National Nurses United

CALIFORNIA NURSES ASSOCIATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) Note 3 - Related Parties (Continued) In addition, the CNA Board authorized advancing up to $550,000 in the form of a loan to CCPA to help fund the startup and initial publication costs of the periodical. The loan balance is payable upon demand and carries a stated interest rate of nine percent per annum. The outstanding amount of funds advanced totaled $512,499 at the end of both June 30, 2004 and 2003 and is included in Due From Other Organizations in the Statements of Financial Position. CNA received $46,125 in interest payments from CCPA during the year ended June 30, 2003, and is included in investment income in the Statement of Activities. CNA contributed $78,000 to CCPA during the year ended June 30, 2004, for current operating expenditures. CCPA's current Board of Directors consists of CNA members and administrative support is provided by CNA staff. California Nurses Foundation The CNA Board serves as the official voting body of the California Nurses Foundation (CNF), a charitable Organization under Internal Revenue Code section 501(c)(3). CNF's Board of Trustees manages the business affairs and fulfills the purposes of CNF. The Trustees are required to be members of CNA and are elected by the CNA Board. Certain CNF programs and activities are staffed and coordinated by CNA employees. CNA donated $10,000 to a nursing scholarship fund administered by CNF during each of the years ended June 30, 2004 and 2003. In addition, during the year ended June 30, 2003, Region 9 donated $20,000 to CNF establishing a new nursing scholarship fund to be awarded to Region 9 members. CNA provides employee services on an as-needed basis to CNF. CNF reimburses CNA for payroll and related costs, including employee benefits, for those services rendered on behalf of CNF. The total amount paid by CNF to CNA for such costs totaled $97,328 during the year ended June 30, 2004 and CNF owed CNA $3,087 in unreimbursed payroll and costs at year end. In addition, CNF paid $4,892 to CNA in rent for office space during the year ended June 30, 2004 and owed $544 in rent at year end. During a portion of the year ended June 30, 2004 certain CNF funds were held in CNA accounts and then transferred into CNF accounts. CNA paid interest in the amount of $3,121 to CNF on the funds held in CNA accounts. No CNF funds were held by CNA at year end. CALIFORNIA NURSES ASSOCIATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) Note 1 - Summary of Organization and Significant Accounting Policies (Continued) Income Taxes CNA is exempt from Federal income taxes under Section 501(c)(5) of the Internal Revenue Code and the related applicable California Revenue and Taxation Code sections. CNA has no federal or state tax liability for unrelated business taxable income (UBTI). Accordingly, no provision for income taxes has been provided herein. Cash and Cash Equivalents All highly liquid investments, with a maturity of three months or less when purchased, are considered to be cash equivalents. Similar investments that have been designated for specific programs are not considered to be cash equivalents. Note 2 - Concentrations CNA maintains cash balances in excess of federally insured amounts. These balances vary throughout the year and the uninsured amounts were $10,265 and $922,813 at June 30, 2004 and 2003, respectively. Undesignated investments in stocks and bonds issued by publicly held companies and bonds issued by the United States government totaled $289,991 and $444,761 at June 30, 2004, and 2003, respectively. Loans to other non-profit or tax-exempt organizations totaled $777,341 and $801,342 at June 30, 2004, and 2003, respectively. Concentrations of credit risk with respect to dues and fees receivable is limited due to the large number of payers comprising CNA's receivable base. CNA has a collective bargaining agreement with Staff Professional and Clerical Association that represents non-management staff. The current Agreement was ratified in May 2004 and expires April 30, 2008. Note 3 - Related Parties Center for Caregiver and Patient Advocacy (CCPA) Incorporated in September 1999 under the Laws of the State of California, The Center For Caregiver and Patient Advocacy (CCPA), is a charitable organization exempt from federal and state income and franchise taxes. CCPA's purpose is to act as an advocate for both the provider and consumer in the health care industry. To help further these goals CNA, which helped found the CCPA, transferred to that Organization the name and publishing rights to Revolution, a small local periodical of interest to registered nurses and others interested in the health care system. CALIFORNIA NURSES ASSOCIATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) Note 1 - Summary of Organization and Significant Accounting Policies (Continued) Contributions Contributions and grants are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence and/ or nature of any donor restrictions. CNA has received no contributions with donor-imposed restrictions that would result in permanently restricted net assets. Basis of Presentation CNA reports information regarding its financial position and activities according to three classes of net assets based on the existence or absence of donor-imposed restrictions. Net assets are classified and reported as follows: Unrestricted net assets —Net assets that are not subject to donor-imposed restrictions including net assets that are designated by the Board, CNA's bylaws, or its constitution are considered unrestricted net assets. Assets with donor-imposed restrictions which are fulfilled in the year of receipt are considered and reported as unrestricted net assets in that year. Temporarily restricted net assets —Net assets subject to donor-imposed stipulations that may or will be met, either by actions of CNA and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported as net assets released from restrictions. Permanently restricted net assets —Net assets subject to donor-imposed stipulations that neither expire by the passage of time nor can be fulfilled or otherwise removed by actions of CNA. Certain accounts in the prior year financial statements have been reclassified for comparative purpose to conform to the presentation in the current year financial statements. Investments Investments, comprised of equity securities, corporate debt, and U. S. government obligations are valued at fair value. Realized and unrealized gains and losses are reflected in the Statement of Activities. The Board has decided that the overall portfolio will be held for long-term purposes. The fair value of the investments is based on quoted market prices. CALIFORNIA NURSES ASSOCIATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) Note 1 - Summary of Organization and Significant Accounting Policies (Continued) Loan Costs and Fees Loan costs and fees in connection with the mortgages are capitalized and included in prepaid expenses and other assets on the Statement of Financial Position. Amortization is computed using the straight-line method over the terms of the respective mortgages. Fixed Assets Fixed assets consisting of both real property including land, building and improvements, and personal property consisting of equipment, furniture, computers and software are recorded at cost. External consulting costs related to the development of internal use computer software are capitalized to the extent the costs benefit future years. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets, normally 39.5 years for buildings and improvements and 5 to 7 years for personal property. Repairs and maintenance are charged to expense and included in the Statement of Activities when incurred. Revenues The principal source of revenue for CNA is membership dues or an equivalent fee required to be paid by non-members. A revision to CNA bylaws changing the Organization's dues structure effective beginning April 1, 2004 was passed at the House of Delegates meeting in September 2003 and ratified later that year by a vote of the general membership. Both the original and revised bylaws require that a portion of each member's dues be designated for various specific purposes or programs and that each geographical region receive a subsidy from CNA based upon amounts paid by members of the region. Dues designated for specific programs by the CNA constitution, bylaws, or by the Board are considered and treated as unrestricted net assets. The regions' subsidy may be used only for activities as specified in the bylaws and their use must be authorized by the region. The funds are classified as temporarily restricted net assets in the financial statements. Under the new dues structure monthly dues are set at 2.2 times a member's hourly wage rate with dues capped at a maximum of $80.00 month. The monthly dues rate is reduced and set at a flat $40.00 for those members who meet certain criteria as set out in the bylaws. The $80.00 cap and $40.00 reduced rate are to increase annually with the first increase scheduled for July 1, 2005. Prior to April 1, 2004, dues rates for each facility were established at the beginning of each fiscal year and were computed on a per month basis under formulas prescribed by CNA's constitution and bylaws. The monthly dues rate was reduced for those members who met certain criteria as set out in the bylaws.

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