BOSTON VA RESEARCH INSTITUTE, INC. FINANCIAL STATEMENTS ...bvari.org/FAM/Important...

BOSTON VA RESEARCH INSTITUTE, INC.

FINANCIAL STATEMENTS AND SINGLE AUDIT REPORTS

YEAR ENDED DECEMBER 31, 2011 and 2010


FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2011 and 2010 TABLE OF CONTENTS Page FINANCIAL SECTION Independent Auditors’ Report 3 FINANCIAL STATEMENTS Statements of Financial Position 5 Statements of Activities 6 Statements of Cash Flows 7 Notes to Financial Statements 8 SUPPLEMENTARY INFORMATION Statements of Revenue 14 Statements of Program Expenses – Research 15 Statements of Program Expenses – Education 16 Statements of General and Administrative Expenses 17 Schedule of Expenditures of Federal Awards 18 Notes to Schedule of Expenditures of Federal Awards 19 SINGLE AUDIT SECTION 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 21 Report on compliance with requirements that could have a direct and material effect on each major program and internal control over compliance in accordance with OMB Circular A-133 23 Schedule of findings and questioned costs 25

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Financial Section

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Independent Auditors’ Report The Audit Committee Boston VA Research Institute, Inc. Boston, Massachusetts

We have audited the accompanying statements of financial position of the Boston VA Research Institute, Inc. (BVARI), a nonprofit organization, as of December 31, 2011 and 2010, and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the BVARI’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Boston VA Research Institute, Inc. as of December 31, 2011 and 2010, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated April 11, 2012, on our consideration of BVARI’s internal control over financial reporting and our tests of compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and important for assessing the results of our audit. Our audits were made for the purpose of forming an opinion on the financial statements taken as a whole. The Schedules of Revenue, Program Expenses, and General and Administrative Expenses, as listed in the table of contents, are presented for the purpose of supplementary analysis and are not a required part of the financial statements of BVARI. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of State and Local Governments and Non-Profit organizations, and is not a required part of the financial statements of BVARI. 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 financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

April 11, 2012

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Financial Statements

2011 2010

ASSETSCURRENT: Cash and cash equivalents $ 1,569,053 $ 1,014,726 Short term investments 1,440,660 1,089,882 Accounts receivable - net 1,731,519 1,473,009 Accrued interest receivable 11,927 21,613 Prepaid expenses and other current assets 83,141 5,706

TOTAL CURRENT ASSETS 4,836,300 3,604,936

NONCURRENT:Long-term investments 2,084,381 3,553,083 Property and equipment, net of accumulated depreciation 10,649 14,865

TOTAL NONCURRENT ASSETS 2,095,030 3,567,948

TOTAL ASSETS $ 6,931,330 $ 7,172,884

LIABILITIES AND NET ASSETSCURRENT: Accounts payable and accrued expenses $ 372,836 $ 388,703 Payroll related liabilities 487,737 606,168 Grant advances 2,396,462 1,320,902

TOTAL LIABILITIES 3,257,035 2,315,773

NET ASSETS Unrestricted 3,656,295 4,848,111 Permanently restricted 18,000 9,000

TOTAL NET ASSETS 3,674,295 4,857,111

TOTAL LIABILITIES AND NET ASSETS $ 6,931,330 $ 7,172,884

See notes to financial statements.


STATEMENTS OF FINANCIAL POSITIONYEARS ENDED DECEMBER 31,

Boston VA Research Institute, Inc. 5 Financial Statements

2010

PermanentlyUnrestricted Restricted Total Total

REVENUE Program revenue $ 3,742,791 $ - $ 3,742,791 $ 5,411,888 Other support 8,285,110 - 8,285,110 6,561,208 Education revenue 395,894 10,000 405,894 536,390 Investment income 66,799 - 66,799 157,314

TOTAL REVENUE 12,490,594 10,000 12,500,594 12,666,800

EXPENSES Program expenses - research 10,034,293 - 10,034,293 10,212,033 Program expenses - education 284,113 1,000 285,113 420,947 General and administrative expenses 3,364,004 - 3,364,004 3,208,267

TOTAL EXPENSES 13,682,410 1,000 13,683,410 13,841,247

CHANGE IN NET ASSETS (1,191,816) 9,000 (1,182,816) (1,174,447)

NET ASSETS AT BEGINNING OF YEAR 4,848,111 9,000 4,857,111 6,031,558

NET ASSETS AT END OF YEAR $ 3,656,295 $ 18,000 $ 3,674,295 $ 4,857,111



STATEMENTS OF ACTIVITIESYEARS ENDED DECEMBER 31,

2011


2011 2010

CASH FLOWS FROM OPERATING ACTIVITIESChange in net assets $ (1,182,816) $ (1,174,447) Adjustments to reconcile change in net assets to net cash from operating activities: Depreciation 4,216 13,200 Market value adjustment - investments 46,924 38,428 Changes in assets and liabilities: Decrease (Increase) in accounts receivable (258,510) (702,720) Decrease (Increase) in accrued interest receivable 9,686 19,882 Decrease (Increase) in prepaid insurance and expenses (77,435) 6,529 (Decrease) Increase in accounts payable and accrued expenses (15,867) (5,084) (Decrease) Increase in payroll related liabilities (118,431) 226,766 (Decrease) Increase in grant advances 1,075,560 598,365

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (516,673) (979,081)

CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES Purchases of investments (1,775,000) (2,459,753)

Proceeds from the sale of investments 2,846,000 3,207,449

NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 1,071,000 747,696

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 554,327 (231,385)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,014,726 1,246,111

CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,569,053 $ 1,014,726



STATEMENTS OF CASH FLOWSYEARS ENDED DECEMBER 31,


Notes to Financial Statements Years Ended December 31, 2011 and 2010


NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of Boston VA Research Institute, Inc. (BVARI) is presented to assist in understanding BVARI’s financial statements. The financial statements and notes are representations of the BVARI’s management who is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements. Organization BVARI was established and incorporated as a non-profit organization under the laws of the Commonwealth of Massachusetts in May 1990. BVARI derives its origins in legislation authorizing non-profit research corporations at all Veterans Administration (VA) Medical Centers. Public law 100-322 dated May 20, 1988 amended 38 USC, Chapter 73 authorizing the establishment of non-profit corporations at each VA Medical Center, the purpose of which is to provide a funding mechanism for monies received from other than VA appropriations for conducting research and educational projects approved by the Medical Center. The purpose of BVARI is to advance the research mission of the Department of Veterans Affairs through the support of research and educational related activities at the VA Boston Health Care System. Collaborative research and educational endeavors may be established with universities, for-profit companies, hospitals, charitable foundations, professional societies, the Public Health Service or other governmental agencies, and other non-profit agencies. Basis of Presentation BVARI’s policy is to prepare its financial statements in accordance with the Financial Accounting Standards Board Statement of Financial Accounting Standards (SFAS) No. 117, Financial Statements of Not-for-Profit Organizations, on an accrual basis of accounting which recognizes revenue when earned rather than when received and records expenses when incurred rather than when paid. Under SFAS No. 117, BVARI is required to report information regarding its financial position and activities based on three classes of net assets as follows: Unrestricted net assets – Net assets that are not subject to donor-imposed restrictions or limits as to their use. Temporarily restricted net assets – Net assets subject to donor-imposed stipulations or limitations as to their use that may or will be met either by actions of BVARI and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets satisfied from program restrictions. Permanently restricted net assets – Net assets subject to donor-imposed stipulations in which only the earnings can be used to fund various programs. Tax Status BVARI is a tax-exempt organization under the Internal Revenue Code Section 509(c) (3) and, therefore, has no provision for Federal or state income taxes. Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.



Fair Value Measurements BVARI reports required types of financial instruments in accordance with the fair value standards. These standards require an entity to maximize the use of observable inputs (such as quoted prices in active markets) and minimize the use of unobservable inputs (such as appraisals or valuation techniques) to determine fair value. Fair value standards also require the organization to classify these financial instruments into a three-level hierarchy, based on the priority of inputs to the valuation technique or in accordance with net asset value practical expedient rules, which allow for either Level 2 or Level 3 depending on lock up and notice periods associated with the underlying funds. Instruments measured and reported at fair value are classified and disclosed in one of the following categories: Level 1 – Quoted prices are available in active markets for identical instruments as of the reporting date. Instruments, which are generally included in this category, include listed equity and debt securities publicly traded on a stock exchange. Level 2 – Pricing inputs are other than quoted in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Level 3 – Pricing inputs are unobservable for the instrument and include situations where there is little, if any, market activity for the instrument. The inputs into the determination of fair value require significant management judgment or estimation. In some instances the inputs used to measure fair value may fall into different levels of the fair value hierarchy and is based on the lowest level of input that is significant to the fair value measurement. Market price is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. It is reasonably possible that change in values of these instruments will occur in the near term and that such changes could materially affect amounts reported in these financial statements. For more information on the fair value of BVARI’s financial instruments, see Note 8 – Fair Value Measurements. Cash and Cash Equivalents For purposes of the statement of cash flows, BVARI considers all highly liquid investments available for current use with an initial maturity date of three months or less to be cash equivalents. Investments Investments are stated at fair value as of the financial statement date, in accordance with Statement of Financial Accounting Standards (SFAS) No. 124, Accounting for Certain Investments Held by Not-for-Profit Organizations. The fair values of investments are based on quoted market prices for those or similar investments. Property and Equipment BVARI capitalizes the costs of office furnishings and equipment with expected useful lives greater than one year. This policy relates to individual purchases in excess of $5,000 and these are valued at historical cost. Depreciation is provided using the straight-line method for financial reporting purposes at rates based on estimated useful lives approximating 5 years. The cost of normal maintenance and repairs that do not add to the



value of the assets or materially extend assets lives are not capitalized and are treated as expenses when incurred. Contributed Facilities and Equipment The Financial Accounting Standards Board in its Statement of Financial Accounting Standards (SFAS) No. 116, Accounting for Contributions Received and Contributions Made, requires the fair value of donated materials and facilities to be recognized in the financial statements. BVARI is provided with office space and the use of necessary office equipment as part of their association with the VA Medical Center. BVARI has recorded the estimated value of the office space provided as donated services and rent expense in the amount of $96,000 and $91,000 for the years ended December 31, 2011 and 2010, respectively. No amounts have been recorded in the financial statements for the value of office equipment provided as there is no measurable benefit specifically accruing to BVARI. Insurance BVARI is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which BVARI carries commercial insurance. Compensated Absences Employees are granted time off in varying amounts based on state laws and executive policies. Vested or accumulated unused leave is recorded as a liability. Advertising Advertising costs are expensed as incurred. There were no advertising expenses incurred for the years ended December 31, 2011 or 2010. Fund-Raising Activities BVARI’s fund-raising expenses relate to the Winter Sport educational activities. These expenses amounted to $18,388 and $24,512 for the years ended December 31, 2011 and 2010, respectively. Uncertain Tax Positions BVARI accounts for the effect of any uncertain tax positions based on a “more likely than not” threshold to the recognition of the tax positions being sustained based on the technical merits of the position under scrutiny by the applicable taxing authority. If a tax position or positions are deemed to result in uncertainties of those positions, the unrecognized tax benefit is estimated based on a “cumulative probability assessment” that aggregates the estimated tax liability for all uncertain tax positions. BVARI has identified its tax status as a tax exempt entity as a tax position: however, BVARI has determined that such tax position does not result in an uncertainty requiring recognition. BVARI is not currently under examination by any taxing jurisdiction. Its federal and state income tax returns are generally open for examination for the past 3 years. Subsequent Events BVARI has evaluated subsequent events through April 11, 2012, the date that the financial statements have been issued.



Reclassifications Certain amounts reported in 2010 have been reclassified to compare with the presentations made in 2011 without any change to net assets. NOTE 2 – INVESTMENTS VA Research Corporations are legally restricted as to the management of funds. The Corporation may use idle funds to purchase instruments backed by the full faith and credit of the United States Government such as US Treasury bills and notes, and fully insured bank certificates of deposit. At December 31, 2011 and 2010, BVARI had $3,525,041 and $4,642,965 respectively, of certificates of deposit with original maturity dates greater than three months. NOTE 3 – PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31:

2011 2010

Furniture and Equipment $ 78,995 $ 78,995 Less: Accumulated Depreciation (68,346) (64,130)

Total Property and Equipment $ 10,649 $ 14,865

Depreciation expense amounted to $4,216 and $13,200 for the years ended December 31, 2011 and 2010, respectively. NOTE 4 – CONCENTRATIONS OF CREDIT RISK BVARI derives its revenues from research and educational activities associated with the Department of Veterans Affairs and related collaborative research projects sponsored by a variety of organizations in support of the VA Boston Healthcare System. Accounts receivable for the years ended December 31, 2011 and 2010 are net of an allowance for doubtful accounts in the amount of $15,000, respectively. BVARI believes that it has no significant concentration of credit risk outside of its basis or origin as described in Note 1. NOTE 5 – RETIREMENT PLAN BVARI implemented a Section 403(b) retirement plan in 2008 that covers substantially all employees who have completed one year of service and are at least 21 years old. There is no minimum age or service requirement for employee pre-tax contributions. BVARI may make discretionary contributions to the plan as determined by the Board of Directors annually. Pension expense amounted to approximately $109,000 and $269,000 for the years ended December 31, 2011 and 2010 respectively.



NOTE 6 – FUNCTIONAL ALLOCATION OF EXPENSES The costs of providing the various programs and activities have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. NOTE 7 – CONTINGENCIES BVARI participates in a number of federal award programs. Although BVARI’s programs have been audited in accordance with the provisions of the Single Audit Act Amendments of 1996, these programs are still subject to financial and compliance audits. The amounts, if any, of expenditures or overhead allowances which may be disallowed or changed by the granting agencies cannot be determined at this time, although BVARI expects such amounts, if any, to be immaterial. In addition to its federal award programs, BVARI is subject to the oversight of the Veterans’ Health Administration of the Department of Veterans’ Affairs (VHA). The VHA is responsible for the development and monitoring of compliance standards associated with the research projects administered by BVARI. As such, these projects are still subject to compliance audits by the VHA. NOTE 8 - FAIR VALUE MEASUREMENTS The following table presents financial assets at December 31, 2011 that BVARI measures fair value on a recurring basis, by level, within the fair value hierarchy:

Significant SignificantPortion Quoted prices in observable unobservable

carried at active markets inputs inputsAssets fair value Level 1 Level 2 Level 3

Certificates of Deposit………… $ 3,525,041 $ 3,525,041 $ - $ -

The following table presents financial assets at December 31, 2010 that BVARI measures fair value on a recurring basis, by level, within the fair value hierarchy:

Significant SignificantPortion Quoted prices in observable unobservable

carried at active markets inputs inputsAssets fair value Level 1 Level 2 Level 3

Certificates of Deposit………… $ 4,642,965 $ 4,642,965 $ - $ -

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Supplementary Information

2011 2010

PROGRAM REVENUE Research income $ 1,197,874 $ 1,549,274 Federal awards - subrecipient 1,010,221 1,529,011 DOD revenue 1,045,794 1,770,364 Other research income 488,902 563,239

TOTAL PROGRAM REVENUE 3,742,791 5,411,888

SUPPORT SERVICES IPA reimbursements 4,257,072 2,756,660 Subject fee revenue 267,667 199,803 Veterinary research support 147,636 230,664

SUPPORT SERVICES 4,672,375 3,187,127

OTHER SUPPORT Payroll assessments 2,377,707 2,084,540 Overhead assessment 939,291 1,073,922 Donated services - office space 96,000 91,000 Other support 199,737 124,619

OTHER SUPPORT 3,612,735 3,374,081

TOTAL SUPPORT SERVICES 8,285,110 6,561,208

EDUCATION REVENUE Federally supported DOD educational programs - 162,275 Veteran educational programs 204,000 281,766 Other education revenue 201,894 92,349

TOTAL EDUCATION REVENUE 405,894 536,390

INVESTMENT INCOME 66,799 157,314

TOTAL REVENUE $ 12,500,594 $ 12,666,800


SUPPLEMENTARY SCHEDULES OF REVENUEYEARS ENDED DECEMBER 31,

Boston VA Research Institute, Inc. 14 Supplementary Information

2011 2010PROGRAM EXPENSES Payroll and fringe benefit related expenses $ 3,738,739 $ 4,605,069 Overhead assessment 894,767 1,004,486 Laboratory expenses 152,612 282,603 Office expense and miscellaneous 98,039 104,688 Computer and technology expenses 84,548 101,375 Conferences and meetings 48,471 72,385 Travel 123,029 148,953 Subject payments 363,389 223,554 Other support 376,886 831,317

TOTAL PROGRAM EXPENSES 5,880,480 7,374,430

RESEARCH SUPPORT SERVICES IPA Compensation 4,153,813 2,837,603

TOTAL PROGRAM EXPENSES - RESEARCH $ 10,034,293 $ 10,212,033


SUPPLEMENTARY SCHEDULES OF PROGRAM EXPENSES - RESEARCHYEARS ENDED DECEMBER 31,


2011 2010

PROGRAM EXPENSES - EDUCATION Payroll and fringe benefit related expenses $ 49,671 $ 169,891 Overhead assessment 44,524 69,436 Office expense and miscellaneous 5,240 7,926 Conferences and meetings 125,543 30,269 Travel 11,130 3,835 Other support 49,005 139,590

TOTAL PROGRAM EXPENSES - EDUCATION $ 285,113 $ 420,947

YEARS ENDED DECEMBER 31,


SUPPLEMENTARY SCHEDULES OF PROGRAM EXPENSES - EDUCATION


2011 2010GENERAL AND ADMINISTRATIVE EXPENSES Payroll and fringe benefit related expenses $ 2,983,303 $ 2,781,617 Office expense and miscellaneous 214,061 213,572 Computer and technology expenses 47,090 50,141 Conferences and meetings 13,597 10,878 Travel 24,734 53,718 Other support 81,219 98,341

TOTAL GENERAL AND ADMINISTRATIVE EXPENSES $ 3,364,004 $ 3,208,267

SUPPLEMENTARY SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSESYEARS ENDED DECEMBER 31,




SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFOR THE YEAR ENDED DECEMBER 31, 2011

Federal CFDA

Federal Grantor/Program Title Number Expenditures

U.S. DEPARTMENT OF DEFENSEDirect Program

Basic Scientific Research 12.431 $ 6,626

Passed through the University of Texas Health Science Center at San AntonioIssue of Department of Defense Excess Equipment 12.000 21,347

Passed through the National Guard BureauMilitary Construction, National Guard 12.400 292,479

Passed through the US Army Medical Research ACQ UnitMilitary Medical Research and Development 12.420 1,303,027

Passed through the Henry M. Jackson FoundationIdentification of Mortality Rates Among Ex-POWs and Veterans with PTSD 12.750 35,578

TOTAL DEPARTMENT OF DEFENSE 1,659,057

ENVIRONMENTAL PROTECTION AGENCYPassed through the United States Environmental Protection Agency

Science to Achieve Results (STAR) Research Program 66.509 10,596

U.S. DEPARTMENT OF EDUCATIONPassed through the Spalding Rehabilitation Hospital

Spinal Chord Injuries Model Systems 84.133N 4,986

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICESDirect Program

Grants for Dental Public Health Residency Training 93.236 406,349

Passed through the National Institute of HealthEnvironmental Health 93.113 46,915 Alcohol Research Programs 93.273 17,427 National Center for Research Resources 93.389 10,918 Cancer Treatment Research 93.395 1,511 Cancer Centers Support Grants 93.397 52,090 ARRA -Trans-NIH Recovery Act Research Support, Recovery Act 93.701 108,563 Cardiovascular Diseases Research 93.837 29,658 Lung Diseases Research 93.838 25,965 Arthritis, Musculoskeletal and Skin Disease Research 93.846 59,503 Extramural Research Programs in the Neurosciences and Neurological Disorders 93.853 180,261

Passed through the National Institute of Mental HealthMental Health Research Grants 93.242 56,771

Passed through the National Cancer InstituteCancer Control 93.399 6,269

Passed through the Centers for Disease Control and Prevention

Injury Prevention and Control Research and State and Community Based Programs 93.136 3,308

Passed through the New York University School of MedicineARRA - Comparative Effectiveness Research - AHRQ, Recovery Act 93.715 6,416

TOTAL HEALTH AND HUMAN SERVICES 1,011,923

TOTAL $ 2,686,563

See notes to schedule of expenditures of federal awards.


Notes to Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2010


Note 1 – Definition of Reporting Entity Notes to schedule of expenditures of federal awards The accompanying Schedule of Expenditures of Federal Awards presents the activity of all federal financial assistance programs of the Boston VA Research Institute, Inc. All federal financial assistance received directly from federal agencies as well as federal financial assistance passed through other governmental agencies is included on the schedule. Note 2 – Significant Accounting Policies The accounting and reporting policies of the Boston VA Research Institute, Inc. are set forth below: Basis of Presentation - The accompanying Schedule of Expenditures of Federal Awards is presented on the accrual basis of accounting. Accordingly, expenses are recognized as incurred. Note 3 – Program Clusters In accordance with Subpart A §_.105 of OMB Circular No. A-133, Audits of States, Local Governments and Non Profit Organizations, certain programs have been clustered in determining major programs. All of the Boston VA Research Institute, Inc. programs are included as one research and development cluster. Note 4 – Subrecipients Boston VA Research Institute, Inc. provided federal awards to subrecipients as follows:

Federal AmountProgram Title CFDA Number Provided

Military Medical Research and Development 12.420 $ 139,709

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Single Audit Section

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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

To the Audit Committee Boston VA Research Institute, Inc. Boston, Massachusetts We have audited the financial statements of the Boston VA Research Institute, Inc. (BVARI), as of and for the year ended December 31, 2011, and have issued our report thereon dated April 11, 2012. We conducted our audit 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered the BVARI’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the BVARI’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of BVARI’s internal control over financial reporting. A deficiency in internal control over financial reporting 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 combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the BVARI’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, non compliance 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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This report is intended solely for the information and use of management of BVARI and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

April 11, 2012

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REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133

To the Audit Committee Boston VA Research Institute, Inc. Boston, Massachusetts Compliance We have audited the compliance of the Boston VA Research Institute, Inc. (BVARI), with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of BVARI’s major federal programs for the fiscal year ended December 31, 2011. BVARI’s major federal programs are identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the BVARI’s management. Our responsibility is to express an opinion on the BVARI’s compliance based on our audit. 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 OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 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 BVARI’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. Our audit does not provide a legal determination on BVARI’s compliance with those requirements. In our opinion, BVARI complied, in all material respects, with the requirements referred to above that could have a direct and material effect on each of its major federal programs for the fiscal year ended December 31, 2011. Internal Control Over Compliance Management of BVARI is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered BVARI’s internal control over compliance with the requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of BVARI’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.

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A material weakness in internal control over compliance is a deficiency, or 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. Our consideration of the 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 deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information of management of BVARI, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

April 11, 2012

Schedule of Findings and Questioned Costs For the Year Ended December 31, 2011

Boston VA Research Institute, Inc. 25 Schedule of Findings and Questioned Costs

A. Summary of Auditors’ Results Schedule of findings and questioned costs 1. The auditors’ report expresses an unqualified opinion on the financial statements of the Boston VA

Research Institute, Inc. 2. No significant deficiencies relating to the audit of the financial statements are reported in the 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.

3. No instances of noncompliance material to the financial statements of the Boston VA Research Institute,

Inc., were disclosed during the audit. 4. No significant deficiencies relating to the audit of the major federal award programs is reported in the

Report on Compliance with Requirements that could have a Direct and Material Effect on Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133.

5. The auditors’ report on compliance for the major federal award programs for the Boston VA Research

Institute, Inc. expresses an unqualified opinion.

6. There were no audit findings relative to the major federal award programs for the Boston VA Research Institute, Inc.

7. The programs tested as major grants included all programs within the Research and Development

Cluster. 8. The threshold for distinguishing Types A and B programs was $300,000. 9. The Boston VA Research Institute, Inc. was determined to be a low-risk auditee. B. Findings-Financial Statements Audit None

C. Findings and Questioned Costs-Major Federal Award Programs

None D. Summary Schedule of Prior Audit Findings None

BOSTON VA RESEARCH INSTITUTE, INC. FINANCIAL STATEMENTS ...bvari.org/FAM/Important...

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