The Communicator October 2011

6. LEASES PEF has entered into a variety of leases, primarily for the use

of office space and equipment, which are accounted for as operating leases. In addition, PEF has certain office and computer equipment leases that are accounted for as capital leases. Included within "furniture, fixtures and equipment" is equipment held under a capital lease with a cost basis of $567,224, and accumulated amortization of $283,612 and $170,167 at March 31, 2011 and 2010, respectively. Future minimum payments under all noncancelable leases having initial terms in excess of one year at March 31, 2011 consist of the following:

Capital Leases

2012 2013 2014 2015 2016 Total

Less amounts representing interest

Present Value of Net Minimum Lease Payments

Less current maturities of capital lease obligations

Capital Lease Obligations, net of current maturities

$ 133,979 133,979 100,484 – –

368,442 33,032 335,410 114,849 __________ $ 220,561 Total rental expense related to operating leases for the years

ended March 31, 2011 and 2010 was $712,447 and $637,387, respectively. Lease agreements frequently include renewal options and require PEF to pay utilities, taxes, insurance and maintenance. PEF, as lessor, leases certain office space in its main office

building on a month-to-month basis to two related organizations (see Note 8). Minimum monthly rental payments are $2,661 and $1,227 per month.

7. LITIGATION Under an arbitration award rendered in May 1985, PEF was

ordered to pay New York State United Teachers/American Federation of Teachers (AFT) in excess of $9 million in back per capita taxes for the period March 1983 through May 1985. During fiscal 1988, a State Supreme Court decision vacated the award in its entirety. However, AFT subsequently appealed the decision and, in May 1989, the Appellate Division reversed the lower court decision, thereby awarding AFT approximately $9.2 million of back per capita taxes. In 1989, PEF attempted to appeal the decision of the Appellate Division. On March 27, 1990, the Court of Appeals denied PEF’s

motion and reaffirmed the judgment to AFT of approximately $9.2 million for per capita taxes. During the fiscal year ending March 31, 1991, AFT made a motion to the State Supreme Court to be awarded prejudgment date interest. In June 1991, the State Supreme Court granted AFT’s motion for prejudgment date interest. Interest on the outstanding balance accrues at the rate of 9% annually. Each year since 1991, AFT has unilaterally forgiven one twentieth of the total outstanding principal balance and the annual accrued interest amount. AFT has not sought enforcement of the judgment in the past,

but rather, as noted, has forgiven a portion of the indebtedness and interest. As of March 31, 2011, PEF has fulfilled its obligation related to this judgment and no further debt is owed to AFT by PEF relating to this judgment. PEF has been named as a defendant in several other lawsuits and claims. While the ultimate outcome of these actions cannot

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Operating Leases

$ 680,425 641,762 650,229 641,586 582,582

$3,196,584 ___________

be predicted at this time, it is the opinion of management that the disposition of these lawsuits and claims will not have a material adverse effect on the financial position of PEF.

8. RELATED ORGANIZATIONS PEF is affiliated with the following:

Public Employees Federation Membership Benefits Program (the Program) This Program was established to provide PEF members the

opportunity to obtain various insurance and other benefits at group rates. The Program is outside the operations of PEF and is not included within the accompanying consolidated financial statements. PEF is not responsible for the debts of the Program and any remaining assets upon termination of the Program revert to the participating members and not to PEF. PEF incurs costs on behalf of the Program, which are billed

to the Program. Included in other receivables at March 31, 2011 and 2010 are receivables from the Program for $906,082 and $894,716, respectively. Additionally, as of March 31, 2011 and 2010, PEF is due $836,758 and $555,183, respectively for the portion of the accumulated postretirement benefit obligation applicable to the Program’s employees. The Program occupies space in PEF’s headquarters on a month to month lease with PEF requiring minimum payments of $2,661 monthly plus the proportionate share of taxes, utilities and common area costs.

PEF Travel PEF Travel was established by the Membership Benefits

Program to offer discounted travel for members and staff. PEF Travel is outside the operations of PEF and is not included within the accompanying consolidated financial statements. PEF is not responsible for the debts of PEF Travel. In the 2007-2011 contract between PEF and USWA, the

employees of PEF Travel became eligible to participate in the SEIU Pension, 401(k) Plan and Health Insurance Plans. Similar to the agreements with the Public Employees Federation Membership Benefits Program, PEF Travel is billed for the cost of these plans as well as for postage and reproduction. Additionally PEF Travel occupies space in PEF’s headquarters on a month to month lease with PEF requiring minimum payments of $1,227 monthly plus the proportionate share of taxes, utilities and common area costs. Included in other receivables at March 31, 2011 and 2010 are receivables from PEF Travel for $22,066 and $5,276, respectively.

Retirees’ Fund The Retirees’ Fund was established to provide various

services, such as continuing insurance and seminars, to retired PEF members. This Fund is outside the operations and control of PEF and is not included within the accompanying consolidated financial statements. PEF incurs various costs for payroll, benefits and office expenses on behalf of the Retirees’ Fund, which it bills to the Fund. Included in other receivables at March 31, 2011 and 2010 are receivables from the Fund for $124,073 and $33,407, respectively.

9. FUNCTIONAL EXPENSES PEF’s expenses by functional activity are as follows: 2011

Membership services Administration and support

Grants and contracts activities

Labor management activities Legislative and political action Total

2010

$15,974,459 $15,237,391 6,034,000

475,366

3,780,521 1,576,999

4,385,191 333,876

2,917,388 1,226,060

_$27,841,345 $24,099,906

10. TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets at March 31, 2011 and

2010 are available for the following purposes: PEF Information Line: 1-800-553-2445 ____________ _____________

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