute up
to 75 percent of their compensation annually, subject
to Internal Revenue Service (IRS) limits. The AMA
matches 100 percent of the first three percent and 50

Mutual funds are open-ended SEC registered
investment funds with a daily NAV.

- 12 -

 the AMA initially accounted for the subsidy as an
actuarial experience gain to the accumulated
postretirement
benefit
obligation.

percent of the next two percent of employee
contributions. The AMA may, in its discretion, make
additional contributions for any year in an amount up
to two percent of the compensation for each eligible
employee. Compensation is subject to IRS limits and
excludes bonuses and severance pay. AMA matching
and discretionary contribution expense totaled $6.1
million and $5.6 million in 2018 and 2017, respectively.
The AMA also maintains a non-qualified, unfunded
supplemental pension plan for certain long-term
employees. Participation in the plan was closed in
1994. The AMA recognizes the liability in its
consolidated statements of financial position. The
accumulated benefit obligation and liability totaled $0.3
million and
$0.4 million in 2018 and 2017, respectively. The AMA
uses the same discount rates noted above for the
pension plan to determine the plan benefit obligation.
There was a $0.1 million credit to expense for this plan
in 2018 and no expense in 2017. There was a $0.1
million increase in prior service costs due to plan
amendments in 2018 and no changes in pension
actuarial losses that are not yet reflected in periodic
pension expense in 2018 or 2017. The prior service
cost is included in unrestricted equity in 2018 and
2017. Payments from the plan totaled $0.1 million in
2018 and no payments were made in 2017.
The AMA expects to pay approximately $0.3 million in
benefits from the supplemental pension plan in 2019
due to the pension plan termination.
8.

Postretirement health care benefits

The AMA provides health care benefits to retired
employees who were employed on or prior to
December 31, 2010. After that date, no individual can
become a participant in the plan. Generally, qualified
employees become eligible for these benefits if they
retire in accordance with provisions similar to the
AMA’s pension plan and are participating in the AMA
medical plan at the time of their retirement. The AMA
shares the cost of the retiree health care payments with
retirees, paying approximately 60 to 80 percent of the
benefit payments. The AMA has the right to modify or
terminate the postretirement benefit plan at any time.
Other employers participate in this plan and assets and
liabilities are allocated between the AMA and the other
employers.
The AMA has applied for and received the federal
subsidy to sponsors of retiree health care benefit plans
that provides a prescription drug benefit that is
actuarially equivalent to Medicare Part D under the
Medicare Prescription Drug, Improvement and Modernization
Act of 2003. In accordance with ASC Topic 958-715,

- 13 -

 The postretirement health care plan is unfunded. In
accordance with ASC Topic 958-715, the AMA
recognizes this liability in its consolidated statements of
financial position.

2018
Service cost
Interest cost
Recognized actuarial loss
Amortization of prior service
credits
Postretirement health care
expense

The following reconciles the change in accumulated
benefit obligation and the amounts included in the
consolidated statements of financial position at
December 31:

Change in benefit obligation
Benefit obligation
at beginning of year
Service cost
Interest cost
Benefits paid
Participant contributions
Federal subsidy
Plan amendments
Actuarial gains
Accrued postretirement
benefit costs

2018

2017

$ 103.1
1.7
3.5
(4.0)
1.2
0.2
0.8
(14.2)

$ 106.4
1.7
4.0
(3.6)
1.0
0.2
(2.8)
(3.8)

$ 92.3

$ 103.1

Actuarial losses
Prior service credits

$

6.3
(1.8)
$ 4.5

Actuarial gains arising
during period
Reclassification adjustment for
losses reflected in periodic
postretirement health care
expense
Plan amendments
Reclassification adjustment for
recognition of prior
service credits
Change in unrestricted equity

3.7%
6.22%
4.5%

2038

2038

4.8

$ 14.2

(0.8)
$

5.4

2017
$

(0.9)
$ 13.0

3.8

0.5
2.8

0.5
(0.8)

Discount rate
Initial health care cost trend

$

(0.8)
6.3

3.7%
6.22%

2017
4.3%
6.39%

A one-percentage point change in assumed health care
cost rates would have the following effect:

Actuarial assumptions used in determining the
accumulated benefit obligation at December 31 are:

4.3%
6.03%
4.5%

$

2018

An estimated $0.8 million in prior service credits and
no actuarial losses will be included as components of
postretirement health care expense in 2019.

Discount rate
Initial health care cost trend
Ultimate health care cost trend
Year that the rate reaches the
ultimate trend rate

(0.9)

1.7
4.0
0.5

Actuarial assumptions used in determining
postretirement health care expense are the same
assumptions noted in the table above for determining
the accumulated benefit obligation, except as follows:

$ 21.0
(3.5)
$ 17.5

2017

$

2018

2017

2018

1.7
3.5
0.5

Postretirement health care-related changes, other than
periodic expense, that have been included as a charge
or credit to unrestricted equity consist of:

The postretirement health care plan accumulated
losses and prior service credits not yet recognized as a
component of periodic postretirement health care
expense, but included as an accumulated charge or
credit to equity as of December 31 are:
2018

$

2017

Effect on postretirement
service and interest cost
Effect on postretirement
benefit obligation

1%
Increase

1%
Decrease

$

1.2

$ (0.9)

$ 17.6

$ (13.9)

The following postretirement health care benefit
payments are expected to be paid by the AMA, net of
contributions by retirees and federal subsidies:

The AMA recognizes postretirement health care
expense in its consolidated statements of activities. The
components of expense are:

- 14 -

 2019
2020
2021
2022
2023
2024 – 2028
9.

$

reserve. If the AMA were to make a determination in
future years that these deferred tax assets would be
realized, the related valuation allowance would be
reduced and a benefit to earnings recorded.

2.7
2.9
3.0
3.2
3.5
20.1

In 2018, AMA’s for-profit subsidiaries’ income tax was
reduced by approximately $2.5 million due to changes
in tax laws, with the federal rate decline of 35% to 21%
offset slightly by state tax rate increases. Operating tax
expense was not materially impacted by changes in the
tax law in 2017, with reductions in deferred tax assets
of $1.3 million offset by an equivalent reduction in the
valuation allowance. Tax expense related to credits to
equity increased by $2 million in 2017, with an
offsetting reduction in deferred tax assets as a result of
the change in tax law.

Income taxes

The provision for income taxes includes:

Operating
Current
Deferred
Valuation allowance
Tax expense related to
credits or charges to equity
Deferred

2018

2017

$ 5.5
(0.1)
(0.3)
5.1

$ 8.9
0.6
(1.2)
8.3

0.8
$ 5.9

Deferred tax assets recognized in the consolidated
statements of financial position at December 31 are:

3.0
$ 11.3

Benefit plans and
compensation
Other
Valuation allowance

As prescribed under Accounting Standards
Codification (ASC) Topic 740, Income Taxes, the
AMA determines its provision for income taxes using
the asset and liability method. Under this method,
deferred tax assets and liabilities are recognized for
future tax effects of temporary differences between the
financial statement carrying amounts of existing assets
and liabilities and their respective tax basis.

2018

2017

$ 6.6
6.6
(2.9)
$ 3.7

$ 6.9
0.4
7.3
(2.9)
$ 4.4

Cash payments for income taxes were $5.9 million and
$7.8 million in 2018 and 2017, respectively.
10. Deferred tenant improvement allowances

The deferred tax benefit or charge from credits or
charges to equity represents the estimated tax benefit
from recording unrecognized actuarial losses and prior
service credits for both the pension and postretirement
health care plans, pursuant to ASC Topic 958-715.

As part of the new headquarters lease agreement that
commenced in 2013, the AMA received a $21.7 million
tenant improvement allowance from the landlord in
2012 and 2013. In 2016, AMA renegotiated its office
lease in Washington D.C. and received $1.4 million in
new tenant improvement allowances. This was in
addition to the initial $2.1 million allowance related to
the Washington D.C. office space received in 2007. A
new lease in New Jersey that was effective in 2017
included $0.2 million in tenant improvement
allowances.

Valuation allowances are provided to reduce deferred
tax assets to an amount that is more likely than not to
be realized. The AMA evaluates the likelihood of
realizing its deferred tax assets by estimating sources of
future taxable income and assessing whether or not it
is likely that future taxable income will be adequate for
the AMA to realize the deferred tax asset. The AMA
established an initial valuation allowance in 2009 to
reflect the fact that deferred tax assets include future
expected benefits, largely related to retiree health care
payments, that may not be deductible due to a
projected lack of taxable advertising income in future
years. Increases or decreases in deferred tax assets,
where future benefits are considered unlikely, will
result in an equal and offsetting change in the valuation

Prior to adoption of ASU No. 2016-02, tenant
improvement allowances were recorded as a deferred
liability on the consolidated statements of financial
position and as a cash inflow from operating activities
in the consolidated statements of cash flows. Capital
expenditures funded by the tenant improvement
allowances received were capitalized as leasehold

- 15 -

 improvements on the consolidated statements of
financial position and as capital expenditures in the
consolidated statements of cash flows. The allowances
were deferred and amortized on a straight-line basis
over the life of the leases as a reduction of rent
expense. The tenant improvement allowance liability
was derecognized upon adoption of the new lease
standard by AMA as of January 1, 2018, by reducing
the value of the ROU asset by the remaining balance in
deferred tenant improvement allowances as of
December 31, 2017. See Note 12 for additional
information.

During 2018, AMA entered into new office space
operating leases which resulted in establishing an
additional $4.1 million in ROU assets and $4.4
million liability for the present value of future lease
payments. The ROU asset was reduced by $0.3
million in tenant allowances received.
The ROU assets will be amortized over the lives of the
leases and the present value of the liability will be
increased by interest cost and reduced by cash
payments.
Operating lease cost was $9.5 million in 2018. Cash
paid for amounts included in the measurement of
lease liabilities was $11.2 million. Rent expense under
operating leases, including executory costs and taxes,
was $13.3 million in 2017.

11. Deferred rent obligations
Most office lease agreements included rent abatement
as well as rent escalation clauses over the life of the
lease. Prior to adoption of ASU No. 2016-02, AMA
was required to recognize rent expense on a straightline basis beginning on the earlier of the first rent
payment or the date of possession of the leased
property, with the difference between the amounts
charged to expense and the rent payment recorded as a
deferred rent obligation and amortized over the lease
term. The deferred rent expense liability was
derecognized upon adoption of the new lease standard
by AMA as of January 1, 2018, by reducing the value
of the ROU asset by the remaining balance in deferred
rent obligations as of December 31, 2017. See Note 12
for additional information.

The weighted-average remaining lease term for
operating leases is 9.9 years. The weighted-average
discount rate used for operating leases is 5%.
The maturity of lease liabilities as of December 31,
2018:
2019
2020
2021
2022
2023
2024 and beyond
Total lease payments
Less imputed interest
Present value of lease obligations

12. Leases

$ 12.2
12.4
12.5
12.6
12.2
65.4
127.3
(28.1)
$ 99.2

13. Financial asset availability and liquidity

AMA leases office space at a number of locations and
the initial terms of the office leases range from five
years to 15 years. Most leases have options to renew
at then prevailing market rates. As any extension or
renewal is at the sole discretion of AMA and at this
date, is not certain, the renewal options are not
included in the calculation of the ROU asset or lease
liability. AMA also leases copiers and printers in
several locations. All office and equipment leases are
classified as operating leases.

AMA has a formal reserve policy that defines the
reserve investment portfolios as pools of liquid net
assets that can be accessed to mitigate the impact of
undesirable financial events or to pursue
opportunities of strategic importance that may arise,
as well as provide a source of capital appreciation.
The policy establishes minimum required dollar levels
required to be held in the portfolios (defined as an
amount equal to one-year’s general and administrative
operating expenses plus long-term liabilities). The
policy also covers the use of dividend and interest
income, establishes criteria for use of the funds and
outlines the handling of excess operating funds on an
annual basis.

Adoption of the new lease standard as of January 1,
2018 has resulted in AMA recording noncash
transactions to establish the liability for the present
value of future lease payments of $101 million and
derecognition of liabilities for deferred rent and
deferred tenant improvement allowances of $22.5
million and $17.1 million, respectively, increasing
total liabilities by $61.4 million. A ROU asset in an
equivalent amount of $61.4 million was also
established on the consolidated statement of financial
position.

Dividend and interest income generated from the
reserve portfolios are transferred to operating funds
monthly and used to fund operations. The formal
reserve policy contemplates use of reserve portfolio
funds for board approved time- or dollar-limited
strategic outlays, to the extent that the reserve

- 16 -

 portfolio balances exceed the minimum amount
established by policy. All surplus funds generated
from operations annually (defined as operating cash
plus other current assets minus current liabilities and
deferred revenue at year end) are transferred to the
reserve portfolios after year-end. The reserve policy
does not cover the for-profit subsidiaries’ activities.

issued. For the year ended December 31, 2018, the
AMA has evaluated all subsequent events through
February 15, 2019, which is the date the consolidated
financial statements were available to be issued.

AMA invests cash in excess of projected weekly
requirements in short-term investments and money
market funds. AMA does not maintain any credit
facilities as the reserve portfolios provide ample
protection against any liquidity needs.
The following reflects AMA’s financial assets as of
December 31, 2018 reduced by amounts not available
for general use that have been set aside for long-term
investing in the reserve investment portfolios or
funds subject to donor restrictions. AMA’s financial
assets include cash, cash equivalents and donor
restricted cash, short-term investments and long-term
investments in the reserve portfolios.
Financial assets
Less assets unavailable for
general expenditures:
Restricted by donor with purpose
restrictions
Restricted by governing body
primarily
for long-term investing or for
governing body approved outlays
Financial assets available to meet cash
needs for general expenditures
within one year

$ 696.4
(1.7)

(550.8)

$ 143.9

In addition to financial assets available to meet
general expenditures over the next 12 months, the
AMA operates under a policy that requires an annual
budget surplus, excluding time- or dollar-limited
strategic expenditures approved by the board, and
anticipates generating sufficient revenue to cover
general ongoing expenditures.
14. Contingencies
In the opinion of management, there are no pending
legal actions for which the ultimate liability will have a
material effect on the equity of the AMA.
15. Subsequent events
ASC Topic 855, Subsequent Events, establishes general
standards of accounting for and disclosure of events
that occur after the balance sheet date but before
financial statements are issued or are available to be

- 17 -

 16. Functional expenses
The costs of providing program and other activities have been summarized on a functional basis in the statements of activities. Certain costs have been allocated
among the Strategic Focus areas and Core Operations, Publishing, Health Solutions and Insurance, Membership and other supporting services. Such allocations are
determined by management on an equitable basis.
The expenses that are allocated and the method of allocation include the following: fringe benefits based on percentage of compensation and occupancy based on
square footage. All other expenses are direct expenses of each functional area.

Membership
Cost of goods sold and selling expense
Compensation and benefits
Occupancy
Travel and meetings
Technology costs
Marketing and promotion
Professional services and consulting
Other operating expense
2018 total expense

Cost of goods sold and selling expense
Compensation and benefits
Occupancy
Travel and meetings
Technology costs
Marketing and promotion
Professional services and consulting
Other operating expense
2017 total expense

$

$

$

$

4.6
0.5
0.1
1.4
8.9
1.0
0.9
17.4

4.1
0.4
0.1
1.4
6.8
1.2
0.9
14.9

Publishing,
Health
Solutions and
Insurance
$

$

$

$

27.7
53.6
5.1
3.1
7.9
0.6
2.9
6.9
107.8

28.2
49.4
5.1
3.2
7.9
0.9
2.7
5.8
103.2

Investments
(AMA only)
$

$

$

$

Strategic
Focus Areas
and Core
Operations

0.2
0.5
0.7

$

0.2
0.6
0.8

$

- 18 -

$

$

52.2
6.0
5.9
4.8
3.3
14.1
7.6
93.9

45.5
5.2
5.4
2.9
11.8
15.5
10.2
96.5

Governance,
Administration
and
Operations
$

$

$

$

Health2047
and
Subsidiaries

74.2
6.9
5.8
10.0
3.9
3.4
104.2

68.6
7.1
5.4
10.7
4.2
3.6
99.6

$

$

$

$

Total

7.0
1.2
0.4
0.1
0.6
3.3
1.6
14.2

$

27.7
191.6
19.7
15.3
24.2
13.4
25.4
20.9
$ 338.2

3.4
0.6
0.3
0.1
0.5
4.9
0.7
10.5

$

28.2
171.0
18.4
14.4
23.0
20.0
28.7
21.8
$ 325.5

 Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance
and Other Matters Based on an Audit of Financial Statements Performed in Accordance With
Government Auditing Standards
The Board of Trustees of
American Medical Association:
We have audited, in accordance with the auditing standards generally accepted in the United States of America and
the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller
General of the United States, the consolidated financial statements of the American Medical Association (the
“AMA”) and subsidiaries, which comprise the consolidated statement of financial position as of December 31, 2018,
and the related consolidated statement of activities, and cash flows for the year then ended, and the related notes to
the consolidated financial statements, and have issued our report thereon dated February 15, 2019.
Internal Control over Financial Reporting
In planning and performing our audit of the consolidated financial statements, we considered the AMA’s internal
control over financial reporting (internal control) to determine the audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinions on the consolidated financial statements, but not for the
purpose of expressing an opinion on the effectiveness of the AMA’s internal control. Accordingly, we do not
express an opinion on the effectiveness of the AMA’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal
control, such that there is a reasonable possibility that a material misstatement of the AMA’s consolidated financial
statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency,
or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important
enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and
was not designed to identify all deficiencies in internal control that might be material weaknesses or significant
deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we
consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the AMA’s consolidated financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts,
and grant agreements, noncompliance with which could have a direct and material effect on the determination of
financial statement amounts. However, providing an opinion on compliance with those provisions was not an
objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no
instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

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 Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the
results of that testing, and not to provide an opinion on the effectiveness of the AMA’s internal control or on
compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards
in considering the AMA’s internal control and compliance. Accordingly, this communication is not suitable for any
other purpose.

February 15, 2019

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 Independent Auditor’s Report on Compliance for Each Major Federal Program; Report on Internal
Control Over Compliance; and Report on Schedule of Expenditures of Federal Awards Required
by the Uniform Guidance
The Board of Trustees of
American Medical Association:
Report on Compliance for Each Major Federal Program
We have audited the American Medical Association (the “AMA”) and subsidiaries’ compliance with the types of
compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect
on the AMA’s major federal program for the year ended December 31, 2018. The AMA’s major federal program is
identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned
costs.
Management’s Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its
federal awards applicable to its federal programs.
Auditors’ Responsibility
Our responsibility is to express an opinion on compliance for the AMA’s major federal program based on our audit
of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance
with auditing standards generally accepted in the United States of America; the standards applicable to financial
audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the
audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform
Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance
with the types of compliance requirements referred to above that could have a direct and material effect on a major
federal program occurred. An audit includes examining, on a test basis, evidence about the AMA’s compliance with
those requirements and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for the AMA’s major federal
program. However, our audit does not provide a legal determination of the AMA’s compliance.
Opinion on Each Major Federal Program
In our opinion, the AMA complied, in all material respects, with the types of compliance requirements referred to
above that could have a direct and material effect on its major federal program for the year ended December 31,
2018.
Report on Internal Control over Compliance
Management of the AMA is responsible for establishing and maintaining effective internal control over compliance
with the types of compliance requirements referred to above. In planning and performing our audit of compliance,
we considered the AMA’s internal control over compliance with the types of requirements that could have a direct
and material effect on its major federal program to determine the auditing procedures that are appropriate in the
circumstances for the purpose of expressing an opinion on compliance for its major federal program and to test and
report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of

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 expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an
opinion on the effectiveness of the AMA’s internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance
does not allow management or employees, in the normal course of performing their assigned functions, to prevent,
or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis.
A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in
internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type
of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis.
A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in
internal control over compliance with a type of compliance requirement of a federal program that is less severe than
a material weakness in internal control over compliance, yet important enough to merit attention by those charged
with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of
this section and was not designed to identify all deficiencies in internal control over compliance that might be
material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over
compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been
identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of
internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance.
Accordingly, this report is not suitable for any other purpose.

February 15, 2019

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 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

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AMERICAN MEDICAL ASSOCIATION AND SUBSIDIARIES
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE YEAR ENDED DECEMBER 31, 2018

Federal
CFDA
Number

Pass-Through
Entity
Identifying
Number

U.S. Department of Health and Human Services — Agency for Healthcare
Research & Quality — passed through Northwestern University —
Midwest Small Practice Care Transformation Research Alliance

93.226

5R18HS023921-03

U.S. Department of Health and Human Services — Agency for Healthcare
Research & Quality — passed through RAND Corporation —
Health Insurance Expansion and Physician Distribution

93.226

R01HS025750

82,097

U.S. Department of Health and Human Services — Centers for Disease
Control and Prevention — passed through National Association of Chronic
Disease Directors — Diabetes Technical Assistance and Support

93.424

5 NU38OT000225-05

100,061

U.S. Department of Health and Human Services — Centers for Disease
Control and Prevention -- passed through The National Council of Young
Men's Christian Associations of the United States of America —
Diabetes Prevention Program

93.424

6 NU38OT000183-04-02

60,897

U.S. Department of Health and Human Services — Centers for Medicare
Medicaid Services — Transforming Clinical Practices Initiative —
Support and Alignment Networks

93.639

1L1CMS331475-03-00
1L1CMS331475-04-00

561,900

U.S. Department of Health and Human Services — National Institutes of Health
— passed through HCM Strategist, LLC — Provider Influencer Initiative (PII)
All of Us Research Program

93.310

OT2OD023206

64,091

U.S. Department of Health and Human Services — Substance Abuse
and Mental Health Services Administration — passed through American
Academy of Addiction Psychiatry — Providers Clinical Support System
for Opioid Therapies

93.243

1H79TI025595-03NCE

68,928

Federal Grantor/Pass-Through Grantor/
Program Title

Federal
Expenditures

RESEARCH AND DEVELOPMENT CLUSTER:

TOTAL FEDERAL EXPENDITURES

$

$

See accompanying notes to the schedule of expenditures of federal awards.

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73,863

1,011,837

 AMERICAN MEDICAL ASSOCIATION AND SUBSIDIARIES
NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE YEAR ENDED DECEMBER 31, 2018

1.

SCOPE OF AUDIT
Entity Subject to Single Audit — The American Medical Association (the “AMA”) is a national
professional association of physicians with approximately 250,000 members. All federally funded
operations of the AMA are included under the scope of Title 2 U.S. Code of Federal Regulations
Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal
Awards (Uniform Guidance).
Programs Subject to Single Audit — A schedule of expenditures of federal awards is presented for the
federal programs audited in accordance with the Uniform Guidance.
Fiscal Period Audited — Single Audit testing procedures were performed for the program transactions
during the year ended December 31, 2018.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting — The accompanying schedule of expenditures of federal awards includes the
federal grant activity of the AMA and is presented on the accrual basis of accounting. The information
presented in this schedule is presented in accordance with the Uniform Guidance. The amounts
presented in this schedule are included in the AMA’s consolidated financial statements.
Cost Allocation — The AMA has a policy that allows for the allocation of common costs such as
salaries, employee benefits, occupancy, and other miscellaneous organizational costs relating to grant
programs. Common costs are allocated to the specific grant based on the percentage of time spent by the
specific support organization (department) on the grant. The AMA did not elect to use the de minimus
indirect cost rate as allowed under the Uniform Guidance.

3.

NONCASH ASSISTANCE AND FEDERAL INSURANCE
The AMA did not receive any noncash federal awards, federal insurance, or in-kind contributions during
the year ended December 31, 2018.
******

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 SCHEDULE OF FINDINGS AND QUESTIONED COSTS

-26-

AMERICAN MEDICAL ASSOCIATION AND SUBSIDIARIES
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED DECEMBER 31, 2018

PART I — SUMMARY OF INDEPENDENT AUDITORS’ RESULTS
Financial Statements
Type of Auditors’ Report Issued:

Unmodified

Internal control over financial reporting:


Material weakness(es) identified?

Yes

X

No



Significant deficiency(ies) identified?

Yes

X

None reported



Noncompliance material to financial statements noted?

Yes

X

No

Federal Awards
Internal control over major federal programs:



Material weakness(es) identified?

Yes

X

No



Significant deficiency(ies) identified?

Yes

X

None reported

Type of Auditors’ Report Issued on Compliance for
Major Federal Programs:



Any audit findings disclosed that are required to be reported in
accordance with 2 CFR 200.516(a)?



AMA’s major federal program was the Research and Development
Cluster



A threshold of $750,000 was used to distinguish between Type A and
Type B programs



AMA qualifies as a low-risk auditee as that term is defined in 2 CFR
200.520

Unmodified

Yes

PART II — FINANCIAL STATEMENT FINDINGS
None.
PART III — FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
None.

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X

No

 AMERICAN MEDICAL ASSOCIATION AND SUBSIDIARIES
SUMMARY SCHEDULE OF PRIOR-YEAR AUDIT FINDINGS
FOR THE YEAR ENDED DECEMBER 31, 2017

Prior-Year Financial Statement Findings
None.
Prior-Year Federal Award Findings and Questioned Costs
None.

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