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Respond using only the information contained within this prompt.
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According to this letter to shareholders, what was launched in Germany in 2023 to benefit the Motors P&A business?
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Dear Stockholders, This past year has been a transformative one for eBay: We delivered solid results, and in our continued pursuit to drive long-term sustainable growth, we’ve set an even more ambitious vision — to reinvent the future of ecommerce for enthusiasts. We made significant progress against our goals, with improvements in organic FX-Neutral and as-reported year-over-year GMV growth during each quarter of 2023. For the full year, revenue was up 3% organically, we generated approximately $2 billion of free cash flow, and we returned over $1.9 billion to stockholders through repurchases and dividends. Based on these results, we are confident that our strategy is the right one and that we are on the path to build a stronger, more resilient company. Since I rejoined eBay as CEO four years ago, we’ve renewed our focus on offering meaningful choices and value, and building trust with our global community of sellers and buyers. The pace of innovation at eBay has accelerated, and we have pivoted to a full-funnel marketing approach aimed at attracting and retaining enthusiast customers. In 2023, we raised the bar further to enhance the end-to-end experience for our customers and drive growth for stockholders by leveraging three key strategic pillars: relevant experiences, scalable solutions, and magical innovations. As we navigated a dynamic macroeconomic environment, we set our organization up for speed and prioritized initiatives that we believe will have an outsized impact on our customers, community, and stockholders. Relevant Experiences We are focused on solving the specific and ever-changing needs of our sellers and buyers across all shopping occasions. Through our Focus Category playbook, we have seen a meaningful improvement in our growth relative to the market in every category we’ve invested in to date. In 2023, Focus Categories grew by 4% year-over-year on an FX-neutral basis, outpacing the remainder of our business by roughly seven points. We exited the year with Focus Categories making up nearly 30% of our business, and we will continue to expand to new categories in 2024. Our investments in Focus Categories led to numerous improvements in the overall customer experience on eBay last year, including: CEO Letter to Stockholders 2023 2 • We launched eBay Guaranteed Fit in the U.S. and similar programs in the UK and Germany to benefit our Motors Parts & Accessories (P&A) business, assuring buyers that eBay will stand behind them if a part doesn’t fit their vehicle. These programs are underpinned by multiple years of investment in P&A technology, have delivered a game-changing level of trust for buyers, and have yielded measurable uplift in conversion for sellers. • We launched the Certified by Brand program with over 30 brands offering new and certified preowned inventory, bringing an enhanced level of trust to the watch, jewelry, and handbag categories. • Our eBay Refurbished program continues to outperform as consumers turn to eBay for sustainability and value in the current economic environment. eBay Refurbished was one of our fastest growing Focus Categories in 2023, posting healthy double-digit, FX-Neutral GMV growth for the full year. Last year, we added dozens of new categories to the program, signed up more brands and OEMs to sell refurbished inventory directly on eBay, and made onboarding for small business sellers faster and more scalable to increase the amount of great refurbished inventory available to buyers. In addition to Focus Categories, we’re investing in country-specific experiences so that our marketplace is more attuned to the needs of local sellers and buyers. Last year, we made a significant investment in Germany, our third largest market as measured by demand, adopting a similar approach to our vertical playbook: • We removed some of the biggest hurdles for sellers and introduced a number of features to address the unique needs of German consumers, including search and SEO enhancements, shipping and return label improvements, and a complete overhaul of the local pickup experience. Additionally, we eliminated final value fees for German C2C sellers on domestic transactions to stimulate our sell-to-buy flywheel in the country. • Over the past year, C2C seller NPS and customer satisfaction have increased by 20 points or more, buyers who sell returned to positive growth, unpaid items have been cut in half for local pickups, and C2C volume in Germany has returned to positive growth. • Notably, these investments have made our business significantly more resilient to the challenging macroenvironment in Germany and have resulted in hundreds of millions of dollars of incremental GMV relative to our prior trajectory. CEO Letter to Stockholders 2023 3 Finally, we continued to improve the selling and buying experiences with horizontal enhancements in 2023: • We invested further in new capabilities for Search, such as deep learning and visual similarity to improve ranking and retrieval, reducing queries with low or null results to surface more of our amazing inventory for customers. • We began our work in modernizing the buying experience on eBay by rolling out an enhanced View Item page, which features a streamlined appearance, larger and higher-resolution images, and an optimized information hierarchy. This update has contributed to a measurable uplift in GMV versus our previous design, and our work to modernize the overall shopping experience will continue in 2024. Scalable Solutions eBay’s scale is one of our most powerful assets, with over 28 years of data, 132 million buyers, and nearly 2 billion live listings in 190 markets around the world at the end of 2023. With the foundational capabilities we developed using AI last year, we will continue to invest in unlocking the power of our data assets to fuel next-gen ecommerce experiences that we are confident will exceed our customers’ expectations and set a new standard for the industry. Our advertising business continued to show strong double-digit growth rates in 2023, driving our ability to invest meaningfully into the rest of the business. Our advertising platform, which surpassed 900 million live Promoted Listings in 2023, helps sellers achieve greater velocity and price realization for their inventory. • We generated over $1.4 billion of total advertising revenue, up roughly 25% on an FX-Neutral basis for the year and more than double our advertising revenue in 2019. • Promoted Listings Standard, our cost-per-acquisition product, remains our largest contributor to advertising revenue due to its simplicity and proven return on ad spend. • And Promoted Listings Advanced, our cost-per-click format, was among the fastest-growing products in our advertising portfolio on a year-over-year basis. Over the course of the year, we significantly enhanced this product with customized keywords and bidding structures, and by using AI to optimize campaigns. Also, the payments platform processed approximately $70 billion of volume in 2023 while enabling transactions between millions of eBay sellers and buyers globally. We continued to scale our financial services offerings like FX conversion and alternative methods to pay and get paid. We also meaningfully improved our identity and risk management capabilities that enhance customer value CEO Letter to Stockholders 2023 4 and marketplace trust. For instance, investments in the eBay checkout experience and in-house risk modeling enhancements aimed at reducing transaction friction have measurably improved conversion on our marketplace and contributed nearly $1 billion in incremental GMV in 2023. Lastly, our global scale and cross-border capabilities enabled us to launch the eBay International Shipping (eIS) program, which makes trade more seamless and cost effective for sellers and buyers worldwide by simplifying the complexities of taxes, duties, and returns. • We introduced combined shipping for eIS, allowing buyers to order multiple items from an international seller and pay one consolidated shipping fee. • We ended 2023 with over 400 million live listings from U.S. sellers shippable to international buyers, and sellers have had an overwhelmingly positive response to the program, with customer satisfaction ratings over 40 points higher than the previous global shipping program eIS replaced.
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System instruction: Respond using only the information contained within this prompt. question: According to this letter to shareholders, what was launched in Germany in 2023 to benefit the Motors P&A business? context: Dear Stockholders, This past year has been a transformative one for eBay: We delivered solid results, and in our continued pursuit to drive long-term sustainable growth, we’ve set an even more ambitious vision — to reinvent the future of ecommerce for enthusiasts. We made significant progress against our goals, with improvements in organic FX-Neutral and as-reported year-over-year GMV growth during each quarter of 2023. For the full year, revenue was up 3% organically, we generated approximately $2 billion of free cash flow, and we returned over $1.9 billion to stockholders through repurchases and dividends. Based on these results, we are confident that our strategy is the right one and that we are on the path to build a stronger, more resilient company. Since I rejoined eBay as CEO four years ago, we’ve renewed our focus on offering meaningful choices and value, and building trust with our global community of sellers and buyers. The pace of innovation at eBay has accelerated, and we have pivoted to a full-funnel marketing approach aimed at attracting and retaining enthusiast customers. In 2023, we raised the bar further to enhance the end-to-end experience for our customers and drive growth for stockholders by leveraging three key strategic pillars: relevant experiences, scalable solutions, and magical innovations. As we navigated a dynamic macroeconomic environment, we set our organization up for speed and prioritized initiatives that we believe will have an outsized impact on our customers, community, and stockholders. Relevant Experiences We are focused on solving the specific and ever-changing needs of our sellers and buyers across all shopping occasions. Through our Focus Category playbook, we have seen a meaningful improvement in our growth relative to the market in every category we’ve invested in to date. In 2023, Focus Categories grew by 4% year-over-year on an FX-neutral basis, outpacing the remainder of our business by roughly seven points. We exited the year with Focus Categories making up nearly 30% of our business, and we will continue to expand to new categories in 2024. Our investments in Focus Categories led to numerous improvements in the overall customer experience on eBay last year, including: CEO Letter to Stockholders 2023 2 • We launched eBay Guaranteed Fit in the U.S. and similar programs in the UK and Germany to benefit our Motors Parts & Accessories (P&A) business, assuring buyers that eBay will stand behind them if a part doesn’t fit their vehicle. These programs are underpinned by multiple years of investment in P&A technology, have delivered a game-changing level of trust for buyers, and have yielded measurable uplift in conversion for sellers. • We launched the Certified by Brand program with over 30 brands offering new and certified preowned inventory, bringing an enhanced level of trust to the watch, jewelry, and handbag categories. • Our eBay Refurbished program continues to outperform as consumers turn to eBay for sustainability and value in the current economic environment. eBay Refurbished was one of our fastest growing Focus Categories in 2023, posting healthy double-digit, FX-Neutral GMV growth for the full year. Last year, we added dozens of new categories to the program, signed up more brands and OEMs to sell refurbished inventory directly on eBay, and made onboarding for small business sellers faster and more scalable to increase the amount of great refurbished inventory available to buyers. In addition to Focus Categories, we’re investing in country-specific experiences so that our marketplace is more attuned to the needs of local sellers and buyers. Last year, we made a significant investment in Germany, our third largest market as measured by demand, adopting a similar approach to our vertical playbook: • We removed some of the biggest hurdles for sellers and introduced a number of features to address the unique needs of German consumers, including search and SEO enhancements, shipping and return label improvements, and a complete overhaul of the local pickup experience. Additionally, we eliminated final value fees for German C2C sellers on domestic transactions to stimulate our sell-to-buy flywheel in the country. • Over the past year, C2C seller NPS and customer satisfaction have increased by 20 points or more, buyers who sell returned to positive growth, unpaid items have been cut in half for local pickups, and C2C volume in Germany has returned to positive growth. • Notably, these investments have made our business significantly more resilient to the challenging macroenvironment in Germany and have resulted in hundreds of millions of dollars of incremental GMV relative to our prior trajectory. CEO Letter to Stockholders 2023 3 Finally, we continued to improve the selling and buying experiences with horizontal enhancements in 2023: • We invested further in new capabilities for Search, such as deep learning and visual similarity to improve ranking and retrieval, reducing queries with low or null results to surface more of our amazing inventory for customers. • We began our work in modernizing the buying experience on eBay by rolling out an enhanced View Item page, which features a streamlined appearance, larger and higher-resolution images, and an optimized information hierarchy. This update has contributed to a measurable uplift in GMV versus our previous design, and our work to modernize the overall shopping experience will continue in 2024. Scalable Solutions eBay’s scale is one of our most powerful assets, with over 28 years of data, 132 million buyers, and nearly 2 billion live listings in 190 markets around the world at the end of 2023. With the foundational capabilities we developed using AI last year, we will continue to invest in unlocking the power of our data assets to fuel next-gen ecommerce experiences that we are confident will exceed our customers’ expectations and set a new standard for the industry. Our advertising business continued to show strong double-digit growth rates in 2023, driving our ability to invest meaningfully into the rest of the business. Our advertising platform, which surpassed 900 million live Promoted Listings in 2023, helps sellers achieve greater velocity and price realization for their inventory. • We generated over $1.4 billion of total advertising revenue, up roughly 25% on an FX-Neutral basis for the year and more than double our advertising revenue in 2019. • Promoted Listings Standard, our cost-per-acquisition product, remains our largest contributor to advertising revenue due to its simplicity and proven return on ad spend. • And Promoted Listings Advanced, our cost-per-click format, was among the fastest-growing products in our advertising portfolio on a year-over-year basis. Over the course of the year, we significantly enhanced this product with customized keywords and bidding structures, and by using AI to optimize campaigns. Also, the payments platform processed approximately $70 billion of volume in 2023 while enabling transactions between millions of eBay sellers and buyers globally. We continued to scale our financial services offerings like FX conversion and alternative methods to pay and get paid. We also meaningfully improved our identity and risk management capabilities that enhance customer value CEO Letter to Stockholders 2023 4 and marketplace trust. For instance, investments in the eBay checkout experience and in-house risk modeling enhancements aimed at reducing transaction friction have measurably improved conversion on our marketplace and contributed nearly $1 billion in incremental GMV in 2023. Lastly, our global scale and cross-border capabilities enabled us to launch the eBay International Shipping (eIS) program, which makes trade more seamless and cost effective for sellers and buyers worldwide by simplifying the complexities of taxes, duties, and returns. • We introduced combined shipping for eIS, allowing buyers to order multiple items from an international seller and pay one consolidated shipping fee. • We ended 2023 with over 400 million live listings from U.S. sellers shippable to international buyers, and sellers have had an overwhelmingly positive response to the program, with customer satisfaction ratings over 40 points higher than the previous global shipping program eIS replaced.
|
Respond using only the information contained within this prompt.
EVIDENCE:
Dear Stockholders, This past year has been a transformative one for eBay: We delivered solid results, and in our continued pursuit to drive long-term sustainable growth, we’ve set an even more ambitious vision — to reinvent the future of ecommerce for enthusiasts. We made significant progress against our goals, with improvements in organic FX-Neutral and as-reported year-over-year GMV growth during each quarter of 2023. For the full year, revenue was up 3% organically, we generated approximately $2 billion of free cash flow, and we returned over $1.9 billion to stockholders through repurchases and dividends. Based on these results, we are confident that our strategy is the right one and that we are on the path to build a stronger, more resilient company. Since I rejoined eBay as CEO four years ago, we’ve renewed our focus on offering meaningful choices and value, and building trust with our global community of sellers and buyers. The pace of innovation at eBay has accelerated, and we have pivoted to a full-funnel marketing approach aimed at attracting and retaining enthusiast customers. In 2023, we raised the bar further to enhance the end-to-end experience for our customers and drive growth for stockholders by leveraging three key strategic pillars: relevant experiences, scalable solutions, and magical innovations. As we navigated a dynamic macroeconomic environment, we set our organization up for speed and prioritized initiatives that we believe will have an outsized impact on our customers, community, and stockholders. Relevant Experiences We are focused on solving the specific and ever-changing needs of our sellers and buyers across all shopping occasions. Through our Focus Category playbook, we have seen a meaningful improvement in our growth relative to the market in every category we’ve invested in to date. In 2023, Focus Categories grew by 4% year-over-year on an FX-neutral basis, outpacing the remainder of our business by roughly seven points. We exited the year with Focus Categories making up nearly 30% of our business, and we will continue to expand to new categories in 2024. Our investments in Focus Categories led to numerous improvements in the overall customer experience on eBay last year, including: CEO Letter to Stockholders 2023 2 • We launched eBay Guaranteed Fit in the U.S. and similar programs in the UK and Germany to benefit our Motors Parts & Accessories (P&A) business, assuring buyers that eBay will stand behind them if a part doesn’t fit their vehicle. These programs are underpinned by multiple years of investment in P&A technology, have delivered a game-changing level of trust for buyers, and have yielded measurable uplift in conversion for sellers. • We launched the Certified by Brand program with over 30 brands offering new and certified preowned inventory, bringing an enhanced level of trust to the watch, jewelry, and handbag categories. • Our eBay Refurbished program continues to outperform as consumers turn to eBay for sustainability and value in the current economic environment. eBay Refurbished was one of our fastest growing Focus Categories in 2023, posting healthy double-digit, FX-Neutral GMV growth for the full year. Last year, we added dozens of new categories to the program, signed up more brands and OEMs to sell refurbished inventory directly on eBay, and made onboarding for small business sellers faster and more scalable to increase the amount of great refurbished inventory available to buyers. In addition to Focus Categories, we’re investing in country-specific experiences so that our marketplace is more attuned to the needs of local sellers and buyers. Last year, we made a significant investment in Germany, our third largest market as measured by demand, adopting a similar approach to our vertical playbook: • We removed some of the biggest hurdles for sellers and introduced a number of features to address the unique needs of German consumers, including search and SEO enhancements, shipping and return label improvements, and a complete overhaul of the local pickup experience. Additionally, we eliminated final value fees for German C2C sellers on domestic transactions to stimulate our sell-to-buy flywheel in the country. • Over the past year, C2C seller NPS and customer satisfaction have increased by 20 points or more, buyers who sell returned to positive growth, unpaid items have been cut in half for local pickups, and C2C volume in Germany has returned to positive growth. • Notably, these investments have made our business significantly more resilient to the challenging macroenvironment in Germany and have resulted in hundreds of millions of dollars of incremental GMV relative to our prior trajectory. CEO Letter to Stockholders 2023 3 Finally, we continued to improve the selling and buying experiences with horizontal enhancements in 2023: • We invested further in new capabilities for Search, such as deep learning and visual similarity to improve ranking and retrieval, reducing queries with low or null results to surface more of our amazing inventory for customers. • We began our work in modernizing the buying experience on eBay by rolling out an enhanced View Item page, which features a streamlined appearance, larger and higher-resolution images, and an optimized information hierarchy. This update has contributed to a measurable uplift in GMV versus our previous design, and our work to modernize the overall shopping experience will continue in 2024. Scalable Solutions eBay’s scale is one of our most powerful assets, with over 28 years of data, 132 million buyers, and nearly 2 billion live listings in 190 markets around the world at the end of 2023. With the foundational capabilities we developed using AI last year, we will continue to invest in unlocking the power of our data assets to fuel next-gen ecommerce experiences that we are confident will exceed our customers’ expectations and set a new standard for the industry. Our advertising business continued to show strong double-digit growth rates in 2023, driving our ability to invest meaningfully into the rest of the business. Our advertising platform, which surpassed 900 million live Promoted Listings in 2023, helps sellers achieve greater velocity and price realization for their inventory. • We generated over $1.4 billion of total advertising revenue, up roughly 25% on an FX-Neutral basis for the year and more than double our advertising revenue in 2019. • Promoted Listings Standard, our cost-per-acquisition product, remains our largest contributor to advertising revenue due to its simplicity and proven return on ad spend. • And Promoted Listings Advanced, our cost-per-click format, was among the fastest-growing products in our advertising portfolio on a year-over-year basis. Over the course of the year, we significantly enhanced this product with customized keywords and bidding structures, and by using AI to optimize campaigns. Also, the payments platform processed approximately $70 billion of volume in 2023 while enabling transactions between millions of eBay sellers and buyers globally. We continued to scale our financial services offerings like FX conversion and alternative methods to pay and get paid. We also meaningfully improved our identity and risk management capabilities that enhance customer value CEO Letter to Stockholders 2023 4 and marketplace trust. For instance, investments in the eBay checkout experience and in-house risk modeling enhancements aimed at reducing transaction friction have measurably improved conversion on our marketplace and contributed nearly $1 billion in incremental GMV in 2023. Lastly, our global scale and cross-border capabilities enabled us to launch the eBay International Shipping (eIS) program, which makes trade more seamless and cost effective for sellers and buyers worldwide by simplifying the complexities of taxes, duties, and returns. • We introduced combined shipping for eIS, allowing buyers to order multiple items from an international seller and pay one consolidated shipping fee. • We ended 2023 with over 400 million live listings from U.S. sellers shippable to international buyers, and sellers have had an overwhelmingly positive response to the program, with customer satisfaction ratings over 40 points higher than the previous global shipping program eIS replaced.
USER:
According to this letter to shareholders, what was launched in Germany in 2023 to benefit the Motors P&A business?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 9
| 19
| 1,296
| null | 295
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Using only information found in the provided context answer the prompt's question using a summary paragraph followed by a bulleted list The bulleted list should be concise but detailed enough that it covers all aspect of the line item. A conclusion paragraph should be included that is no more than 3 sentences and leaves the conversation open for discussion.
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Summarize the benefit that enhanced firewall capabilities can have on network security.
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Cloud Access Security Broker (CASB) Given the increasing subscription to multiple clouds in many enterprises, one of the most important pieces of software is the cloud access security broker (CASB). It sits on the network between the cloud service customers (CSC) and the cloud service providers (CSP). The evolution of CASB functionality can be traced as follows [3]: • The primary function of the first generation of CASBs was the discovery of resources. They provided visibility into all of the cloud resources that the enterprise users accessed, thus preventing or minimizing the chances of shadow IT. Shadow IT is the practice of some users using cloud applications that are not authorized by the enterprise IT management from home or the office using enterprise desktops. An example of this is the use of unapproved software as-a-service (SaaS) applications for file sharing, social media, collaboration, and web conferencing [4]. This generation of CASBs also provides some statistics, such as software-as-a-service (SaaS) utilization. • The current generation of CASBs enforces security and governance policies for cloud applications, thus enabling enterprises to extend their on-premises policies to the cloud. Specific security services provided by CASBs include: o Protection of enterprise data that live in cloud service providers’ servers (due to SaaS or IaaS subscriptions), as well as data inflow and data outflow (i.e., Data Loss Prevention [DLP] capabilities) from those servers. o Tracking of threats, such as account hijacking and other malicious activities, some of which can detect anomalies in users’ cloud access behavior (through robust User and Entity Behavior Analytics (UEBA) functionality) and stop insider threats and advanced cyberattacks [5]. o Detection of misconfigurations in the enterprise’s subscribed IaaS and cloud servers. These misconfigurations pose serious security risks, such as data breaches. Alerts generated by CASB due to misconfigurations in the enterprise’s IaaS deployments direct the enterprise to follow guidelines, such as the Center for Internet Security’s (CIS) benchmarks for public cloud services, thus improving the overall security profile of the enterprise for cloud access [4]. Enhanced Firewall Capabilities The security functions in firewalls have enlarged alongside the changing network landscape. Firewalls started as hardware appliances that prevented network packets from a device with a particular network location (e.g., combination of Internet Protocol (IP) address and port) in one 8 NIST SP 800-215 November 2022 Guide to a Secure Enterprise Network Landscape subnet (e.g., external network or internet) from accessing a device on another network location or subnet (e.g., intranet or Demilitarized Zone (DMZ) or corporate network). In that setup, it primarily secured a network perimeter. The evolution of firewall functions can be traced based on the following feature sets [6]: • Packet filters and network address translation: Packet filtering and Network address translation (NAT) are used to monitor and control packets moving across a network interface, apply predetermined security rules, and obscure the internal network from the public internet. • Stateful inspection: Stateful firewalling, also known as dynamic packet filtering, monitors the state of connections and makes determinations as to what types of data packets belong to a known active connection and can be allowed to pass through the firewall. • Deep packet inspection (DPI): This feature, also known as packet sniffing, examines the content of packets (both the header and the payload, unlike the stateful inspection that inspects only the packet header). In addition to the capability provided by stateful inspection, this has capabilities related to finding hidden threats within the data stream, such as attempts at data exfiltration, violations of content policies, malware, and more. • Threat detection and response: Modern firewalls can gather and analyze enough data across multiple packets and sessions to detect threats and security incidents targeted at a particular system or a family of systems. These data from multiple firewalls can also be directed toward security information and event management (SIEM) and correlated with data from other security tools and IT systems to detect enterprise-wide attacks that span multiple systems and network layers. In addition, these data can be used to understand evolving threats and define new access rules, attack patterns, and defensive strategies [6]. • Logging and auditing capabilities: Logging and auditing capabilities result in the construction of network events that can be used to identify patterns of performance and security issues. • Access control functions: Access control functions enforce granular sophisticated access control policies. • Multiple locations and functions: Firewalls reside at different locations to perform different functions. Firewalls at the network edge perform the network perimeter protection function by filtering disallowed sources and destinations and blocking the packets of potential threats. Firewalls inside a data center can segment the internal network to prevent the lateral movement of traffic and isolate sensitive resources (e.g., services and data stores). Device-based firewalls prevent malicious traffic in and out of endpoints. • Open Application Programming Interfaces (APIs): These enable integration with many networking products that provide additional security capabilities. • Policy Composition Capabilities: Some firewalls can have the capabilities to merge policies at enforcement time so as to ensure that consistent policies are applied to different classes of users (e.g., those on-premises and on private and public clouds). • Web application firewalls (WAF): This class of firewalls has been used ever since web applications accessed through web protocols, such as Hypertext Transfer Protocol 9 NIST SP 800-215 November 2022 Guide to a Secure Enterprise Network Landscape (HTTP), came into existence. A feature advancement in this class of firewalls is advanced Uniform Resource Locator (URL) filtering. This is the ability to detect traffic from malicious URLs and prevent web-based threats and attacks by receiving real-time data analyzed by machine learning algorithms [7][8]. Specifically, this class of firewalls can inspect threat vectors for SQL Injection, operating system (OS) command injections, and cross-site scripting attacks, as well as prevent inbound attacks. They are used in content delivery networks (CDN) and to prevent distributed denial-of-service (DDoS) attacks. Some additional features found in this class of firewalls are: a. Ability to specify an allowable list of services (control at the application level) b. Traffic matches the intent of allowed ports c. Filtering of some unwanted protocols Appliance-set with Integrated Functions • Unified threat management (or UTMs): UTM devices combine many of the most critical security functions – firewall, IPS, VPN concentrator, gateway antivirus, content filtering, and WAN load balancing – into a single device, usually with a unified management console. • Next-generation firewall (NGFW): The distinguishing feature of NGFW is application data awareness. It can look at data not only at layers 3 and 4 of an Open Systems Interconnection (OSI) stack but also at layer 7 – the application level. Its capabilities extend beyond packet filtering and stateful inspection. There are multiple deployment options available for NGFWs, such as an appliance in the data center, as a software running in a VM in a cloud, or as a cloud service (FWaaS). Some capabilities of NGFW include [9]: a. Deep Packet Inspection (DPI) b. TLS decryption and inspection of packet payload c. Intrusion prevention system (IPS) feature • Web application and API protection (WAAP): This is a comprehensive security approach and an enhancement over WAF. WAF is an integral component for API security, BOT (abbreviation for Robot) defense, and DDOS protection. a. These can be offered as a product suite or as a cloud-based service [10][11]. b. Secure web gateway (SWGs): SWGs are appliances utilized for policy-based access to and control of cloud-based applications as well as governance of access to the open web for enterprise users in ubiquitous locations (e.g., headquarters, branch offices, home, remote locations). An SWG is fundamentally a web filter that protects outbound user traffic through HTTP or Hypertext Transfer Protocol Secure (HTTPS) inspection [12]. It also protects user endpoints from web-based threats that can occur when users click on links to malicious websites or to websites infected with malware. They centralize control, visibility, and reporting across many locations and types of users. They are not a replacement for WAFs, 10 NIST SP 800-215 November 2022 Network Security Automation Tools Guide to a Secure Enterprise Network Landscape which protect websites housed in enterprise data centers and large headquarter sites from inbound attacks.
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Using only information available from the text below, summarize the benefit that enhanced firewall capabilities can have on network security. The summary should be written in a single paragraph that is followed by a bulleted list that highlights the key points required to answering the question. The bullet points should be concise but descriptive. Include a conclusion that is no more than 3 sentences long and leaves the response open to discussion. Cloud Access Security Broker (CASB) Given the increasing subscription to multiple clouds in many enterprises, one of the most important pieces of software is the cloud access security broker (CASB). It sits on the network between the cloud service customers (CSC) and the cloud service providers (CSP). The evolution of CASB functionality can be traced as follows [3]: • The primary function of the first generation of CASBs was the discovery of resources. They provided visibility into all of the cloud resources that the enterprise users accessed, thus preventing or minimizing the chances of shadow IT. Shadow IT is the practice of some users using cloud applications that are not authorized by the enterprise IT management from home or the office using enterprise desktops. An example of this is the use of unapproved software as-a-service (SaaS) applications for file sharing, social media, collaboration, and web conferencing [4]. This generation of CASBs also provides some statistics, such as software-as-a-service (SaaS) utilization. • The current generation of CASBs enforces security and governance policies for cloud applications, thus enabling enterprises to extend their on-premises policies to the cloud. Specific security services provided by CASBs include: o Protection of enterprise data that live in cloud service providers’ servers (due to SaaS or IaaS subscriptions), as well as data inflow and data outflow (i.e., Data Loss Prevention [DLP] capabilities) from those servers. o Tracking of threats, such as account hijacking and other malicious activities, some of which can detect anomalies in users’ cloud access behavior (through robust User and Entity Behavior Analytics (UEBA) functionality) and stop insider threats and advanced cyberattacks [5]. o Detection of misconfigurations in the enterprise’s subscribed IaaS and cloud servers. These misconfigurations pose serious security risks, such as data breaches. Alerts generated by CASB due to misconfigurations in the enterprise’s IaaS deployments direct the enterprise to follow guidelines, such as the Center for Internet Security’s (CIS) benchmarks for public cloud services, thus improving the overall security profile of the enterprise for cloud access [4]. Enhanced Firewall Capabilities The security functions in firewalls have enlarged alongside the changing network landscape. Firewalls started as hardware appliances that prevented network packets from a device with a particular network location (e.g., combination of Internet Protocol (IP) address and port) in one 8 NIST SP 800-215 November 2022 Guide to a Secure Enterprise Network Landscape subnet (e.g., external network or internet) from accessing a device on another network location or subnet (e.g., intranet or Demilitarized Zone (DMZ) or corporate network). In that setup, it primarily secured a network perimeter. The evolution of firewall functions can be traced based on the following feature sets [6]: • Packet filters and network address translation: Packet filtering and Network address translation (NAT) are used to monitor and control packets moving across a network interface, apply predetermined security rules, and obscure the internal network from the public internet. • Stateful inspection: Stateful firewalling, also known as dynamic packet filtering, monitors the state of connections and makes determinations as to what types of data packets belong to a known active connection and can be allowed to pass through the firewall. • Deep packet inspection (DPI): This feature, also known as packet sniffing, examines the content of packets (both the header and the payload, unlike the stateful inspection that inspects only the packet header). In addition to the capability provided by stateful inspection, this has capabilities related to finding hidden threats within the data stream, such as attempts at data exfiltration, violations of content policies, malware, and more. • Threat detection and response: Modern firewalls can gather and analyze enough data across multiple packets and sessions to detect threats and security incidents targeted at a particular system or a family of systems. These data from multiple firewalls can also be directed toward security information and event management (SIEM) and correlated with data from other security tools and IT systems to detect enterprise-wide attacks that span multiple systems and network layers. In addition, these data can be used to understand evolving threats and define new access rules, attack patterns, and defensive strategies [6]. • Logging and auditing capabilities: Logging and auditing capabilities result in the construction of network events that can be used to identify patterns of performance and security issues. • Access control functions: Access control functions enforce granular sophisticated access control policies. • Multiple locations and functions: Firewalls reside at different locations to perform different functions. Firewalls at the network edge perform the network perimeter protection function by filtering disallowed sources and destinations and blocking the packets of potential threats. Firewalls inside a data center can segment the internal network to prevent the lateral movement of traffic and isolate sensitive resources (e.g., services and data stores). Device-based firewalls prevent malicious traffic in and out of endpoints. • Open Application Programming Interfaces (APIs): These enable integration with many networking products that provide additional security capabilities. • Policy Composition Capabilities: Some firewalls can have the capabilities to merge policies at enforcement time so as to ensure that consistent policies are applied to different classes of users (e.g., those on-premises and on private and public clouds). • Web application firewalls (WAF): This class of firewalls has been used ever since web applications accessed through web protocols, such as Hypertext Transfer Protocol 9 NIST SP 800-215 November 2022 Guide to a Secure Enterprise Network Landscape (HTTP), came into existence. A feature advancement in this class of firewalls is advanced Uniform Resource Locator (URL) filtering. This is the ability to detect traffic from malicious URLs and prevent web-based threats and attacks by receiving real-time data analyzed by machine learning algorithms [7][8]. Specifically, this class of firewalls can inspect threat vectors for SQL Injection, operating system (OS) command injections, and cross-site scripting attacks, as well as prevent inbound attacks. They are used in content delivery networks (CDN) and to prevent distributed denial-of-service (DDoS) attacks. Some additional features found in this class of firewalls are: a. Ability to specify an allowable list of services (control at the application level) b. Traffic matches the intent of allowed ports c. Filtering of some unwanted protocols Appliance-set with Integrated Functions • Unified threat management (or UTMs): UTM devices combine many of the most critical security functions – firewall, IPS, VPN concentrator, gateway antivirus, content filtering, and WAN load balancing – into a single device, usually with a unified management console. • Next-generation firewall (NGFW): The distinguishing feature of NGFW is application data awareness. It can look at data not only at layers 3 and 4 of an Open Systems Interconnection (OSI) stack but also at layer 7 – the application level. Its capabilities extend beyond packet filtering and stateful inspection. There are multiple deployment options available for NGFWs, such as an appliance in the data center, as a software running in a VM in a cloud, or as a cloud service (FWaaS). Some capabilities of NGFW include [9]: a. Deep Packet Inspection (DPI) b. TLS decryption and inspection of packet payload c. Intrusion prevention system (IPS) feature • Web application and API protection (WAAP): This is a comprehensive security approach and an enhancement over WAF. WAF is an integral component for API security, BOT (abbreviation for Robot) defense, and DDOS protection. a. These can be offered as a product suite or as a cloud-based service [10][11]. b. Secure web gateway (SWGs): SWGs are appliances utilized for policy-based access to and control of cloud-based applications as well as governance of access to the open web for enterprise users in ubiquitous locations (e.g., headquarters, branch offices, home, remote locations). An SWG is fundamentally a web filter that protects outbound user traffic through HTTP or Hypertext Transfer Protocol Secure (HTTPS) inspection [12]. It also protects user endpoints from web-based threats that can occur when users click on links to malicious websites or to websites infected with malware. They centralize control, visibility, and reporting across many locations and types of users. They are not a replacement for WAFs, 10 NIST SP 800-215 November 2022 Network Security Automation Tools Guide to a Secure Enterprise Network Landscape which protect websites housed in enterprise data centers and large headquarter sites from inbound attacks.
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Using only information found in the provided context answer the prompt's question using a summary paragraph followed by a bulleted list The bulleted list should be concise but detailed enough that it covers all aspect of the line item. A conclusion paragraph should be included that is no more than 3 sentences and leaves the conversation open for discussion.
EVIDENCE:
Cloud Access Security Broker (CASB) Given the increasing subscription to multiple clouds in many enterprises, one of the most important pieces of software is the cloud access security broker (CASB). It sits on the network between the cloud service customers (CSC) and the cloud service providers (CSP). The evolution of CASB functionality can be traced as follows [3]: • The primary function of the first generation of CASBs was the discovery of resources. They provided visibility into all of the cloud resources that the enterprise users accessed, thus preventing or minimizing the chances of shadow IT. Shadow IT is the practice of some users using cloud applications that are not authorized by the enterprise IT management from home or the office using enterprise desktops. An example of this is the use of unapproved software as-a-service (SaaS) applications for file sharing, social media, collaboration, and web conferencing [4]. This generation of CASBs also provides some statistics, such as software-as-a-service (SaaS) utilization. • The current generation of CASBs enforces security and governance policies for cloud applications, thus enabling enterprises to extend their on-premises policies to the cloud. Specific security services provided by CASBs include: o Protection of enterprise data that live in cloud service providers’ servers (due to SaaS or IaaS subscriptions), as well as data inflow and data outflow (i.e., Data Loss Prevention [DLP] capabilities) from those servers. o Tracking of threats, such as account hijacking and other malicious activities, some of which can detect anomalies in users’ cloud access behavior (through robust User and Entity Behavior Analytics (UEBA) functionality) and stop insider threats and advanced cyberattacks [5]. o Detection of misconfigurations in the enterprise’s subscribed IaaS and cloud servers. These misconfigurations pose serious security risks, such as data breaches. Alerts generated by CASB due to misconfigurations in the enterprise’s IaaS deployments direct the enterprise to follow guidelines, such as the Center for Internet Security’s (CIS) benchmarks for public cloud services, thus improving the overall security profile of the enterprise for cloud access [4]. Enhanced Firewall Capabilities The security functions in firewalls have enlarged alongside the changing network landscape. Firewalls started as hardware appliances that prevented network packets from a device with a particular network location (e.g., combination of Internet Protocol (IP) address and port) in one 8 NIST SP 800-215 November 2022 Guide to a Secure Enterprise Network Landscape subnet (e.g., external network or internet) from accessing a device on another network location or subnet (e.g., intranet or Demilitarized Zone (DMZ) or corporate network). In that setup, it primarily secured a network perimeter. The evolution of firewall functions can be traced based on the following feature sets [6]: • Packet filters and network address translation: Packet filtering and Network address translation (NAT) are used to monitor and control packets moving across a network interface, apply predetermined security rules, and obscure the internal network from the public internet. • Stateful inspection: Stateful firewalling, also known as dynamic packet filtering, monitors the state of connections and makes determinations as to what types of data packets belong to a known active connection and can be allowed to pass through the firewall. • Deep packet inspection (DPI): This feature, also known as packet sniffing, examines the content of packets (both the header and the payload, unlike the stateful inspection that inspects only the packet header). In addition to the capability provided by stateful inspection, this has capabilities related to finding hidden threats within the data stream, such as attempts at data exfiltration, violations of content policies, malware, and more. • Threat detection and response: Modern firewalls can gather and analyze enough data across multiple packets and sessions to detect threats and security incidents targeted at a particular system or a family of systems. These data from multiple firewalls can also be directed toward security information and event management (SIEM) and correlated with data from other security tools and IT systems to detect enterprise-wide attacks that span multiple systems and network layers. In addition, these data can be used to understand evolving threats and define new access rules, attack patterns, and defensive strategies [6]. • Logging and auditing capabilities: Logging and auditing capabilities result in the construction of network events that can be used to identify patterns of performance and security issues. • Access control functions: Access control functions enforce granular sophisticated access control policies. • Multiple locations and functions: Firewalls reside at different locations to perform different functions. Firewalls at the network edge perform the network perimeter protection function by filtering disallowed sources and destinations and blocking the packets of potential threats. Firewalls inside a data center can segment the internal network to prevent the lateral movement of traffic and isolate sensitive resources (e.g., services and data stores). Device-based firewalls prevent malicious traffic in and out of endpoints. • Open Application Programming Interfaces (APIs): These enable integration with many networking products that provide additional security capabilities. • Policy Composition Capabilities: Some firewalls can have the capabilities to merge policies at enforcement time so as to ensure that consistent policies are applied to different classes of users (e.g., those on-premises and on private and public clouds). • Web application firewalls (WAF): This class of firewalls has been used ever since web applications accessed through web protocols, such as Hypertext Transfer Protocol 9 NIST SP 800-215 November 2022 Guide to a Secure Enterprise Network Landscape (HTTP), came into existence. A feature advancement in this class of firewalls is advanced Uniform Resource Locator (URL) filtering. This is the ability to detect traffic from malicious URLs and prevent web-based threats and attacks by receiving real-time data analyzed by machine learning algorithms [7][8]. Specifically, this class of firewalls can inspect threat vectors for SQL Injection, operating system (OS) command injections, and cross-site scripting attacks, as well as prevent inbound attacks. They are used in content delivery networks (CDN) and to prevent distributed denial-of-service (DDoS) attacks. Some additional features found in this class of firewalls are: a. Ability to specify an allowable list of services (control at the application level) b. Traffic matches the intent of allowed ports c. Filtering of some unwanted protocols Appliance-set with Integrated Functions • Unified threat management (or UTMs): UTM devices combine many of the most critical security functions – firewall, IPS, VPN concentrator, gateway antivirus, content filtering, and WAN load balancing – into a single device, usually with a unified management console. • Next-generation firewall (NGFW): The distinguishing feature of NGFW is application data awareness. It can look at data not only at layers 3 and 4 of an Open Systems Interconnection (OSI) stack but also at layer 7 – the application level. Its capabilities extend beyond packet filtering and stateful inspection. There are multiple deployment options available for NGFWs, such as an appliance in the data center, as a software running in a VM in a cloud, or as a cloud service (FWaaS). Some capabilities of NGFW include [9]: a. Deep Packet Inspection (DPI) b. TLS decryption and inspection of packet payload c. Intrusion prevention system (IPS) feature • Web application and API protection (WAAP): This is a comprehensive security approach and an enhancement over WAF. WAF is an integral component for API security, BOT (abbreviation for Robot) defense, and DDOS protection. a. These can be offered as a product suite or as a cloud-based service [10][11]. b. Secure web gateway (SWGs): SWGs are appliances utilized for policy-based access to and control of cloud-based applications as well as governance of access to the open web for enterprise users in ubiquitous locations (e.g., headquarters, branch offices, home, remote locations). An SWG is fundamentally a web filter that protects outbound user traffic through HTTP or Hypertext Transfer Protocol Secure (HTTPS) inspection [12]. It also protects user endpoints from web-based threats that can occur when users click on links to malicious websites or to websites infected with malware. They centralize control, visibility, and reporting across many locations and types of users. They are not a replacement for WAFs, 10 NIST SP 800-215 November 2022 Network Security Automation Tools Guide to a Secure Enterprise Network Landscape which protect websites housed in enterprise data centers and large headquarter sites from inbound attacks.
USER:
Summarize the benefit that enhanced firewall capabilities can have on network security.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
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| 12
| 1,354
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
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My cousin and I are considering getting vaccinations for the first time shes 57 and I'm 50 but currently pregnant. Considering our medical history and age, I need to know if there are any risks for us. List 3 best reasons to get or not to get the shot with bullet points.
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Recombinant zoster (shingles) vaccine can prevent shingles. Shingles (also called herpes zoster, or just zoster) is a painful skin rash, usually with blisters. In addition to the rash, shingles can cause fever, headache, chills, or upset stomach. Rarely, shingles can lead to complications such as pneumonia, hearing problems, blindness, brain inflammation (encephalitis), or death. The risk of shingles increases with age. The most common complication of shingles is long-term nerve pain called postherpetic neuralgia (PHN). PHN occurs in the areas where the shingles rash was and can last for months or years after the rash goes away. The pain from PHN can be severe and debilitating. The risk of PHN increases with age. An older adult with shingles is more likely to develop PHN and have longer lasting and more severe pain than a younger person. People with weakened immune systems also have a higher risk of getting shingles and complications from the disease. Shingles is caused by varicella-zoster virus, the same virus that causes chickenpox. After you have chickenpox, the virus stays in your body and can cause shingles later in life. Shingles cannot be passed from one person to another, but the virus that causes shingles can spread and cause chickenpox in someone who has never had chickenpox or has never received chickenpox vaccine. Recombinant shingles vaccine Recombinant shingles vaccine provides strong protection against shingles. By preventing shingles, recombinant shingles vaccine also protects against PHN and other complications. Recombinant shingles vaccine is recommended for: Adults 50 years and older Adults 19 years and older who have a weakened immune system because of disease or treatments Shingles vaccine is given as a two-dose series. For most people, the second dose should be given 2 to 6 months after the first dose. Some people who have or will have a weakened immune system can get the second dose 1 to 2 months after the first dose. Ask your health care provider for guidance. People who have had shingles in the past and people who have received varicella (chickenpox) vaccine are recommended to get recombinant shingles vaccine. The vaccine is also recommended for people who have already gotten another type of shingles vaccine, the live shingles vaccine. There is no live virus in recombinant shingles vaccine. Shingles vaccine may be given at the same time as other vaccines. Talk with your health care provider Tell your vaccination provider if the person getting the vaccine: Has had an allergic reaction after a previous dose of recombinant shingles vaccine, or has any severe, life-threatening allergies Is currently experiencing an episode of shingles Is pregnant In some cases, your health care provider may decide to postpone shingles vaccination until a future visit. People with minor illnesses, such as a cold, may be vaccinated. People who are moderately or severely ill should usually wait until they recover before getting recombinant shingles vaccine. Your health care provider can give you more information. Risks of a vaccine reaction A sore arm with mild or moderate pain is very common after recombinant shingles vaccine. Redness and swelling can also happen at the site of the injection. Tiredness, muscle pain, headache, shivering, fever, stomach pain, and nausea are common after recombinant shingles vaccine. These side effects may temporarily prevent a vaccinated person from doing regular activities. Symptoms usually go away on their own in 2 to 3 days. You should still get the second dose of recombinant shingles vaccine even if you had one of these reactions after the first dose. Guillain-Barré syndrome (GBS), a serious nervous system disorder, has been reported very rarely after recombinant zoster vaccine. People sometimes faint after medical procedures, including vaccination. Tell your provider if you feel dizzy or have vision changes or ringing in the ears. As with any medicine, there is a very remote chance of a vaccine causing a severe allergic reaction, other serious injury, or death. What if there is a serious problem? An allergic reaction could occur after the vaccinated person leaves the clinic. If you see signs of a severe allergic reaction (hives, swelling of the face and throat, difficulty breathing, a fast heartbeat, dizziness, or weakness), call 9-1-1 and get the person to the nearest hospital.
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== My cousin and I are considering getting vaccinations for the first time shes 57 and I'm 50 but currently pregnant. Considering our medical history and age, I need to know if there are any risks for us. List 3 best reasons to get or not to get the shot with bullet points. {passage 0} ========== Recombinant zoster (shingles) vaccine can prevent shingles. Shingles (also called herpes zoster, or just zoster) is a painful skin rash, usually with blisters. In addition to the rash, shingles can cause fever, headache, chills, or upset stomach. Rarely, shingles can lead to complications such as pneumonia, hearing problems, blindness, brain inflammation (encephalitis), or death. The risk of shingles increases with age. The most common complication of shingles is long-term nerve pain called postherpetic neuralgia (PHN). PHN occurs in the areas where the shingles rash was and can last for months or years after the rash goes away. The pain from PHN can be severe and debilitating. The risk of PHN increases with age. An older adult with shingles is more likely to develop PHN and have longer lasting and more severe pain than a younger person. People with weakened immune systems also have a higher risk of getting shingles and complications from the disease. Shingles is caused by varicella-zoster virus, the same virus that causes chickenpox. After you have chickenpox, the virus stays in your body and can cause shingles later in life. Shingles cannot be passed from one person to another, but the virus that causes shingles can spread and cause chickenpox in someone who has never had chickenpox or has never received chickenpox vaccine. Recombinant shingles vaccine Recombinant shingles vaccine provides strong protection against shingles. By preventing shingles, recombinant shingles vaccine also protects against PHN and other complications. Recombinant shingles vaccine is recommended for: Adults 50 years and older Adults 19 years and older who have a weakened immune system because of disease or treatments Shingles vaccine is given as a two-dose series. For most people, the second dose should be given 2 to 6 months after the first dose. Some people who have or will have a weakened immune system can get the second dose 1 to 2 months after the first dose. Ask your health care provider for guidance. People who have had shingles in the past and people who have received varicella (chickenpox) vaccine are recommended to get recombinant shingles vaccine. The vaccine is also recommended for people who have already gotten another type of shingles vaccine, the live shingles vaccine. There is no live virus in recombinant shingles vaccine. Shingles vaccine may be given at the same time as other vaccines. Talk with your health care provider Tell your vaccination provider if the person getting the vaccine: Has had an allergic reaction after a previous dose of recombinant shingles vaccine, or has any severe, life-threatening allergies Is currently experiencing an episode of shingles Is pregnant In some cases, your health care provider may decide to postpone shingles vaccination until a future visit. People with minor illnesses, such as a cold, may be vaccinated. People who are moderately or severely ill should usually wait until they recover before getting recombinant shingles vaccine. Your health care provider can give you more information. Risks of a vaccine reaction A sore arm with mild or moderate pain is very common after recombinant shingles vaccine. Redness and swelling can also happen at the site of the injection. Tiredness, muscle pain, headache, shivering, fever, stomach pain, and nausea are common after recombinant shingles vaccine. These side effects may temporarily prevent a vaccinated person from doing regular activities. Symptoms usually go away on their own in 2 to 3 days. You should still get the second dose of recombinant shingles vaccine even if you had one of these reactions after the first dose. Guillain-Barré syndrome (GBS), a serious nervous system disorder, has been reported very rarely after recombinant zoster vaccine. People sometimes faint after medical procedures, including vaccination. Tell your provider if you feel dizzy or have vision changes or ringing in the ears. As with any medicine, there is a very remote chance of a vaccine causing a severe allergic reaction, other serious injury, or death. What if there is a serious problem? An allergic reaction could occur after the vaccinated person leaves the clinic. If you see signs of a severe allergic reaction (hives, swelling of the face and throat, difficulty breathing, a fast heartbeat, dizziness, or weakness), call 9-1-1 and get the person to the nearest hospital. https://www.cdc.gov/vaccines/hcp/vis/vis-statements/shingles-recombinant.html
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
EVIDENCE:
Recombinant zoster (shingles) vaccine can prevent shingles. Shingles (also called herpes zoster, or just zoster) is a painful skin rash, usually with blisters. In addition to the rash, shingles can cause fever, headache, chills, or upset stomach. Rarely, shingles can lead to complications such as pneumonia, hearing problems, blindness, brain inflammation (encephalitis), or death. The risk of shingles increases with age. The most common complication of shingles is long-term nerve pain called postherpetic neuralgia (PHN). PHN occurs in the areas where the shingles rash was and can last for months or years after the rash goes away. The pain from PHN can be severe and debilitating. The risk of PHN increases with age. An older adult with shingles is more likely to develop PHN and have longer lasting and more severe pain than a younger person. People with weakened immune systems also have a higher risk of getting shingles and complications from the disease. Shingles is caused by varicella-zoster virus, the same virus that causes chickenpox. After you have chickenpox, the virus stays in your body and can cause shingles later in life. Shingles cannot be passed from one person to another, but the virus that causes shingles can spread and cause chickenpox in someone who has never had chickenpox or has never received chickenpox vaccine. Recombinant shingles vaccine Recombinant shingles vaccine provides strong protection against shingles. By preventing shingles, recombinant shingles vaccine also protects against PHN and other complications. Recombinant shingles vaccine is recommended for: Adults 50 years and older Adults 19 years and older who have a weakened immune system because of disease or treatments Shingles vaccine is given as a two-dose series. For most people, the second dose should be given 2 to 6 months after the first dose. Some people who have or will have a weakened immune system can get the second dose 1 to 2 months after the first dose. Ask your health care provider for guidance. People who have had shingles in the past and people who have received varicella (chickenpox) vaccine are recommended to get recombinant shingles vaccine. The vaccine is also recommended for people who have already gotten another type of shingles vaccine, the live shingles vaccine. There is no live virus in recombinant shingles vaccine. Shingles vaccine may be given at the same time as other vaccines. Talk with your health care provider Tell your vaccination provider if the person getting the vaccine: Has had an allergic reaction after a previous dose of recombinant shingles vaccine, or has any severe, life-threatening allergies Is currently experiencing an episode of shingles Is pregnant In some cases, your health care provider may decide to postpone shingles vaccination until a future visit. People with minor illnesses, such as a cold, may be vaccinated. People who are moderately or severely ill should usually wait until they recover before getting recombinant shingles vaccine. Your health care provider can give you more information. Risks of a vaccine reaction A sore arm with mild or moderate pain is very common after recombinant shingles vaccine. Redness and swelling can also happen at the site of the injection. Tiredness, muscle pain, headache, shivering, fever, stomach pain, and nausea are common after recombinant shingles vaccine. These side effects may temporarily prevent a vaccinated person from doing regular activities. Symptoms usually go away on their own in 2 to 3 days. You should still get the second dose of recombinant shingles vaccine even if you had one of these reactions after the first dose. Guillain-Barré syndrome (GBS), a serious nervous system disorder, has been reported very rarely after recombinant zoster vaccine. People sometimes faint after medical procedures, including vaccination. Tell your provider if you feel dizzy or have vision changes or ringing in the ears. As with any medicine, there is a very remote chance of a vaccine causing a severe allergic reaction, other serious injury, or death. What if there is a serious problem? An allergic reaction could occur after the vaccinated person leaves the clinic. If you see signs of a severe allergic reaction (hives, swelling of the face and throat, difficulty breathing, a fast heartbeat, dizziness, or weakness), call 9-1-1 and get the person to the nearest hospital.
USER:
My cousin and I are considering getting vaccinations for the first time shes 57 and I'm 50 but currently pregnant. Considering our medical history and age, I need to know if there are any risks for us. List 3 best reasons to get or not to get the shot with bullet points.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
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| 52
| 699
| null | 203
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Please limit your knowledge to the document. Avoid generalizations and ensure accuracy by directly referencing the document's arguments and examples.
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How can graduate students receive financial support at the University of Cincinnati?
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University of Cincinnati Graduate College Graduate Handbook Welcome from the Graduate College! We invite you to review the Graduate Handbook. This document is designed as a helpful guide to graduate education at UC. Here is where you will find policies, procedures, and important information for the graduate student lifecycle, from admissions to graduation. In addition, there may also be requirements that pertain to specific degree programs and colleges. Please visit program and college websites for these specific requirements. 1 The Graduate College Graduate College Leadership Rose Marie Ward Vice Provost and Dean of the Graduate College Omotayo (Tayo) Banjo Associate Dean of the Graduate College Tai Collins Associate Dean of the Graduate College Laura Dell Graduate College Thought Leader Emily Kregor Software Applications Developer Lead Sarah Matthews Sr Data Reporting Analyst Angel Prewitt Assistant Director of Business Affairs Megan Tischner Carroll Program Director Graduate College Staff Kaitlin Bauer Academic Evaluator Virginia Dennis Program Manager, Student Services Shaymaa Minkara Program Manager, Graduation Caitie Norrie Program Manager, Professional Development Stephen Patrick Program Manager, Marketing and Communications Amy Wheeler Program Manager, Student Success & Retention Brandilyn Worrell Program Manager, Community and Belonging 2 Brady Wright Executive Staff Assistant and Office Manager Graduate College IT Staff Chris Amann Computer & Info Analyst, Management Specialist IT Dushan Aththidiyavidanalage Don Software Applications Developer Eric Rasnake Computer & Info Analyst I Coco Zhang Software Applications Developer Contact the Graduate College Location University of Cincinnati 110 Van Wormer Hall 2614 University Circle Cincinnati, OH Mailing Address P.O. Box 210627 Cincinnati, OH 45221-0627 Email: [email protected] or [email protected] Phone: (513) 556-4335 Fax: (513) 556-0128 3 Introduction This Graduate Handbook is intended to provide information about university policies that assist faculty, students, and program coordinators in supporting their individual programs of study. To which educational programs does this Handbook pertain? The Graduate College oversees all post-baccalaureate certificates and degrees (master’s and doctoral level) EXCEPT the Juris Doctor (in the College of Law), the Doctor of Medicine (in the College of Medicine), and the Doctor of Pharmacy (in the College of Pharmacy). The University of Cincinnati does not discriminate on the basis of disability, race, color, religion, national origin, ancestry, medical condition, genetic information, marital status, parental status (including status as a foster parent), sex, age, sexual orientation, veteran status, military status (past, present, or future), or gender identity and expression in its programs and activities. View UC’s complete Notice of Non-Discrimination. Published 11/28/2023. This version is an update to the 2022-23 AY handbook to reflect changes to the Graduate Scholarship structure and terminology. This version supersedes all previous versions. 4 TABLE OF CONTENTS ADMISSION TO GRADUATE PROGRAMS ....................................... 9 ADMISSIONS POLICY .............................................................................................. 9 Faculty and Administrators' Eligibility for Graduate Degrees .................................. 9 ADMISSIONS CATEGORIES .................................................................................... 9 APPLICATION PROCESS FOR 4+1 AND AIM PROGRAMS .................................. 10 Application to 4+1 Degree Programs .................................................................... 10 Application to Accelerated Integrated Master’s (AIM) Programs .......................... 11 DUAL DEGREE PROGRAMS .................................................................................. 11 CHANGING DEGREE PROGRAMS AT UC ............................................................ 11 GRADUATE CERTIFICATE PROGRAMS ............................................................... 12 INTERNATIONAL STUDENT ADMISSION.............................................................. 12 English Proficiency Requirement .......................................................................... 13 FINANCIAL SUPPORT .................................................................... 14 UNIVERSITY MERIT-BASED GRADUATE AWARDS ............................................. 14 GRADUATE SCHOLARSHIPS (GS)........................................................................ 14 UNIVERSITY FELLOWSHIPS ................................................................................. 15 GRADUATE ASSISTANTSHIP STIPEND AWARDS ............................................... 16 Teaching Assistant Requirements and OEPT ...................................................... 17 Graduate Assistant/Fellow Health Insurance Awards ........................................... 17 Multiple Appointments/Employment ..................................................................... 18 Summer Employment Without Full-time Enrollment ............................................. 18 Graduate Assistants on Jury Duty ........................................................................ 18 Strike Policy for Graduate Assistants ................................................................... 19 Sick Leave/Family Leave for Graduate Assistants ............................................... 19 Holidays/UC Closing Policy for Graduate Assistants ............................................ 19 Military Duty .......................................................................................................... 19 Termination........................................................................................................... 19 Workers’ Compensation ....................................................................................... 19 Unemployment ..................................................................................................... 19 Social Security, Medicare Tax and Ohio Public Employees Retirement System (OPERS)............................................................................................................... 20 174 GRADUATE CREDIT RULE .............................................................................. 20 TAXATION OF CINCINNATI GRADUATE AWARDS .............................................. 21 EXEMPTION FROM OPERS FOR STUDENT EMPLOYEES.................................. 21 EXTERNAL SOURCES OF FUNDING .................................................................... 21 5 FEDERAL FINANCIAL AID ...................................................................................... 22 GRADUATE CREDIT AND GRADES............................................... 23 ELIGIBLE CREDITS ................................................................................................ 23 CREDITS REQUIRED TO EARN A GRADUATE DEGREE .................................... 23 Advanced Standing for Graduate Courses Taken Outside of UC ......................... 23 Transfer Credit for Graduate Courses Taken at UC ............................................. 24 Course Exemption for Prior Knowledge, Without Credit ....................................... 24 Multiple Degree Exemptions ................................................................................. 25 Enrolling in Non-UC Classes through the Greater Cincinnati Collegiate Connection ............................................................................................................................. 25 Graduate Credit for Undergraduate Students ....................................................... 25 Graduate Credit Earned in 6000-Level Courses ................................................... 25 GRADING ................................................................................................................ 25 Final Exams .......................................................................................................... 25 Make-up Final Exams ........................................................................................... 26 Grade Reports ...................................................................................................... 26 Grades Assigned to Research Courses That Are Repeated ................................ 27 Pass/Fail Grades .................................................................................................. 27 Grade Changes .................................................................................................... 27 No Grade Replacements for Graduate Students .................................................. 27 MAINTAINING GRADUATE STUDENT STATUS ............................ 29 MINIMUM CREDITS/REGISTRATION REQUIREMENTS ....................................... 29 Dual Degree Programs ......................................................................................... 29 FULL-TIME COURSE LOAD.................................................................................... 29 PART-TIME COURSE LOAD ................................................................................... 29 REDUCED COURSE LOAD (INTERNATIONAL STUDENTS) ................................ 30 MEETING PROGRAM REQUIREMENTS................................................................ 30 MINIMUM ACADEMIC PERFORMANCE ................................................................ 30 INTERNATIONAL STUDENTS, MAINTAINING IMMIGRATION STATUS............... 30 TIME TO DEGREE .................................................................................................. 30 Time to Degree and Extensions ........................................................................... 30 Reinstatements..................................................................................................... 31 Readmission ......................................................................................................... 32 Leaves of Absence ............................................................................................... 32 Withdrawal from Program ..................................................................................... 33 Dismissal from Program ....................................................................................... 33 MASTER’S DEGREE POLICIES AND PROCEDURES ................... 34 COURSE OF STUDY ............................................................................................... 34 6 CREDIT HOUR REQUIREMENTS .......................................................................... 34 CANDIDACY ............................................................................................................ 34 CULMINATING EXPERIENCE: THESES and CAPSTONES .................................. 34 Thesis Preparation, Evaluation and Submission Process..................................... 34 Capstone Process ................................................................................................ 35 GRADUATION ......................................................................................................... 35 Application to Graduate ........................................................................................ 36 Graduation from Dual Degree Programs .............................................................. 36 Certification for Graduation (Certify Online) .......................................................... 36 CONTINUING TO A DOCTORAL PROGRAM ......................................................... 37 DOCTORAL DEGREE POLICIES AND PROCEDURES ................. 38 COURSE OF STUDY ............................................................................................... 38 CREDIT HOUR REQUIREMENTS .......................................................................... 38 RESIDENCY AS FULL-TIME STUDENT ................................................................. 38 CANDIDACY, QUALIFYING EXAM ......................................................................... 38 UNIVERSITY GRADUATE FACULTY ROLE ........................................................... 39 DISSERTATION....................................................................................................... 39 Dissertation Advisor and Committee..................................................................... 39 Final Defense of Dissertation................................................................................ 40 Use of a Moderator ............................................................................................... 40 Submission of Dissertation ................................................................................... 40 GRADUATION ......................................................................................................... 41 Application to Graduate ........................................................................................ 41 Dual Degree Programs Graduation ...................................................................... 41 Graduation Requirements for Doctoral Degrees................................................... 41 Certification for Graduation (Certify Online) .......................................................... 41 GRADUATE CERTIFICATE VERIFICATION FOR UC TRANSCRIPT ENDORSEMENT ..................................................................................................... 42 DOCTORAL HOODING AND MASTER’S RECOGNITION CEREMONY ................ 42 INSTITUTIONAL RULES, POLICIES, AND PROCEDURES ............ 44 PROGRAM STANDARDS........................................................................................ 44 RECORDS PRIVACY, FERPA, AND THE RIGHT TO REVIEW .............................. 44 NOTICE OF NON-DISCRIMINATION ...................................................................... 44 ACADEMIC DISHONESTY ...................................................................................... 45 STUDENT CODE OF CONDUCT ............................................................................ 45 RESPONSIBLE CONDUCT OF RESEARCH .......................................................... 46 RESTRICTED RESEARCH ..................................................................................... 46 7 GRADUATE STUDENT GRIEVANCE PROCEDURES ........................................... 46 8 ADMISSION TO GRADUATE PROGRAMS ADMISSIONS POLICY The University of Cincinnati welcomes graduate applications from students who: • hold a baccalaureate degree from a college or university regarded as standard by a regional accrediting agency and; • have at least a B average (3.000/4.0 system) in undergraduate course work or otherwise give evidence of promise that is judged satisfactory by the admitting program and the Graduate College. Programs that wish to admit applicants who lack this 3.000 minimum GPA requirement must provide supporting evidence and rationale of how such students will be able to complete a graduate program that requires achievement of a 3.000 GPA, and indicate any support offered by the program to ensure the applicant’s success given the GPA deficiency. Decisions concerning admission to graduate programs rest with the programs, and criteria used for determining admission beyond these minimal requirements are established by the programs. All programs have established written criteria for judging the admissibility of applicants, which are published in each program’s graduate handbook. The program’s handbook for graduate study must be available to the student. Upon the student’s acceptance of the admission offer, the program and the student are bound by the terms and conditions set forth in the letter of appointment. Faculty and Administrators' Eligibility for Graduate Degrees No holder of an academic administrative title at the University of Cincinnati (equivalent to assistant dean or above) may matriculate or be granted a graduate certificate or degree from the University of Cincinnati. No graduate degree or certificate from the University of Cincinnati will be granted to any faculty member at the University of Cincinnati (full-time or part-time above rank of instructor) who teaches in the same department, division or school in which the degree is to be granted. This rule also applies to adjunct appointments at any faculty rank and to interdisciplinary degrees when the same college is one of the interdisciplinary colleges. College deans may petition the Associate Dean of the Graduate College for a waiver of this policy on an individual faculty member’s behalf. The written request should describe the teaching responsibilities of the faculty member, indicating whether they are teaching graduate students and a plan for managing potential conflicts of interest. ADMISSIONS CATEGORIES Matriculated graduate status is granted to an applicant who has been accepted into a graduate certificate or degree program and has met all admissions criteria. Note that applicants first receive a provisional acceptance, and conversion to matriculated graduate status is dependent upon receipt of an official transcript that confirms that the student holds a baccalaureate or higher degree from a college or university regarded as standard by a regional accrediting agency. Please note that additional official documentation may be required (e.g. if the transcript does not contain information about degree conferral or if a foreign degree needs confirmation as baccalaureate equivalent). Instructions and deadlines for meeting this requirement are included on the Transcript Submission Policy web page. 9 Provisional graduate status is granted to applicants who have been accepted into a graduate certificate or degree program, but who have NOT yet met all admissions criteria. As described above, one routine requirement for all students is the submission of an official transcript. However, some students must in addition take undergraduate courses or improve English language proficiency to satisfy prerequisites, and these students may be accepted by the program on a provisional basis that is contingent on satisfying those additional prerequisites. Letters of admission should be read carefully to make sure all requirements tied to provisional status are identified. Visiting student status allows students to take courses for graduate credit when they have not been admitted into a graduate degree program. These students were previously called “non- matriculated students”. Should this visiting student subsequently matriculate into a certificate or degree program, a maximum of 12 semester hours may be applied to the certificate or degree program. Students are not eligible for tuition or stipend awards allocated by the Graduate College while in visiting graduate status. This policy and other funding policies are further explained in the Financial Support chapter. APPLICATION PROCESS FOR 4+1 AND AIM PROGRAMS Application to 4+1 Degree Programs If an undergraduate student plans to matriculate into a master’s degree program upon completion of the bachelor's degree, they can consult with advisors to begin (A) taking graduate-level coursework as an advanced undergraduate student, and (B) focusing on thesis-related, independent research at an earlier date. This advising plan to achieve an articulated path to a master’s degree is called a 4+1 program. Students who enter these programs must complete all of the requirements of each respective degree and must apply separately for both degree programs at the appropriate time. To be eligible for entry to a 4+1 program, students must have junior standing (64 semester credits). In addition, students must meet all College and graduate program admission requirements for the particular program. 4+1 students should note the following: • 4+1 students who enroll in graduate-level coursework prior to formally matriculating as a graduate student are allowed to apply up to 12 semester graduate-level credits toward the requirements of the master’s degree. These credits cannot be used for the bachelor’s degree. Students in the 4+1 program will complete the rest of their graduate coursework after formal completion and certification of the bachelor's degree. Students should refer to the section of this handbook containing the general requirements of the master’s degree and speak to the directors of the graduate program about specific requirements. • 4+1 students wishing to matriculate into a master’s program must complete a formal graduate admission application online in their junior or senior year to be admitted to the graduate program and begin the master’s degree. Students should speak to the directors of the graduate program about specific admission and application requirements. 10 Application to Accelerated Integrated Master’s (AIM) Programs The university has a limited set of programs that allow for a single application and admission to obtain a bachelor’s plus master’s degree in a single course of study. These programs are tightly structured around co-op experiences and allow undergraduate students to accumulate more than 12 graduate credits prior to transitioning to a matriculated graduate student. Applicants apply to an AIM program at the time of application to UC as an undergraduate but are still required to formally apply to transition to the graduate portion of their program at a time defined by their AIM program. There is a free and abbreviated application for UC undergraduate students transitioning to the associated master’s degree that is part of their AIM program. DUAL DEGREE PROGRAMS The university offers the opportunity for students to pursue two complementary graduate degrees simultaneously through structured, official dual degree programs (see below for a complete listing). The advantage of these programs is that they may require fewer credits than completing each degree program separately. Each program’s entrance requirements must be met in addition to university requirements, and the applicant must be accepted by both programs. Below is a listing of the Dual Degree programs: • Accounting MBA/MS • Business Analytics MBA/MS • Business Administration/Arts Administration MBA/MA • Business Administration/Nursing MBA/MSN • Community Planning/Landscape Architecture MCP/MLA • Community Planning/Law MCP/JD • Finance MBA/MS • Human Resources MBA/MA • Information Systems MBA/MS • Marketing MBA/MS • Law/Women’s Studies JD/MA • Law/Business JD/MBA • Law/Political Science JD/MA • Law/Political Science JD/PhD Please see the Multiple Degree Exemptions section for information on the maximum amount of transfer credit that can be applied to the dual degree programs. CHANGING DEGREE PROGRAMS AT UC In order to change from one degree program to another within the university, a student must submit a complete application to the new program. If the degrees are housed in the same unit, and the change is made over consecutive term enrollments, the application fee is waived. If the new degree program is in a different administrative program, the student is responsible for paying the application fee. Students are always responsible for fulfilling the requirements of the given degree program in which they are matriculated. Please see the Transfer Credit for Graduate Courses Taken at UC 11 section for information on the amount of graduate credits that can be transferred if a student is changing from one graduate program to another within the university, or if a student is changing from visiting graduate status at the university. GRADUATE CERTIFICATE PROGRAMS The University of Cincinnati offers graduate certificate programs. Certificates vary in both credit hours and in how they are configured: for instance, some can be earned only in conjunction with a degree; some require a master’s degree as a prerequisite, and some can be earned outside of a degree program. Applicants must apply for admission to a certificate program. Graduate College general guidelines are as follows: • Students must hold a baccalaureate degree. • Certificate programs may enroll degree seeking and non-degree seeking students. • For students matriculated into a degree program, credit hours earned under a certificate program may count toward a degree in any program if approved by the program director, and if requirements for the certificate and degree are completed the student will be awarded both. Credits earned while matriculated in a certificate program will count as credits matriculated in a degree. • Students can apply a single course to multiple certificates but only to ONE master’s or doctoral degree. • Students can obtain more than one certificate within the same program prior to attaining their master’s degree. • Students apply for a certificate program just like applying for a degree program, and must pay any relevant application fee. • Students enrolled only in a graduate certificate program are not eligible for tuition or stipend support with university funds (University Graduate Assistantship/Graduate Scholarship funds). If a student is interested, the student should contact the appropriate program office to obtain the specific criteria and prerequisites for the desired certificate. INTERNATIONAL STUDENT ADMISSION UC International Services supports the needs of international students at the University of Cincinnati. The office assists international students in understanding the rules, regulations, and procedures that must be followed during their stay in the United States and provides support services and cultural information to students. UC International Services is located in Suite 7148, One Edwards Center (1-513-556-4278). Information about admission to the University of Cincinnati for international students is available on their website. International students with F-1 visas can only be granted admission as matriculated graduate status in a degree-seeking program. (Most international students with J-1 visas can be granted admission with matriculated graduate status only, with some exceptions.) Students with J-1 visas should inquire with UC International Services to determine the regulations that apply to them. Students with green cards (U.S. resident aliens/permanent residents) are not defined as international students and, therefore, are not governed by the university’s international student policies. However, the English proficiency requirement does apply to green card holders (see The English Proficiency Requirement, below). 12 In instances where an international student holds a degree for which the U.S. equivalent is not known, or if it is determined by the program or the Graduate College that the applicant does not have the equivalent of a bachelor’s degree, the program must submit a petition for admission without the bachelor’s degree, with supporting documentation and rationale, to the Associate Dean of the Graduate College. All international students are required to carry University of Cincinnati student health insurance unless they qualify for a waiver. Semester insurance fees are automatically assessed each registration period. Please visit the Graduate College website for more information on the Graduate Assistant/Fellow Health Insurance Award. English Proficiency Requirement English proficiency is required of all applicants whose native language is not English. Students can demonstrate proficiency in a number of ways at the graduate level. PLEASE NOTE, many colleges and programs have higher requirements than those listed below. Applicants should contact the programs to which they are applying for details. For more information, please refer to the English Proficiency Requirement web page. 13 FINANCIAL SUPPORT Graduate students may obtain financial support from several sources. • The University of Cincinnati provides merit-based graduate awards in the form of tuition scholarships (known as the Graduate Scholarships, which may be provided with or without an assistantship), as well as stipend awards (graduate assistantships including teaching and research assistantships), and program-specific scholarships and fellowships. • Scholarship and fellowship support is also available from a diverse collection of external sponsors at the local, state, national, and international levels. Programs and colleges may have additional sources of support through grants and endowed funds • Need-based support may be obtained from federal and state sources. Financial support from each of these sources is described below. UNIVERSITY MERIT-BASED GRADUATE AWARDS The University of Cincinnati offers several types of merit-based graduate awards. The most common types – Graduate Scholarships, fellowships, and University Graduate Assistantships – are described below. Most university graduate awards are underwritten by university funds allocated by the Graduate College (“general funds”) to each college, which are then awarded to students by the individual programs. Some awards are competitive and granted by the Graduate College upon recommendation of an individual graduate program. Not all graduate students are eligible for graduate awards. Graduate awards allocated by the Graduate College are not available to students: (1) taking classes as visiting students, (2) enrolled only in a graduate certificate program, (3) who have not maintained the minimum GPA of 3.000 in their program, (4) who are on academic probation, or (5) who have exceeded the 174 graduate credit rule. Awards can only be guaranteed for a maximum period of one academic year, and renewal of a university graduate award is not automatic. Awards that are appointed by individual programs are awarded to eligible students at the sole discretion of the program. Programs are not obligated to renew awards, even if previously awarded students met all eligibility requirements. GRADUATE SCHOLARSHIPS (GS) The Graduate College funds scholarships that cover all or part of a student’s tuition and fees. In most colleges, the scholarship awards supported by the Graduate College are the Graduate Scholarships (GS), with and without assistantships. The GS with assistantship is used to support graduate assistants who are additionally awarded a stipend that requires service in return for stipend support. The GS without assistantship is for graduate students who do not receive university stipend support and therefore no service is required in return for the GS award. The appointing program sends written offers of scholarship awards to students, including information about the amount and duration of the award and the terms of the offer. Students must maintain all of the required eligibility requirements in their offer letter to maintain their tuition scholarship. 14 Students receiving a tuition scholarship must register for a specified minimum number of graduate credit hours in each semester for which they are receiving support. If an international student is supported by a GS without assistantship, they must register for a minimum load of 10 graduate credit hours per semester during the time they receive the GS scholarship. If a domestic student is supported by a GS without assistantship, they must register for a minimum load of 1 graduate credit hour per semester during the time they receive the GS scholarship. Students supported by a GS with assistantship must register for a minimum of 12 graduate credit hours per semester during the time they receive the GS scholarship. These minimum enrollments in graded courses must be met prior to using scholarship support for any audited courses. If a student withdraws from a class funded by a tuition scholarship, with the remaining enrolled credit hours totaling less than the minimum required for the award, the award is cancelled immediately and the student is responsible for the tuition balance, based on the date of withdrawal. Full tuition scholarships cover a maximum of 18 credits per semester. Students registered for more than 18 credits in a semester will be billed tuition and general fees on a per-credit-hour rate for each credit over the 18. All rules that govern recipients of tuition support pertain to all students, including international students. Other rules and policies that apply specifically to international students are independent of GS regulations. Both sets of regulations must be met. Neither set of regulations negates or takes the place of the other. (See 174 Graduate Credit Rule.) Note: Financial awards that require no service may reduce eligibility for educational loans. Students should notify the Student Financial Aid Office of their tuition support if they apply for aid from that office. UNIVERSITY FELLOWSHIPS University of Cincinnati fellowships are financial awards that include tuition scholarships and stipends with no associated service requirements. The purpose of a fellowship award is to allow the recipient to concentrate exclusively on their studies; therefore, multiple appointments and/or employment by the University of Cincinnati are not permitted for students receiving fellowships. The appointing program sends written offers of fellowship awards, including information about the amount and duration of the award; a general description of the academic obligations accepted by the student as part of the award; a reference to sources of information about academic requirements for degree completion; a description of the conditions under which either the student or unit may terminate the award prior to its end-date; and criteria for reappointment. Students receiving fellowships should check with Student Financial Aid to be informed about the potential impact on their eligibility for aid. Income received that is not for services rendered (whether it be in the form of a fellowship, grant, or award) will be calculated in whether a student meets the Cost of Attendance for the University of Cincinnati. Fellowship awardees have an enrollment obligation identical to GS with assistantship/UGA (university graduate assistantship) awardees, and they lose eligibility for the fellowship award if they accumulate more than 174 graduate credit hours. (See 174 Graduate Credit Rule). 15 For information on university-sponsored fellowships, please see the Graduate College website. GRADUATE ASSISTANTSHIP STIPEND AWARDS A student awarded a graduate assistantship receives a financial stipend for services rendered in addition to a full or partial tuition scholarship. These stipend funds are called UGA (university graduate assistantship) awards. Graduate assistants are also entitled to a discount at the University Bookstore and may be eligible for the Graduate Assistant/Fellow Health Insurance Award. UGA awardees devote effort to a combined program of formal study and assigned duties of teaching, research or administrative service that is designed to enhance their university education. The stipend received by the graduate assistant is in recognition of these services. Those with teaching duties are teaching assistants (TAs) and those with research duties are research assistants (RAs). During the appointment, the goal is to help a graduate student become a more learned, creative, and professional individual through formal instruction, interaction with faculty, research, and administrative experience. Any such service assignments should be consistent with the student’s academic pursuits. UGA funds are awarded for designated periods of time by the graduate programs. Graduate Assistants are considered exempt from minimum wage and overtime requirements, and they are paid on a salaried basis. Minimum stipends are set by the Dean of the Graduate College. The minimum stipend for a graduate assistant, as set in July 2023, must be the equivalent of a minimum of $16.98 per hour for all master’s and doctoral students except those in PhD programs. Graduate assistants enrolled in PhD programs have a minimum of $22.28 per hour. The appointing academic program, college, or area of responsibility determines service requirements of students who hold assistantships. If awarded an assistantship outside their program, graduate assistants’ duties are governed by the academic program, college, or the area of responsibility that made the award. In all cases, the award obligates awardees to no more than 20 hours per week of services, and those services must make a substantive contribution to the student’s academic and professional development. Students must be appointed to a position that is consistent with their field of academic study. If the student determines that they cannot meet the requirements of the award, it is imperative that they notify the program to initiate renegotiation or reassignment of the award with correspondingly less support. A student’s hours are prorated for weeks with a holiday or school closure and students are not required to be available during break periods unless given additional compensation. UGA awardees must be registered for 12 graduate credit hours or more, exclusive of audit credits, for each semester they receive the assistantship. University assistantships will be cancelled if the awardee does not meet their enrollment obligation. The exception to this rule is summer semester. See Summer Employment without Full-time Enrollment section. Students lose eligibility for the UGA stipend funding if they accumulate more than 174 graduate credit hours. (See 174 Graduate Credit Rule.) Assistantship awards are contingent upon student status, satisfactory degree progress, and performance of service as assigned, and can be terminated at any time. Each year the assistantship is in effect, the appointing program, college, or area must notify the awardee in 16 writing of any significant change to the services or conditions of the appointment. Such changes include, but are not limited to: • the amount and duration of the award • any tuition and/or fee not paid by the program • the average expected time per week or per semester of required duties • description of the duties assigned to the student • description of the conditions under which either the student or unit may terminate the award prior to its end-date • criteria for reappointment of the award • criteria for determining variations in stipend levels where such variations exist • information on current IRS guidelines, Medicare, and the Public Employee Retirement System (PERS) • graduate appointment procedures if any of the documents have been modified since the student’s initial appointment. Teaching Assistant Requirements and OEPT All teaching assistants must be supervised by a faculty member who has the academic credentials and authorization (as defined by the Higher Learning Commission, Ohio Dept. of Higher Education, and the University of Cincinnati) to offer instruction to the students in the class. Supervising faculty must be listed (as supervisor or instructor) in any course/section overseen by a graduate teaching assistant. Non-native speakers of English who are awarded teaching assistantships at the University of Cincinnati are required to score at least a 3.0 on the Oral English Proficiency Test (OEPT). The OEPT evaluates the spoken language skills of non-native speakers of English. Students who pass are certified for oral English proficiency and may assume the full range of duties associated with their teaching assistantship. Students whose oral English proficiency has not been officially certified may not assume instructional responsibilities. However, students who score 26 or above on the speaking section of the TOEFL IBT or students with a score of 50 or above on the Test of Spoken English are exempt from the OEPT. Students are required to take the test at the beginning of their first term of study. If a score is less than 3.0, students are recommended to take ESL courses before retaking the test. A student is permitted to take the OEPT twice without charge during an academic year. Graduate Assistant/Fellow Health Insurance Awards Academic programs are required to notify eligible students with information on the Graduate Student Health Insurance (GSHI) award, which can subsidize the cost of UC Student Health Insurance for qualified students. Programs must provide graduate assistants/fellows with the GSHI Award application deadline and relevant details on GSHI Award criteria, and must keep records that they have provided this information to their students. Such information can be found at the Graduate Student Health Insurance Award web page. 17 Multiple Appointments/Employment Graduate assistantship awardees who are domestic students are limited to 24 total hours of combined service and student hourly work while school is in session. The following policies regarding multiple appointments must be followed: • Units are responsible for monitoring of hours worked by student employees assigned to their unit; this is especially important for students who hold multiple student appointments. • The program must closely monitor academic progress. • The additional appointment must be terminated if a student does not maintain academic progress deemed to be acceptable by the program. This limit applies only while school is in session. During scheduled breaks only, if students work more than 20 hours or they work more than the prorated salary hours required, they must be compensated at an hourly rate for the extra work. Students can be employed for a maximum of 40 hrs/week during scheduled breaks. International students are limited to working 20 hours per week while school is in session and are limited to 40 hours per week during scheduled breaks. All International Students must have onboarding conducted by the International Services Office. An international student on F-1 or J-1 immigration status contemplating employment should contact the International Student Services Office at 1-513-556-4278. Summer Employment Without Full-time Enrollment For summer semester only, students who are not registered for graduate credit hours or are registered for less than 12 credits hours are eligible to be employed by their respective program, usually by performing the duties of their assistantship such as teaching or lab work. In this case, the student will receive a stipend for the work performed. Retirement funds and taxes will be withheld from the student’s check. Questions about options with retirement funds once separated from the university should be directed to Human Resources and/or OPERS. Graduate Assistants on Jury Duty All graduate students are encouraged to participate when they are subpoenaed for jury duty. The student must seek their advisor’s and program director’s permission with the expectation that every effort will be made to accommodate the jury service. If the student’s absence from UC will create a hardship to the unit, they should seek a deferral or make arrangements to cover their responsibilities during the absence. Such arrangements must be approved by their program director. Students serving on jury duty will be paid their normal university stipend during the period of service, with the understanding that any compensation received for jury service must be returned to the university if their assistantship responsibilities remain uncovered. If the student makes arrangements to cover their assistantship commitment for the period in which they serve on jury duty, and if those arrangements are approved by their program director, they may keep the jury duty compensation in total. The student may also keep any travel reimbursement fees. 18 Strike Policy for Graduate Assistants In the event of a strike, graduate assistants are expected to fulfill commitments associated with their assistantships. Graduate assistants assigned to teach a course as part of their assistantship agreement are expected to teach the course during a strike. Graduate assistants who choose not to teach can lose their assistantship. If the student’s responsibilities are associated with a course taught by a faculty member and the strike results in the course not being taught, which makes it impossible for the student to fulfill their responsibilities, the student would not be held responsible. Sick Leave/Family Leave for Graduate Assistants Graduate assistants do not accrue vacation, sick leave or other paid time-off. In the event of illness, a graduate assistant shall notify the GA supervisor as soon as possible on each day of such absence. Holidays/UC Closing Policy for Graduate Assistants Graduate assistants are not hired as essential personnel, and thus cannot be required to work during holidays or official UC closings (such as emergency closings due to severe weather, public emergency, etc.). Required weekly hours will be prorated based on the official holidays or closings during that week. Military Duty A graduate assistant who is a member of any reserve component of the United States Armed Forces, who is voluntarily or involuntarily ordered to extended U.S. military service, shall be granted time-off without pay. The graduate assistant should provide to the appropriate program official advance written notice of the call for impending training or active duty. Upon completion of military service or if discharged under honorable conditions, and upon prompt re-registration as a student, the graduate assistant shall be returned to the former assistantship in a timely manner, based upon availability. Due to the temporary nature of graduate assistantships, if the assistantship is eliminated during the student’s absence, then no obligation exists. Termination A graduate assistantship may be terminated at any time with or without cause, unless there is an explicit written contract between the student and the university that provides otherwise. Workers’ Compensation The Ohio Workers’ Compensation Law covers graduate assistants, who are paid by payroll and provides medical, income and survivor benefits in the event of accidental injury, occupational disease or death occurring in the course of, and arising from, employment. Unemployment Graduate assistants are not entitled to unemployment compensation. 19 Social Security, Medicare Tax and Ohio Public Employees Retirement System (OPERS) Please see Exemption from OPERS/Medicare for Student Employees. 174 GRADUATE CREDIT RULE Students receiving any university award (e.g. UGA stipend, GS tuition scholarship) and students who receive funds from the State of Ohio are governed by the requirements and limitations described in the following paragraphs. Any student who becomes ineligible to receive state subsidy is not eligible to receive general funds financial aid (i.e., a university stipend and/or tuition). Since this policy is due to regulations governing state support of the university, exceptions to the policy are not considered. Graduate students who have attempted 174 graduate credit hours at the University of Cincinnati are not eligible for a university award for enrollment at or beyond the 174 hours. Hours attempted include hours for which credit has been awarded, as well as withdrawn courses, audited courses, and hours in progress or incomplete (these graduate credit hours include all courses with grades F, I, UW, SP, IP, UP, W, etc.). All graduate hours attempted at the University of Cincinnati, regardless of program or student status, count toward the 174 total. A student is not eligible for funding beginning with the semester in which said student will reach the 174 attempted hours. For example, if a student has earned 167 graduate credit hours at the University of Cincinnati by the close of summer sessions and registers for (i.e., attempts) 12 credit hours for fall semester, they are ineligible for a university graduate scholarship or fellowship in the fall semester. If a student earned master’s credits at the University of Cincinnati (for either a partial or a full degree), the exact number of these credits are deducted from the 174 credit hour total for which they can receive funding. This is true if the credits are earned at an earlier time and the student returns to the University of Cincinnati to continue graduate education, and it is true regardless of the discipline in which those credits were earned. For example, if a student has earned a master’s degree in engineering and then chooses to pursue a master’s and a doctoral degree in math, the credits earned to get the engineering degree are deducted from the 174 credit hours for which the student can receive state financial support (e.g., fellowships, assistantships, and scholarships). Graduate students who have earned a master’s degree or other equivalent or higher advanced degree at another institution are not eligible for a university scholarship or fellowship once they have attempted 140 graduate credit hours at the University of Cincinnati. If a student enters the University of Cincinnati with a master’s degree from any institution other than the University of Cincinnati, they are credited with 34 graduate credit hours toward the 174 credit hour limit for state funding eligibility. Per Ohio Department of Higher Education policy, Ohio can subsidize up to the remaining 140 credit hours. The 34 credit hours are deducted from the 174, regardless of the discipline and regardless of the graduate level at which the student enters the University of Cincinnati. For example, if a student has earned a master’s degree in engineering at The Ohio State University and then chooses to pursue a master’s and a doctoral degree in math at UC, the credits they earned to get their engineering degree are deducted from the 174 credit hours for which they can receive state financial support in the math program. Note that professional 20 degrees, like a juris doctorate or medical doctorate, do not count as a master’s or higher equivalent for the purpose of comparative funding. Students who enter graduate education at the University of Cincinnati with a professional degree and no other advanced degrees are still eligible to receive up to the 174 credit hours of funding. If a student enters the University of Cincinnati with only partial credit toward a degree from another institution, those credits are not deducted from the 174 total—even if the program they enter at the University of Cincinnati agrees to accept transfer of those credits toward the student’s degree requirements at the University of Cincinnati. The student can still receive state subsidy for up to 174 credit hours earned at the University of Cincinnati beyond those transferred in. Note: For the purposes of this policy, a master’s degree is one awarded by an American institution or a degree of equivalent value from a foreign institution. Students holding a master’s degree from a foreign institution that is the equivalent of a bachelor’s degree in the U.S. will have the higher limit (174). The higher limit will not be affected by a student’s completion of course work short of a master’s degree at another institution. TAXATION OF CINCINNATI GRADUATE AWARDS The university maintains a position that all income, from whatever source, is taxable and may be subject to withholding. The IRS maintains final authority on the taxability of all stipends, and in all cases, the university cannot guarantee that any stipend is tax-exempt. The Graduate College will not review an individual award nor provide legal advice to individual students. In addition, students (not the university) are responsible for the withholding information that they submit on their W-4 forms at the time of appointment. Those students who receive a stipend during any academic semester and are not enrolled for at least half time will have Medicare tax and Ohio Public Employee Retirement System (OPERS) payments deducted from their checks. If a student is enrolled half time or more, they may apply for an exemption from these fees in their program office. No taxes are withheld from fellowships, but students may still have a tax liability and should consult a tax advisor. EXEMPTION FROM OPERS FOR STUDENT EMPLOYEES Employees (including student employees) of Ohio public institutions do not contribute to the federal Social Security system. Student employees’ retirement contributions will be directed to the state retirement plan, the Ohio Public Employees Retirement System (OPERS). Student employees (including graduate assistants and hourly student workers) may be eligible to opt out of OPERS participation when first hired by UC as long as certain requirements are met. See the Student Employees web page on UC’s Human Resources site for the OPERS exemption form and for additional information. EXTERNAL SOURCES OF FUNDING Tuition scholarship and fellowship funding is provided to graduate students by a wide variety of governmental and private sponsors. UC’s Financial Aid website, the ScholarshipUniverse scholarship search application, the Office of Nationally Competitive Awards and local and university libraries are potential sources of information about these funding opportunities. The Office of Nationally Competitive Awards provides workshops, application writing assistance and university endorsement (for applicable awards). Students may also visit the Office of Research 21 for more information on upcoming grant opportunities, grant writing workshops, and searchable research opportunity databases. FEDERAL FINANCIAL AID See the Student Financial Aid website for more information on federal financial aid (including summer aid). The Graduate College does not regulate or audit any outside fellowships or other outside funding a student may receive. However, it is advised that students with outside funding consult with the Financial Aid Office to see if and how the outside funding may or may not affect other Financial Aid eligibility. 22 GRADUATE CREDIT AND GRADES ELIGIBLE CREDITS Credit towards a graduate degree or certificate can only be earned for those courses in this university that are listed as graduate in the Schedule of Classes or which have been approved in writing by appropriate program authority for inclusion in the curriculum. Graduate credit towards a degree will only be granted when a course is included in the graduate career category of the student record in Catalyst. CREDITS REQUIRED TO EARN A GRADUATE DEGREE Graduate degrees at UC each have a stated number of credit hours that must be completed satisfactorily to earn the degree. As described below, there are multiple opportunities where coursework taken prior to matriculation into a degree program may count towards that credit hour total. In all cases, to earn a degree at UC, at least 67% of the relevant coursework credit must be earned while a matriculated student at the University of Cincinnati. Students entering in Fall 2019 or later should make application to their program for such (advanced standing or transfer) credit during their first semester at UC to assure their course of study is optimized. For all students matriculating in Fall 2019 and later, such credit will only be granted if a complete and program-approved application for such credit is submitted to the Graduate College by the end of their first year in the program, or prior to their final semester of study, whichever comes first. This new policy (introduced in AY19-20) is in effect for all students matriculated in Fall 2019 and later. In prior policies, master’s degrees were granted when 50% of graduate credits were completed while matriculated in the graduate program granting the degree, therefore allowing up to 50% of credits to be via advanced standing. Advanced Standing for Graduate Courses Taken Outside of UC a. Programs are permitted to award up to one third of the credits of a UC graduate program through advanced standing (e.g., 10 credits are eligible in a 30 credit hour program or 13 credits in a 40 credit hour program). The relevant number of credits is based on the minimum credits required to earn the advanced degree starting from the minimum degree qualification (usually a baccalaureate degree). Note that for doctoral students the advanced standing credit total will include any use of the ODHE allowance of up to 30 credits for a prior master's degree. b. Any graduate course credits, including those earned from previously earned graduate or undergraduate degrees, are eligible as advanced standing credits. c. Advanced standing can only be offered for courses (including electives) entered in e- curriculum for the UC program. d. Program faculty must evaluate courses for equivalence or comparability prior to granting students Advanced Standing credit for courses taken at another institution, meeting all the following criteria; 1. Courses taken at a recognized University or College 2. Courses taken at the graduate level 3. Requested advanced standing credits must be the lower of the following two choices 23 i. Credits originally earned for the course ii. Credits available in the UC course listed in e-curriculum 4. For 1:1 course equivalency, one or more of the following criteria must be met when compared to the University of Cincinnati course for which Advanced Standing credit is sought: i. Course was taken in the same field with the same title ii. Course had similar topics iii. Course had similar learning outcomes iv. Course assignment and assessment requirements were similar v. Course readings requirements are similar 5. This evaluation process should be documented for each case in which it is applied e. The one third rule doesn’t apply to dual degrees, sequential master's to doctorate programs, or others with shared content that have received approval from the Graduate College. f. Advanced standing credit recommended by program faculty must first be approved by the graduate program director and then submitted for final review by the Graduate College to assure the request complies with the criteria above. Transfer Credit for Graduate Courses Taken at UC a. When leaving one graduate program to join another at UC, all UC graduate credits taken as part of the incomplete program are eligible to use to fulfill requirements in the new program, based on faculty evaluation of the equivalence to courses in the new curriculum and program approval. b. When a student enters a graduate program at UC, non-matriculated UC graduate credits are eligible to be used for the program, if the coursework is listed in e-curriculum as part of the curricular requirements. Subject to program approval, students may transfer up to one third of the credits required to earn their UC graduate degree Programs are permitted to award transfer credit from a prior UC graduate degree if (1) the sum of unique credits to earn both degrees is equal to or greater than the State minimums for each degree type, and (2) the transfer credit courses are part of the curriculum of the new degree program as defined in e-curriculum. Using credit that meets both criteria, up to one third of the credits of the new UC graduate program may be awarded through transfer credit. The relevant number of credits is based on the minimum credits required to earn the advanced degree starting from the minimum degree qualification (usually a baccalaureate degree). Note that for doctoral students the transfer credit total will include any use of the ODHE allowance of up to 30 credits for a prior master’s degree. Course Exemption for Prior Knowledge, Without Credit Faculty in a program have the option to provide students with an examination to determine if accumulated knowledge is sufficient to be exempted from specific courses in a graduate curriculum (e.g., continuing education courses in some professional fields may provide a background that eliminates the need to take introductory courses). The form and content of that examination is at the discretion of the program. When such exemptions are granted, the student does not earn graduate credit for such knowledge. The credits required to complete their UC graduate degree remain unchanged, and the student will take alternative coursework (approved by the graduate program director) to advance their knowledge. 24 Multiple Degree Exemptions a. If the graduate faculty from a UC program has participated in designing and/or presenting the curriculum at another institution, shared degree programs between the institutions can deviate from these rules with prior approval of the Graduate College and their college leadership. In no case will a UC degree be awarded if more than 50% of the curriculum is offered by non-UC faculty. b. Dual degree programs can combine two UC graduate degrees into a single curriculum if approved by the University. Approved dual degree programs can share up to one-third of the combined credits of the two degrees, but the total count of unique credits to earn both degrees must always be equal to or greater than the State minimums for each degree type. Enrolling in Non-UC Classes through the Greater Cincinnati Collegiate Connection The University of Cincinnati is a member of the Greater Cincinnati Collegiate Connection. GC3 classes are those not generally available at the University of Cincinnati but which can be used to satisfy degree requirements. The student must have met all tuition commitments at the University of Cincinnati and must observe all regulations of the host institution. For additional information, participating institutions, and registration instructions, consult the Greater Cincinnati Collegiate Connection page of the Registrar’s Office website. Approval is at the discretion of the program. Graduate Credit for Undergraduate Students Any program may allow juniors or seniors to register for graduate courses for graduate credit before those students have completed the baccalaureate degree. It is recommended, if the program permits such registration, to limit the privilege to students with senior status and a grade point average of at least 3.000 (higher in some programs). This is evidenced by a written request from the student that is signed by an authorized member of the graduate program. Upon approval by the graduate program and the course instructor, graduate credit will be given for the courses. A maximum of 12 semester graduate credits can be earned in this manner. Credit will not be given toward both graduate and undergraduate degrees for the same course. Graduate Credit Earned in 6000-Level Courses In fall 2016, all 6000-level courses became graduate only. In the past, 6000-level courses were available for either undergraduate or graduate credit (to earn graduate credit, students selected the graduate level designation (G) in these courses, indicating that additional work was required beyond that required of undergraduates in the course). PLEASE NOTE: with the transition to the new use of course numbers, there will be no change to the graduate (or undergraduate) credits earned previously in the pre-fall-2016 version of these courses. GRADING Final Exams Exams are held during the last week of the semester after classes have ended. For each term’s full final examination schedule, consult the Calendars page of the Registrar’s Office website. 25 Make-up Final Exams Special policies may govern the taking of missed final exams. Students and faculty members should check the college office or program office for specific details. Every student is responsible for the material presented in their class. Arrangements for make-up work and tests are determined by the instructor. Absences incurred by students officially representing the university will be excused, provided that official notification of such absence has been given in advance to the instructor. Grade Reports End-of-term final grades may be viewed in the Catalyst student portal immediately following submission of final grades by the instructor. Grade reports include total graduate hours and hours for the current semester. The student’s grade report differentiates between “units taken” (course credits the student enrolled in but did not complete successfully or which are still pending a final grade) and “credits passed” (course credits successfully completed with a final grade other than F). These values are posted on the student’s transcript as attempted hours and earned hours. A graduate grade point average (GPA) is calculated each semester. Approved transfer credits from other institutions are included in the sum of credits earned, but grades for those credits are not included in the GPA. All graduate work, regardless of the University of Cincinnati college in which the work was done, is accumulated in these tallies. For this reason, if a student record includes UC graduate courses that do not count towards the degree, this GPA may differ from the calculation of GPA in program coursework (a minimum 3.000 program GPA is essential to earn a graduate degree). The I incomplete grade is awarded as a course grade (without grade point assignment) at the end of a term when a significant portion of course work has been satisfactorily completed, but not all of the required course work has been completed. The incomplete grade is appropriate when the completed course work is of passing quality and the student has had such hardship that completion of the remaining course work within the term timeline would present an additional hardship. The instructor who assigns the incomplete grade should set a specific date by which the student must complete the remaining course work, recognizing that time must be available for any final evaluation and grade change to be made, prior to the deadline when the grade converts to an F. The deadline is one year to the last day of exams. (Please check the Office of the Registrar’s website for the specific date.) The student must work with the instructor to develop an agreement that indicates the date by which the remaining course work is to be completed and submitted to the instructor. The instructor is not obligated to provide the student with a full year to complete the remaining course work. If the remaining course work is completed within the time period agreed upon by the instructor and the student, and that completion occurs within the one year, then the instructor will submit a change of grade online (in Catalyst) based on the quality of the remaining work. If no specific time for completion is set by the instructor, the student has one year (from the end of the term in which the incomplete was assigned) to complete the remaining course work and submit it to the instructor in time for evaluation of the work and a final grade to be approved by the Registrar. If the coursework is not completed within the one-year period (i.e., one year from the end of the term in which the I grade was assigned), the I grade automatically converts to an I/F grade which affects the student’s GPA the same as the grade of F. For the complete graduate grading scale and a definition of all grades, consult the Grading Scales and Definitions page of the Registrar’s Office website. 26 Grades Assigned to Research Courses That Are Repeated If students are working on dissertation or thesis research, they should be registered in the appropriate research course (e.g., Individual Dissertation or Individual Master’s Thesis), and the course work should be given a final grade each semester. The use of P/F for such courses is strongly recommended to avoid undue influence on GPA due to individual grading practices and the large amount of research credit awarded, but it is recognized that some programs will want to use letter grades. “Placeholder” grades such as SP and NG should not be used. Regardless of the grading scheme selected, it must be consistently applied across an entire program. If a program faculty cannot agree on a single grading scheme, the program must use the P/F choice. Students should be graded for each semester based on their progress and achievements in that semester. Note: The definition of a “research course” is a course outside of formal class work or instruction that allows a student to be registered as a graduate student while they are working independently on their thesis or dissertation under the guidance of their advisor or dissertation committee. This policy also applies to internships and other multiple semester or series courses. Pass/Fail Grades An instructor may request approval for pass/fail grading for an individual student in their class prior to the first day of class. A graduate student can take a course on a pass/fail basis (P or U grade) when approved by their advisor and instructor. An instructor is not required to accept a student on such a basis. Grade Changes A change of grade is only appropriate for an I, an NG, an SP/UP, or an error made by the instructor. SP/UP grades must be converted to a final grade by the end of the following semester. Instructors may change an I or NG grade online in Catalyst for approximately one year (the interval extends from the initial grading semester to the last working day of the same term the following year). To request a change of grade for a non-research course for graduate credit after this period, or an F grade any time, the instructor must do an official, paper change of grade form and forward to the Registrar’s Office. Previously recorded grades may not be changed to W or I after the close of the term. Both I and W grades must be awarded while the course and semester are still in progress and cannot be awarded retroactively. W reflects an official withdrawal that took place by the deadline outlined in the academic calendar, and I indicates work remains to be completed and the student did not earn a final grade. Students cannot withdraw from a class retroactively or be given additional opportunities to seek a different final grade retroactively. If an F is in a non- required course or the required course has since been retaken for a passing grade, the Program Director at certification may request a waiver of the F grade from the Associate University Dean of the Graduate College. No Grade Replacements for Graduate Students Please note, if a graduate student re-registers and re-takes a course, both grades will be included in the student’s overall GPA. There are no grade replacements at the graduate level. The process to make a grade change cannot be initiated by a student. The course instructor of record must send the form. At no time should a student be in possession of a change of grade 27 form. Note: that an I/F grade is governed by the same policies that govern the F grade and is weighted into the student’s GPA in the same fashion. 28 MAINTAINING GRADUATE STUDENT STATUS Maintaining graduate student status signifies that the student is actively engaged in making progress towards their degree and meeting program requirements. Graduate status determines which students may use facilities of the university, may participate in the university governance process and student organizations, and are covered by the Student Code of Conduct and the grievance process. A University of Cincinnati graduate student must hold the equivalent of a baccalaureate or higher degree and must have been accepted for admission into graduate study by the appropriate graduate program. MINIMUM CREDITS/REGISTRATION REQUIREMENTS To maintain graduate status at the University of Cincinnati, students must register at UC for at least one graduate credit that contributes to degree requirements (as determined by the graduate program) in an academic year. If the student is registered for at least one graduate credit in the academic year (fall through summer), they will maintain graduate student status for the entire academic year. Credits that are audited or in which a student receives a W, UW or F do not count toward the minimum credit requirement. Any student that does not register in the fall of an academic year and has not registered for the previous two academic years will automatically be exited from their program. A student whose status has thus automatically terminated will no longer be considered a graduate student but may seek reinstatement (see Reinstatements). Also note that students wishing to use many UC resources, such as university housing, campus laboratories, office space, equipment, campus recreation center, computer labs, etc. may need to be registered. Students should check with specific facilities for their particular requirements. Dual Degree Programs In dual degree programs, students must be registered for at least one graduate credit that contributes to degree requirements in one of the two programs (as determined by the program) during the academic year in which they graduate with their dual degrees. FULL-TIME COURSE LOAD Students must be registered for 10 or more graduate credits each semester to be considered full- time students, 12 if holding a university sponsored graduate assistantship or fellowship. Audit or undergraduate credits do not count toward full-time status and cannot be supported by a University Graduate Award. PART-TIME COURSE LOAD Students who can devote less than full time to graduate study may register for the number of graduate credits judged by their program advisors to represent the appropriate fraction of a full- time load. However, doctoral students must satisfy the Board of Trustees residency requirement, which requires that they have one year of full-time study, which is defined as being enrolled for at least 10 graduate credits in their program in each of two semesters (including summer semester) during a span of three consecutive semesters. Full-time UC employees using their tuition remission benefit to complete a part-time doctoral program may request a waiver of this requirement from the Associate Dean of the Graduate College. (See Doctoral Degrees Policies and Procedures, Course of Study.) 29 REDUCED COURSE LOAD (INTERNATIONAL STUDENTS) Once an international student has finished all required course work and will no longer be enrolling full time, she/he may choose to enroll with a reduced course load. Visit the F-1 Students page on the UC International Services website, referring to the “Enrolling part-time as a graduate student who has finished all course requirements” section for the link to the form and more information. MEETING PROGRAM REQUIREMENTS Students who continue on active status in their program without interruption are responsible for meeting all current requirements, including requirements that are revised since the student first entered the program. Students readmitted into their program are responsible for meeting the program requirements applicable at the time of readmission. MINIMUM ACADEMIC PERFORMANCE The Graduate College requires that a student must have an aggregate grade point average (GPA) of at least 3.000 to obtain a graduate certificate or degree at the University of Cincinnati. The GPA used for this purpose should aggregate graduate-level coursework completed since the student’s matriculation into the particular degree program from which the student seeks graduation, and only courses taken that are applicable to the degree/certificate count towards this GPA. Transfer graduate credits may also be accepted at the discretion of the degree program (and within Graduate College limits), and any transfer credit coming from courses taken at the University of Cincinnati will contribute to the GPA certified for graduation. Please note that programs establish minimum academic standards that may exceed the overall university standards provided above, so students need to be aware of their program requirements. Note that there is no grade replacement for graduate students, so any failed graduate courses remain in the student record. However, if a student retakes a failed course and obtains a passing grade, and if the GPA calculated without that original failing grade is above 3.000, then the program can petition the Graduate College for a waiver of the GPA requirement for graduation. Multiple failing grades, or multiple attempts to pass a course, are examples of why a petition may be denied. INTERNATIONAL STUDENTS, MAINTAINING IMMIGRATION STATUS The student has responsibility for maintaining their immigration status. Key information on maintaining immigration status on the F-1 Students page on the UC International Services website. TIME TO DEGREE Time to Degree and Extensions The Board of Trustees stipulates that all degree requirements must be completed within a defined span of years starting from the date of matriculation into the degree program, regardless of whether students are full time or part time. This span is 5 years for the master's degree and 9 years for the doctoral degree. Under extenuating circumstances, a program may petition, on 30 behalf of the student, for extension of the time limit for attaining the degree. Prior to the program petitioning the Graduate College for an extension, the student must communicate with the student’s program advisor and/or director to review the student’s degree completion to date and form a plan for degree completion. All this information should be included in a petition submitted to the Graduate College, which will review this petition and make a final decision. Students who have not completed degree requirements by their time-to-degree limit are on inactive status regardless of course registration in each academic year. Such students are required to apply for an extension of their time-to-degree. Reinstatements Students who have not been registered for at least one graduate credit hour at UC that contributes to degree requirements (as determined by the graduate program) in an academic year (fall-summer) are considered inactive. Reinstatements are available to students who have been inactive for less than three academic years. Students who have not been enrolled for any credits in their graduate program for three or more consecutive academic years are not eligible for reinstatement and must apply for readmission to the university. (See Readmission.) Readmission is processed via the reinstatement petition in Gradtracker. Applications submitted by the student via the admissions system will not be accepted. To request reinstatement, a program must petition the Graduate College on behalf of the student. Prior to the program petitioning the Graduate College for a reinstatement, the student must communicate with the student’s program advisor and/or director to review the student’s degree completion to date and form a plan for degree completion. The program coordinator, director or advisor will begin the reinstatement process in Gradtracker. The originator of the petition in Gradtracker will upload documents in one pdf to include degree completion information to date and a written plan for degree completion. The Graduate College will review the packet and if approved the student will also need to approve the petition and fee. If a student wishes to be reinstated so they can register and take classes, reinstatement petitions must be submitted in Gradtracker prior to the start of the first day of the term to be eligible for reinstatement in that term. Petitions received before the census date (the 15th calendar day of the term), the term may be considered for the current term. Petitions received after the census date will be considered for the following term. If a student wishes to be reinstated so they can graduate without taking any further classes, petitions for reinstatement (and extensions) must be submitted in Gradtracker no later than 3 weeks prior to graduation for the student to be certified for graduation in that semester. Petitions received after this time will not be approved in time for graduation that same semester. Late petitions will be held through the next processing period and a decision will be granted in time for the next graduation. A reinstatement fee equal to the current tuition for one graduate credit for each of the unregistered years up to a maximum of 3 years is assessed. The reinstatement fee will be added to the student’s bursar account and will become part of the student bill. Reinstatement fees are due 30 days after formal approval unless a payment plan is agreed to with the bursar’s office. If the fee is not paid by the due date, service charges may accrue, a block may be placed on future registrations and/or on the release of UC diplomas and official transcripts, and the account may be sent to collections. 31 Readmission Graduate students who have been inactive (not enrolled in their program) for three or more academic years are not eligible for reinstatement and must apply for readmission to the university. Readmission does not change the student’s original entry date. Time to degree will be calculated from the student’s first entry date. The program may petition the Graduate College on behalf of the student for readmission. Additionally, if the student has exceeded time to degree limits, the program should also petition for an extension with the readmission to specify the term in which the student will graduate. The readmission process is an opportunity for the program to carefully consider the former student’s progress and length of time between the student’s inception into the program and completion of remaining requirements. This may result in readmission, readmission with conditions, or denial of readmission. Prior to the program petitioning for a readmission, the student must communicate with the student’s program advisor and/or director to review the student’s degree completion to date and form a written plan for completing remaining degree requirements and removing any standing impediments to graduation, including any I/F, F, NG grades and courses required for graduation. This plan should include a timeline that describes the student's progress toward degree completion to date. The program coordinator, director or advisor will begin the readmission process in Gradtracker and will upload documents in one pdf to include degree completion information to date and a written plan for degree completion. The Graduate College will review the packet and if approved, the student will need to approve the petition and fee as well. Upon approval, the student must pay a readmission fee equivalent to in-state tuition in effect at the time of readmission for three graduate credits. The student will also be asked to complete, sign, and return the supplemental form for residency requirements to the Registrar’s office. Leaves of Absence Under special circumstances, graduate students may apply for leave of absence from formal study at the university for a specific period up to one year. Assuming appropriate documentation is provided, the circumstances justifying a leave include but are not limited to personal or family medical conditions, call to active military duty, parental leave, or death in immediate family. The rationale must be documented by the applicant. An approved leave of absence preserves the student’s status in the degree program, and the time off will not be counted against the time limits for awarding degrees. Consequently, registration is not required during the leave period. A leave may be renewed past the first year, for up to a maximum of five years, depending on the individual circumstances. Renewal of a leave is subject to the approval of the program, college, and the Graduate College. While the Graduate College leave of absence is only necessary for students who will be unable to register for a full academic year, programs may have more strict and specific registration policies and leave of absence policies. Students should also consult their program handbook if there is a legitimate need not to register for any amount of time. 32 To apply for a leave of absence, a student must complete the Request for Leave of Absence Form and upload the appropriate documentation (e.g., doctor’s letter or military orders) through Gradtracker. The program will approve through Gradtracker as well. Once the program has approved the request, the Graduate College will review the petition and if approved, the student and program will receive an email notification through their UC email. Note: A student on a leave of absence is placed on inactive status and their Catalyst record is discontinued, to be reactivated upon their return. While on inactive status, they will not be eligible for student health insurance and may be unable to use many UC resources. Students with financial aid or student loans should confer with the Financial Aid Office prior to requesting a leave of absence to ascertain the consequences of a leave on their loan status. Students should also be aware that any scholarships or assistantships are not guaranteed to be available when a student returns from a leave of absence. Withdrawal from Program Students must notify their program in writing and copy the Graduate Admissions Program Manager regarding their intent to withdraw from their programs. Dismissal from Program Students must consult with individual programs concerning dismissal policies. If a program dismisses a student, the program must copy the Graduate Admissions Program Manager on the notification to the student. 33 MASTER’S DEGREE POLICIES AND PROCEDURES COURSE OF STUDY The course of study for the master’s degree is planned with the advisor and is subject to approval by the program graduate committee or its equivalent. It must show a reasonable degree of concentration on interrelated subjects. Programs will recommend students for degrees only after students have developed and demonstrated the necessary knowledge and skills and have fulfilled all other university requirements. At least once an academic year, the graduate program director or the graduate student’s advisor shall inform the student in writing of their academic progress in the master’s degree program. An annual Academic Progress Report or some other form of formal evaluation of progress is required throughout each student’s program. Students must take a minimum of one graduate credit that contributes to degree requirements (as determined by the graduate program) per academic year (fall-summer) to maintain active status. If a student does not maintain active status, they may apply for reinstatement within three years or apply for readmission to their program thereafter. There are fees associated with these steps. (See Maintaining Graduate Student Status, Reinstatements and Readmission.) CREDIT HOUR REQUIREMENTS The University of Cincinnati is on a semester system. Although qualification for the master’s degree is not based exclusively upon the completion of a definite number of hours of course work, the satisfactorily completed graduate work must consist of the equivalent of a minimum of one academic year of full-time graduate study consisting of at least 30 graduate semester credit hours, including any thesis or capstone project. Credits earned in professional law or medicine programs are not applicable to the 30-credit minimum. CANDIDACY There is no formal candidacy status for the master’s degree. However, some programs do have defense requirements, so each student should confer with their advisor or program director to ascertain the requirements of their specific program. CULMINATING EXPERIENCE: THESES and CAPSTONES Every degree requires a culminating experience that is designed to integrate and apply the knowledge and learning gained from the curriculum, and demonstrate mastery of the subject matter in the degree. A master’s thesis is required by some programs, and a master’s capstone project/experience is required in others. Each master’s degree student undergoes an individual evaluation process at the end of their program. Thesis Preparation, Evaluation and Submission Process Preparation of a thesis demonstrates the student’s ability to communicate and to evaluate critically. Information about preparing an electronic thesis is available on the Graduate College 34 website. The student should consult with their program office for additional forms required other than what appears on the graduation checklist. A student must note any relevant deadlines defined by their program, and work with their program leadership to form a thesis committee composed of at least two UC faculty members, at least one of whom must be a member of the university graduate faculty. The thesis committee can guide the student in their exploration of the topic of the master’s thesis, and is responsible for final evaluation of the thesis. The student must submit the completed thesis to the thesis committee for critical evaluation, by the deadline required by the program or their thesis committee. Students who have written a thesis are expected by the Graduate College per their program requirements to make a public announcement of their thesis defense, including time, date, and title of the public presentation. The format for thesis evaluation is decided by the academic unit offering the graduate degree. Faculty with emerit status may remain on the committee if they were members when the proposal was accepted and were full-time tenured, university graduate faculty. A faculty member originally on a student’s committee who leaves UC to take an academic position elsewhere may also continue to serve on the student’s committee if both the faculty member and the student agree to continue the relationship. However, neither an emerit professor nor a faculty member from another institution may serve as chair of the committee, since they are no longer eligible to be university graduate faculty. Once a thesis has been approved by their committee, the candidate for the master’s degree must submit an electronic thesis by following the current instructions online at the Graduate Collge's Graduation page. Be careful to adhere to any deadlines for submission, or graduation will be delayed. Capstone Process Master’s students who are not required to complete a thesis should consult their academic programs about the requirements and procedures for the capstone experience in their programs. In some programs, the final capstone event may be in the form of a comprehensive exam or research project; in others, the final evaluation may appropriately be a recital, performance, or exhibition. The specific nature of the final evaluation is determined by the academic unit offering the master’s degree program, but it must include evaluation by full-time faculty at the University of Cincinnati. If questioned, the appropriateness of a final evaluation will be decided by the University Graduate Council. GRADUATION One semester prior to the semester in which a student anticipates graduating, the student should: • confer with their program office staff; • consult the Graduate College’s website for deadlines, instructions on submitting their electronic thesis; • visit the Graduate Collge’s website to determine if they are defined as a thesis or non- thesis student, or consult with their program; and • talk to advisor about whether an embargo is needed. 35 Application to Graduate Students must: (1) complete academic requirements and (2) complete the official online Application to Graduate by the deadline for the semester in which they expect to graduate. NOTE: for all graduate students, the application for graduation is started at the Graduation page, and not within Catalyst. Start an application for graduation early in the semester you plan to graduate. Deadlines posted on the Graduation Deadlines page are firm and failure to meet them will delay students’ graduation until the following semester, when they must then submit a new application for their revised graduation date. A student graduating from a dual degree program must make a formal application for graduation for each program (see details in next section). All students applying to graduate will be assessed a non-refundable graduation application fee. The fee will be assessed each semester a student applies for graduation. Students who have applied for graduation and learn later they will not be graduating must be removed from the graduation list before they can apply again for any future semesters (programs must notify the Graduation Program Manager to remove a student). When the application for graduation is complete, the student receives an email receipt for payment of the graduation application from the registrar’s office. If this receipt is not received, promptly notify your program, as your graduation application may not be completed. Some PhD programs incorporate a master’s degree. Students should contact their program for help in adding this additional degree. Graduation from Dual Degree Programs The online Application to Graduate will allow a student to apply for graduation from both degree programs in an official dual degree program. Each of the two programs must follow and complete the certification processes and procedures necessary to facilitate a student’s graduation from their own program. In dual degree programs, students must be registered for at least one graduate credit that contributes to degree requirements in one of the two programs (as determined by the program) during the academic year in which they graduate with their dual degrees. Certification for Graduation (Certify Online) The finalization and submission of a student’s Application to Graduate will activate the process by which the student will be certified for graduation, and the following requirements must be met. The student should confer with their program office one-two weeks after the application period has ended to assure that any problems related to these requirements (reinstatements/ extensions, or grade changes) are resolved in a timely manner and avoid delay of graduation until a subsequent semester. Specifically, the student’s records will be reviewed to verify satisfaction of the following requirements: • finalization and submission of their online Graduation Application by the deadline; 36 • instructor’s submission of passing grades for their final semester credits; • removal of all I grades from their transcript; • removal of all UP/SP grades from unapproved courses and/or the final semester in the approved courses were taken; • assignment of letter grades rather than UP/SP grades for courses in the final semester of the student’s program; • removal of previously awarded NG grades and blank grade awards; • confirmation of satisfactory repetition or waiver of required courses in which an F was originally received; • confirmation of completion of work and changes of I grades within the one-year limit; • confirmation that the student was registered for at least one credit in their graduate program in each academic year, including the year of expected graduation; • confirmation that the student completed degree requirements within the prescribed time- to-degree; • satisfactory completion of at least 30 graduate credits completed to the satisfaction of the student’s program; • completion of all program requirements for the degree; • 3.000 GPA has been earned while a matriculated graduate student in the program; • if a thesis is required, upload the electronic thesis (ETD) with chair approval by the deadline date, which is posted on the Graduation Deadlines website. Note: The requirements explained here are university requirements. Students must contact their program’s office for any additional program-level requirements or deadlines that must be completed prior to graduation. Please see the Doctoral Hooding and Master’s Recognition Ceremony section for details on the event. CONTINUING TO A DOCTORAL PROGRAM For a UC master’s student continuing to a doctoral program in the same program area, the student will fill out the application in the graduate admissions application system, and the graduate application fee is waived. 37 DOCTORAL DEGREE POLICIES AND PROCEDURES COURSE OF STUDY The course of study for the doctoral degree is arranged with each student by their advisor and reviewed by the program’s graduate committee or its equivalent. The program should provide a concentration and breadth of study for the student to develop competence in research, scholarship, teaching, and professional performance in general, with knowledge of their chosen specialty in relation to allied branches of learning. A written assessment of performance for each doctoral student is required at the end of their first year; an annual Academic Progress Report or some other form of formal evaluation of progress is required throughout each student’s program. CREDIT HOUR REQUIREMENTS The doctoral degree will be granted for no less than the equivalent of three years of full-time graduate study. Individual program requirements vary, but eligibility for graduation typically requires a minimum of 90 graduate credits beyond the bachelor’s degree. Doctoral students with a prior master’s degree may petition their program to allow up to 30 transfer credits from the master’s degree towards their doctoral degree. Degree credits must include at least 7 hours in dissertation research. Some program credit requirements may be higher. The last 30 credits must be completed under the direction of University of Cincinnati graduate faculty. The degree will not be granted solely on the basis of the accumulation of the required number of credits. A program will recommend students for degrees only after they have developed the necessary intellectual maturity and have fulfilled all other requirements of the program and the university. RESIDENCY AS FULL-TIME STUDENT Prior to admission to doctoral candidacy, all doctoral students shall complete a residency requirement by enrolling in 10 graduate credit hours (12 if funded by a Graduate Assistantship) per semester for two out of three consecutive semesters of study (including summer). Part-time students are not exempt from enrollment requirements to achieve residency. However, full-time UC employees using their tuition remission benefit to complete a part-time doctoral program may request a waiver of this requirement from the Associate Dean of the Graduate College. CANDIDACY, QUALIFYING EXAM The Graduate College does not currently track time to candidacy, but encourages programs to implement candidacy exams early in their programs to allow the students optimal feedback on their aspirations and research. Doctoral students are required to complete a program certification process according to the program’s established standards. The student must have at least a 3.000 grade point average in doctoral coursework and fulfill all other pre-candidacy requirements specified by the doctoral program in which the student is enrolled. Upon completion of these requirements, the student will receive a formal letter from the Graduate College informing the student of admission to candidacy. 38 UNIVERSITY GRADUATE FACULTY ROLE In accordance with the university’s Board of Trustees’ rule (50-77-11) (B) (2), only university graduate faculty are permitted to chair thesis or dissertation committees. The Graduate College appropriately identifies members of the university graduate faculty. Faculty members are nominated for graduate-faculty status by the program most closely aligned with the academic unit holding their primary academic appointment, and with the approval of their college dean or associate dean in charge of graduate education (from whom the nomination should arrive to the Graduate College). Faculty members holding any type of faculty appointment may be eligible for college-initiated nomination to the graduate faculty, the decision to be made based on an evaluation of the individual curriculum vitae and research and creative profile of the nominee. Criteria for nomination are formulated by individual programs and used by the Graduate College in adjudication. DISSERTATION Each PhD and EdD student must produce and defend a dissertation showing high scholarly achievement based on their original research. The student is required to submit an electronic document as evidence of this research. Students in all other doctoral programs should consult their academic programs regarding requirements and procedures for the capstone experience required in their programs. Dissertation Advisor and Committee When the student has been admitted into doctoral candidacy and has selected a dissertation subject and dissertation advisor, a dissertation committee should be appointed as soon as possible. The dissertation advisor must be qualified to serve as the chair of the dissertation committee, meaning this faculty member must be a member of the university graduate faculty and all members of the committee will be appointed by the Graduate College upon recommendation of the program director or director of graduate studies (in consultation with the committee chair and student). Students have the right to request a change in the committee but must do so in consultation with the graduate program director and their program must make the change in GradTracker. Preferably, the dissertation committee will include at least one person from outside the program, who might be faculty from the University of Cincinnati or another institution. A dissertation committee must be composed of a minimum of three UC faculty members. Members of the university graduate faculty are eligible to serve on all thesis and dissertation committees. In addition, all tenured and tenure-track faculty members may serve on all thesis and dissertation committees (even if they are not members of the university graduate faculty, meaning they may not serve in the chair role and cannot act as primary advisors). Other types of UC faculty members may serve on committees if the appointing unit demonstrates that their expertise is beneficial for the dissertation project. Programs should make such requests to the Graduate College in advance, to be ascertained on a case-by-case basis. Neither an emerit faculty member nor a faculty member from another institution may serve as the chair of the committee. Emerit faculty may remain on the committee if they were members when the proposal was accepted. A faculty member originally on a student’s committee who leaves UC to take an academic position elsewhere may also continue to serve on the student’s committee if both the faculty member and the student agree to continue the relationship. If a non-UC faculty member or appropriate professional practitioner has special expertise in a dissertation topic, 39 such a person may be added to the dissertation committee if they are nominated by the candidate and approved by both the chairperson of the dissertation committee, the director of graduate studies for the academic unit involved and the Graduate College. All such individuals serve as a full voting member of the dissertation committee without compensation from either the university or the candidate and would serve in addition to the minimum number of three qualified full-time UC faculty. A copy of the completed dissertation must be submitted to each committee member for critical evaluation, with sufficient time for review as determined by the dissertation committee. If it is considered satisfactory with respect to form and content by the committee, a final defense of the dissertation can be scheduled. Final Defense of Dissertation Students should check with their program office for the final deadline for their dissertation defense. The student’s final defense of the dissertation will be open to the public and all members of the academic community. Students are required to enter details of their dissertation defense, such as time, date, and location, online at the Graduate College website through the Graduation checklist steps. Begin at the Graduation webpage. One can also browse scheduled dissertation defenses by visiting the Upcoming Dissertation Defenses page. The candidate answers questions posed by members of the committee and other members of the audience following an oral presentation of their dissertation. At the conclusion of the defense, the committee will withdraw, make a decision with regard to the acceptability of the dissertation and its defense, and report its decision to the candidate. At least ¾ of the voting members of the dissertation committee (including at least one representative of each major area involved, in the case of interdisciplinary programs) must approve the dissertation. When the student’s dissertation committee chair has approved a defense, the student should assure that they have met all requirements for graduation including those in the graduation information obtained online. Use of a Moderator Although an outside moderator is not required, a moderator may be assigned by the Graduate College dean upon the request of the candidate, the chairperson of the dissertation committee, or the person empowered to approve the composition of a dissertation committee (the director of graduate studies for the academic unit involved). Moderators should be members of the university graduate faculty from outside the academic unit involved. The duties of the moderator are limited to observing the oral defense of the dissertation and reporting in writing to the Graduate College dean on the academic propriety of the proceedings. Submission of Dissertation After a dissertation has been approved, the candidate for the doctoral degree must submit their electronic dissertation by following the current instructions found at the Electronic Thesis and Dissertation Information webpage. Students in all other doctoral programs should consult their academic programs for the capstone experience required in their programs. Deadlines are posted at the Graduation Deadlines page. • All thesis/dissertations must be electronically submitted by the student and approved by the advisor. Students log in via the link available on the Graduation webpage. 40 • Advisors are sent an email when the student submits for their approval, and the advisor then logs in to review/approve. • Once approved by the chair, the student is notified by email. • A Graduate College approval email is sent to the student once reviewed. • The program is copied on all email correspondence during the Electronic Thesis/Dissertation (ETD) approval process. GRADUATION One semester prior to the semester in which a student anticipates graduating, the student should: 1. Confer with their program office staff. 2. Consult the Graduation page on the Graduate College’s website for deadlines, instructions on submitting their electronic dissertation, and doctoral hooding ceremony information. 3. Talk to advisor about whether an embargo is needed. Application to Graduate Students must: (1) complete academic requirements and (2) complete the official online Application to Graduate by the deadline for the semester in which they expect to graduate. Deadlines are firm and failure to meet them will delay students’ graduation until the following semester, when they must then submit a new application for their revised graduation date. All students applying to graduate will be assessed a non-refundable graduation application fee. The fee will be assessed each semester a student applies for graduation. Dual Degree Programs Graduation The online Application to Graduate will allow a student to apply for graduation from both degree programs in a dual degree program. Each of the two programs must follow the certification processes and procedures necessary to facilitate the student’s graduation from their own program. In dual degree programs, students must be registered for at least one graduate credit that contributes to degree requirements in one of the two programs (as determined by the program) during the academic year in which they graduate with dual degrees. Graduation Requirements for Doctoral Degrees Students must be registered for at least one graduate credit that contributes to degree requirements (as determined by the graduate program) during the academic year in which they graduate from that program. Doctoral students must also complete degree requirements within a nine-year period unless they have an approved extension (see Maintaining Graduate Student Status, Time to Degree). They should contact their program offices for any additional program requirements or deadlines to be completed prior to graduation. Certification for Graduation (Certify Online) Finalization and submission of a student’s Application to Graduate will activate the process by which the student will be certified for graduation, and the following requirements have been met. 41 The student should confer with their program office one-two weeks after the application period has ended to assure that any problems related to these requirements are resolved in a timely manner and avoid delay of graduation until a subsequent semester. Specifically, the student’s records will be reviewed to verify satisfaction of the following requirements: • finalization and submission of their online Application to Graduate by the deadline; • instructor’s submission of passing grades for final semester credits; • removal of all I grades from transcript; • Removal of previously earned NG grades and blank grade awards - removal of all UP/SP grades from unapproved courses and/or the final semester in which the courses were taken; • assignment of letter grades rather than UP/SP grades for courses in the final semester of the student’s program; • confirmation of satisfactory repetition or waiver of required courses in which an F was originally received; • confirmation of completion of work and changes of I grades within the one-year limit; • confirmation that the student was registered for at least one credit in the graduate program in each academic year, including the year of expected graduation; • confirmation that the student reached candidacy and has a valid dissertation committee; • degree requirements completed within prescribed time-to-degree; • satisfactory completion of sufficient graduate credits. In general, doctoral degrees require at least 7 research credits (many programs have higher requirements), within a total of at least 90 graduate credits for students who do not have a prior master’s degree, or require a total of at least 60 credits for students beyond the master’s degree. Please note that individual program credit requirements can vary widely. • completion of all program requirements for the degree; • 3.000 GPA has been earned while matriculated in the graduate program; • if a dissertation is required, upload the electronic dissertation (ETD), following the instructions on the Electronic Thesis and Dissertation Information page, for chair approval by the deadline. Note: The requirements explained here are university requirements. Students must contact their program office for any additional program-level requirements or deadlines that must be completed prior to graduation. GRADUATE CERTIFICATE VERIFICATION FOR UC TRANSCRIPT ENDORSEMENT In order for students to have their UC transcript endorsed with an earned certificate, students must apply for graduation and the program must approve the record through certify online just like the master's or doctoral students. DOCTORAL HOODING AND MASTER’S RECOGNITION CEREMONY Doctoral and master’s students who are graduating or who have graduated during the academic year will receive an invitation from the Dean of the Graduate College to participate in the university’s prestigious Doctoral Hooding and Master’s Recognition Ceremony held each semester. Please visit the commencement ceremony’s website for up-to-date details or 42 the Graduate College’s Graduation webpage. This is a joyous occasion in which students celebrate their accomplishment with family and friends as they are recognized by faculty and university leadership. Doctoral participants will be adorned with their hoods during the ceremony, by either their faculty mentor or the dean of their college. Graduates must confirm their intent to participate by reserving a seat online for the celebratory event and providing current home and email addresses for notification purposes. If you wish to be hooded by your faculty mentor, discuss the date with them to make sure they can attend. 43 INSTITUTIONAL RULES, POLICIES, AND PROCEDURES PROGRAM STANDARDS This Graduate Handbook clarifies minimum university-level requirements and policies that apply to all graduate students throughout the University of Cincinnati. Beyond these, each student is also expected to adhere to requirements, policies, and procedures specific to their own degree program and college. All graduate programs must publish in writing in accessible format the minimum academic standards for each graduate program offered, including the following: • minimum grade point average, including grades earned in required courses; • acceptable grade distribution, including grades earned in required courses; • nature and number of programmatic examinations, such as preliminary or qualifying, and the consequences of failing all or part of each examination; • specified research requirements; • a time-related definition of normal progress for all full- and part-time students; • standards and procedures for the mandatory annual review of academic performance; • standards and procedures for probation, suspension, and dismissal from the program. RECORDS PRIVACY, FERPA, AND THE RIGHT TO REVIEW The Family Educational Rights and Privacy Act of 1974 (FERPA), is the federal law that governs the release of and access to student education records. FERPA affords students certain rights with respect to their education records. For the complete FERPA information, consult the FERPA and Records Privacy page of the Registrar’s Office website. NOTICE OF NON-DISCRIMINATION The University of Cincinnati does not discriminate on the basis of disability, race, color, religion, national origin, ancestry, medical condition, genetic information, marital status, parental status (including status as a foster parent), sex, age, sexual orientation, veteran status, military status (past, present, or future), or gender identity and expression in its programs and activities. The university does not tolerate discrimination, harassment, or retaliation on these bases and takes steps to ensure that students, employees, and third parties are not subject to a hostile environment in university programs or activities. The university responds promptly and effectively to allegations of discrimination, harassment, and retaliation. It promptly conducts investigations and takes appropriate action, including disciplinary action, against individuals found to have violated its policies, as well as provides appropriate remedies to complainants and the campus community. The university takes immediate action to end a hostile environment if one has been created, prevent its recurrence, and remedy the effects of any hostile environment on affected members of the campus community. UC is committed to the ideal of universal Web accessibility and strives to provide an accessible Web presence that enables all university community members and visitors full access to 44 information provided on its websites. Every effort has been made to make these pages as accessible as possible in accordance with the applicable guidelines. The University of Cincinnati provides free aids and services to people with disabilities to communicate effectively with us, such as qualified sign language interpreters and written information in other formats (large print, audio, accessible electronic formats, other formats). The University of Cincinnati also provides free language services to people whose primary language is not English, such as qualified interpreters (call 513-556-5503) and information written in other languages. If you need these services, please tell any employee of a University of Cincinnati health program or activity. If you believe that the University of Cincinnati has failed to provide these services or discriminated in another way, you can file a grievance with the Office of Equal Opportunity and Access and/or Office of Gender Equity & Inclusion. You can file a grievance in person, by mail or by email. If you need help filing a grievance, the Office of Equal Opportunity & Access and Office of Gender Equity & Inclusion staff are available to help you. ACADEMIC DISHONESTY Academic dishonesty in any form is a serious offense that cannot be tolerated in an academic community. Dishonesty—including cheating, plagiarism, deception of effort, and/or unauthorized assistance—may result in a failing grade in a course and/or suspension or dismissal from the university. Allegations of academic dishonesty will be processed pursuant to the university’s Student Code of Conduct. After graduation, alumni remain responsible for the academic integrity of the work they performed while a student at the University of Cincinnati. If evidence of academic dishonesty or research misconduct is revealed after the graduation of a student, the Office of Research, the Graduate College, and the university can examine whether such concerns impact the academic integrity of the degree that was conferred on the student, with consequences including but not limited to degree revocation. STUDENT CODE OF CONDUCT The Student Code of Conduct defines behavior expected of all University of Cincinnati students. It is each student’s responsibility to know and comply with the university’s Student Code of Conduct, and sanctions or penalties are outlined. Academic behavior considered to be misconduct is defined in the Student Code of Conduct. The code also addresses nonacademic misconduct (such as disturbing the peace, destruction of property, and theft). Disciplinary procedures are explained in a step-by-step manner, and the procedures for appeal of decisions are stated. In addition to this code, students must adhere to their college’s professional code of conduct and honor codes where applicable. Students should contact the office of the dean for their college to inquire about any applicable conduct and honor codes to ensure compliance. Students can be suspended or dismissed from the university for unprofessional behavior. 45 RESPONSIBLE CONDUCT OF RESEARCH Furthering of research is a major institutional goal of the University of Cincinnati. Research includes not only intellectual activity and exploration designed to expand knowledge and understanding, but also activities in the creative and performing arts designed to interpret and create. Such activities require responsibilities for the ethical and safe conduct of research. Individuals charged with supervision of research, as well as all individuals directly engaged in it, and collaborators of investigators outside their own units are responsible for the quality of the data generated in their own laboratories as well as the laboratories of their collaborators. Everyone shares responsibility for the physical safety and intellectual property of individuals in the responsible conduct of creative scholarship and research. RESTRICTED RESEARCH The right to open exchange of information and opinion in faculty relations with students carries the obligation to avoid comments or violations of confidentiality that would reduce free expression or inquiry by students. Student involvement in industrial proprietary projects should be permitted only when these projects in no way restrict the student’s ability to fulfill their degree requirements, which includes the obligation to publish dissertation results. Faculty members have the right to publish their research findings and the right to protection against retaliation because of displeasure over their conclusions by the public, administration, government, or others. They have the concomitant responsibility to refrain from conducting secret, non-publishable research as part of their university duties. GRADUATE STUDENT GRIEVANCE PROCEDURES The University of Cincinnati provides an opportunity for the resolution of disputes involving graduate students in a fair and collegial manner. The Graduate Student Grievance Procedures establish a formal academic process for graduate students to request review and redress of certain complaints arising out of their academic relationships with their programs, their colleges, or the university. The grievance begins with a mediation process and may proceed, if necessary, through the more formal review and decision or appeal processes. In general, however, it is expected that grievances will be resolved by the parties within their programs. Students are encouraged to seek assistance from the university Ombuds Office for possible resolution before initiating the formal grievance process. Students, faculty and staff should note that Grievance Procedures are not legal protocols. They are, however, effective means by which to resolve conflicts. The Graduate College endorses these procedures and expects all programs and students involved to follow them according to the established guidelines. No outside parties, such as lawyers, ministers, and family members, are allowed to participate in or impose upon the procedures. The Graduate Student Grievance Procedures cannot supplant final sanctions stemming from the University of Cincinnati Student Code of Conduct process. There is a time limit to filing a grievance: it must be filed within 60-90 business days of the alleged improper mistreatment. The procedures are applicable to the following types of grievances: • grievances alleging improper dismissal or suspension from a graduate program, not as a result of the Student Code of Conduct process; • grievances alleging the improper withholding or termination of financial support of any kind; 46 • grievances alleging any other improper treatment, either substantive or procedural, of a graduate student by a university employee or university affiliate except: o allegations of improper evaluation of the quality and/or quantity of academic work, which a student cannot grieve; o allegations of unfair recommendation for employment or further graduate study, which a student cannot grieve; o allegations of discrimination or harassment that are subject to review by the Office of Equal Opportunity and Access or the Office of Gender, Equity and Inclusion. Published November 28, 2023. This version is an update to the 2022-23 AY handbook to reflect changes to the Graduate Scholarship structure and terminology. This version supersedes all previous versions. 47
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Please limit your knowledge to the document. Avoid generalizations and ensure accuracy by directly referencing the document's arguments and examples. How can graduate students receive financial support at the University of Cincinnati? University of Cincinnati Graduate College Graduate Handbook Welcome from the Graduate College! We invite you to review the Graduate Handbook. This document is designed as a helpful guide to graduate education at UC. Here is where you will find policies, procedures, and important information for the graduate student lifecycle, from admissions to graduation. In addition, there may also be requirements that pertain to specific degree programs and colleges. Please visit program and college websites for these specific requirements. 1 The Graduate College Graduate College Leadership Rose Marie Ward Vice Provost and Dean of the Graduate College Omotayo (Tayo) Banjo Associate Dean of the Graduate College Tai Collins Associate Dean of the Graduate College Laura Dell Graduate College Thought Leader Emily Kregor Software Applications Developer Lead Sarah Matthews Sr Data Reporting Analyst Angel Prewitt Assistant Director of Business Affairs Megan Tischner Carroll Program Director Graduate College Staff Kaitlin Bauer Academic Evaluator Virginia Dennis Program Manager, Student Services Shaymaa Minkara Program Manager, Graduation Caitie Norrie Program Manager, Professional Development Stephen Patrick Program Manager, Marketing and Communications Amy Wheeler Program Manager, Student Success & Retention Brandilyn Worrell Program Manager, Community and Belonging 2 Brady Wright Executive Staff Assistant and Office Manager Graduate College IT Staff Chris Amann Computer & Info Analyst, Management Specialist IT Dushan Aththidiyavidanalage Don Software Applications Developer Eric Rasnake Computer & Info Analyst I Coco Zhang Software Applications Developer Contact the Graduate College Location University of Cincinnati 110 Van Wormer Hall 2614 University Circle Cincinnati, OH Mailing Address P.O. Box 210627 Cincinnati, OH 45221-0627 Email: [email protected] or [email protected] Phone: (513) 556-4335 Fax: (513) 556-0128 3 Introduction This Graduate Handbook is intended to provide information about university policies that assist faculty, students, and program coordinators in supporting their individual programs of study. To which educational programs does this Handbook pertain? The Graduate College oversees all post-baccalaureate certificates and degrees (master’s and doctoral level) EXCEPT the Juris Doctor (in the College of Law), the Doctor of Medicine (in the College of Medicine), and the Doctor of Pharmacy (in the College of Pharmacy). The University of Cincinnati does not discriminate on the basis of disability, race, color, religion, national origin, ancestry, medical condition, genetic information, marital status, parental status (including status as a foster parent), sex, age, sexual orientation, veteran status, military status (past, present, or future), or gender identity and expression in its programs and activities. View UC’s complete Notice of Non-Discrimination. Published 11/28/2023. This version is an update to the 2022-23 AY handbook to reflect changes to the Graduate Scholarship structure and terminology. This version supersedes all previous versions. 4 TABLE OF CONTENTS ADMISSION TO GRADUATE PROGRAMS ....................................... 9 ADMISSIONS POLICY .............................................................................................. 9 Faculty and Administrators' Eligibility for Graduate Degrees .................................. 9 ADMISSIONS CATEGORIES .................................................................................... 9 APPLICATION PROCESS FOR 4+1 AND AIM PROGRAMS .................................. 10 Application to 4+1 Degree Programs .................................................................... 10 Application to Accelerated Integrated Master’s (AIM) Programs .......................... 11 DUAL DEGREE PROGRAMS .................................................................................. 11 CHANGING DEGREE PROGRAMS AT UC ............................................................ 11 GRADUATE CERTIFICATE PROGRAMS ............................................................... 12 INTERNATIONAL STUDENT ADMISSION.............................................................. 12 English Proficiency Requirement .......................................................................... 13 FINANCIAL SUPPORT .................................................................... 14 UNIVERSITY MERIT-BASED GRADUATE AWARDS ............................................. 14 GRADUATE SCHOLARSHIPS (GS)........................................................................ 14 UNIVERSITY FELLOWSHIPS ................................................................................. 15 GRADUATE ASSISTANTSHIP STIPEND AWARDS ............................................... 16 Teaching Assistant Requirements and OEPT ...................................................... 17 Graduate Assistant/Fellow Health Insurance Awards ........................................... 17 Multiple Appointments/Employment ..................................................................... 18 Summer Employment Without Full-time Enrollment ............................................. 18 Graduate Assistants on Jury Duty ........................................................................ 18 Strike Policy for Graduate Assistants ................................................................... 19 Sick Leave/Family Leave for Graduate Assistants ............................................... 19 Holidays/UC Closing Policy for Graduate Assistants ............................................ 19 Military Duty .......................................................................................................... 19 Termination........................................................................................................... 19 Workers’ Compensation ....................................................................................... 19 Unemployment ..................................................................................................... 19 Social Security, Medicare Tax and Ohio Public Employees Retirement System (OPERS)............................................................................................................... 20 174 GRADUATE CREDIT RULE .............................................................................. 20 TAXATION OF CINCINNATI GRADUATE AWARDS .............................................. 21 EXEMPTION FROM OPERS FOR STUDENT EMPLOYEES.................................. 21 EXTERNAL SOURCES OF FUNDING .................................................................... 21 5 FEDERAL FINANCIAL AID ...................................................................................... 22 GRADUATE CREDIT AND GRADES............................................... 23 ELIGIBLE CREDITS ................................................................................................ 23 CREDITS REQUIRED TO EARN A GRADUATE DEGREE .................................... 23 Advanced Standing for Graduate Courses Taken Outside of UC ......................... 23 Transfer Credit for Graduate Courses Taken at UC ............................................. 24 Course Exemption for Prior Knowledge, Without Credit ....................................... 24 Multiple Degree Exemptions ................................................................................. 25 Enrolling in Non-UC Classes through the Greater Cincinnati Collegiate Connection ............................................................................................................................. 25 Graduate Credit for Undergraduate Students ....................................................... 25 Graduate Credit Earned in 6000-Level Courses ................................................... 25 GRADING ................................................................................................................ 25 Final Exams .......................................................................................................... 25 Make-up Final Exams ........................................................................................... 26 Grade Reports ...................................................................................................... 26 Grades Assigned to Research Courses That Are Repeated ................................ 27 Pass/Fail Grades .................................................................................................. 27 Grade Changes .................................................................................................... 27 No Grade Replacements for Graduate Students .................................................. 27 MAINTAINING GRADUATE STUDENT STATUS ............................ 29 MINIMUM CREDITS/REGISTRATION REQUIREMENTS ....................................... 29 Dual Degree Programs ......................................................................................... 29 FULL-TIME COURSE LOAD.................................................................................... 29 PART-TIME COURSE LOAD ................................................................................... 29 REDUCED COURSE LOAD (INTERNATIONAL STUDENTS) ................................ 30 MEETING PROGRAM REQUIREMENTS................................................................ 30 MINIMUM ACADEMIC PERFORMANCE ................................................................ 30 INTERNATIONAL STUDENTS, MAINTAINING IMMIGRATION STATUS............... 30 TIME TO DEGREE .................................................................................................. 30 Time to Degree and Extensions ........................................................................... 30 Reinstatements..................................................................................................... 31 Readmission ......................................................................................................... 32 Leaves of Absence ............................................................................................... 32 Withdrawal from Program ..................................................................................... 33 Dismissal from Program ....................................................................................... 33 MASTER’S DEGREE POLICIES AND PROCEDURES ................... 34 COURSE OF STUDY ............................................................................................... 34 6 CREDIT HOUR REQUIREMENTS .......................................................................... 34 CANDIDACY ............................................................................................................ 34 CULMINATING EXPERIENCE: THESES and CAPSTONES .................................. 34 Thesis Preparation, Evaluation and Submission Process..................................... 34 Capstone Process ................................................................................................ 35 GRADUATION ......................................................................................................... 35 Application to Graduate ........................................................................................ 36 Graduation from Dual Degree Programs .............................................................. 36 Certification for Graduation (Certify Online) .......................................................... 36 CONTINUING TO A DOCTORAL PROGRAM ......................................................... 37 DOCTORAL DEGREE POLICIES AND PROCEDURES ................. 38 COURSE OF STUDY ............................................................................................... 38 CREDIT HOUR REQUIREMENTS .......................................................................... 38 RESIDENCY AS FULL-TIME STUDENT ................................................................. 38 CANDIDACY, QUALIFYING EXAM ......................................................................... 38 UNIVERSITY GRADUATE FACULTY ROLE ........................................................... 39 DISSERTATION....................................................................................................... 39 Dissertation Advisor and Committee..................................................................... 39 Final Defense of Dissertation................................................................................ 40 Use of a Moderator ............................................................................................... 40 Submission of Dissertation ................................................................................... 40 GRADUATION ......................................................................................................... 41 Application to Graduate ........................................................................................ 41 Dual Degree Programs Graduation ...................................................................... 41 Graduation Requirements for Doctoral Degrees................................................... 41 Certification for Graduation (Certify Online) .......................................................... 41 GRADUATE CERTIFICATE VERIFICATION FOR UC TRANSCRIPT ENDORSEMENT ..................................................................................................... 42 DOCTORAL HOODING AND MASTER’S RECOGNITION CEREMONY ................ 42 INSTITUTIONAL RULES, POLICIES, AND PROCEDURES ............ 44 PROGRAM STANDARDS........................................................................................ 44 RECORDS PRIVACY, FERPA, AND THE RIGHT TO REVIEW .............................. 44 NOTICE OF NON-DISCRIMINATION ...................................................................... 44 ACADEMIC DISHONESTY ...................................................................................... 45 STUDENT CODE OF CONDUCT ............................................................................ 45 RESPONSIBLE CONDUCT OF RESEARCH .......................................................... 46 RESTRICTED RESEARCH ..................................................................................... 46 7 GRADUATE STUDENT GRIEVANCE PROCEDURES ........................................... 46 8 ADMISSION TO GRADUATE PROGRAMS ADMISSIONS POLICY The University of Cincinnati welcomes graduate applications from students who: • hold a baccalaureate degree from a college or university regarded as standard by a regional accrediting agency and; • have at least a B average (3.000/4.0 system) in undergraduate course work or otherwise give evidence of promise that is judged satisfactory by the admitting program and the Graduate College. Programs that wish to admit applicants who lack this 3.000 minimum GPA requirement must provide supporting evidence and rationale of how such students will be able to complete a graduate program that requires achievement of a 3.000 GPA, and indicate any support offered by the program to ensure the applicant’s success given the GPA deficiency. Decisions concerning admission to graduate programs rest with the programs, and criteria used for determining admission beyond these minimal requirements are established by the programs. All programs have established written criteria for judging the admissibility of applicants, which are published in each program’s graduate handbook. The program’s handbook for graduate study must be available to the student. Upon the student’s acceptance of the admission offer, the program and the student are bound by the terms and conditions set forth in the letter of appointment. Faculty and Administrators' Eligibility for Graduate Degrees No holder of an academic administrative title at the University of Cincinnati (equivalent to assistant dean or above) may matriculate or be granted a graduate certificate or degree from the University of Cincinnati. No graduate degree or certificate from the University of Cincinnati will be granted to any faculty member at the University of Cincinnati (full-time or part-time above rank of instructor) who teaches in the same department, division or school in which the degree is to be granted. This rule also applies to adjunct appointments at any faculty rank and to interdisciplinary degrees when the same college is one of the interdisciplinary colleges. College deans may petition the Associate Dean of the Graduate College for a waiver of this policy on an individual faculty member’s behalf. The written request should describe the teaching responsibilities of the faculty member, indicating whether they are teaching graduate students and a plan for managing potential conflicts of interest. ADMISSIONS CATEGORIES Matriculated graduate status is granted to an applicant who has been accepted into a graduate certificate or degree program and has met all admissions criteria. Note that applicants first receive a provisional acceptance, and conversion to matriculated graduate status is dependent upon receipt of an official transcript that confirms that the student holds a baccalaureate or higher degree from a college or university regarded as standard by a regional accrediting agency. Please note that additional official documentation may be required (e.g. if the transcript does not contain information about degree conferral or if a foreign degree needs confirmation as baccalaureate equivalent). Instructions and deadlines for meeting this requirement are included on the Transcript Submission Policy web page. 9 Provisional graduate status is granted to applicants who have been accepted into a graduate certificate or degree program, but who have NOT yet met all admissions criteria. As described above, one routine requirement for all students is the submission of an official transcript. However, some students must in addition take undergraduate courses or improve English language proficiency to satisfy prerequisites, and these students may be accepted by the program on a provisional basis that is contingent on satisfying those additional prerequisites. Letters of admission should be read carefully to make sure all requirements tied to provisional status are identified. Visiting student status allows students to take courses for graduate credit when they have not been admitted into a graduate degree program. These students were previously called “non- matriculated students”. Should this visiting student subsequently matriculate into a certificate or degree program, a maximum of 12 semester hours may be applied to the certificate or degree program. Students are not eligible for tuition or stipend awards allocated by the Graduate College while in visiting graduate status. This policy and other funding policies are further explained in the Financial Support chapter. APPLICATION PROCESS FOR 4+1 AND AIM PROGRAMS Application to 4+1 Degree Programs If an undergraduate student plans to matriculate into a master’s degree program upon completion of the bachelor's degree, they can consult with advisors to begin (A) taking graduate-level coursework as an advanced undergraduate student, and (B) focusing on thesis-related, independent research at an earlier date. This advising plan to achieve an articulated path to a master’s degree is called a 4+1 program. Students who enter these programs must complete all of the requirements of each respective degree and must apply separately for both degree programs at the appropriate time. To be eligible for entry to a 4+1 program, students must have junior standing (64 semester credits). In addition, students must meet all College and graduate program admission requirements for the particular program. 4+1 students should note the following: • 4+1 students who enroll in graduate-level coursework prior to formally matriculating as a graduate student are allowed to apply up to 12 semester graduate-level credits toward the requirements of the master’s degree. These credits cannot be used for the bachelor’s degree. Students in the 4+1 program will complete the rest of their graduate coursework after formal completion and certification of the bachelor's degree. Students should refer to the section of this handbook containing the general requirements of the master’s degree and speak to the directors of the graduate program about specific requirements. • 4+1 students wishing to matriculate into a master’s program must complete a formal graduate admission application online in their junior or senior year to be admitted to the graduate program and begin the master’s degree. Students should speak to the directors of the graduate program about specific admission and application requirements. 10 Application to Accelerated Integrated Master’s (AIM) Programs The university has a limited set of programs that allow for a single application and admission to obtain a bachelor’s plus master’s degree in a single course of study. These programs are tightly structured around co-op experiences and allow undergraduate students to accumulate more than 12 graduate credits prior to transitioning to a matriculated graduate student. Applicants apply to an AIM program at the time of application to UC as an undergraduate but are still required to formally apply to transition to the graduate portion of their program at a time defined by their AIM program. There is a free and abbreviated application for UC undergraduate students transitioning to the associated master’s degree that is part of their AIM program. DUAL DEGREE PROGRAMS The university offers the opportunity for students to pursue two complementary graduate degrees simultaneously through structured, official dual degree programs (see below for a complete listing). The advantage of these programs is that they may require fewer credits than completing each degree program separately. Each program’s entrance requirements must be met in addition to university requirements, and the applicant must be accepted by both programs. Below is a listing of the Dual Degree programs: • Accounting MBA/MS • Business Analytics MBA/MS • Business Administration/Arts Administration MBA/MA • Business Administration/Nursing MBA/MSN • Community Planning/Landscape Architecture MCP/MLA • Community Planning/Law MCP/JD • Finance MBA/MS • Human Resources MBA/MA • Information Systems MBA/MS • Marketing MBA/MS • Law/Women’s Studies JD/MA • Law/Business JD/MBA • Law/Political Science JD/MA • Law/Political Science JD/PhD Please see the Multiple Degree Exemptions section for information on the maximum amount of transfer credit that can be applied to the dual degree programs. CHANGING DEGREE PROGRAMS AT UC In order to change from one degree program to another within the university, a student must submit a complete application to the new program. If the degrees are housed in the same unit, and the change is made over consecutive term enrollments, the application fee is waived. If the new degree program is in a different administrative program, the student is responsible for paying the application fee. Students are always responsible for fulfilling the requirements of the given degree program in which they are matriculated. Please see the Transfer Credit for Graduate Courses Taken at UC 11 section for information on the amount of graduate credits that can be transferred if a student is changing from one graduate program to another within the university, or if a student is changing from visiting graduate status at the university. GRADUATE CERTIFICATE PROGRAMS The University of Cincinnati offers graduate certificate programs. Certificates vary in both credit hours and in how they are configured: for instance, some can be earned only in conjunction with a degree; some require a master’s degree as a prerequisite, and some can be earned outside of a degree program. Applicants must apply for admission to a certificate program. Graduate College general guidelines are as follows: • Students must hold a baccalaureate degree. • Certificate programs may enroll degree seeking and non-degree seeking students. • For students matriculated into a degree program, credit hours earned under a certificate program may count toward a degree in any program if approved by the program director, and if requirements for the certificate and degree are completed the student will be awarded both. Credits earned while matriculated in a certificate program will count as credits matriculated in a degree. • Students can apply a single course to multiple certificates but only to ONE master’s or doctoral degree. • Students can obtain more than one certificate within the same program prior to attaining their master’s degree. • Students apply for a certificate program just like applying for a degree program, and must pay any relevant application fee. • Students enrolled only in a graduate certificate program are not eligible for tuition or stipend support with university funds (University Graduate Assistantship/Graduate Scholarship funds). If a student is interested, the student should contact the appropriate program office to obtain the specific criteria and prerequisites for the desired certificate. INTERNATIONAL STUDENT ADMISSION UC International Services supports the needs of international students at the University of Cincinnati. The office assists international students in understanding the rules, regulations, and procedures that must be followed during their stay in the United States and provides support services and cultural information to students. UC International Services is located in Suite 7148, One Edwards Center (1-513-556-4278). Information about admission to the University of Cincinnati for international students is available on their website. International students with F-1 visas can only be granted admission as matriculated graduate status in a degree-seeking program. (Most international students with J-1 visas can be granted admission with matriculated graduate status only, with some exceptions.) Students with J-1 visas should inquire with UC International Services to determine the regulations that apply to them. Students with green cards (U.S. resident aliens/permanent residents) are not defined as international students and, therefore, are not governed by the university’s international student policies. However, the English proficiency requirement does apply to green card holders (see The English Proficiency Requirement, below). 12 In instances where an international student holds a degree for which the U.S. equivalent is not known, or if it is determined by the program or the Graduate College that the applicant does not have the equivalent of a bachelor’s degree, the program must submit a petition for admission without the bachelor’s degree, with supporting documentation and rationale, to the Associate Dean of the Graduate College. All international students are required to carry University of Cincinnati student health insurance unless they qualify for a waiver. Semester insurance fees are automatically assessed each registration period. Please visit the Graduate College website for more information on the Graduate Assistant/Fellow Health Insurance Award. English Proficiency Requirement English proficiency is required of all applicants whose native language is not English. Students can demonstrate proficiency in a number of ways at the graduate level. PLEASE NOTE, many colleges and programs have higher requirements than those listed below. Applicants should contact the programs to which they are applying for details. For more information, please refer to the English Proficiency Requirement web page. 13 FINANCIAL SUPPORT Graduate students may obtain financial support from several sources. • The University of Cincinnati provides merit-based graduate awards in the form of tuition scholarships (known as the Graduate Scholarships, which may be provided with or without an assistantship), as well as stipend awards (graduate assistantships including teaching and research assistantships), and program-specific scholarships and fellowships. • Scholarship and fellowship support is also available from a diverse collection of external sponsors at the local, state, national, and international levels. Programs and colleges may have additional sources of support through grants and endowed funds • Need-based support may be obtained from federal and state sources. Financial support from each of these sources is described below. UNIVERSITY MERIT-BASED GRADUATE AWARDS The University of Cincinnati offers several types of merit-based graduate awards. The most common types – Graduate Scholarships, fellowships, and University Graduate Assistantships – are described below. Most university graduate awards are underwritten by university funds allocated by the Graduate College (“general funds”) to each college, which are then awarded to students by the individual programs. Some awards are competitive and granted by the Graduate College upon recommendation of an individual graduate program. Not all graduate students are eligible for graduate awards. Graduate awards allocated by the Graduate College are not available to students: (1) taking classes as visiting students, (2) enrolled only in a graduate certificate program, (3) who have not maintained the minimum GPA of 3.000 in their program, (4) who are on academic probation, or (5) who have exceeded the 174 graduate credit rule. Awards can only be guaranteed for a maximum period of one academic year, and renewal of a university graduate award is not automatic. Awards that are appointed by individual programs are awarded to eligible students at the sole discretion of the program. Programs are not obligated to renew awards, even if previously awarded students met all eligibility requirements. GRADUATE SCHOLARSHIPS (GS) The Graduate College funds scholarships that cover all or part of a student’s tuition and fees. In most colleges, the scholarship awards supported by the Graduate College are the Graduate Scholarships (GS), with and without assistantships. The GS with assistantship is used to support graduate assistants who are additionally awarded a stipend that requires service in return for stipend support. The GS without assistantship is for graduate students who do not receive university stipend support and therefore no service is required in return for the GS award. The appointing program sends written offers of scholarship awards to students, including information about the amount and duration of the award and the terms of the offer. Students must maintain all of the required eligibility requirements in their offer letter to maintain their tuition scholarship. 14 Students receiving a tuition scholarship must register for a specified minimum number of graduate credit hours in each semester for which they are receiving support. If an international student is supported by a GS without assistantship, they must register for a minimum load of 10 graduate credit hours per semester during the time they receive the GS scholarship. If a domestic student is supported by a GS without assistantship, they must register for a minimum load of 1 graduate credit hour per semester during the time they receive the GS scholarship. Students supported by a GS with assistantship must register for a minimum of 12 graduate credit hours per semester during the time they receive the GS scholarship. These minimum enrollments in graded courses must be met prior to using scholarship support for any audited courses. If a student withdraws from a class funded by a tuition scholarship, with the remaining enrolled credit hours totaling less than the minimum required for the award, the award is cancelled immediately and the student is responsible for the tuition balance, based on the date of withdrawal. Full tuition scholarships cover a maximum of 18 credits per semester. Students registered for more than 18 credits in a semester will be billed tuition and general fees on a per-credit-hour rate for each credit over the 18. All rules that govern recipients of tuition support pertain to all students, including international students. Other rules and policies that apply specifically to international students are independent of GS regulations. Both sets of regulations must be met. Neither set of regulations negates or takes the place of the other. (See 174 Graduate Credit Rule.) Note: Financial awards that require no service may reduce eligibility for educational loans. Students should notify the Student Financial Aid Office of their tuition support if they apply for aid from that office. UNIVERSITY FELLOWSHIPS University of Cincinnati fellowships are financial awards that include tuition scholarships and stipends with no associated service requirements. The purpose of a fellowship award is to allow the recipient to concentrate exclusively on their studies; therefore, multiple appointments and/or employment by the University of Cincinnati are not permitted for students receiving fellowships. The appointing program sends written offers of fellowship awards, including information about the amount and duration of the award; a general description of the academic obligations accepted by the student as part of the award; a reference to sources of information about academic requirements for degree completion; a description of the conditions under which either the student or unit may terminate the award prior to its end-date; and criteria for reappointment. Students receiving fellowships should check with Student Financial Aid to be informed about the potential impact on their eligibility for aid. Income received that is not for services rendered (whether it be in the form of a fellowship, grant, or award) will be calculated in whether a student meets the Cost of Attendance for the University of Cincinnati. Fellowship awardees have an enrollment obligation identical to GS with assistantship/UGA (university graduate assistantship) awardees, and they lose eligibility for the fellowship award if they accumulate more than 174 graduate credit hours. (See 174 Graduate Credit Rule). 15 For information on university-sponsored fellowships, please see the Graduate College website. GRADUATE ASSISTANTSHIP STIPEND AWARDS A student awarded a graduate assistantship receives a financial stipend for services rendered in addition to a full or partial tuition scholarship. These stipend funds are called UGA (university graduate assistantship) awards. Graduate assistants are also entitled to a discount at the University Bookstore and may be eligible for the Graduate Assistant/Fellow Health Insurance Award. UGA awardees devote effort to a combined program of formal study and assigned duties of teaching, research or administrative service that is designed to enhance their university education. The stipend received by the graduate assistant is in recognition of these services. Those with teaching duties are teaching assistants (TAs) and those with research duties are research assistants (RAs). During the appointment, the goal is to help a graduate student become a more learned, creative, and professional individual through formal instruction, interaction with faculty, research, and administrative experience. Any such service assignments should be consistent with the student’s academic pursuits. UGA funds are awarded for designated periods of time by the graduate programs. Graduate Assistants are considered exempt from minimum wage and overtime requirements, and they are paid on a salaried basis. Minimum stipends are set by the Dean of the Graduate College. The minimum stipend for a graduate assistant, as set in July 2023, must be the equivalent of a minimum of $16.98 per hour for all master’s and doctoral students except those in PhD programs. Graduate assistants enrolled in PhD programs have a minimum of $22.28 per hour. The appointing academic program, college, or area of responsibility determines service requirements of students who hold assistantships. If awarded an assistantship outside their program, graduate assistants’ duties are governed by the academic program, college, or the area of responsibility that made the award. In all cases, the award obligates awardees to no more than 20 hours per week of services, and those services must make a substantive contribution to the student’s academic and professional development. Students must be appointed to a position that is consistent with their field of academic study. If the student determines that they cannot meet the requirements of the award, it is imperative that they notify the program to initiate renegotiation or reassignment of the award with correspondingly less support. A student’s hours are prorated for weeks with a holiday or school closure and students are not required to be available during break periods unless given additional compensation. UGA awardees must be registered for 12 graduate credit hours or more, exclusive of audit credits, for each semester they receive the assistantship. University assistantships will be cancelled if the awardee does not meet their enrollment obligation. The exception to this rule is summer semester. See Summer Employment without Full-time Enrollment section. Students lose eligibility for the UGA stipend funding if they accumulate more than 174 graduate credit hours. (See 174 Graduate Credit Rule.) Assistantship awards are contingent upon student status, satisfactory degree progress, and performance of service as assigned, and can be terminated at any time. Each year the assistantship is in effect, the appointing program, college, or area must notify the awardee in 16 writing of any significant change to the services or conditions of the appointment. Such changes include, but are not limited to: • the amount and duration of the award • any tuition and/or fee not paid by the program • the average expected time per week or per semester of required duties • description of the duties assigned to the student • description of the conditions under which either the student or unit may terminate the award prior to its end-date • criteria for reappointment of the award • criteria for determining variations in stipend levels where such variations exist • information on current IRS guidelines, Medicare, and the Public Employee Retirement System (PERS) • graduate appointment procedures if any of the documents have been modified since the student’s initial appointment. Teaching Assistant Requirements and OEPT All teaching assistants must be supervised by a faculty member who has the academic credentials and authorization (as defined by the Higher Learning Commission, Ohio Dept. of Higher Education, and the University of Cincinnati) to offer instruction to the students in the class. Supervising faculty must be listed (as supervisor or instructor) in any course/section overseen by a graduate teaching assistant. Non-native speakers of English who are awarded teaching assistantships at the University of Cincinnati are required to score at least a 3.0 on the Oral English Proficiency Test (OEPT). The OEPT evaluates the spoken language skills of non-native speakers of English. Students who pass are certified for oral English proficiency and may assume the full range of duties associated with their teaching assistantship. Students whose oral English proficiency has not been officially certified may not assume instructional responsibilities. However, students who score 26 or above on the speaking section of the TOEFL IBT or students with a score of 50 or above on the Test of Spoken English are exempt from the OEPT. Students are required to take the test at the beginning of their first term of study. If a score is less than 3.0, students are recommended to take ESL courses before retaking the test. A student is permitted to take the OEPT twice without charge during an academic year. Graduate Assistant/Fellow Health Insurance Awards Academic programs are required to notify eligible students with information on the Graduate Student Health Insurance (GSHI) award, which can subsidize the cost of UC Student Health Insurance for qualified students. Programs must provide graduate assistants/fellows with the GSHI Award application deadline and relevant details on GSHI Award criteria, and must keep records that they have provided this information to their students. Such information can be found at the Graduate Student Health Insurance Award web page. 17 Multiple Appointments/Employment Graduate assistantship awardees who are domestic students are limited to 24 total hours of combined service and student hourly work while school is in session. The following policies regarding multiple appointments must be followed: • Units are responsible for monitoring of hours worked by student employees assigned to their unit; this is especially important for students who hold multiple student appointments. • The program must closely monitor academic progress. • The additional appointment must be terminated if a student does not maintain academic progress deemed to be acceptable by the program. This limit applies only while school is in session. During scheduled breaks only, if students work more than 20 hours or they work more than the prorated salary hours required, they must be compensated at an hourly rate for the extra work. Students can be employed for a maximum of 40 hrs/week during scheduled breaks. International students are limited to working 20 hours per week while school is in session and are limited to 40 hours per week during scheduled breaks. All International Students must have onboarding conducted by the International Services Office. An international student on F-1 or J-1 immigration status contemplating employment should contact the International Student Services Office at 1-513-556-4278. Summer Employment Without Full-time Enrollment For summer semester only, students who are not registered for graduate credit hours or are registered for less than 12 credits hours are eligible to be employed by their respective program, usually by performing the duties of their assistantship such as teaching or lab work. In this case, the student will receive a stipend for the work performed. Retirement funds and taxes will be withheld from the student’s check. Questions about options with retirement funds once separated from the university should be directed to Human Resources and/or OPERS. Graduate Assistants on Jury Duty All graduate students are encouraged to participate when they are subpoenaed for jury duty. The student must seek their advisor’s and program director’s permission with the expectation that every effort will be made to accommodate the jury service. If the student’s absence from UC will create a hardship to the unit, they should seek a deferral or make arrangements to cover their responsibilities during the absence. Such arrangements must be approved by their program director. Students serving on jury duty will be paid their normal university stipend during the period of service, with the understanding that any compensation received for jury service must be returned to the university if their assistantship responsibilities remain uncovered. If the student makes arrangements to cover their assistantship commitment for the period in which they serve on jury duty, and if those arrangements are approved by their program director, they may keep the jury duty compensation in total. The student may also keep any travel reimbursement fees. 18 Strike Policy for Graduate Assistants In the event of a strike, graduate assistants are expected to fulfill commitments associated with their assistantships. Graduate assistants assigned to teach a course as part of their assistantship agreement are expected to teach the course during a strike. Graduate assistants who choose not to teach can lose their assistantship. If the student’s responsibilities are associated with a course taught by a faculty member and the strike results in the course not being taught, which makes it impossible for the student to fulfill their responsibilities, the student would not be held responsible. Sick Leave/Family Leave for Graduate Assistants Graduate assistants do not accrue vacation, sick leave or other paid time-off. In the event of illness, a graduate assistant shall notify the GA supervisor as soon as possible on each day of such absence. Holidays/UC Closing Policy for Graduate Assistants Graduate assistants are not hired as essential personnel, and thus cannot be required to work during holidays or official UC closings (such as emergency closings due to severe weather, public emergency, etc.). Required weekly hours will be prorated based on the official holidays or closings during that week. Military Duty A graduate assistant who is a member of any reserve component of the United States Armed Forces, who is voluntarily or involuntarily ordered to extended U.S. military service, shall be granted time-off without pay. The graduate assistant should provide to the appropriate program official advance written notice of the call for impending training or active duty. Upon completion of military service or if discharged under honorable conditions, and upon prompt re-registration as a student, the graduate assistant shall be returned to the former assistantship in a timely manner, based upon availability. Due to the temporary nature of graduate assistantships, if the assistantship is eliminated during the student’s absence, then no obligation exists. Termination A graduate assistantship may be terminated at any time with or without cause, unless there is an explicit written contract between the student and the university that provides otherwise. Workers’ Compensation The Ohio Workers’ Compensation Law covers graduate assistants, who are paid by payroll and provides medical, income and survivor benefits in the event of accidental injury, occupational disease or death occurring in the course of, and arising from, employment. Unemployment Graduate assistants are not entitled to unemployment compensation. 19 Social Security, Medicare Tax and Ohio Public Employees Retirement System (OPERS) Please see Exemption from OPERS/Medicare for Student Employees. 174 GRADUATE CREDIT RULE Students receiving any university award (e.g. UGA stipend, GS tuition scholarship) and students who receive funds from the State of Ohio are governed by the requirements and limitations described in the following paragraphs. Any student who becomes ineligible to receive state subsidy is not eligible to receive general funds financial aid (i.e., a university stipend and/or tuition). Since this policy is due to regulations governing state support of the university, exceptions to the policy are not considered. Graduate students who have attempted 174 graduate credit hours at the University of Cincinnati are not eligible for a university award for enrollment at or beyond the 174 hours. Hours attempted include hours for which credit has been awarded, as well as withdrawn courses, audited courses, and hours in progress or incomplete (these graduate credit hours include all courses with grades F, I, UW, SP, IP, UP, W, etc.). All graduate hours attempted at the University of Cincinnati, regardless of program or student status, count toward the 174 total. A student is not eligible for funding beginning with the semester in which said student will reach the 174 attempted hours. For example, if a student has earned 167 graduate credit hours at the University of Cincinnati by the close of summer sessions and registers for (i.e., attempts) 12 credit hours for fall semester, they are ineligible for a university graduate scholarship or fellowship in the fall semester. If a student earned master’s credits at the University of Cincinnati (for either a partial or a full degree), the exact number of these credits are deducted from the 174 credit hour total for which they can receive funding. This is true if the credits are earned at an earlier time and the student returns to the University of Cincinnati to continue graduate education, and it is true regardless of the discipline in which those credits were earned. For example, if a student has earned a master’s degree in engineering and then chooses to pursue a master’s and a doctoral degree in math, the credits earned to get the engineering degree are deducted from the 174 credit hours for which the student can receive state financial support (e.g., fellowships, assistantships, and scholarships). Graduate students who have earned a master’s degree or other equivalent or higher advanced degree at another institution are not eligible for a university scholarship or fellowship once they have attempted 140 graduate credit hours at the University of Cincinnati. If a student enters the University of Cincinnati with a master’s degree from any institution other than the University of Cincinnati, they are credited with 34 graduate credit hours toward the 174 credit hour limit for state funding eligibility. Per Ohio Department of Higher Education policy, Ohio can subsidize up to the remaining 140 credit hours. The 34 credit hours are deducted from the 174, regardless of the discipline and regardless of the graduate level at which the student enters the University of Cincinnati. For example, if a student has earned a master’s degree in engineering at The Ohio State University and then chooses to pursue a master’s and a doctoral degree in math at UC, the credits they earned to get their engineering degree are deducted from the 174 credit hours for which they can receive state financial support in the math program. Note that professional 20 degrees, like a juris doctorate or medical doctorate, do not count as a master’s or higher equivalent for the purpose of comparative funding. Students who enter graduate education at the University of Cincinnati with a professional degree and no other advanced degrees are still eligible to receive up to the 174 credit hours of funding. If a student enters the University of Cincinnati with only partial credit toward a degree from another institution, those credits are not deducted from the 174 total—even if the program they enter at the University of Cincinnati agrees to accept transfer of those credits toward the student’s degree requirements at the University of Cincinnati. The student can still receive state subsidy for up to 174 credit hours earned at the University of Cincinnati beyond those transferred in. Note: For the purposes of this policy, a master’s degree is one awarded by an American institution or a degree of equivalent value from a foreign institution. Students holding a master’s degree from a foreign institution that is the equivalent of a bachelor’s degree in the U.S. will have the higher limit (174). The higher limit will not be affected by a student’s completion of course work short of a master’s degree at another institution. TAXATION OF CINCINNATI GRADUATE AWARDS The university maintains a position that all income, from whatever source, is taxable and may be subject to withholding. The IRS maintains final authority on the taxability of all stipends, and in all cases, the university cannot guarantee that any stipend is tax-exempt. The Graduate College will not review an individual award nor provide legal advice to individual students. In addition, students (not the university) are responsible for the withholding information that they submit on their W-4 forms at the time of appointment. Those students who receive a stipend during any academic semester and are not enrolled for at least half time will have Medicare tax and Ohio Public Employee Retirement System (OPERS) payments deducted from their checks. If a student is enrolled half time or more, they may apply for an exemption from these fees in their program office. No taxes are withheld from fellowships, but students may still have a tax liability and should consult a tax advisor. EXEMPTION FROM OPERS FOR STUDENT EMPLOYEES Employees (including student employees) of Ohio public institutions do not contribute to the federal Social Security system. Student employees’ retirement contributions will be directed to the state retirement plan, the Ohio Public Employees Retirement System (OPERS). Student employees (including graduate assistants and hourly student workers) may be eligible to opt out of OPERS participation when first hired by UC as long as certain requirements are met. See the Student Employees web page on UC’s Human Resources site for the OPERS exemption form and for additional information. EXTERNAL SOURCES OF FUNDING Tuition scholarship and fellowship funding is provided to graduate students by a wide variety of governmental and private sponsors. UC’s Financial Aid website, the ScholarshipUniverse scholarship search application, the Office of Nationally Competitive Awards and local and university libraries are potential sources of information about these funding opportunities. The Office of Nationally Competitive Awards provides workshops, application writing assistance and university endorsement (for applicable awards). Students may also visit the Office of Research 21 for more information on upcoming grant opportunities, grant writing workshops, and searchable research opportunity databases. FEDERAL FINANCIAL AID See the Student Financial Aid website for more information on federal financial aid (including summer aid). The Graduate College does not regulate or audit any outside fellowships or other outside funding a student may receive. However, it is advised that students with outside funding consult with the Financial Aid Office to see if and how the outside funding may or may not affect other Financial Aid eligibility. 22 GRADUATE CREDIT AND GRADES ELIGIBLE CREDITS Credit towards a graduate degree or certificate can only be earned for those courses in this university that are listed as graduate in the Schedule of Classes or which have been approved in writing by appropriate program authority for inclusion in the curriculum. Graduate credit towards a degree will only be granted when a course is included in the graduate career category of the student record in Catalyst. CREDITS REQUIRED TO EARN A GRADUATE DEGREE Graduate degrees at UC each have a stated number of credit hours that must be completed satisfactorily to earn the degree. As described below, there are multiple opportunities where coursework taken prior to matriculation into a degree program may count towards that credit hour total. In all cases, to earn a degree at UC, at least 67% of the relevant coursework credit must be earned while a matriculated student at the University of Cincinnati. Students entering in Fall 2019 or later should make application to their program for such (advanced standing or transfer) credit during their first semester at UC to assure their course of study is optimized. For all students matriculating in Fall 2019 and later, such credit will only be granted if a complete and program-approved application for such credit is submitted to the Graduate College by the end of their first year in the program, or prior to their final semester of study, whichever comes first. This new policy (introduced in AY19-20) is in effect for all students matriculated in Fall 2019 and later. In prior policies, master’s degrees were granted when 50% of graduate credits were completed while matriculated in the graduate program granting the degree, therefore allowing up to 50% of credits to be via advanced standing. Advanced Standing for Graduate Courses Taken Outside of UC a. Programs are permitted to award up to one third of the credits of a UC graduate program through advanced standing (e.g., 10 credits are eligible in a 30 credit hour program or 13 credits in a 40 credit hour program). The relevant number of credits is based on the minimum credits required to earn the advanced degree starting from the minimum degree qualification (usually a baccalaureate degree). Note that for doctoral students the advanced standing credit total will include any use of the ODHE allowance of up to 30 credits for a prior master's degree. b. Any graduate course credits, including those earned from previously earned graduate or undergraduate degrees, are eligible as advanced standing credits. c. Advanced standing can only be offered for courses (including electives) entered in e- curriculum for the UC program. d. Program faculty must evaluate courses for equivalence or comparability prior to granting students Advanced Standing credit for courses taken at another institution, meeting all the following criteria; 1. Courses taken at a recognized University or College 2. Courses taken at the graduate level 3. Requested advanced standing credits must be the lower of the following two choices 23 i. Credits originally earned for the course ii. Credits available in the UC course listed in e-curriculum 4. For 1:1 course equivalency, one or more of the following criteria must be met when compared to the University of Cincinnati course for which Advanced Standing credit is sought: i. Course was taken in the same field with the same title ii. Course had similar topics iii. Course had similar learning outcomes iv. Course assignment and assessment requirements were similar v. Course readings requirements are similar 5. This evaluation process should be documented for each case in which it is applied e. The one third rule doesn’t apply to dual degrees, sequential master's to doctorate programs, or others with shared content that have received approval from the Graduate College. f. Advanced standing credit recommended by program faculty must first be approved by the graduate program director and then submitted for final review by the Graduate College to assure the request complies with the criteria above. Transfer Credit for Graduate Courses Taken at UC a. When leaving one graduate program to join another at UC, all UC graduate credits taken as part of the incomplete program are eligible to use to fulfill requirements in the new program, based on faculty evaluation of the equivalence to courses in the new curriculum and program approval. b. When a student enters a graduate program at UC, non-matriculated UC graduate credits are eligible to be used for the program, if the coursework is listed in e-curriculum as part of the curricular requirements. Subject to program approval, students may transfer up to one third of the credits required to earn their UC graduate degree Programs are permitted to award transfer credit from a prior UC graduate degree if (1) the sum of unique credits to earn both degrees is equal to or greater than the State minimums for each degree type, and (2) the transfer credit courses are part of the curriculum of the new degree program as defined in e-curriculum. Using credit that meets both criteria, up to one third of the credits of the new UC graduate program may be awarded through transfer credit. The relevant number of credits is based on the minimum credits required to earn the advanced degree starting from the minimum degree qualification (usually a baccalaureate degree). Note that for doctoral students the transfer credit total will include any use of the ODHE allowance of up to 30 credits for a prior master’s degree. Course Exemption for Prior Knowledge, Without Credit Faculty in a program have the option to provide students with an examination to determine if accumulated knowledge is sufficient to be exempted from specific courses in a graduate curriculum (e.g., continuing education courses in some professional fields may provide a background that eliminates the need to take introductory courses). The form and content of that examination is at the discretion of the program. When such exemptions are granted, the student does not earn graduate credit for such knowledge. The credits required to complete their UC graduate degree remain unchanged, and the student will take alternative coursework (approved by the graduate program director) to advance their knowledge. 24 Multiple Degree Exemptions a. If the graduate faculty from a UC program has participated in designing and/or presenting the curriculum at another institution, shared degree programs between the institutions can deviate from these rules with prior approval of the Graduate College and their college leadership. In no case will a UC degree be awarded if more than 50% of the curriculum is offered by non-UC faculty. b. Dual degree programs can combine two UC graduate degrees into a single curriculum if approved by the University. Approved dual degree programs can share up to one-third of the combined credits of the two degrees, but the total count of unique credits to earn both degrees must always be equal to or greater than the State minimums for each degree type. Enrolling in Non-UC Classes through the Greater Cincinnati Collegiate Connection The University of Cincinnati is a member of the Greater Cincinnati Collegiate Connection. GC3 classes are those not generally available at the University of Cincinnati but which can be used to satisfy degree requirements. The student must have met all tuition commitments at the University of Cincinnati and must observe all regulations of the host institution. For additional information, participating institutions, and registration instructions, consult the Greater Cincinnati Collegiate Connection page of the Registrar’s Office website. Approval is at the discretion of the program. Graduate Credit for Undergraduate Students Any program may allow juniors or seniors to register for graduate courses for graduate credit before those students have completed the baccalaureate degree. It is recommended, if the program permits such registration, to limit the privilege to students with senior status and a grade point average of at least 3.000 (higher in some programs). This is evidenced by a written request from the student that is signed by an authorized member of the graduate program. Upon approval by the graduate program and the course instructor, graduate credit will be given for the courses. A maximum of 12 semester graduate credits can be earned in this manner. Credit will not be given toward both graduate and undergraduate degrees for the same course. Graduate Credit Earned in 6000-Level Courses In fall 2016, all 6000-level courses became graduate only. In the past, 6000-level courses were available for either undergraduate or graduate credit (to earn graduate credit, students selected the graduate level designation (G) in these courses, indicating that additional work was required beyond that required of undergraduates in the course). PLEASE NOTE: with the transition to the new use of course numbers, there will be no change to the graduate (or undergraduate) credits earned previously in the pre-fall-2016 version of these courses. GRADING Final Exams Exams are held during the last week of the semester after classes have ended. For each term’s full final examination schedule, consult the Calendars page of the Registrar’s Office website. 25 Make-up Final Exams Special policies may govern the taking of missed final exams. Students and faculty members should check the college office or program office for specific details. Every student is responsible for the material presented in their class. Arrangements for make-up work and tests are determined by the instructor. Absences incurred by students officially representing the university will be excused, provided that official notification of such absence has been given in advance to the instructor. Grade Reports End-of-term final grades may be viewed in the Catalyst student portal immediately following submission of final grades by the instructor. Grade reports include total graduate hours and hours for the current semester. The student’s grade report differentiates between “units taken” (course credits the student enrolled in but did not complete successfully or which are still pending a final grade) and “credits passed” (course credits successfully completed with a final grade other than F). These values are posted on the student’s transcript as attempted hours and earned hours. A graduate grade point average (GPA) is calculated each semester. Approved transfer credits from other institutions are included in the sum of credits earned, but grades for those credits are not included in the GPA. All graduate work, regardless of the University of Cincinnati college in which the work was done, is accumulated in these tallies. For this reason, if a student record includes UC graduate courses that do not count towards the degree, this GPA may differ from the calculation of GPA in program coursework (a minimum 3.000 program GPA is essential to earn a graduate degree). The I incomplete grade is awarded as a course grade (without grade point assignment) at the end of a term when a significant portion of course work has been satisfactorily completed, but not all of the required course work has been completed. The incomplete grade is appropriate when the completed course work is of passing quality and the student has had such hardship that completion of the remaining course work within the term timeline would present an additional hardship. The instructor who assigns the incomplete grade should set a specific date by which the student must complete the remaining course work, recognizing that time must be available for any final evaluation and grade change to be made, prior to the deadline when the grade converts to an F. The deadline is one year to the last day of exams. (Please check the Office of the Registrar’s website for the specific date.) The student must work with the instructor to develop an agreement that indicates the date by which the remaining course work is to be completed and submitted to the instructor. The instructor is not obligated to provide the student with a full year to complete the remaining course work. If the remaining course work is completed within the time period agreed upon by the instructor and the student, and that completion occurs within the one year, then the instructor will submit a change of grade online (in Catalyst) based on the quality of the remaining work. If no specific time for completion is set by the instructor, the student has one year (from the end of the term in which the incomplete was assigned) to complete the remaining course work and submit it to the instructor in time for evaluation of the work and a final grade to be approved by the Registrar. If the coursework is not completed within the one-year period (i.e., one year from the end of the term in which the I grade was assigned), the I grade automatically converts to an I/F grade which affects the student’s GPA the same as the grade of F. For the complete graduate grading scale and a definition of all grades, consult the Grading Scales and Definitions page of the Registrar’s Office website. 26 Grades Assigned to Research Courses That Are Repeated If students are working on dissertation or thesis research, they should be registered in the appropriate research course (e.g., Individual Dissertation or Individual Master’s Thesis), and the course work should be given a final grade each semester. The use of P/F for such courses is strongly recommended to avoid undue influence on GPA due to individual grading practices and the large amount of research credit awarded, but it is recognized that some programs will want to use letter grades. “Placeholder” grades such as SP and NG should not be used. Regardless of the grading scheme selected, it must be consistently applied across an entire program. If a program faculty cannot agree on a single grading scheme, the program must use the P/F choice. Students should be graded for each semester based on their progress and achievements in that semester. Note: The definition of a “research course” is a course outside of formal class work or instruction that allows a student to be registered as a graduate student while they are working independently on their thesis or dissertation under the guidance of their advisor or dissertation committee. This policy also applies to internships and other multiple semester or series courses. Pass/Fail Grades An instructor may request approval for pass/fail grading for an individual student in their class prior to the first day of class. A graduate student can take a course on a pass/fail basis (P or U grade) when approved by their advisor and instructor. An instructor is not required to accept a student on such a basis. Grade Changes A change of grade is only appropriate for an I, an NG, an SP/UP, or an error made by the instructor. SP/UP grades must be converted to a final grade by the end of the following semester. Instructors may change an I or NG grade online in Catalyst for approximately one year (the interval extends from the initial grading semester to the last working day of the same term the following year). To request a change of grade for a non-research course for graduate credit after this period, or an F grade any time, the instructor must do an official, paper change of grade form and forward to the Registrar’s Office. Previously recorded grades may not be changed to W or I after the close of the term. Both I and W grades must be awarded while the course and semester are still in progress and cannot be awarded retroactively. W reflects an official withdrawal that took place by the deadline outlined in the academic calendar, and I indicates work remains to be completed and the student did not earn a final grade. Students cannot withdraw from a class retroactively or be given additional opportunities to seek a different final grade retroactively. If an F is in a non- required course or the required course has since been retaken for a passing grade, the Program Director at certification may request a waiver of the F grade from the Associate University Dean of the Graduate College. No Grade Replacements for Graduate Students Please note, if a graduate student re-registers and re-takes a course, both grades will be included in the student’s overall GPA. There are no grade replacements at the graduate level. The process to make a grade change cannot be initiated by a student. The course instructor of record must send the form. At no time should a student be in possession of a change of grade 27 form. Note: that an I/F grade is governed by the same policies that govern the F grade and is weighted into the student’s GPA in the same fashion. 28 MAINTAINING GRADUATE STUDENT STATUS Maintaining graduate student status signifies that the student is actively engaged in making progress towards their degree and meeting program requirements. Graduate status determines which students may use facilities of the university, may participate in the university governance process and student organizations, and are covered by the Student Code of Conduct and the grievance process. A University of Cincinnati graduate student must hold the equivalent of a baccalaureate or higher degree and must have been accepted for admission into graduate study by the appropriate graduate program. MINIMUM CREDITS/REGISTRATION REQUIREMENTS To maintain graduate status at the University of Cincinnati, students must register at UC for at least one graduate credit that contributes to degree requirements (as determined by the graduate program) in an academic year. If the student is registered for at least one graduate credit in the academic year (fall through summer), they will maintain graduate student status for the entire academic year. Credits that are audited or in which a student receives a W, UW or F do not count toward the minimum credit requirement. Any student that does not register in the fall of an academic year and has not registered for the previous two academic years will automatically be exited from their program. A student whose status has thus automatically terminated will no longer be considered a graduate student but may seek reinstatement (see Reinstatements). Also note that students wishing to use many UC resources, such as university housing, campus laboratories, office space, equipment, campus recreation center, computer labs, etc. may need to be registered. Students should check with specific facilities for their particular requirements. Dual Degree Programs In dual degree programs, students must be registered for at least one graduate credit that contributes to degree requirements in one of the two programs (as determined by the program) during the academic year in which they graduate with their dual degrees. FULL-TIME COURSE LOAD Students must be registered for 10 or more graduate credits each semester to be considered full- time students, 12 if holding a university sponsored graduate assistantship or fellowship. Audit or undergraduate credits do not count toward full-time status and cannot be supported by a University Graduate Award. PART-TIME COURSE LOAD Students who can devote less than full time to graduate study may register for the number of graduate credits judged by their program advisors to represent the appropriate fraction of a full- time load. However, doctoral students must satisfy the Board of Trustees residency requirement, which requires that they have one year of full-time study, which is defined as being enrolled for at least 10 graduate credits in their program in each of two semesters (including summer semester) during a span of three consecutive semesters. Full-time UC employees using their tuition remission benefit to complete a part-time doctoral program may request a waiver of this requirement from the Associate Dean of the Graduate College. (See Doctoral Degrees Policies and Procedures, Course of Study.) 29 REDUCED COURSE LOAD (INTERNATIONAL STUDENTS) Once an international student has finished all required course work and will no longer be enrolling full time, she/he may choose to enroll with a reduced course load. Visit the F-1 Students page on the UC International Services website, referring to the “Enrolling part-time as a graduate student who has finished all course requirements” section for the link to the form and more information. MEETING PROGRAM REQUIREMENTS Students who continue on active status in their program without interruption are responsible for meeting all current requirements, including requirements that are revised since the student first entered the program. Students readmitted into their program are responsible for meeting the program requirements applicable at the time of readmission. MINIMUM ACADEMIC PERFORMANCE The Graduate College requires that a student must have an aggregate grade point average (GPA) of at least 3.000 to obtain a graduate certificate or degree at the University of Cincinnati. The GPA used for this purpose should aggregate graduate-level coursework completed since the student’s matriculation into the particular degree program from which the student seeks graduation, and only courses taken that are applicable to the degree/certificate count towards this GPA. Transfer graduate credits may also be accepted at the discretion of the degree program (and within Graduate College limits), and any transfer credit coming from courses taken at the University of Cincinnati will contribute to the GPA certified for graduation. Please note that programs establish minimum academic standards that may exceed the overall university standards provided above, so students need to be aware of their program requirements. Note that there is no grade replacement for graduate students, so any failed graduate courses remain in the student record. However, if a student retakes a failed course and obtains a passing grade, and if the GPA calculated without that original failing grade is above 3.000, then the program can petition the Graduate College for a waiver of the GPA requirement for graduation. Multiple failing grades, or multiple attempts to pass a course, are examples of why a petition may be denied. INTERNATIONAL STUDENTS, MAINTAINING IMMIGRATION STATUS The student has responsibility for maintaining their immigration status. Key information on maintaining immigration status on the F-1 Students page on the UC International Services website. TIME TO DEGREE Time to Degree and Extensions The Board of Trustees stipulates that all degree requirements must be completed within a defined span of years starting from the date of matriculation into the degree program, regardless of whether students are full time or part time. This span is 5 years for the master's degree and 9 years for the doctoral degree. Under extenuating circumstances, a program may petition, on 30 behalf of the student, for extension of the time limit for attaining the degree. Prior to the program petitioning the Graduate College for an extension, the student must communicate with the student’s program advisor and/or director to review the student’s degree completion to date and form a plan for degree completion. All this information should be included in a petition submitted to the Graduate College, which will review this petition and make a final decision. Students who have not completed degree requirements by their time-to-degree limit are on inactive status regardless of course registration in each academic year. Such students are required to apply for an extension of their time-to-degree. Reinstatements Students who have not been registered for at least one graduate credit hour at UC that contributes to degree requirements (as determined by the graduate program) in an academic year (fall-summer) are considered inactive. Reinstatements are available to students who have been inactive for less than three academic years. Students who have not been enrolled for any credits in their graduate program for three or more consecutive academic years are not eligible for reinstatement and must apply for readmission to the university. (See Readmission.) Readmission is processed via the reinstatement petition in Gradtracker. Applications submitted by the student via the admissions system will not be accepted. To request reinstatement, a program must petition the Graduate College on behalf of the student. Prior to the program petitioning the Graduate College for a reinstatement, the student must communicate with the student’s program advisor and/or director to review the student’s degree completion to date and form a plan for degree completion. The program coordinator, director or advisor will begin the reinstatement process in Gradtracker. The originator of the petition in Gradtracker will upload documents in one pdf to include degree completion information to date and a written plan for degree completion. The Graduate College will review the packet and if approved the student will also need to approve the petition and fee. If a student wishes to be reinstated so they can register and take classes, reinstatement petitions must be submitted in Gradtracker prior to the start of the first day of the term to be eligible for reinstatement in that term. Petitions received before the census date (the 15th calendar day of the term), the term may be considered for the current term. Petitions received after the census date will be considered for the following term. If a student wishes to be reinstated so they can graduate without taking any further classes, petitions for reinstatement (and extensions) must be submitted in Gradtracker no later than 3 weeks prior to graduation for the student to be certified for graduation in that semester. Petitions received after this time will not be approved in time for graduation that same semester. Late petitions will be held through the next processing period and a decision will be granted in time for the next graduation. A reinstatement fee equal to the current tuition for one graduate credit for each of the unregistered years up to a maximum of 3 years is assessed. The reinstatement fee will be added to the student’s bursar account and will become part of the student bill. Reinstatement fees are due 30 days after formal approval unless a payment plan is agreed to with the bursar’s office. If the fee is not paid by the due date, service charges may accrue, a block may be placed on future registrations and/or on the release of UC diplomas and official transcripts, and the account may be sent to collections. 31 Readmission Graduate students who have been inactive (not enrolled in their program) for three or more academic years are not eligible for reinstatement and must apply for readmission to the university. Readmission does not change the student’s original entry date. Time to degree will be calculated from the student’s first entry date. The program may petition the Graduate College on behalf of the student for readmission. Additionally, if the student has exceeded time to degree limits, the program should also petition for an extension with the readmission to specify the term in which the student will graduate. The readmission process is an opportunity for the program to carefully consider the former student’s progress and length of time between the student’s inception into the program and completion of remaining requirements. This may result in readmission, readmission with conditions, or denial of readmission. Prior to the program petitioning for a readmission, the student must communicate with the student’s program advisor and/or director to review the student’s degree completion to date and form a written plan for completing remaining degree requirements and removing any standing impediments to graduation, including any I/F, F, NG grades and courses required for graduation. This plan should include a timeline that describes the student's progress toward degree completion to date. The program coordinator, director or advisor will begin the readmission process in Gradtracker and will upload documents in one pdf to include degree completion information to date and a written plan for degree completion. The Graduate College will review the packet and if approved, the student will need to approve the petition and fee as well. Upon approval, the student must pay a readmission fee equivalent to in-state tuition in effect at the time of readmission for three graduate credits. The student will also be asked to complete, sign, and return the supplemental form for residency requirements to the Registrar’s office. Leaves of Absence Under special circumstances, graduate students may apply for leave of absence from formal study at the university for a specific period up to one year. Assuming appropriate documentation is provided, the circumstances justifying a leave include but are not limited to personal or family medical conditions, call to active military duty, parental leave, or death in immediate family. The rationale must be documented by the applicant. An approved leave of absence preserves the student’s status in the degree program, and the time off will not be counted against the time limits for awarding degrees. Consequently, registration is not required during the leave period. A leave may be renewed past the first year, for up to a maximum of five years, depending on the individual circumstances. Renewal of a leave is subject to the approval of the program, college, and the Graduate College. While the Graduate College leave of absence is only necessary for students who will be unable to register for a full academic year, programs may have more strict and specific registration policies and leave of absence policies. Students should also consult their program handbook if there is a legitimate need not to register for any amount of time. 32 To apply for a leave of absence, a student must complete the Request for Leave of Absence Form and upload the appropriate documentation (e.g., doctor’s letter or military orders) through Gradtracker. The program will approve through Gradtracker as well. Once the program has approved the request, the Graduate College will review the petition and if approved, the student and program will receive an email notification through their UC email. Note: A student on a leave of absence is placed on inactive status and their Catalyst record is discontinued, to be reactivated upon their return. While on inactive status, they will not be eligible for student health insurance and may be unable to use many UC resources. Students with financial aid or student loans should confer with the Financial Aid Office prior to requesting a leave of absence to ascertain the consequences of a leave on their loan status. Students should also be aware that any scholarships or assistantships are not guaranteed to be available when a student returns from a leave of absence. Withdrawal from Program Students must notify their program in writing and copy the Graduate Admissions Program Manager regarding their intent to withdraw from their programs. Dismissal from Program Students must consult with individual programs concerning dismissal policies. If a program dismisses a student, the program must copy the Graduate Admissions Program Manager on the notification to the student. 33 MASTER’S DEGREE POLICIES AND PROCEDURES COURSE OF STUDY The course of study for the master’s degree is planned with the advisor and is subject to approval by the program graduate committee or its equivalent. It must show a reasonable degree of concentration on interrelated subjects. Programs will recommend students for degrees only after students have developed and demonstrated the necessary knowledge and skills and have fulfilled all other university requirements. At least once an academic year, the graduate program director or the graduate student’s advisor shall inform the student in writing of their academic progress in the master’s degree program. An annual Academic Progress Report or some other form of formal evaluation of progress is required throughout each student’s program. Students must take a minimum of one graduate credit that contributes to degree requirements (as determined by the graduate program) per academic year (fall-summer) to maintain active status. If a student does not maintain active status, they may apply for reinstatement within three years or apply for readmission to their program thereafter. There are fees associated with these steps. (See Maintaining Graduate Student Status, Reinstatements and Readmission.) CREDIT HOUR REQUIREMENTS The University of Cincinnati is on a semester system. Although qualification for the master’s degree is not based exclusively upon the completion of a definite number of hours of course work, the satisfactorily completed graduate work must consist of the equivalent of a minimum of one academic year of full-time graduate study consisting of at least 30 graduate semester credit hours, including any thesis or capstone project. Credits earned in professional law or medicine programs are not applicable to the 30-credit minimum. CANDIDACY There is no formal candidacy status for the master’s degree. However, some programs do have defense requirements, so each student should confer with their advisor or program director to ascertain the requirements of their specific program. CULMINATING EXPERIENCE: THESES and CAPSTONES Every degree requires a culminating experience that is designed to integrate and apply the knowledge and learning gained from the curriculum, and demonstrate mastery of the subject matter in the degree. A master’s thesis is required by some programs, and a master’s capstone project/experience is required in others. Each master’s degree student undergoes an individual evaluation process at the end of their program. Thesis Preparation, Evaluation and Submission Process Preparation of a thesis demonstrates the student’s ability to communicate and to evaluate critically. Information about preparing an electronic thesis is available on the Graduate College 34 website. The student should consult with their program office for additional forms required other than what appears on the graduation checklist. A student must note any relevant deadlines defined by their program, and work with their program leadership to form a thesis committee composed of at least two UC faculty members, at least one of whom must be a member of the university graduate faculty. The thesis committee can guide the student in their exploration of the topic of the master’s thesis, and is responsible for final evaluation of the thesis. The student must submit the completed thesis to the thesis committee for critical evaluation, by the deadline required by the program or their thesis committee. Students who have written a thesis are expected by the Graduate College per their program requirements to make a public announcement of their thesis defense, including time, date, and title of the public presentation. The format for thesis evaluation is decided by the academic unit offering the graduate degree. Faculty with emerit status may remain on the committee if they were members when the proposal was accepted and were full-time tenured, university graduate faculty. A faculty member originally on a student’s committee who leaves UC to take an academic position elsewhere may also continue to serve on the student’s committee if both the faculty member and the student agree to continue the relationship. However, neither an emerit professor nor a faculty member from another institution may serve as chair of the committee, since they are no longer eligible to be university graduate faculty. Once a thesis has been approved by their committee, the candidate for the master’s degree must submit an electronic thesis by following the current instructions online at the Graduate Collge's Graduation page. Be careful to adhere to any deadlines for submission, or graduation will be delayed. Capstone Process Master’s students who are not required to complete a thesis should consult their academic programs about the requirements and procedures for the capstone experience in their programs. In some programs, the final capstone event may be in the form of a comprehensive exam or research project; in others, the final evaluation may appropriately be a recital, performance, or exhibition. The specific nature of the final evaluation is determined by the academic unit offering the master’s degree program, but it must include evaluation by full-time faculty at the University of Cincinnati. If questioned, the appropriateness of a final evaluation will be decided by the University Graduate Council. GRADUATION One semester prior to the semester in which a student anticipates graduating, the student should: • confer with their program office staff; • consult the Graduate College’s website for deadlines, instructions on submitting their electronic thesis; • visit the Graduate Collge’s website to determine if they are defined as a thesis or non- thesis student, or consult with their program; and • talk to advisor about whether an embargo is needed. 35 Application to Graduate Students must: (1) complete academic requirements and (2) complete the official online Application to Graduate by the deadline for the semester in which they expect to graduate. NOTE: for all graduate students, the application for graduation is started at the Graduation page, and not within Catalyst. Start an application for graduation early in the semester you plan to graduate. Deadlines posted on the Graduation Deadlines page are firm and failure to meet them will delay students’ graduation until the following semester, when they must then submit a new application for their revised graduation date. A student graduating from a dual degree program must make a formal application for graduation for each program (see details in next section). All students applying to graduate will be assessed a non-refundable graduation application fee. The fee will be assessed each semester a student applies for graduation. Students who have applied for graduation and learn later they will not be graduating must be removed from the graduation list before they can apply again for any future semesters (programs must notify the Graduation Program Manager to remove a student). When the application for graduation is complete, the student receives an email receipt for payment of the graduation application from the registrar’s office. If this receipt is not received, promptly notify your program, as your graduation application may not be completed. Some PhD programs incorporate a master’s degree. Students should contact their program for help in adding this additional degree. Graduation from Dual Degree Programs The online Application to Graduate will allow a student to apply for graduation from both degree programs in an official dual degree program. Each of the two programs must follow and complete the certification processes and procedures necessary to facilitate a student’s graduation from their own program. In dual degree programs, students must be registered for at least one graduate credit that contributes to degree requirements in one of the two programs (as determined by the program) during the academic year in which they graduate with their dual degrees. Certification for Graduation (Certify Online) The finalization and submission of a student’s Application to Graduate will activate the process by which the student will be certified for graduation, and the following requirements must be met. The student should confer with their program office one-two weeks after the application period has ended to assure that any problems related to these requirements (reinstatements/ extensions, or grade changes) are resolved in a timely manner and avoid delay of graduation until a subsequent semester. Specifically, the student’s records will be reviewed to verify satisfaction of the following requirements: • finalization and submission of their online Graduation Application by the deadline; 36 • instructor’s submission of passing grades for their final semester credits; • removal of all I grades from their transcript; • removal of all UP/SP grades from unapproved courses and/or the final semester in the approved courses were taken; • assignment of letter grades rather than UP/SP grades for courses in the final semester of the student’s program; • removal of previously awarded NG grades and blank grade awards; • confirmation of satisfactory repetition or waiver of required courses in which an F was originally received; • confirmation of completion of work and changes of I grades within the one-year limit; • confirmation that the student was registered for at least one credit in their graduate program in each academic year, including the year of expected graduation; • confirmation that the student completed degree requirements within the prescribed time- to-degree; • satisfactory completion of at least 30 graduate credits completed to the satisfaction of the student’s program; • completion of all program requirements for the degree; • 3.000 GPA has been earned while a matriculated graduate student in the program; • if a thesis is required, upload the electronic thesis (ETD) with chair approval by the deadline date, which is posted on the Graduation Deadlines website. Note: The requirements explained here are university requirements. Students must contact their program’s office for any additional program-level requirements or deadlines that must be completed prior to graduation. Please see the Doctoral Hooding and Master’s Recognition Ceremony section for details on the event. CONTINUING TO A DOCTORAL PROGRAM For a UC master’s student continuing to a doctoral program in the same program area, the student will fill out the application in the graduate admissions application system, and the graduate application fee is waived. 37 DOCTORAL DEGREE POLICIES AND PROCEDURES COURSE OF STUDY The course of study for the doctoral degree is arranged with each student by their advisor and reviewed by the program’s graduate committee or its equivalent. The program should provide a concentration and breadth of study for the student to develop competence in research, scholarship, teaching, and professional performance in general, with knowledge of their chosen specialty in relation to allied branches of learning. A written assessment of performance for each doctoral student is required at the end of their first year; an annual Academic Progress Report or some other form of formal evaluation of progress is required throughout each student’s program. CREDIT HOUR REQUIREMENTS The doctoral degree will be granted for no less than the equivalent of three years of full-time graduate study. Individual program requirements vary, but eligibility for graduation typically requires a minimum of 90 graduate credits beyond the bachelor’s degree. Doctoral students with a prior master’s degree may petition their program to allow up to 30 transfer credits from the master’s degree towards their doctoral degree. Degree credits must include at least 7 hours in dissertation research. Some program credit requirements may be higher. The last 30 credits must be completed under the direction of University of Cincinnati graduate faculty. The degree will not be granted solely on the basis of the accumulation of the required number of credits. A program will recommend students for degrees only after they have developed the necessary intellectual maturity and have fulfilled all other requirements of the program and the university. RESIDENCY AS FULL-TIME STUDENT Prior to admission to doctoral candidacy, all doctoral students shall complete a residency requirement by enrolling in 10 graduate credit hours (12 if funded by a Graduate Assistantship) per semester for two out of three consecutive semesters of study (including summer). Part-time students are not exempt from enrollment requirements to achieve residency. However, full-time UC employees using their tuition remission benefit to complete a part-time doctoral program may request a waiver of this requirement from the Associate Dean of the Graduate College. CANDIDACY, QUALIFYING EXAM The Graduate College does not currently track time to candidacy, but encourages programs to implement candidacy exams early in their programs to allow the students optimal feedback on their aspirations and research. Doctoral students are required to complete a program certification process according to the program’s established standards. The student must have at least a 3.000 grade point average in doctoral coursework and fulfill all other pre-candidacy requirements specified by the doctoral program in which the student is enrolled. Upon completion of these requirements, the student will receive a formal letter from the Graduate College informing the student of admission to candidacy. 38 UNIVERSITY GRADUATE FACULTY ROLE In accordance with the university’s Board of Trustees’ rule (50-77-11) (B) (2), only university graduate faculty are permitted to chair thesis or dissertation committees. The Graduate College appropriately identifies members of the university graduate faculty. Faculty members are nominated for graduate-faculty status by the program most closely aligned with the academic unit holding their primary academic appointment, and with the approval of their college dean or associate dean in charge of graduate education (from whom the nomination should arrive to the Graduate College). Faculty members holding any type of faculty appointment may be eligible for college-initiated nomination to the graduate faculty, the decision to be made based on an evaluation of the individual curriculum vitae and research and creative profile of the nominee. Criteria for nomination are formulated by individual programs and used by the Graduate College in adjudication. DISSERTATION Each PhD and EdD student must produce and defend a dissertation showing high scholarly achievement based on their original research. The student is required to submit an electronic document as evidence of this research. Students in all other doctoral programs should consult their academic programs regarding requirements and procedures for the capstone experience required in their programs. Dissertation Advisor and Committee When the student has been admitted into doctoral candidacy and has selected a dissertation subject and dissertation advisor, a dissertation committee should be appointed as soon as possible. The dissertation advisor must be qualified to serve as the chair of the dissertation committee, meaning this faculty member must be a member of the university graduate faculty and all members of the committee will be appointed by the Graduate College upon recommendation of the program director or director of graduate studies (in consultation with the committee chair and student). Students have the right to request a change in the committee but must do so in consultation with the graduate program director and their program must make the change in GradTracker. Preferably, the dissertation committee will include at least one person from outside the program, who might be faculty from the University of Cincinnati or another institution. A dissertation committee must be composed of a minimum of three UC faculty members. Members of the university graduate faculty are eligible to serve on all thesis and dissertation committees. In addition, all tenured and tenure-track faculty members may serve on all thesis and dissertation committees (even if they are not members of the university graduate faculty, meaning they may not serve in the chair role and cannot act as primary advisors). Other types of UC faculty members may serve on committees if the appointing unit demonstrates that their expertise is beneficial for the dissertation project. Programs should make such requests to the Graduate College in advance, to be ascertained on a case-by-case basis. Neither an emerit faculty member nor a faculty member from another institution may serve as the chair of the committee. Emerit faculty may remain on the committee if they were members when the proposal was accepted. A faculty member originally on a student’s committee who leaves UC to take an academic position elsewhere may also continue to serve on the student’s committee if both the faculty member and the student agree to continue the relationship. If a non-UC faculty member or appropriate professional practitioner has special expertise in a dissertation topic, 39 such a person may be added to the dissertation committee if they are nominated by the candidate and approved by both the chairperson of the dissertation committee, the director of graduate studies for the academic unit involved and the Graduate College. All such individuals serve as a full voting member of the dissertation committee without compensation from either the university or the candidate and would serve in addition to the minimum number of three qualified full-time UC faculty. A copy of the completed dissertation must be submitted to each committee member for critical evaluation, with sufficient time for review as determined by the dissertation committee. If it is considered satisfactory with respect to form and content by the committee, a final defense of the dissertation can be scheduled. Final Defense of Dissertation Students should check with their program office for the final deadline for their dissertation defense. The student’s final defense of the dissertation will be open to the public and all members of the academic community. Students are required to enter details of their dissertation defense, such as time, date, and location, online at the Graduate College website through the Graduation checklist steps. Begin at the Graduation webpage. One can also browse scheduled dissertation defenses by visiting the Upcoming Dissertation Defenses page. The candidate answers questions posed by members of the committee and other members of the audience following an oral presentation of their dissertation. At the conclusion of the defense, the committee will withdraw, make a decision with regard to the acceptability of the dissertation and its defense, and report its decision to the candidate. At least ¾ of the voting members of the dissertation committee (including at least one representative of each major area involved, in the case of interdisciplinary programs) must approve the dissertation. When the student’s dissertation committee chair has approved a defense, the student should assure that they have met all requirements for graduation including those in the graduation information obtained online. Use of a Moderator Although an outside moderator is not required, a moderator may be assigned by the Graduate College dean upon the request of the candidate, the chairperson of the dissertation committee, or the person empowered to approve the composition of a dissertation committee (the director of graduate studies for the academic unit involved). Moderators should be members of the university graduate faculty from outside the academic unit involved. The duties of the moderator are limited to observing the oral defense of the dissertation and reporting in writing to the Graduate College dean on the academic propriety of the proceedings. Submission of Dissertation After a dissertation has been approved, the candidate for the doctoral degree must submit their electronic dissertation by following the current instructions found at the Electronic Thesis and Dissertation Information webpage. Students in all other doctoral programs should consult their academic programs for the capstone experience required in their programs. Deadlines are posted at the Graduation Deadlines page. • All thesis/dissertations must be electronically submitted by the student and approved by the advisor. Students log in via the link available on the Graduation webpage. 40 • Advisors are sent an email when the student submits for their approval, and the advisor then logs in to review/approve. • Once approved by the chair, the student is notified by email. • A Graduate College approval email is sent to the student once reviewed. • The program is copied on all email correspondence during the Electronic Thesis/Dissertation (ETD) approval process. GRADUATION One semester prior to the semester in which a student anticipates graduating, the student should: 1. Confer with their program office staff. 2. Consult the Graduation page on the Graduate College’s website for deadlines, instructions on submitting their electronic dissertation, and doctoral hooding ceremony information. 3. Talk to advisor about whether an embargo is needed. Application to Graduate Students must: (1) complete academic requirements and (2) complete the official online Application to Graduate by the deadline for the semester in which they expect to graduate. Deadlines are firm and failure to meet them will delay students’ graduation until the following semester, when they must then submit a new application for their revised graduation date. All students applying to graduate will be assessed a non-refundable graduation application fee. The fee will be assessed each semester a student applies for graduation. Dual Degree Programs Graduation The online Application to Graduate will allow a student to apply for graduation from both degree programs in a dual degree program. Each of the two programs must follow the certification processes and procedures necessary to facilitate the student’s graduation from their own program. In dual degree programs, students must be registered for at least one graduate credit that contributes to degree requirements in one of the two programs (as determined by the program) during the academic year in which they graduate with dual degrees. Graduation Requirements for Doctoral Degrees Students must be registered for at least one graduate credit that contributes to degree requirements (as determined by the graduate program) during the academic year in which they graduate from that program. Doctoral students must also complete degree requirements within a nine-year period unless they have an approved extension (see Maintaining Graduate Student Status, Time to Degree). They should contact their program offices for any additional program requirements or deadlines to be completed prior to graduation. Certification for Graduation (Certify Online) Finalization and submission of a student’s Application to Graduate will activate the process by which the student will be certified for graduation, and the following requirements have been met. 41 The student should confer with their program office one-two weeks after the application period has ended to assure that any problems related to these requirements are resolved in a timely manner and avoid delay of graduation until a subsequent semester. Specifically, the student’s records will be reviewed to verify satisfaction of the following requirements: • finalization and submission of their online Application to Graduate by the deadline; • instructor’s submission of passing grades for final semester credits; • removal of all I grades from transcript; • Removal of previously earned NG grades and blank grade awards - removal of all UP/SP grades from unapproved courses and/or the final semester in which the courses were taken; • assignment of letter grades rather than UP/SP grades for courses in the final semester of the student’s program; • confirmation of satisfactory repetition or waiver of required courses in which an F was originally received; • confirmation of completion of work and changes of I grades within the one-year limit; • confirmation that the student was registered for at least one credit in the graduate program in each academic year, including the year of expected graduation; • confirmation that the student reached candidacy and has a valid dissertation committee; • degree requirements completed within prescribed time-to-degree; • satisfactory completion of sufficient graduate credits. In general, doctoral degrees require at least 7 research credits (many programs have higher requirements), within a total of at least 90 graduate credits for students who do not have a prior master’s degree, or require a total of at least 60 credits for students beyond the master’s degree. Please note that individual program credit requirements can vary widely. • completion of all program requirements for the degree; • 3.000 GPA has been earned while matriculated in the graduate program; • if a dissertation is required, upload the electronic dissertation (ETD), following the instructions on the Electronic Thesis and Dissertation Information page, for chair approval by the deadline. Note: The requirements explained here are university requirements. Students must contact their program office for any additional program-level requirements or deadlines that must be completed prior to graduation. GRADUATE CERTIFICATE VERIFICATION FOR UC TRANSCRIPT ENDORSEMENT In order for students to have their UC transcript endorsed with an earned certificate, students must apply for graduation and the program must approve the record through certify online just like the master's or doctoral students. DOCTORAL HOODING AND MASTER’S RECOGNITION CEREMONY Doctoral and master’s students who are graduating or who have graduated during the academic year will receive an invitation from the Dean of the Graduate College to participate in the university’s prestigious Doctoral Hooding and Master’s Recognition Ceremony held each semester. Please visit the commencement ceremony’s website for up-to-date details or 42 the Graduate College’s Graduation webpage. This is a joyous occasion in which students celebrate their accomplishment with family and friends as they are recognized by faculty and university leadership. Doctoral participants will be adorned with their hoods during the ceremony, by either their faculty mentor or the dean of their college. Graduates must confirm their intent to participate by reserving a seat online for the celebratory event and providing current home and email addresses for notification purposes. If you wish to be hooded by your faculty mentor, discuss the date with them to make sure they can attend. 43 INSTITUTIONAL RULES, POLICIES, AND PROCEDURES PROGRAM STANDARDS This Graduate Handbook clarifies minimum university-level requirements and policies that apply to all graduate students throughout the University of Cincinnati. Beyond these, each student is also expected to adhere to requirements, policies, and procedures specific to their own degree program and college. All graduate programs must publish in writing in accessible format the minimum academic standards for each graduate program offered, including the following: • minimum grade point average, including grades earned in required courses; • acceptable grade distribution, including grades earned in required courses; • nature and number of programmatic examinations, such as preliminary or qualifying, and the consequences of failing all or part of each examination; • specified research requirements; • a time-related definition of normal progress for all full- and part-time students; • standards and procedures for the mandatory annual review of academic performance; • standards and procedures for probation, suspension, and dismissal from the program. RECORDS PRIVACY, FERPA, AND THE RIGHT TO REVIEW The Family Educational Rights and Privacy Act of 1974 (FERPA), is the federal law that governs the release of and access to student education records. FERPA affords students certain rights with respect to their education records. For the complete FERPA information, consult the FERPA and Records Privacy page of the Registrar’s Office website. NOTICE OF NON-DISCRIMINATION The University of Cincinnati does not discriminate on the basis of disability, race, color, religion, national origin, ancestry, medical condition, genetic information, marital status, parental status (including status as a foster parent), sex, age, sexual orientation, veteran status, military status (past, present, or future), or gender identity and expression in its programs and activities. The university does not tolerate discrimination, harassment, or retaliation on these bases and takes steps to ensure that students, employees, and third parties are not subject to a hostile environment in university programs or activities. The university responds promptly and effectively to allegations of discrimination, harassment, and retaliation. It promptly conducts investigations and takes appropriate action, including disciplinary action, against individuals found to have violated its policies, as well as provides appropriate remedies to complainants and the campus community. The university takes immediate action to end a hostile environment if one has been created, prevent its recurrence, and remedy the effects of any hostile environment on affected members of the campus community. UC is committed to the ideal of universal Web accessibility and strives to provide an accessible Web presence that enables all university community members and visitors full access to 44 information provided on its websites. Every effort has been made to make these pages as accessible as possible in accordance with the applicable guidelines. The University of Cincinnati provides free aids and services to people with disabilities to communicate effectively with us, such as qualified sign language interpreters and written information in other formats (large print, audio, accessible electronic formats, other formats). The University of Cincinnati also provides free language services to people whose primary language is not English, such as qualified interpreters (call 513-556-5503) and information written in other languages. If you need these services, please tell any employee of a University of Cincinnati health program or activity. If you believe that the University of Cincinnati has failed to provide these services or discriminated in another way, you can file a grievance with the Office of Equal Opportunity and Access and/or Office of Gender Equity & Inclusion. You can file a grievance in person, by mail or by email. If you need help filing a grievance, the Office of Equal Opportunity & Access and Office of Gender Equity & Inclusion staff are available to help you. ACADEMIC DISHONESTY Academic dishonesty in any form is a serious offense that cannot be tolerated in an academic community. Dishonesty—including cheating, plagiarism, deception of effort, and/or unauthorized assistance—may result in a failing grade in a course and/or suspension or dismissal from the university. Allegations of academic dishonesty will be processed pursuant to the university’s Student Code of Conduct. After graduation, alumni remain responsible for the academic integrity of the work they performed while a student at the University of Cincinnati. If evidence of academic dishonesty or research misconduct is revealed after the graduation of a student, the Office of Research, the Graduate College, and the university can examine whether such concerns impact the academic integrity of the degree that was conferred on the student, with consequences including but not limited to degree revocation. STUDENT CODE OF CONDUCT The Student Code of Conduct defines behavior expected of all University of Cincinnati students. It is each student’s responsibility to know and comply with the university’s Student Code of Conduct, and sanctions or penalties are outlined. Academic behavior considered to be misconduct is defined in the Student Code of Conduct. The code also addresses nonacademic misconduct (such as disturbing the peace, destruction of property, and theft). Disciplinary procedures are explained in a step-by-step manner, and the procedures for appeal of decisions are stated. In addition to this code, students must adhere to their college’s professional code of conduct and honor codes where applicable. Students should contact the office of the dean for their college to inquire about any applicable conduct and honor codes to ensure compliance. Students can be suspended or dismissed from the university for unprofessional behavior. 45 RESPONSIBLE CONDUCT OF RESEARCH Furthering of research is a major institutional goal of the University of Cincinnati. Research includes not only intellectual activity and exploration designed to expand knowledge and understanding, but also activities in the creative and performing arts designed to interpret and create. Such activities require responsibilities for the ethical and safe conduct of research. Individuals charged with supervision of research, as well as all individuals directly engaged in it, and collaborators of investigators outside their own units are responsible for the quality of the data generated in their own laboratories as well as the laboratories of their collaborators. Everyone shares responsibility for the physical safety and intellectual property of individuals in the responsible conduct of creative scholarship and research. RESTRICTED RESEARCH The right to open exchange of information and opinion in faculty relations with students carries the obligation to avoid comments or violations of confidentiality that would reduce free expression or inquiry by students. Student involvement in industrial proprietary projects should be permitted only when these projects in no way restrict the student’s ability to fulfill their degree requirements, which includes the obligation to publish dissertation results. Faculty members have the right to publish their research findings and the right to protection against retaliation because of displeasure over their conclusions by the public, administration, government, or others. They have the concomitant responsibility to refrain from conducting secret, non-publishable research as part of their university duties. GRADUATE STUDENT GRIEVANCE PROCEDURES The University of Cincinnati provides an opportunity for the resolution of disputes involving graduate students in a fair and collegial manner. The Graduate Student Grievance Procedures establish a formal academic process for graduate students to request review and redress of certain complaints arising out of their academic relationships with their programs, their colleges, or the university. The grievance begins with a mediation process and may proceed, if necessary, through the more formal review and decision or appeal processes. In general, however, it is expected that grievances will be resolved by the parties within their programs. Students are encouraged to seek assistance from the university Ombuds Office for possible resolution before initiating the formal grievance process. Students, faculty and staff should note that Grievance Procedures are not legal protocols. They are, however, effective means by which to resolve conflicts. The Graduate College endorses these procedures and expects all programs and students involved to follow them according to the established guidelines. No outside parties, such as lawyers, ministers, and family members, are allowed to participate in or impose upon the procedures. The Graduate Student Grievance Procedures cannot supplant final sanctions stemming from the University of Cincinnati Student Code of Conduct process. There is a time limit to filing a grievance: it must be filed within 60-90 business days of the alleged improper mistreatment. The procedures are applicable to the following types of grievances: • grievances alleging improper dismissal or suspension from a graduate program, not as a result of the Student Code of Conduct process; • grievances alleging the improper withholding or termination of financial support of any kind; 46 • grievances alleging any other improper treatment, either substantive or procedural, of a graduate student by a university employee or university affiliate except: o allegations of improper evaluation of the quality and/or quantity of academic work, which a student cannot grieve; o allegations of unfair recommendation for employment or further graduate study, which a student cannot grieve; o allegations of discrimination or harassment that are subject to review by the Office of Equal Opportunity and Access or the Office of Gender, Equity and Inclusion. Published November 28, 2023. This version is an update to the 2022-23 AY handbook to reflect changes to the Graduate Scholarship structure and terminology. This version supersedes all previous versions. 47
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Please limit your knowledge to the document. Avoid generalizations and ensure accuracy by directly referencing the document's arguments and examples.
EVIDENCE:
University of Cincinnati Graduate College Graduate Handbook Welcome from the Graduate College! We invite you to review the Graduate Handbook. This document is designed as a helpful guide to graduate education at UC. Here is where you will find policies, procedures, and important information for the graduate student lifecycle, from admissions to graduation. In addition, there may also be requirements that pertain to specific degree programs and colleges. Please visit program and college websites for these specific requirements. 1 The Graduate College Graduate College Leadership Rose Marie Ward Vice Provost and Dean of the Graduate College Omotayo (Tayo) Banjo Associate Dean of the Graduate College Tai Collins Associate Dean of the Graduate College Laura Dell Graduate College Thought Leader Emily Kregor Software Applications Developer Lead Sarah Matthews Sr Data Reporting Analyst Angel Prewitt Assistant Director of Business Affairs Megan Tischner Carroll Program Director Graduate College Staff Kaitlin Bauer Academic Evaluator Virginia Dennis Program Manager, Student Services Shaymaa Minkara Program Manager, Graduation Caitie Norrie Program Manager, Professional Development Stephen Patrick Program Manager, Marketing and Communications Amy Wheeler Program Manager, Student Success & Retention Brandilyn Worrell Program Manager, Community and Belonging 2 Brady Wright Executive Staff Assistant and Office Manager Graduate College IT Staff Chris Amann Computer & Info Analyst, Management Specialist IT Dushan Aththidiyavidanalage Don Software Applications Developer Eric Rasnake Computer & Info Analyst I Coco Zhang Software Applications Developer Contact the Graduate College Location University of Cincinnati 110 Van Wormer Hall 2614 University Circle Cincinnati, OH Mailing Address P.O. Box 210627 Cincinnati, OH 45221-0627 Email: [email protected] or [email protected] Phone: (513) 556-4335 Fax: (513) 556-0128 3 Introduction This Graduate Handbook is intended to provide information about university policies that assist faculty, students, and program coordinators in supporting their individual programs of study. To which educational programs does this Handbook pertain? The Graduate College oversees all post-baccalaureate certificates and degrees (master’s and doctoral level) EXCEPT the Juris Doctor (in the College of Law), the Doctor of Medicine (in the College of Medicine), and the Doctor of Pharmacy (in the College of Pharmacy). The University of Cincinnati does not discriminate on the basis of disability, race, color, religion, national origin, ancestry, medical condition, genetic information, marital status, parental status (including status as a foster parent), sex, age, sexual orientation, veteran status, military status (past, present, or future), or gender identity and expression in its programs and activities. View UC’s complete Notice of Non-Discrimination. Published 11/28/2023. This version is an update to the 2022-23 AY handbook to reflect changes to the Graduate Scholarship structure and terminology. This version supersedes all previous versions. 4 TABLE OF CONTENTS ADMISSION TO GRADUATE PROGRAMS ....................................... 9 ADMISSIONS POLICY .............................................................................................. 9 Faculty and Administrators' Eligibility for Graduate Degrees .................................. 9 ADMISSIONS CATEGORIES .................................................................................... 9 APPLICATION PROCESS FOR 4+1 AND AIM PROGRAMS .................................. 10 Application to 4+1 Degree Programs .................................................................... 10 Application to Accelerated Integrated Master’s (AIM) Programs .......................... 11 DUAL DEGREE PROGRAMS .................................................................................. 11 CHANGING DEGREE PROGRAMS AT UC ............................................................ 11 GRADUATE CERTIFICATE PROGRAMS ............................................................... 12 INTERNATIONAL STUDENT ADMISSION.............................................................. 12 English Proficiency Requirement .......................................................................... 13 FINANCIAL SUPPORT .................................................................... 14 UNIVERSITY MERIT-BASED GRADUATE AWARDS ............................................. 14 GRADUATE SCHOLARSHIPS (GS)........................................................................ 14 UNIVERSITY FELLOWSHIPS ................................................................................. 15 GRADUATE ASSISTANTSHIP STIPEND AWARDS ............................................... 16 Teaching Assistant Requirements and OEPT ...................................................... 17 Graduate Assistant/Fellow Health Insurance Awards ........................................... 17 Multiple Appointments/Employment ..................................................................... 18 Summer Employment Without Full-time Enrollment ............................................. 18 Graduate Assistants on Jury Duty ........................................................................ 18 Strike Policy for Graduate Assistants ................................................................... 19 Sick Leave/Family Leave for Graduate Assistants ............................................... 19 Holidays/UC Closing Policy for Graduate Assistants ............................................ 19 Military Duty .......................................................................................................... 19 Termination........................................................................................................... 19 Workers’ Compensation ....................................................................................... 19 Unemployment ..................................................................................................... 19 Social Security, Medicare Tax and Ohio Public Employees Retirement System (OPERS)............................................................................................................... 20 174 GRADUATE CREDIT RULE .............................................................................. 20 TAXATION OF CINCINNATI GRADUATE AWARDS .............................................. 21 EXEMPTION FROM OPERS FOR STUDENT EMPLOYEES.................................. 21 EXTERNAL SOURCES OF FUNDING .................................................................... 21 5 FEDERAL FINANCIAL AID ...................................................................................... 22 GRADUATE CREDIT AND GRADES............................................... 23 ELIGIBLE CREDITS ................................................................................................ 23 CREDITS REQUIRED TO EARN A GRADUATE DEGREE .................................... 23 Advanced Standing for Graduate Courses Taken Outside of UC ......................... 23 Transfer Credit for Graduate Courses Taken at UC ............................................. 24 Course Exemption for Prior Knowledge, Without Credit ....................................... 24 Multiple Degree Exemptions ................................................................................. 25 Enrolling in Non-UC Classes through the Greater Cincinnati Collegiate Connection ............................................................................................................................. 25 Graduate Credit for Undergraduate Students ....................................................... 25 Graduate Credit Earned in 6000-Level Courses ................................................... 25 GRADING ................................................................................................................ 25 Final Exams .......................................................................................................... 25 Make-up Final Exams ........................................................................................... 26 Grade Reports ...................................................................................................... 26 Grades Assigned to Research Courses That Are Repeated ................................ 27 Pass/Fail Grades .................................................................................................. 27 Grade Changes .................................................................................................... 27 No Grade Replacements for Graduate Students .................................................. 27 MAINTAINING GRADUATE STUDENT STATUS ............................ 29 MINIMUM CREDITS/REGISTRATION REQUIREMENTS ....................................... 29 Dual Degree Programs ......................................................................................... 29 FULL-TIME COURSE LOAD.................................................................................... 29 PART-TIME COURSE LOAD ................................................................................... 29 REDUCED COURSE LOAD (INTERNATIONAL STUDENTS) ................................ 30 MEETING PROGRAM REQUIREMENTS................................................................ 30 MINIMUM ACADEMIC PERFORMANCE ................................................................ 30 INTERNATIONAL STUDENTS, MAINTAINING IMMIGRATION STATUS............... 30 TIME TO DEGREE .................................................................................................. 30 Time to Degree and Extensions ........................................................................... 30 Reinstatements..................................................................................................... 31 Readmission ......................................................................................................... 32 Leaves of Absence ............................................................................................... 32 Withdrawal from Program ..................................................................................... 33 Dismissal from Program ....................................................................................... 33 MASTER’S DEGREE POLICIES AND PROCEDURES ................... 34 COURSE OF STUDY ............................................................................................... 34 6 CREDIT HOUR REQUIREMENTS .......................................................................... 34 CANDIDACY ............................................................................................................ 34 CULMINATING EXPERIENCE: THESES and CAPSTONES .................................. 34 Thesis Preparation, Evaluation and Submission Process..................................... 34 Capstone Process ................................................................................................ 35 GRADUATION ......................................................................................................... 35 Application to Graduate ........................................................................................ 36 Graduation from Dual Degree Programs .............................................................. 36 Certification for Graduation (Certify Online) .......................................................... 36 CONTINUING TO A DOCTORAL PROGRAM ......................................................... 37 DOCTORAL DEGREE POLICIES AND PROCEDURES ................. 38 COURSE OF STUDY ............................................................................................... 38 CREDIT HOUR REQUIREMENTS .......................................................................... 38 RESIDENCY AS FULL-TIME STUDENT ................................................................. 38 CANDIDACY, QUALIFYING EXAM ......................................................................... 38 UNIVERSITY GRADUATE FACULTY ROLE ........................................................... 39 DISSERTATION....................................................................................................... 39 Dissertation Advisor and Committee..................................................................... 39 Final Defense of Dissertation................................................................................ 40 Use of a Moderator ............................................................................................... 40 Submission of Dissertation ................................................................................... 40 GRADUATION ......................................................................................................... 41 Application to Graduate ........................................................................................ 41 Dual Degree Programs Graduation ...................................................................... 41 Graduation Requirements for Doctoral Degrees................................................... 41 Certification for Graduation (Certify Online) .......................................................... 41 GRADUATE CERTIFICATE VERIFICATION FOR UC TRANSCRIPT ENDORSEMENT ..................................................................................................... 42 DOCTORAL HOODING AND MASTER’S RECOGNITION CEREMONY ................ 42 INSTITUTIONAL RULES, POLICIES, AND PROCEDURES ............ 44 PROGRAM STANDARDS........................................................................................ 44 RECORDS PRIVACY, FERPA, AND THE RIGHT TO REVIEW .............................. 44 NOTICE OF NON-DISCRIMINATION ...................................................................... 44 ACADEMIC DISHONESTY ...................................................................................... 45 STUDENT CODE OF CONDUCT ............................................................................ 45 RESPONSIBLE CONDUCT OF RESEARCH .......................................................... 46 RESTRICTED RESEARCH ..................................................................................... 46 7 GRADUATE STUDENT GRIEVANCE PROCEDURES ........................................... 46 8 ADMISSION TO GRADUATE PROGRAMS ADMISSIONS POLICY The University of Cincinnati welcomes graduate applications from students who: • hold a baccalaureate degree from a college or university regarded as standard by a regional accrediting agency and; • have at least a B average (3.000/4.0 system) in undergraduate course work or otherwise give evidence of promise that is judged satisfactory by the admitting program and the Graduate College. Programs that wish to admit applicants who lack this 3.000 minimum GPA requirement must provide supporting evidence and rationale of how such students will be able to complete a graduate program that requires achievement of a 3.000 GPA, and indicate any support offered by the program to ensure the applicant’s success given the GPA deficiency. Decisions concerning admission to graduate programs rest with the programs, and criteria used for determining admission beyond these minimal requirements are established by the programs. All programs have established written criteria for judging the admissibility of applicants, which are published in each program’s graduate handbook. The program’s handbook for graduate study must be available to the student. Upon the student’s acceptance of the admission offer, the program and the student are bound by the terms and conditions set forth in the letter of appointment. Faculty and Administrators' Eligibility for Graduate Degrees No holder of an academic administrative title at the University of Cincinnati (equivalent to assistant dean or above) may matriculate or be granted a graduate certificate or degree from the University of Cincinnati. No graduate degree or certificate from the University of Cincinnati will be granted to any faculty member at the University of Cincinnati (full-time or part-time above rank of instructor) who teaches in the same department, division or school in which the degree is to be granted. This rule also applies to adjunct appointments at any faculty rank and to interdisciplinary degrees when the same college is one of the interdisciplinary colleges. College deans may petition the Associate Dean of the Graduate College for a waiver of this policy on an individual faculty member’s behalf. The written request should describe the teaching responsibilities of the faculty member, indicating whether they are teaching graduate students and a plan for managing potential conflicts of interest. ADMISSIONS CATEGORIES Matriculated graduate status is granted to an applicant who has been accepted into a graduate certificate or degree program and has met all admissions criteria. Note that applicants first receive a provisional acceptance, and conversion to matriculated graduate status is dependent upon receipt of an official transcript that confirms that the student holds a baccalaureate or higher degree from a college or university regarded as standard by a regional accrediting agency. Please note that additional official documentation may be required (e.g. if the transcript does not contain information about degree conferral or if a foreign degree needs confirmation as baccalaureate equivalent). Instructions and deadlines for meeting this requirement are included on the Transcript Submission Policy web page. 9 Provisional graduate status is granted to applicants who have been accepted into a graduate certificate or degree program, but who have NOT yet met all admissions criteria. As described above, one routine requirement for all students is the submission of an official transcript. However, some students must in addition take undergraduate courses or improve English language proficiency to satisfy prerequisites, and these students may be accepted by the program on a provisional basis that is contingent on satisfying those additional prerequisites. Letters of admission should be read carefully to make sure all requirements tied to provisional status are identified. Visiting student status allows students to take courses for graduate credit when they have not been admitted into a graduate degree program. These students were previously called “non- matriculated students”. Should this visiting student subsequently matriculate into a certificate or degree program, a maximum of 12 semester hours may be applied to the certificate or degree program. Students are not eligible for tuition or stipend awards allocated by the Graduate College while in visiting graduate status. This policy and other funding policies are further explained in the Financial Support chapter. APPLICATION PROCESS FOR 4+1 AND AIM PROGRAMS Application to 4+1 Degree Programs If an undergraduate student plans to matriculate into a master’s degree program upon completion of the bachelor's degree, they can consult with advisors to begin (A) taking graduate-level coursework as an advanced undergraduate student, and (B) focusing on thesis-related, independent research at an earlier date. This advising plan to achieve an articulated path to a master’s degree is called a 4+1 program. Students who enter these programs must complete all of the requirements of each respective degree and must apply separately for both degree programs at the appropriate time. To be eligible for entry to a 4+1 program, students must have junior standing (64 semester credits). In addition, students must meet all College and graduate program admission requirements for the particular program. 4+1 students should note the following: • 4+1 students who enroll in graduate-level coursework prior to formally matriculating as a graduate student are allowed to apply up to 12 semester graduate-level credits toward the requirements of the master’s degree. These credits cannot be used for the bachelor’s degree. Students in the 4+1 program will complete the rest of their graduate coursework after formal completion and certification of the bachelor's degree. Students should refer to the section of this handbook containing the general requirements of the master’s degree and speak to the directors of the graduate program about specific requirements. • 4+1 students wishing to matriculate into a master’s program must complete a formal graduate admission application online in their junior or senior year to be admitted to the graduate program and begin the master’s degree. Students should speak to the directors of the graduate program about specific admission and application requirements. 10 Application to Accelerated Integrated Master’s (AIM) Programs The university has a limited set of programs that allow for a single application and admission to obtain a bachelor’s plus master’s degree in a single course of study. These programs are tightly structured around co-op experiences and allow undergraduate students to accumulate more than 12 graduate credits prior to transitioning to a matriculated graduate student. Applicants apply to an AIM program at the time of application to UC as an undergraduate but are still required to formally apply to transition to the graduate portion of their program at a time defined by their AIM program. There is a free and abbreviated application for UC undergraduate students transitioning to the associated master’s degree that is part of their AIM program. DUAL DEGREE PROGRAMS The university offers the opportunity for students to pursue two complementary graduate degrees simultaneously through structured, official dual degree programs (see below for a complete listing). The advantage of these programs is that they may require fewer credits than completing each degree program separately. Each program’s entrance requirements must be met in addition to university requirements, and the applicant must be accepted by both programs. Below is a listing of the Dual Degree programs: • Accounting MBA/MS • Business Analytics MBA/MS • Business Administration/Arts Administration MBA/MA • Business Administration/Nursing MBA/MSN • Community Planning/Landscape Architecture MCP/MLA • Community Planning/Law MCP/JD • Finance MBA/MS • Human Resources MBA/MA • Information Systems MBA/MS • Marketing MBA/MS • Law/Women’s Studies JD/MA • Law/Business JD/MBA • Law/Political Science JD/MA • Law/Political Science JD/PhD Please see the Multiple Degree Exemptions section for information on the maximum amount of transfer credit that can be applied to the dual degree programs. CHANGING DEGREE PROGRAMS AT UC In order to change from one degree program to another within the university, a student must submit a complete application to the new program. If the degrees are housed in the same unit, and the change is made over consecutive term enrollments, the application fee is waived. If the new degree program is in a different administrative program, the student is responsible for paying the application fee. Students are always responsible for fulfilling the requirements of the given degree program in which they are matriculated. Please see the Transfer Credit for Graduate Courses Taken at UC 11 section for information on the amount of graduate credits that can be transferred if a student is changing from one graduate program to another within the university, or if a student is changing from visiting graduate status at the university. GRADUATE CERTIFICATE PROGRAMS The University of Cincinnati offers graduate certificate programs. Certificates vary in both credit hours and in how they are configured: for instance, some can be earned only in conjunction with a degree; some require a master’s degree as a prerequisite, and some can be earned outside of a degree program. Applicants must apply for admission to a certificate program. Graduate College general guidelines are as follows: • Students must hold a baccalaureate degree. • Certificate programs may enroll degree seeking and non-degree seeking students. • For students matriculated into a degree program, credit hours earned under a certificate program may count toward a degree in any program if approved by the program director, and if requirements for the certificate and degree are completed the student will be awarded both. Credits earned while matriculated in a certificate program will count as credits matriculated in a degree. • Students can apply a single course to multiple certificates but only to ONE master’s or doctoral degree. • Students can obtain more than one certificate within the same program prior to attaining their master’s degree. • Students apply for a certificate program just like applying for a degree program, and must pay any relevant application fee. • Students enrolled only in a graduate certificate program are not eligible for tuition or stipend support with university funds (University Graduate Assistantship/Graduate Scholarship funds). If a student is interested, the student should contact the appropriate program office to obtain the specific criteria and prerequisites for the desired certificate. INTERNATIONAL STUDENT ADMISSION UC International Services supports the needs of international students at the University of Cincinnati. The office assists international students in understanding the rules, regulations, and procedures that must be followed during their stay in the United States and provides support services and cultural information to students. UC International Services is located in Suite 7148, One Edwards Center (1-513-556-4278). Information about admission to the University of Cincinnati for international students is available on their website. International students with F-1 visas can only be granted admission as matriculated graduate status in a degree-seeking program. (Most international students with J-1 visas can be granted admission with matriculated graduate status only, with some exceptions.) Students with J-1 visas should inquire with UC International Services to determine the regulations that apply to them. Students with green cards (U.S. resident aliens/permanent residents) are not defined as international students and, therefore, are not governed by the university’s international student policies. However, the English proficiency requirement does apply to green card holders (see The English Proficiency Requirement, below). 12 In instances where an international student holds a degree for which the U.S. equivalent is not known, or if it is determined by the program or the Graduate College that the applicant does not have the equivalent of a bachelor’s degree, the program must submit a petition for admission without the bachelor’s degree, with supporting documentation and rationale, to the Associate Dean of the Graduate College. All international students are required to carry University of Cincinnati student health insurance unless they qualify for a waiver. Semester insurance fees are automatically assessed each registration period. Please visit the Graduate College website for more information on the Graduate Assistant/Fellow Health Insurance Award. English Proficiency Requirement English proficiency is required of all applicants whose native language is not English. Students can demonstrate proficiency in a number of ways at the graduate level. PLEASE NOTE, many colleges and programs have higher requirements than those listed below. Applicants should contact the programs to which they are applying for details. For more information, please refer to the English Proficiency Requirement web page. 13 FINANCIAL SUPPORT Graduate students may obtain financial support from several sources. • The University of Cincinnati provides merit-based graduate awards in the form of tuition scholarships (known as the Graduate Scholarships, which may be provided with or without an assistantship), as well as stipend awards (graduate assistantships including teaching and research assistantships), and program-specific scholarships and fellowships. • Scholarship and fellowship support is also available from a diverse collection of external sponsors at the local, state, national, and international levels. Programs and colleges may have additional sources of support through grants and endowed funds • Need-based support may be obtained from federal and state sources. Financial support from each of these sources is described below. UNIVERSITY MERIT-BASED GRADUATE AWARDS The University of Cincinnati offers several types of merit-based graduate awards. The most common types – Graduate Scholarships, fellowships, and University Graduate Assistantships – are described below. Most university graduate awards are underwritten by university funds allocated by the Graduate College (“general funds”) to each college, which are then awarded to students by the individual programs. Some awards are competitive and granted by the Graduate College upon recommendation of an individual graduate program. Not all graduate students are eligible for graduate awards. Graduate awards allocated by the Graduate College are not available to students: (1) taking classes as visiting students, (2) enrolled only in a graduate certificate program, (3) who have not maintained the minimum GPA of 3.000 in their program, (4) who are on academic probation, or (5) who have exceeded the 174 graduate credit rule. Awards can only be guaranteed for a maximum period of one academic year, and renewal of a university graduate award is not automatic. Awards that are appointed by individual programs are awarded to eligible students at the sole discretion of the program. Programs are not obligated to renew awards, even if previously awarded students met all eligibility requirements. GRADUATE SCHOLARSHIPS (GS) The Graduate College funds scholarships that cover all or part of a student’s tuition and fees. In most colleges, the scholarship awards supported by the Graduate College are the Graduate Scholarships (GS), with and without assistantships. The GS with assistantship is used to support graduate assistants who are additionally awarded a stipend that requires service in return for stipend support. The GS without assistantship is for graduate students who do not receive university stipend support and therefore no service is required in return for the GS award. The appointing program sends written offers of scholarship awards to students, including information about the amount and duration of the award and the terms of the offer. Students must maintain all of the required eligibility requirements in their offer letter to maintain their tuition scholarship. 14 Students receiving a tuition scholarship must register for a specified minimum number of graduate credit hours in each semester for which they are receiving support. If an international student is supported by a GS without assistantship, they must register for a minimum load of 10 graduate credit hours per semester during the time they receive the GS scholarship. If a domestic student is supported by a GS without assistantship, they must register for a minimum load of 1 graduate credit hour per semester during the time they receive the GS scholarship. Students supported by a GS with assistantship must register for a minimum of 12 graduate credit hours per semester during the time they receive the GS scholarship. These minimum enrollments in graded courses must be met prior to using scholarship support for any audited courses. If a student withdraws from a class funded by a tuition scholarship, with the remaining enrolled credit hours totaling less than the minimum required for the award, the award is cancelled immediately and the student is responsible for the tuition balance, based on the date of withdrawal. Full tuition scholarships cover a maximum of 18 credits per semester. Students registered for more than 18 credits in a semester will be billed tuition and general fees on a per-credit-hour rate for each credit over the 18. All rules that govern recipients of tuition support pertain to all students, including international students. Other rules and policies that apply specifically to international students are independent of GS regulations. Both sets of regulations must be met. Neither set of regulations negates or takes the place of the other. (See 174 Graduate Credit Rule.) Note: Financial awards that require no service may reduce eligibility for educational loans. Students should notify the Student Financial Aid Office of their tuition support if they apply for aid from that office. UNIVERSITY FELLOWSHIPS University of Cincinnati fellowships are financial awards that include tuition scholarships and stipends with no associated service requirements. The purpose of a fellowship award is to allow the recipient to concentrate exclusively on their studies; therefore, multiple appointments and/or employment by the University of Cincinnati are not permitted for students receiving fellowships. The appointing program sends written offers of fellowship awards, including information about the amount and duration of the award; a general description of the academic obligations accepted by the student as part of the award; a reference to sources of information about academic requirements for degree completion; a description of the conditions under which either the student or unit may terminate the award prior to its end-date; and criteria for reappointment. Students receiving fellowships should check with Student Financial Aid to be informed about the potential impact on their eligibility for aid. Income received that is not for services rendered (whether it be in the form of a fellowship, grant, or award) will be calculated in whether a student meets the Cost of Attendance for the University of Cincinnati. Fellowship awardees have an enrollment obligation identical to GS with assistantship/UGA (university graduate assistantship) awardees, and they lose eligibility for the fellowship award if they accumulate more than 174 graduate credit hours. (See 174 Graduate Credit Rule). 15 For information on university-sponsored fellowships, please see the Graduate College website. GRADUATE ASSISTANTSHIP STIPEND AWARDS A student awarded a graduate assistantship receives a financial stipend for services rendered in addition to a full or partial tuition scholarship. These stipend funds are called UGA (university graduate assistantship) awards. Graduate assistants are also entitled to a discount at the University Bookstore and may be eligible for the Graduate Assistant/Fellow Health Insurance Award. UGA awardees devote effort to a combined program of formal study and assigned duties of teaching, research or administrative service that is designed to enhance their university education. The stipend received by the graduate assistant is in recognition of these services. Those with teaching duties are teaching assistants (TAs) and those with research duties are research assistants (RAs). During the appointment, the goal is to help a graduate student become a more learned, creative, and professional individual through formal instruction, interaction with faculty, research, and administrative experience. Any such service assignments should be consistent with the student’s academic pursuits. UGA funds are awarded for designated periods of time by the graduate programs. Graduate Assistants are considered exempt from minimum wage and overtime requirements, and they are paid on a salaried basis. Minimum stipends are set by the Dean of the Graduate College. The minimum stipend for a graduate assistant, as set in July 2023, must be the equivalent of a minimum of $16.98 per hour for all master’s and doctoral students except those in PhD programs. Graduate assistants enrolled in PhD programs have a minimum of $22.28 per hour. The appointing academic program, college, or area of responsibility determines service requirements of students who hold assistantships. If awarded an assistantship outside their program, graduate assistants’ duties are governed by the academic program, college, or the area of responsibility that made the award. In all cases, the award obligates awardees to no more than 20 hours per week of services, and those services must make a substantive contribution to the student’s academic and professional development. Students must be appointed to a position that is consistent with their field of academic study. If the student determines that they cannot meet the requirements of the award, it is imperative that they notify the program to initiate renegotiation or reassignment of the award with correspondingly less support. A student’s hours are prorated for weeks with a holiday or school closure and students are not required to be available during break periods unless given additional compensation. UGA awardees must be registered for 12 graduate credit hours or more, exclusive of audit credits, for each semester they receive the assistantship. University assistantships will be cancelled if the awardee does not meet their enrollment obligation. The exception to this rule is summer semester. See Summer Employment without Full-time Enrollment section. Students lose eligibility for the UGA stipend funding if they accumulate more than 174 graduate credit hours. (See 174 Graduate Credit Rule.) Assistantship awards are contingent upon student status, satisfactory degree progress, and performance of service as assigned, and can be terminated at any time. Each year the assistantship is in effect, the appointing program, college, or area must notify the awardee in 16 writing of any significant change to the services or conditions of the appointment. Such changes include, but are not limited to: • the amount and duration of the award • any tuition and/or fee not paid by the program • the average expected time per week or per semester of required duties • description of the duties assigned to the student • description of the conditions under which either the student or unit may terminate the award prior to its end-date • criteria for reappointment of the award • criteria for determining variations in stipend levels where such variations exist • information on current IRS guidelines, Medicare, and the Public Employee Retirement System (PERS) • graduate appointment procedures if any of the documents have been modified since the student’s initial appointment. Teaching Assistant Requirements and OEPT All teaching assistants must be supervised by a faculty member who has the academic credentials and authorization (as defined by the Higher Learning Commission, Ohio Dept. of Higher Education, and the University of Cincinnati) to offer instruction to the students in the class. Supervising faculty must be listed (as supervisor or instructor) in any course/section overseen by a graduate teaching assistant. Non-native speakers of English who are awarded teaching assistantships at the University of Cincinnati are required to score at least a 3.0 on the Oral English Proficiency Test (OEPT). The OEPT evaluates the spoken language skills of non-native speakers of English. Students who pass are certified for oral English proficiency and may assume the full range of duties associated with their teaching assistantship. Students whose oral English proficiency has not been officially certified may not assume instructional responsibilities. However, students who score 26 or above on the speaking section of the TOEFL IBT or students with a score of 50 or above on the Test of Spoken English are exempt from the OEPT. Students are required to take the test at the beginning of their first term of study. If a score is less than 3.0, students are recommended to take ESL courses before retaking the test. A student is permitted to take the OEPT twice without charge during an academic year. Graduate Assistant/Fellow Health Insurance Awards Academic programs are required to notify eligible students with information on the Graduate Student Health Insurance (GSHI) award, which can subsidize the cost of UC Student Health Insurance for qualified students. Programs must provide graduate assistants/fellows with the GSHI Award application deadline and relevant details on GSHI Award criteria, and must keep records that they have provided this information to their students. Such information can be found at the Graduate Student Health Insurance Award web page. 17 Multiple Appointments/Employment Graduate assistantship awardees who are domestic students are limited to 24 total hours of combined service and student hourly work while school is in session. The following policies regarding multiple appointments must be followed: • Units are responsible for monitoring of hours worked by student employees assigned to their unit; this is especially important for students who hold multiple student appointments. • The program must closely monitor academic progress. • The additional appointment must be terminated if a student does not maintain academic progress deemed to be acceptable by the program. This limit applies only while school is in session. During scheduled breaks only, if students work more than 20 hours or they work more than the prorated salary hours required, they must be compensated at an hourly rate for the extra work. Students can be employed for a maximum of 40 hrs/week during scheduled breaks. International students are limited to working 20 hours per week while school is in session and are limited to 40 hours per week during scheduled breaks. All International Students must have onboarding conducted by the International Services Office. An international student on F-1 or J-1 immigration status contemplating employment should contact the International Student Services Office at 1-513-556-4278. Summer Employment Without Full-time Enrollment For summer semester only, students who are not registered for graduate credit hours or are registered for less than 12 credits hours are eligible to be employed by their respective program, usually by performing the duties of their assistantship such as teaching or lab work. In this case, the student will receive a stipend for the work performed. Retirement funds and taxes will be withheld from the student’s check. Questions about options with retirement funds once separated from the university should be directed to Human Resources and/or OPERS. Graduate Assistants on Jury Duty All graduate students are encouraged to participate when they are subpoenaed for jury duty. The student must seek their advisor’s and program director’s permission with the expectation that every effort will be made to accommodate the jury service. If the student’s absence from UC will create a hardship to the unit, they should seek a deferral or make arrangements to cover their responsibilities during the absence. Such arrangements must be approved by their program director. Students serving on jury duty will be paid their normal university stipend during the period of service, with the understanding that any compensation received for jury service must be returned to the university if their assistantship responsibilities remain uncovered. If the student makes arrangements to cover their assistantship commitment for the period in which they serve on jury duty, and if those arrangements are approved by their program director, they may keep the jury duty compensation in total. The student may also keep any travel reimbursement fees. 18 Strike Policy for Graduate Assistants In the event of a strike, graduate assistants are expected to fulfill commitments associated with their assistantships. Graduate assistants assigned to teach a course as part of their assistantship agreement are expected to teach the course during a strike. Graduate assistants who choose not to teach can lose their assistantship. If the student’s responsibilities are associated with a course taught by a faculty member and the strike results in the course not being taught, which makes it impossible for the student to fulfill their responsibilities, the student would not be held responsible. Sick Leave/Family Leave for Graduate Assistants Graduate assistants do not accrue vacation, sick leave or other paid time-off. In the event of illness, a graduate assistant shall notify the GA supervisor as soon as possible on each day of such absence. Holidays/UC Closing Policy for Graduate Assistants Graduate assistants are not hired as essential personnel, and thus cannot be required to work during holidays or official UC closings (such as emergency closings due to severe weather, public emergency, etc.). Required weekly hours will be prorated based on the official holidays or closings during that week. Military Duty A graduate assistant who is a member of any reserve component of the United States Armed Forces, who is voluntarily or involuntarily ordered to extended U.S. military service, shall be granted time-off without pay. The graduate assistant should provide to the appropriate program official advance written notice of the call for impending training or active duty. Upon completion of military service or if discharged under honorable conditions, and upon prompt re-registration as a student, the graduate assistant shall be returned to the former assistantship in a timely manner, based upon availability. Due to the temporary nature of graduate assistantships, if the assistantship is eliminated during the student’s absence, then no obligation exists. Termination A graduate assistantship may be terminated at any time with or without cause, unless there is an explicit written contract between the student and the university that provides otherwise. Workers’ Compensation The Ohio Workers’ Compensation Law covers graduate assistants, who are paid by payroll and provides medical, income and survivor benefits in the event of accidental injury, occupational disease or death occurring in the course of, and arising from, employment. Unemployment Graduate assistants are not entitled to unemployment compensation. 19 Social Security, Medicare Tax and Ohio Public Employees Retirement System (OPERS) Please see Exemption from OPERS/Medicare for Student Employees. 174 GRADUATE CREDIT RULE Students receiving any university award (e.g. UGA stipend, GS tuition scholarship) and students who receive funds from the State of Ohio are governed by the requirements and limitations described in the following paragraphs. Any student who becomes ineligible to receive state subsidy is not eligible to receive general funds financial aid (i.e., a university stipend and/or tuition). Since this policy is due to regulations governing state support of the university, exceptions to the policy are not considered. Graduate students who have attempted 174 graduate credit hours at the University of Cincinnati are not eligible for a university award for enrollment at or beyond the 174 hours. Hours attempted include hours for which credit has been awarded, as well as withdrawn courses, audited courses, and hours in progress or incomplete (these graduate credit hours include all courses with grades F, I, UW, SP, IP, UP, W, etc.). All graduate hours attempted at the University of Cincinnati, regardless of program or student status, count toward the 174 total. A student is not eligible for funding beginning with the semester in which said student will reach the 174 attempted hours. For example, if a student has earned 167 graduate credit hours at the University of Cincinnati by the close of summer sessions and registers for (i.e., attempts) 12 credit hours for fall semester, they are ineligible for a university graduate scholarship or fellowship in the fall semester. If a student earned master’s credits at the University of Cincinnati (for either a partial or a full degree), the exact number of these credits are deducted from the 174 credit hour total for which they can receive funding. This is true if the credits are earned at an earlier time and the student returns to the University of Cincinnati to continue graduate education, and it is true regardless of the discipline in which those credits were earned. For example, if a student has earned a master’s degree in engineering and then chooses to pursue a master’s and a doctoral degree in math, the credits earned to get the engineering degree are deducted from the 174 credit hours for which the student can receive state financial support (e.g., fellowships, assistantships, and scholarships). Graduate students who have earned a master’s degree or other equivalent or higher advanced degree at another institution are not eligible for a university scholarship or fellowship once they have attempted 140 graduate credit hours at the University of Cincinnati. If a student enters the University of Cincinnati with a master’s degree from any institution other than the University of Cincinnati, they are credited with 34 graduate credit hours toward the 174 credit hour limit for state funding eligibility. Per Ohio Department of Higher Education policy, Ohio can subsidize up to the remaining 140 credit hours. The 34 credit hours are deducted from the 174, regardless of the discipline and regardless of the graduate level at which the student enters the University of Cincinnati. For example, if a student has earned a master’s degree in engineering at The Ohio State University and then chooses to pursue a master’s and a doctoral degree in math at UC, the credits they earned to get their engineering degree are deducted from the 174 credit hours for which they can receive state financial support in the math program. Note that professional 20 degrees, like a juris doctorate or medical doctorate, do not count as a master’s or higher equivalent for the purpose of comparative funding. Students who enter graduate education at the University of Cincinnati with a professional degree and no other advanced degrees are still eligible to receive up to the 174 credit hours of funding. If a student enters the University of Cincinnati with only partial credit toward a degree from another institution, those credits are not deducted from the 174 total—even if the program they enter at the University of Cincinnati agrees to accept transfer of those credits toward the student’s degree requirements at the University of Cincinnati. The student can still receive state subsidy for up to 174 credit hours earned at the University of Cincinnati beyond those transferred in. Note: For the purposes of this policy, a master’s degree is one awarded by an American institution or a degree of equivalent value from a foreign institution. Students holding a master’s degree from a foreign institution that is the equivalent of a bachelor’s degree in the U.S. will have the higher limit (174). The higher limit will not be affected by a student’s completion of course work short of a master’s degree at another institution. TAXATION OF CINCINNATI GRADUATE AWARDS The university maintains a position that all income, from whatever source, is taxable and may be subject to withholding. The IRS maintains final authority on the taxability of all stipends, and in all cases, the university cannot guarantee that any stipend is tax-exempt. The Graduate College will not review an individual award nor provide legal advice to individual students. In addition, students (not the university) are responsible for the withholding information that they submit on their W-4 forms at the time of appointment. Those students who receive a stipend during any academic semester and are not enrolled for at least half time will have Medicare tax and Ohio Public Employee Retirement System (OPERS) payments deducted from their checks. If a student is enrolled half time or more, they may apply for an exemption from these fees in their program office. No taxes are withheld from fellowships, but students may still have a tax liability and should consult a tax advisor. EXEMPTION FROM OPERS FOR STUDENT EMPLOYEES Employees (including student employees) of Ohio public institutions do not contribute to the federal Social Security system. Student employees’ retirement contributions will be directed to the state retirement plan, the Ohio Public Employees Retirement System (OPERS). Student employees (including graduate assistants and hourly student workers) may be eligible to opt out of OPERS participation when first hired by UC as long as certain requirements are met. See the Student Employees web page on UC’s Human Resources site for the OPERS exemption form and for additional information. EXTERNAL SOURCES OF FUNDING Tuition scholarship and fellowship funding is provided to graduate students by a wide variety of governmental and private sponsors. UC’s Financial Aid website, the ScholarshipUniverse scholarship search application, the Office of Nationally Competitive Awards and local and university libraries are potential sources of information about these funding opportunities. The Office of Nationally Competitive Awards provides workshops, application writing assistance and university endorsement (for applicable awards). Students may also visit the Office of Research 21 for more information on upcoming grant opportunities, grant writing workshops, and searchable research opportunity databases. FEDERAL FINANCIAL AID See the Student Financial Aid website for more information on federal financial aid (including summer aid). The Graduate College does not regulate or audit any outside fellowships or other outside funding a student may receive. However, it is advised that students with outside funding consult with the Financial Aid Office to see if and how the outside funding may or may not affect other Financial Aid eligibility. 22 GRADUATE CREDIT AND GRADES ELIGIBLE CREDITS Credit towards a graduate degree or certificate can only be earned for those courses in this university that are listed as graduate in the Schedule of Classes or which have been approved in writing by appropriate program authority for inclusion in the curriculum. Graduate credit towards a degree will only be granted when a course is included in the graduate career category of the student record in Catalyst. CREDITS REQUIRED TO EARN A GRADUATE DEGREE Graduate degrees at UC each have a stated number of credit hours that must be completed satisfactorily to earn the degree. As described below, there are multiple opportunities where coursework taken prior to matriculation into a degree program may count towards that credit hour total. In all cases, to earn a degree at UC, at least 67% of the relevant coursework credit must be earned while a matriculated student at the University of Cincinnati. Students entering in Fall 2019 or later should make application to their program for such (advanced standing or transfer) credit during their first semester at UC to assure their course of study is optimized. For all students matriculating in Fall 2019 and later, such credit will only be granted if a complete and program-approved application for such credit is submitted to the Graduate College by the end of their first year in the program, or prior to their final semester of study, whichever comes first. This new policy (introduced in AY19-20) is in effect for all students matriculated in Fall 2019 and later. In prior policies, master’s degrees were granted when 50% of graduate credits were completed while matriculated in the graduate program granting the degree, therefore allowing up to 50% of credits to be via advanced standing. Advanced Standing for Graduate Courses Taken Outside of UC a. Programs are permitted to award up to one third of the credits of a UC graduate program through advanced standing (e.g., 10 credits are eligible in a 30 credit hour program or 13 credits in a 40 credit hour program). The relevant number of credits is based on the minimum credits required to earn the advanced degree starting from the minimum degree qualification (usually a baccalaureate degree). Note that for doctoral students the advanced standing credit total will include any use of the ODHE allowance of up to 30 credits for a prior master's degree. b. Any graduate course credits, including those earned from previously earned graduate or undergraduate degrees, are eligible as advanced standing credits. c. Advanced standing can only be offered for courses (including electives) entered in e- curriculum for the UC program. d. Program faculty must evaluate courses for equivalence or comparability prior to granting students Advanced Standing credit for courses taken at another institution, meeting all the following criteria; 1. Courses taken at a recognized University or College 2. Courses taken at the graduate level 3. Requested advanced standing credits must be the lower of the following two choices 23 i. Credits originally earned for the course ii. Credits available in the UC course listed in e-curriculum 4. For 1:1 course equivalency, one or more of the following criteria must be met when compared to the University of Cincinnati course for which Advanced Standing credit is sought: i. Course was taken in the same field with the same title ii. Course had similar topics iii. Course had similar learning outcomes iv. Course assignment and assessment requirements were similar v. Course readings requirements are similar 5. This evaluation process should be documented for each case in which it is applied e. The one third rule doesn’t apply to dual degrees, sequential master's to doctorate programs, or others with shared content that have received approval from the Graduate College. f. Advanced standing credit recommended by program faculty must first be approved by the graduate program director and then submitted for final review by the Graduate College to assure the request complies with the criteria above. Transfer Credit for Graduate Courses Taken at UC a. When leaving one graduate program to join another at UC, all UC graduate credits taken as part of the incomplete program are eligible to use to fulfill requirements in the new program, based on faculty evaluation of the equivalence to courses in the new curriculum and program approval. b. When a student enters a graduate program at UC, non-matriculated UC graduate credits are eligible to be used for the program, if the coursework is listed in e-curriculum as part of the curricular requirements. Subject to program approval, students may transfer up to one third of the credits required to earn their UC graduate degree Programs are permitted to award transfer credit from a prior UC graduate degree if (1) the sum of unique credits to earn both degrees is equal to or greater than the State minimums for each degree type, and (2) the transfer credit courses are part of the curriculum of the new degree program as defined in e-curriculum. Using credit that meets both criteria, up to one third of the credits of the new UC graduate program may be awarded through transfer credit. The relevant number of credits is based on the minimum credits required to earn the advanced degree starting from the minimum degree qualification (usually a baccalaureate degree). Note that for doctoral students the transfer credit total will include any use of the ODHE allowance of up to 30 credits for a prior master’s degree. Course Exemption for Prior Knowledge, Without Credit Faculty in a program have the option to provide students with an examination to determine if accumulated knowledge is sufficient to be exempted from specific courses in a graduate curriculum (e.g., continuing education courses in some professional fields may provide a background that eliminates the need to take introductory courses). The form and content of that examination is at the discretion of the program. When such exemptions are granted, the student does not earn graduate credit for such knowledge. The credits required to complete their UC graduate degree remain unchanged, and the student will take alternative coursework (approved by the graduate program director) to advance their knowledge. 24 Multiple Degree Exemptions a. If the graduate faculty from a UC program has participated in designing and/or presenting the curriculum at another institution, shared degree programs between the institutions can deviate from these rules with prior approval of the Graduate College and their college leadership. In no case will a UC degree be awarded if more than 50% of the curriculum is offered by non-UC faculty. b. Dual degree programs can combine two UC graduate degrees into a single curriculum if approved by the University. Approved dual degree programs can share up to one-third of the combined credits of the two degrees, but the total count of unique credits to earn both degrees must always be equal to or greater than the State minimums for each degree type. Enrolling in Non-UC Classes through the Greater Cincinnati Collegiate Connection The University of Cincinnati is a member of the Greater Cincinnati Collegiate Connection. GC3 classes are those not generally available at the University of Cincinnati but which can be used to satisfy degree requirements. The student must have met all tuition commitments at the University of Cincinnati and must observe all regulations of the host institution. For additional information, participating institutions, and registration instructions, consult the Greater Cincinnati Collegiate Connection page of the Registrar’s Office website. Approval is at the discretion of the program. Graduate Credit for Undergraduate Students Any program may allow juniors or seniors to register for graduate courses for graduate credit before those students have completed the baccalaureate degree. It is recommended, if the program permits such registration, to limit the privilege to students with senior status and a grade point average of at least 3.000 (higher in some programs). This is evidenced by a written request from the student that is signed by an authorized member of the graduate program. Upon approval by the graduate program and the course instructor, graduate credit will be given for the courses. A maximum of 12 semester graduate credits can be earned in this manner. Credit will not be given toward both graduate and undergraduate degrees for the same course. Graduate Credit Earned in 6000-Level Courses In fall 2016, all 6000-level courses became graduate only. In the past, 6000-level courses were available for either undergraduate or graduate credit (to earn graduate credit, students selected the graduate level designation (G) in these courses, indicating that additional work was required beyond that required of undergraduates in the course). PLEASE NOTE: with the transition to the new use of course numbers, there will be no change to the graduate (or undergraduate) credits earned previously in the pre-fall-2016 version of these courses. GRADING Final Exams Exams are held during the last week of the semester after classes have ended. For each term’s full final examination schedule, consult the Calendars page of the Registrar’s Office website. 25 Make-up Final Exams Special policies may govern the taking of missed final exams. Students and faculty members should check the college office or program office for specific details. Every student is responsible for the material presented in their class. Arrangements for make-up work and tests are determined by the instructor. Absences incurred by students officially representing the university will be excused, provided that official notification of such absence has been given in advance to the instructor. Grade Reports End-of-term final grades may be viewed in the Catalyst student portal immediately following submission of final grades by the instructor. Grade reports include total graduate hours and hours for the current semester. The student’s grade report differentiates between “units taken” (course credits the student enrolled in but did not complete successfully or which are still pending a final grade) and “credits passed” (course credits successfully completed with a final grade other than F). These values are posted on the student’s transcript as attempted hours and earned hours. A graduate grade point average (GPA) is calculated each semester. Approved transfer credits from other institutions are included in the sum of credits earned, but grades for those credits are not included in the GPA. All graduate work, regardless of the University of Cincinnati college in which the work was done, is accumulated in these tallies. For this reason, if a student record includes UC graduate courses that do not count towards the degree, this GPA may differ from the calculation of GPA in program coursework (a minimum 3.000 program GPA is essential to earn a graduate degree). The I incomplete grade is awarded as a course grade (without grade point assignment) at the end of a term when a significant portion of course work has been satisfactorily completed, but not all of the required course work has been completed. The incomplete grade is appropriate when the completed course work is of passing quality and the student has had such hardship that completion of the remaining course work within the term timeline would present an additional hardship. The instructor who assigns the incomplete grade should set a specific date by which the student must complete the remaining course work, recognizing that time must be available for any final evaluation and grade change to be made, prior to the deadline when the grade converts to an F. The deadline is one year to the last day of exams. (Please check the Office of the Registrar’s website for the specific date.) The student must work with the instructor to develop an agreement that indicates the date by which the remaining course work is to be completed and submitted to the instructor. The instructor is not obligated to provide the student with a full year to complete the remaining course work. If the remaining course work is completed within the time period agreed upon by the instructor and the student, and that completion occurs within the one year, then the instructor will submit a change of grade online (in Catalyst) based on the quality of the remaining work. If no specific time for completion is set by the instructor, the student has one year (from the end of the term in which the incomplete was assigned) to complete the remaining course work and submit it to the instructor in time for evaluation of the work and a final grade to be approved by the Registrar. If the coursework is not completed within the one-year period (i.e., one year from the end of the term in which the I grade was assigned), the I grade automatically converts to an I/F grade which affects the student’s GPA the same as the grade of F. For the complete graduate grading scale and a definition of all grades, consult the Grading Scales and Definitions page of the Registrar’s Office website. 26 Grades Assigned to Research Courses That Are Repeated If students are working on dissertation or thesis research, they should be registered in the appropriate research course (e.g., Individual Dissertation or Individual Master’s Thesis), and the course work should be given a final grade each semester. The use of P/F for such courses is strongly recommended to avoid undue influence on GPA due to individual grading practices and the large amount of research credit awarded, but it is recognized that some programs will want to use letter grades. “Placeholder” grades such as SP and NG should not be used. Regardless of the grading scheme selected, it must be consistently applied across an entire program. If a program faculty cannot agree on a single grading scheme, the program must use the P/F choice. Students should be graded for each semester based on their progress and achievements in that semester. Note: The definition of a “research course” is a course outside of formal class work or instruction that allows a student to be registered as a graduate student while they are working independently on their thesis or dissertation under the guidance of their advisor or dissertation committee. This policy also applies to internships and other multiple semester or series courses. Pass/Fail Grades An instructor may request approval for pass/fail grading for an individual student in their class prior to the first day of class. A graduate student can take a course on a pass/fail basis (P or U grade) when approved by their advisor and instructor. An instructor is not required to accept a student on such a basis. Grade Changes A change of grade is only appropriate for an I, an NG, an SP/UP, or an error made by the instructor. SP/UP grades must be converted to a final grade by the end of the following semester. Instructors may change an I or NG grade online in Catalyst for approximately one year (the interval extends from the initial grading semester to the last working day of the same term the following year). To request a change of grade for a non-research course for graduate credit after this period, or an F grade any time, the instructor must do an official, paper change of grade form and forward to the Registrar’s Office. Previously recorded grades may not be changed to W or I after the close of the term. Both I and W grades must be awarded while the course and semester are still in progress and cannot be awarded retroactively. W reflects an official withdrawal that took place by the deadline outlined in the academic calendar, and I indicates work remains to be completed and the student did not earn a final grade. Students cannot withdraw from a class retroactively or be given additional opportunities to seek a different final grade retroactively. If an F is in a non- required course or the required course has since been retaken for a passing grade, the Program Director at certification may request a waiver of the F grade from the Associate University Dean of the Graduate College. No Grade Replacements for Graduate Students Please note, if a graduate student re-registers and re-takes a course, both grades will be included in the student’s overall GPA. There are no grade replacements at the graduate level. The process to make a grade change cannot be initiated by a student. The course instructor of record must send the form. At no time should a student be in possession of a change of grade 27 form. Note: that an I/F grade is governed by the same policies that govern the F grade and is weighted into the student’s GPA in the same fashion. 28 MAINTAINING GRADUATE STUDENT STATUS Maintaining graduate student status signifies that the student is actively engaged in making progress towards their degree and meeting program requirements. Graduate status determines which students may use facilities of the university, may participate in the university governance process and student organizations, and are covered by the Student Code of Conduct and the grievance process. A University of Cincinnati graduate student must hold the equivalent of a baccalaureate or higher degree and must have been accepted for admission into graduate study by the appropriate graduate program. MINIMUM CREDITS/REGISTRATION REQUIREMENTS To maintain graduate status at the University of Cincinnati, students must register at UC for at least one graduate credit that contributes to degree requirements (as determined by the graduate program) in an academic year. If the student is registered for at least one graduate credit in the academic year (fall through summer), they will maintain graduate student status for the entire academic year. Credits that are audited or in which a student receives a W, UW or F do not count toward the minimum credit requirement. Any student that does not register in the fall of an academic year and has not registered for the previous two academic years will automatically be exited from their program. A student whose status has thus automatically terminated will no longer be considered a graduate student but may seek reinstatement (see Reinstatements). Also note that students wishing to use many UC resources, such as university housing, campus laboratories, office space, equipment, campus recreation center, computer labs, etc. may need to be registered. Students should check with specific facilities for their particular requirements. Dual Degree Programs In dual degree programs, students must be registered for at least one graduate credit that contributes to degree requirements in one of the two programs (as determined by the program) during the academic year in which they graduate with their dual degrees. FULL-TIME COURSE LOAD Students must be registered for 10 or more graduate credits each semester to be considered full- time students, 12 if holding a university sponsored graduate assistantship or fellowship. Audit or undergraduate credits do not count toward full-time status and cannot be supported by a University Graduate Award. PART-TIME COURSE LOAD Students who can devote less than full time to graduate study may register for the number of graduate credits judged by their program advisors to represent the appropriate fraction of a full- time load. However, doctoral students must satisfy the Board of Trustees residency requirement, which requires that they have one year of full-time study, which is defined as being enrolled for at least 10 graduate credits in their program in each of two semesters (including summer semester) during a span of three consecutive semesters. Full-time UC employees using their tuition remission benefit to complete a part-time doctoral program may request a waiver of this requirement from the Associate Dean of the Graduate College. (See Doctoral Degrees Policies and Procedures, Course of Study.) 29 REDUCED COURSE LOAD (INTERNATIONAL STUDENTS) Once an international student has finished all required course work and will no longer be enrolling full time, she/he may choose to enroll with a reduced course load. Visit the F-1 Students page on the UC International Services website, referring to the “Enrolling part-time as a graduate student who has finished all course requirements” section for the link to the form and more information. MEETING PROGRAM REQUIREMENTS Students who continue on active status in their program without interruption are responsible for meeting all current requirements, including requirements that are revised since the student first entered the program. Students readmitted into their program are responsible for meeting the program requirements applicable at the time of readmission. MINIMUM ACADEMIC PERFORMANCE The Graduate College requires that a student must have an aggregate grade point average (GPA) of at least 3.000 to obtain a graduate certificate or degree at the University of Cincinnati. The GPA used for this purpose should aggregate graduate-level coursework completed since the student’s matriculation into the particular degree program from which the student seeks graduation, and only courses taken that are applicable to the degree/certificate count towards this GPA. Transfer graduate credits may also be accepted at the discretion of the degree program (and within Graduate College limits), and any transfer credit coming from courses taken at the University of Cincinnati will contribute to the GPA certified for graduation. Please note that programs establish minimum academic standards that may exceed the overall university standards provided above, so students need to be aware of their program requirements. Note that there is no grade replacement for graduate students, so any failed graduate courses remain in the student record. However, if a student retakes a failed course and obtains a passing grade, and if the GPA calculated without that original failing grade is above 3.000, then the program can petition the Graduate College for a waiver of the GPA requirement for graduation. Multiple failing grades, or multiple attempts to pass a course, are examples of why a petition may be denied. INTERNATIONAL STUDENTS, MAINTAINING IMMIGRATION STATUS The student has responsibility for maintaining their immigration status. Key information on maintaining immigration status on the F-1 Students page on the UC International Services website. TIME TO DEGREE Time to Degree and Extensions The Board of Trustees stipulates that all degree requirements must be completed within a defined span of years starting from the date of matriculation into the degree program, regardless of whether students are full time or part time. This span is 5 years for the master's degree and 9 years for the doctoral degree. Under extenuating circumstances, a program may petition, on 30 behalf of the student, for extension of the time limit for attaining the degree. Prior to the program petitioning the Graduate College for an extension, the student must communicate with the student’s program advisor and/or director to review the student’s degree completion to date and form a plan for degree completion. All this information should be included in a petition submitted to the Graduate College, which will review this petition and make a final decision. Students who have not completed degree requirements by their time-to-degree limit are on inactive status regardless of course registration in each academic year. Such students are required to apply for an extension of their time-to-degree. Reinstatements Students who have not been registered for at least one graduate credit hour at UC that contributes to degree requirements (as determined by the graduate program) in an academic year (fall-summer) are considered inactive. Reinstatements are available to students who have been inactive for less than three academic years. Students who have not been enrolled for any credits in their graduate program for three or more consecutive academic years are not eligible for reinstatement and must apply for readmission to the university. (See Readmission.) Readmission is processed via the reinstatement petition in Gradtracker. Applications submitted by the student via the admissions system will not be accepted. To request reinstatement, a program must petition the Graduate College on behalf of the student. Prior to the program petitioning the Graduate College for a reinstatement, the student must communicate with the student’s program advisor and/or director to review the student’s degree completion to date and form a plan for degree completion. The program coordinator, director or advisor will begin the reinstatement process in Gradtracker. The originator of the petition in Gradtracker will upload documents in one pdf to include degree completion information to date and a written plan for degree completion. The Graduate College will review the packet and if approved the student will also need to approve the petition and fee. If a student wishes to be reinstated so they can register and take classes, reinstatement petitions must be submitted in Gradtracker prior to the start of the first day of the term to be eligible for reinstatement in that term. Petitions received before the census date (the 15th calendar day of the term), the term may be considered for the current term. Petitions received after the census date will be considered for the following term. If a student wishes to be reinstated so they can graduate without taking any further classes, petitions for reinstatement (and extensions) must be submitted in Gradtracker no later than 3 weeks prior to graduation for the student to be certified for graduation in that semester. Petitions received after this time will not be approved in time for graduation that same semester. Late petitions will be held through the next processing period and a decision will be granted in time for the next graduation. A reinstatement fee equal to the current tuition for one graduate credit for each of the unregistered years up to a maximum of 3 years is assessed. The reinstatement fee will be added to the student’s bursar account and will become part of the student bill. Reinstatement fees are due 30 days after formal approval unless a payment plan is agreed to with the bursar’s office. If the fee is not paid by the due date, service charges may accrue, a block may be placed on future registrations and/or on the release of UC diplomas and official transcripts, and the account may be sent to collections. 31 Readmission Graduate students who have been inactive (not enrolled in their program) for three or more academic years are not eligible for reinstatement and must apply for readmission to the university. Readmission does not change the student’s original entry date. Time to degree will be calculated from the student’s first entry date. The program may petition the Graduate College on behalf of the student for readmission. Additionally, if the student has exceeded time to degree limits, the program should also petition for an extension with the readmission to specify the term in which the student will graduate. The readmission process is an opportunity for the program to carefully consider the former student’s progress and length of time between the student’s inception into the program and completion of remaining requirements. This may result in readmission, readmission with conditions, or denial of readmission. Prior to the program petitioning for a readmission, the student must communicate with the student’s program advisor and/or director to review the student’s degree completion to date and form a written plan for completing remaining degree requirements and removing any standing impediments to graduation, including any I/F, F, NG grades and courses required for graduation. This plan should include a timeline that describes the student's progress toward degree completion to date. The program coordinator, director or advisor will begin the readmission process in Gradtracker and will upload documents in one pdf to include degree completion information to date and a written plan for degree completion. The Graduate College will review the packet and if approved, the student will need to approve the petition and fee as well. Upon approval, the student must pay a readmission fee equivalent to in-state tuition in effect at the time of readmission for three graduate credits. The student will also be asked to complete, sign, and return the supplemental form for residency requirements to the Registrar’s office. Leaves of Absence Under special circumstances, graduate students may apply for leave of absence from formal study at the university for a specific period up to one year. Assuming appropriate documentation is provided, the circumstances justifying a leave include but are not limited to personal or family medical conditions, call to active military duty, parental leave, or death in immediate family. The rationale must be documented by the applicant. An approved leave of absence preserves the student’s status in the degree program, and the time off will not be counted against the time limits for awarding degrees. Consequently, registration is not required during the leave period. A leave may be renewed past the first year, for up to a maximum of five years, depending on the individual circumstances. Renewal of a leave is subject to the approval of the program, college, and the Graduate College. While the Graduate College leave of absence is only necessary for students who will be unable to register for a full academic year, programs may have more strict and specific registration policies and leave of absence policies. Students should also consult their program handbook if there is a legitimate need not to register for any amount of time. 32 To apply for a leave of absence, a student must complete the Request for Leave of Absence Form and upload the appropriate documentation (e.g., doctor’s letter or military orders) through Gradtracker. The program will approve through Gradtracker as well. Once the program has approved the request, the Graduate College will review the petition and if approved, the student and program will receive an email notification through their UC email. Note: A student on a leave of absence is placed on inactive status and their Catalyst record is discontinued, to be reactivated upon their return. While on inactive status, they will not be eligible for student health insurance and may be unable to use many UC resources. Students with financial aid or student loans should confer with the Financial Aid Office prior to requesting a leave of absence to ascertain the consequences of a leave on their loan status. Students should also be aware that any scholarships or assistantships are not guaranteed to be available when a student returns from a leave of absence. Withdrawal from Program Students must notify their program in writing and copy the Graduate Admissions Program Manager regarding their intent to withdraw from their programs. Dismissal from Program Students must consult with individual programs concerning dismissal policies. If a program dismisses a student, the program must copy the Graduate Admissions Program Manager on the notification to the student. 33 MASTER’S DEGREE POLICIES AND PROCEDURES COURSE OF STUDY The course of study for the master’s degree is planned with the advisor and is subject to approval by the program graduate committee or its equivalent. It must show a reasonable degree of concentration on interrelated subjects. Programs will recommend students for degrees only after students have developed and demonstrated the necessary knowledge and skills and have fulfilled all other university requirements. At least once an academic year, the graduate program director or the graduate student’s advisor shall inform the student in writing of their academic progress in the master’s degree program. An annual Academic Progress Report or some other form of formal evaluation of progress is required throughout each student’s program. Students must take a minimum of one graduate credit that contributes to degree requirements (as determined by the graduate program) per academic year (fall-summer) to maintain active status. If a student does not maintain active status, they may apply for reinstatement within three years or apply for readmission to their program thereafter. There are fees associated with these steps. (See Maintaining Graduate Student Status, Reinstatements and Readmission.) CREDIT HOUR REQUIREMENTS The University of Cincinnati is on a semester system. Although qualification for the master’s degree is not based exclusively upon the completion of a definite number of hours of course work, the satisfactorily completed graduate work must consist of the equivalent of a minimum of one academic year of full-time graduate study consisting of at least 30 graduate semester credit hours, including any thesis or capstone project. Credits earned in professional law or medicine programs are not applicable to the 30-credit minimum. CANDIDACY There is no formal candidacy status for the master’s degree. However, some programs do have defense requirements, so each student should confer with their advisor or program director to ascertain the requirements of their specific program. CULMINATING EXPERIENCE: THESES and CAPSTONES Every degree requires a culminating experience that is designed to integrate and apply the knowledge and learning gained from the curriculum, and demonstrate mastery of the subject matter in the degree. A master’s thesis is required by some programs, and a master’s capstone project/experience is required in others. Each master’s degree student undergoes an individual evaluation process at the end of their program. Thesis Preparation, Evaluation and Submission Process Preparation of a thesis demonstrates the student’s ability to communicate and to evaluate critically. Information about preparing an electronic thesis is available on the Graduate College 34 website. The student should consult with their program office for additional forms required other than what appears on the graduation checklist. A student must note any relevant deadlines defined by their program, and work with their program leadership to form a thesis committee composed of at least two UC faculty members, at least one of whom must be a member of the university graduate faculty. The thesis committee can guide the student in their exploration of the topic of the master’s thesis, and is responsible for final evaluation of the thesis. The student must submit the completed thesis to the thesis committee for critical evaluation, by the deadline required by the program or their thesis committee. Students who have written a thesis are expected by the Graduate College per their program requirements to make a public announcement of their thesis defense, including time, date, and title of the public presentation. The format for thesis evaluation is decided by the academic unit offering the graduate degree. Faculty with emerit status may remain on the committee if they were members when the proposal was accepted and were full-time tenured, university graduate faculty. A faculty member originally on a student’s committee who leaves UC to take an academic position elsewhere may also continue to serve on the student’s committee if both the faculty member and the student agree to continue the relationship. However, neither an emerit professor nor a faculty member from another institution may serve as chair of the committee, since they are no longer eligible to be university graduate faculty. Once a thesis has been approved by their committee, the candidate for the master’s degree must submit an electronic thesis by following the current instructions online at the Graduate Collge's Graduation page. Be careful to adhere to any deadlines for submission, or graduation will be delayed. Capstone Process Master’s students who are not required to complete a thesis should consult their academic programs about the requirements and procedures for the capstone experience in their programs. In some programs, the final capstone event may be in the form of a comprehensive exam or research project; in others, the final evaluation may appropriately be a recital, performance, or exhibition. The specific nature of the final evaluation is determined by the academic unit offering the master’s degree program, but it must include evaluation by full-time faculty at the University of Cincinnati. If questioned, the appropriateness of a final evaluation will be decided by the University Graduate Council. GRADUATION One semester prior to the semester in which a student anticipates graduating, the student should: • confer with their program office staff; • consult the Graduate College’s website for deadlines, instructions on submitting their electronic thesis; • visit the Graduate Collge’s website to determine if they are defined as a thesis or non- thesis student, or consult with their program; and • talk to advisor about whether an embargo is needed. 35 Application to Graduate Students must: (1) complete academic requirements and (2) complete the official online Application to Graduate by the deadline for the semester in which they expect to graduate. NOTE: for all graduate students, the application for graduation is started at the Graduation page, and not within Catalyst. Start an application for graduation early in the semester you plan to graduate. Deadlines posted on the Graduation Deadlines page are firm and failure to meet them will delay students’ graduation until the following semester, when they must then submit a new application for their revised graduation date. A student graduating from a dual degree program must make a formal application for graduation for each program (see details in next section). All students applying to graduate will be assessed a non-refundable graduation application fee. The fee will be assessed each semester a student applies for graduation. Students who have applied for graduation and learn later they will not be graduating must be removed from the graduation list before they can apply again for any future semesters (programs must notify the Graduation Program Manager to remove a student). When the application for graduation is complete, the student receives an email receipt for payment of the graduation application from the registrar’s office. If this receipt is not received, promptly notify your program, as your graduation application may not be completed. Some PhD programs incorporate a master’s degree. Students should contact their program for help in adding this additional degree. Graduation from Dual Degree Programs The online Application to Graduate will allow a student to apply for graduation from both degree programs in an official dual degree program. Each of the two programs must follow and complete the certification processes and procedures necessary to facilitate a student’s graduation from their own program. In dual degree programs, students must be registered for at least one graduate credit that contributes to degree requirements in one of the two programs (as determined by the program) during the academic year in which they graduate with their dual degrees. Certification for Graduation (Certify Online) The finalization and submission of a student’s Application to Graduate will activate the process by which the student will be certified for graduation, and the following requirements must be met. The student should confer with their program office one-two weeks after the application period has ended to assure that any problems related to these requirements (reinstatements/ extensions, or grade changes) are resolved in a timely manner and avoid delay of graduation until a subsequent semester. Specifically, the student’s records will be reviewed to verify satisfaction of the following requirements: • finalization and submission of their online Graduation Application by the deadline; 36 • instructor’s submission of passing grades for their final semester credits; • removal of all I grades from their transcript; • removal of all UP/SP grades from unapproved courses and/or the final semester in the approved courses were taken; • assignment of letter grades rather than UP/SP grades for courses in the final semester of the student’s program; • removal of previously awarded NG grades and blank grade awards; • confirmation of satisfactory repetition or waiver of required courses in which an F was originally received; • confirmation of completion of work and changes of I grades within the one-year limit; • confirmation that the student was registered for at least one credit in their graduate program in each academic year, including the year of expected graduation; • confirmation that the student completed degree requirements within the prescribed time- to-degree; • satisfactory completion of at least 30 graduate credits completed to the satisfaction of the student’s program; • completion of all program requirements for the degree; • 3.000 GPA has been earned while a matriculated graduate student in the program; • if a thesis is required, upload the electronic thesis (ETD) with chair approval by the deadline date, which is posted on the Graduation Deadlines website. Note: The requirements explained here are university requirements. Students must contact their program’s office for any additional program-level requirements or deadlines that must be completed prior to graduation. Please see the Doctoral Hooding and Master’s Recognition Ceremony section for details on the event. CONTINUING TO A DOCTORAL PROGRAM For a UC master’s student continuing to a doctoral program in the same program area, the student will fill out the application in the graduate admissions application system, and the graduate application fee is waived. 37 DOCTORAL DEGREE POLICIES AND PROCEDURES COURSE OF STUDY The course of study for the doctoral degree is arranged with each student by their advisor and reviewed by the program’s graduate committee or its equivalent. The program should provide a concentration and breadth of study for the student to develop competence in research, scholarship, teaching, and professional performance in general, with knowledge of their chosen specialty in relation to allied branches of learning. A written assessment of performance for each doctoral student is required at the end of their first year; an annual Academic Progress Report or some other form of formal evaluation of progress is required throughout each student’s program. CREDIT HOUR REQUIREMENTS The doctoral degree will be granted for no less than the equivalent of three years of full-time graduate study. Individual program requirements vary, but eligibility for graduation typically requires a minimum of 90 graduate credits beyond the bachelor’s degree. Doctoral students with a prior master’s degree may petition their program to allow up to 30 transfer credits from the master’s degree towards their doctoral degree. Degree credits must include at least 7 hours in dissertation research. Some program credit requirements may be higher. The last 30 credits must be completed under the direction of University of Cincinnati graduate faculty. The degree will not be granted solely on the basis of the accumulation of the required number of credits. A program will recommend students for degrees only after they have developed the necessary intellectual maturity and have fulfilled all other requirements of the program and the university. RESIDENCY AS FULL-TIME STUDENT Prior to admission to doctoral candidacy, all doctoral students shall complete a residency requirement by enrolling in 10 graduate credit hours (12 if funded by a Graduate Assistantship) per semester for two out of three consecutive semesters of study (including summer). Part-time students are not exempt from enrollment requirements to achieve residency. However, full-time UC employees using their tuition remission benefit to complete a part-time doctoral program may request a waiver of this requirement from the Associate Dean of the Graduate College. CANDIDACY, QUALIFYING EXAM The Graduate College does not currently track time to candidacy, but encourages programs to implement candidacy exams early in their programs to allow the students optimal feedback on their aspirations and research. Doctoral students are required to complete a program certification process according to the program’s established standards. The student must have at least a 3.000 grade point average in doctoral coursework and fulfill all other pre-candidacy requirements specified by the doctoral program in which the student is enrolled. Upon completion of these requirements, the student will receive a formal letter from the Graduate College informing the student of admission to candidacy. 38 UNIVERSITY GRADUATE FACULTY ROLE In accordance with the university’s Board of Trustees’ rule (50-77-11) (B) (2), only university graduate faculty are permitted to chair thesis or dissertation committees. The Graduate College appropriately identifies members of the university graduate faculty. Faculty members are nominated for graduate-faculty status by the program most closely aligned with the academic unit holding their primary academic appointment, and with the approval of their college dean or associate dean in charge of graduate education (from whom the nomination should arrive to the Graduate College). Faculty members holding any type of faculty appointment may be eligible for college-initiated nomination to the graduate faculty, the decision to be made based on an evaluation of the individual curriculum vitae and research and creative profile of the nominee. Criteria for nomination are formulated by individual programs and used by the Graduate College in adjudication. DISSERTATION Each PhD and EdD student must produce and defend a dissertation showing high scholarly achievement based on their original research. The student is required to submit an electronic document as evidence of this research. Students in all other doctoral programs should consult their academic programs regarding requirements and procedures for the capstone experience required in their programs. Dissertation Advisor and Committee When the student has been admitted into doctoral candidacy and has selected a dissertation subject and dissertation advisor, a dissertation committee should be appointed as soon as possible. The dissertation advisor must be qualified to serve as the chair of the dissertation committee, meaning this faculty member must be a member of the university graduate faculty and all members of the committee will be appointed by the Graduate College upon recommendation of the program director or director of graduate studies (in consultation with the committee chair and student). Students have the right to request a change in the committee but must do so in consultation with the graduate program director and their program must make the change in GradTracker. Preferably, the dissertation committee will include at least one person from outside the program, who might be faculty from the University of Cincinnati or another institution. A dissertation committee must be composed of a minimum of three UC faculty members. Members of the university graduate faculty are eligible to serve on all thesis and dissertation committees. In addition, all tenured and tenure-track faculty members may serve on all thesis and dissertation committees (even if they are not members of the university graduate faculty, meaning they may not serve in the chair role and cannot act as primary advisors). Other types of UC faculty members may serve on committees if the appointing unit demonstrates that their expertise is beneficial for the dissertation project. Programs should make such requests to the Graduate College in advance, to be ascertained on a case-by-case basis. Neither an emerit faculty member nor a faculty member from another institution may serve as the chair of the committee. Emerit faculty may remain on the committee if they were members when the proposal was accepted. A faculty member originally on a student’s committee who leaves UC to take an academic position elsewhere may also continue to serve on the student’s committee if both the faculty member and the student agree to continue the relationship. If a non-UC faculty member or appropriate professional practitioner has special expertise in a dissertation topic, 39 such a person may be added to the dissertation committee if they are nominated by the candidate and approved by both the chairperson of the dissertation committee, the director of graduate studies for the academic unit involved and the Graduate College. All such individuals serve as a full voting member of the dissertation committee without compensation from either the university or the candidate and would serve in addition to the minimum number of three qualified full-time UC faculty. A copy of the completed dissertation must be submitted to each committee member for critical evaluation, with sufficient time for review as determined by the dissertation committee. If it is considered satisfactory with respect to form and content by the committee, a final defense of the dissertation can be scheduled. Final Defense of Dissertation Students should check with their program office for the final deadline for their dissertation defense. The student’s final defense of the dissertation will be open to the public and all members of the academic community. Students are required to enter details of their dissertation defense, such as time, date, and location, online at the Graduate College website through the Graduation checklist steps. Begin at the Graduation webpage. One can also browse scheduled dissertation defenses by visiting the Upcoming Dissertation Defenses page. The candidate answers questions posed by members of the committee and other members of the audience following an oral presentation of their dissertation. At the conclusion of the defense, the committee will withdraw, make a decision with regard to the acceptability of the dissertation and its defense, and report its decision to the candidate. At least ¾ of the voting members of the dissertation committee (including at least one representative of each major area involved, in the case of interdisciplinary programs) must approve the dissertation. When the student’s dissertation committee chair has approved a defense, the student should assure that they have met all requirements for graduation including those in the graduation information obtained online. Use of a Moderator Although an outside moderator is not required, a moderator may be assigned by the Graduate College dean upon the request of the candidate, the chairperson of the dissertation committee, or the person empowered to approve the composition of a dissertation committee (the director of graduate studies for the academic unit involved). Moderators should be members of the university graduate faculty from outside the academic unit involved. The duties of the moderator are limited to observing the oral defense of the dissertation and reporting in writing to the Graduate College dean on the academic propriety of the proceedings. Submission of Dissertation After a dissertation has been approved, the candidate for the doctoral degree must submit their electronic dissertation by following the current instructions found at the Electronic Thesis and Dissertation Information webpage. Students in all other doctoral programs should consult their academic programs for the capstone experience required in their programs. Deadlines are posted at the Graduation Deadlines page. • All thesis/dissertations must be electronically submitted by the student and approved by the advisor. Students log in via the link available on the Graduation webpage. 40 • Advisors are sent an email when the student submits for their approval, and the advisor then logs in to review/approve. • Once approved by the chair, the student is notified by email. • A Graduate College approval email is sent to the student once reviewed. • The program is copied on all email correspondence during the Electronic Thesis/Dissertation (ETD) approval process. GRADUATION One semester prior to the semester in which a student anticipates graduating, the student should: 1. Confer with their program office staff. 2. Consult the Graduation page on the Graduate College’s website for deadlines, instructions on submitting their electronic dissertation, and doctoral hooding ceremony information. 3. Talk to advisor about whether an embargo is needed. Application to Graduate Students must: (1) complete academic requirements and (2) complete the official online Application to Graduate by the deadline for the semester in which they expect to graduate. Deadlines are firm and failure to meet them will delay students’ graduation until the following semester, when they must then submit a new application for their revised graduation date. All students applying to graduate will be assessed a non-refundable graduation application fee. The fee will be assessed each semester a student applies for graduation. Dual Degree Programs Graduation The online Application to Graduate will allow a student to apply for graduation from both degree programs in a dual degree program. Each of the two programs must follow the certification processes and procedures necessary to facilitate the student’s graduation from their own program. In dual degree programs, students must be registered for at least one graduate credit that contributes to degree requirements in one of the two programs (as determined by the program) during the academic year in which they graduate with dual degrees. Graduation Requirements for Doctoral Degrees Students must be registered for at least one graduate credit that contributes to degree requirements (as determined by the graduate program) during the academic year in which they graduate from that program. Doctoral students must also complete degree requirements within a nine-year period unless they have an approved extension (see Maintaining Graduate Student Status, Time to Degree). They should contact their program offices for any additional program requirements or deadlines to be completed prior to graduation. Certification for Graduation (Certify Online) Finalization and submission of a student’s Application to Graduate will activate the process by which the student will be certified for graduation, and the following requirements have been met. 41 The student should confer with their program office one-two weeks after the application period has ended to assure that any problems related to these requirements are resolved in a timely manner and avoid delay of graduation until a subsequent semester. Specifically, the student’s records will be reviewed to verify satisfaction of the following requirements: • finalization and submission of their online Application to Graduate by the deadline; • instructor’s submission of passing grades for final semester credits; • removal of all I grades from transcript; • Removal of previously earned NG grades and blank grade awards - removal of all UP/SP grades from unapproved courses and/or the final semester in which the courses were taken; • assignment of letter grades rather than UP/SP grades for courses in the final semester of the student’s program; • confirmation of satisfactory repetition or waiver of required courses in which an F was originally received; • confirmation of completion of work and changes of I grades within the one-year limit; • confirmation that the student was registered for at least one credit in the graduate program in each academic year, including the year of expected graduation; • confirmation that the student reached candidacy and has a valid dissertation committee; • degree requirements completed within prescribed time-to-degree; • satisfactory completion of sufficient graduate credits. In general, doctoral degrees require at least 7 research credits (many programs have higher requirements), within a total of at least 90 graduate credits for students who do not have a prior master’s degree, or require a total of at least 60 credits for students beyond the master’s degree. Please note that individual program credit requirements can vary widely. • completion of all program requirements for the degree; • 3.000 GPA has been earned while matriculated in the graduate program; • if a dissertation is required, upload the electronic dissertation (ETD), following the instructions on the Electronic Thesis and Dissertation Information page, for chair approval by the deadline. Note: The requirements explained here are university requirements. Students must contact their program office for any additional program-level requirements or deadlines that must be completed prior to graduation. GRADUATE CERTIFICATE VERIFICATION FOR UC TRANSCRIPT ENDORSEMENT In order for students to have their UC transcript endorsed with an earned certificate, students must apply for graduation and the program must approve the record through certify online just like the master's or doctoral students. DOCTORAL HOODING AND MASTER’S RECOGNITION CEREMONY Doctoral and master’s students who are graduating or who have graduated during the academic year will receive an invitation from the Dean of the Graduate College to participate in the university’s prestigious Doctoral Hooding and Master’s Recognition Ceremony held each semester. Please visit the commencement ceremony’s website for up-to-date details or 42 the Graduate College’s Graduation webpage. This is a joyous occasion in which students celebrate their accomplishment with family and friends as they are recognized by faculty and university leadership. Doctoral participants will be adorned with their hoods during the ceremony, by either their faculty mentor or the dean of their college. Graduates must confirm their intent to participate by reserving a seat online for the celebratory event and providing current home and email addresses for notification purposes. If you wish to be hooded by your faculty mentor, discuss the date with them to make sure they can attend. 43 INSTITUTIONAL RULES, POLICIES, AND PROCEDURES PROGRAM STANDARDS This Graduate Handbook clarifies minimum university-level requirements and policies that apply to all graduate students throughout the University of Cincinnati. Beyond these, each student is also expected to adhere to requirements, policies, and procedures specific to their own degree program and college. All graduate programs must publish in writing in accessible format the minimum academic standards for each graduate program offered, including the following: • minimum grade point average, including grades earned in required courses; • acceptable grade distribution, including grades earned in required courses; • nature and number of programmatic examinations, such as preliminary or qualifying, and the consequences of failing all or part of each examination; • specified research requirements; • a time-related definition of normal progress for all full- and part-time students; • standards and procedures for the mandatory annual review of academic performance; • standards and procedures for probation, suspension, and dismissal from the program. RECORDS PRIVACY, FERPA, AND THE RIGHT TO REVIEW The Family Educational Rights and Privacy Act of 1974 (FERPA), is the federal law that governs the release of and access to student education records. FERPA affords students certain rights with respect to their education records. For the complete FERPA information, consult the FERPA and Records Privacy page of the Registrar’s Office website. NOTICE OF NON-DISCRIMINATION The University of Cincinnati does not discriminate on the basis of disability, race, color, religion, national origin, ancestry, medical condition, genetic information, marital status, parental status (including status as a foster parent), sex, age, sexual orientation, veteran status, military status (past, present, or future), or gender identity and expression in its programs and activities. The university does not tolerate discrimination, harassment, or retaliation on these bases and takes steps to ensure that students, employees, and third parties are not subject to a hostile environment in university programs or activities. The university responds promptly and effectively to allegations of discrimination, harassment, and retaliation. It promptly conducts investigations and takes appropriate action, including disciplinary action, against individuals found to have violated its policies, as well as provides appropriate remedies to complainants and the campus community. The university takes immediate action to end a hostile environment if one has been created, prevent its recurrence, and remedy the effects of any hostile environment on affected members of the campus community. UC is committed to the ideal of universal Web accessibility and strives to provide an accessible Web presence that enables all university community members and visitors full access to 44 information provided on its websites. Every effort has been made to make these pages as accessible as possible in accordance with the applicable guidelines. The University of Cincinnati provides free aids and services to people with disabilities to communicate effectively with us, such as qualified sign language interpreters and written information in other formats (large print, audio, accessible electronic formats, other formats). The University of Cincinnati also provides free language services to people whose primary language is not English, such as qualified interpreters (call 513-556-5503) and information written in other languages. If you need these services, please tell any employee of a University of Cincinnati health program or activity. If you believe that the University of Cincinnati has failed to provide these services or discriminated in another way, you can file a grievance with the Office of Equal Opportunity and Access and/or Office of Gender Equity & Inclusion. You can file a grievance in person, by mail or by email. If you need help filing a grievance, the Office of Equal Opportunity & Access and Office of Gender Equity & Inclusion staff are available to help you. ACADEMIC DISHONESTY Academic dishonesty in any form is a serious offense that cannot be tolerated in an academic community. Dishonesty—including cheating, plagiarism, deception of effort, and/or unauthorized assistance—may result in a failing grade in a course and/or suspension or dismissal from the university. Allegations of academic dishonesty will be processed pursuant to the university’s Student Code of Conduct. After graduation, alumni remain responsible for the academic integrity of the work they performed while a student at the University of Cincinnati. If evidence of academic dishonesty or research misconduct is revealed after the graduation of a student, the Office of Research, the Graduate College, and the university can examine whether such concerns impact the academic integrity of the degree that was conferred on the student, with consequences including but not limited to degree revocation. STUDENT CODE OF CONDUCT The Student Code of Conduct defines behavior expected of all University of Cincinnati students. It is each student’s responsibility to know and comply with the university’s Student Code of Conduct, and sanctions or penalties are outlined. Academic behavior considered to be misconduct is defined in the Student Code of Conduct. The code also addresses nonacademic misconduct (such as disturbing the peace, destruction of property, and theft). Disciplinary procedures are explained in a step-by-step manner, and the procedures for appeal of decisions are stated. In addition to this code, students must adhere to their college’s professional code of conduct and honor codes where applicable. Students should contact the office of the dean for their college to inquire about any applicable conduct and honor codes to ensure compliance. Students can be suspended or dismissed from the university for unprofessional behavior. 45 RESPONSIBLE CONDUCT OF RESEARCH Furthering of research is a major institutional goal of the University of Cincinnati. Research includes not only intellectual activity and exploration designed to expand knowledge and understanding, but also activities in the creative and performing arts designed to interpret and create. Such activities require responsibilities for the ethical and safe conduct of research. Individuals charged with supervision of research, as well as all individuals directly engaged in it, and collaborators of investigators outside their own units are responsible for the quality of the data generated in their own laboratories as well as the laboratories of their collaborators. Everyone shares responsibility for the physical safety and intellectual property of individuals in the responsible conduct of creative scholarship and research. RESTRICTED RESEARCH The right to open exchange of information and opinion in faculty relations with students carries the obligation to avoid comments or violations of confidentiality that would reduce free expression or inquiry by students. Student involvement in industrial proprietary projects should be permitted only when these projects in no way restrict the student’s ability to fulfill their degree requirements, which includes the obligation to publish dissertation results. Faculty members have the right to publish their research findings and the right to protection against retaliation because of displeasure over their conclusions by the public, administration, government, or others. They have the concomitant responsibility to refrain from conducting secret, non-publishable research as part of their university duties. GRADUATE STUDENT GRIEVANCE PROCEDURES The University of Cincinnati provides an opportunity for the resolution of disputes involving graduate students in a fair and collegial manner. The Graduate Student Grievance Procedures establish a formal academic process for graduate students to request review and redress of certain complaints arising out of their academic relationships with their programs, their colleges, or the university. The grievance begins with a mediation process and may proceed, if necessary, through the more formal review and decision or appeal processes. In general, however, it is expected that grievances will be resolved by the parties within their programs. Students are encouraged to seek assistance from the university Ombuds Office for possible resolution before initiating the formal grievance process. Students, faculty and staff should note that Grievance Procedures are not legal protocols. They are, however, effective means by which to resolve conflicts. The Graduate College endorses these procedures and expects all programs and students involved to follow them according to the established guidelines. No outside parties, such as lawyers, ministers, and family members, are allowed to participate in or impose upon the procedures. The Graduate Student Grievance Procedures cannot supplant final sanctions stemming from the University of Cincinnati Student Code of Conduct process. There is a time limit to filing a grievance: it must be filed within 60-90 business days of the alleged improper mistreatment. The procedures are applicable to the following types of grievances: • grievances alleging improper dismissal or suspension from a graduate program, not as a result of the Student Code of Conduct process; • grievances alleging the improper withholding or termination of financial support of any kind; 46 • grievances alleging any other improper treatment, either substantive or procedural, of a graduate student by a university employee or university affiliate except: o allegations of improper evaluation of the quality and/or quantity of academic work, which a student cannot grieve; o allegations of unfair recommendation for employment or further graduate study, which a student cannot grieve; o allegations of discrimination or harassment that are subject to review by the Office of Equal Opportunity and Access or the Office of Gender, Equity and Inclusion. Published November 28, 2023. This version is an update to the 2022-23 AY handbook to reflect changes to the Graduate Scholarship structure and terminology. This version supersedes all previous versions. 47
USER:
How can graduate students receive financial support at the University of Cincinnati?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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<TASK DESCRIPTION> Only use the provided text to answer the question, no outside sources. <QUESTION> [user request] <TEXT> [context document]
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Explain the differences and advantages between carbon fiber and thermoplastics in prosthetic design. Which material would be better for designing leg limbs for individuals who like to participate in sports?
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There are two common types of materials that are used in the field of prosthetics and orthotics; these materials are thermoplastics and carbon fiber. Each of these types of materials have different uses and applications and are used based on the needs of each patient and the type of device they are receiving. Carbon is among one of the most valuable materials used in orthopedic applications. Carbon is very light, rigid, and able to hold its shape under stress. This is due to its high tensile strength under both tension and compression. Carbon has a bi-directional woven pattern that allows for an increase in the fracture resistance, allowing for a uniform strength throughout the device (Berry). This means that the carbon socket (prosthetics) or the brace (orthotics) is very durable and can withstand a lot of pressure from patient use. Carbon fiber is used in prosthetics for the definitive socket that the patient will receive after the test socket has been approved by the patient. The design of the socket is determined by the type of prosthesis that the patient is receiving and the patient and customize the outer design of the socket to their liking. In orthotics, carbon fiber is used based on the type of brace and activity level of the patient. Carbon fiber allows for increased rigidity in the brace which is needed for braces that allow for an articulating ankle or for braces that need increased stability. The use of thermoplastics delivers many design improvements over carbon and other traditional systems due to design options that allow increased contact and support on the limb, simple fabrication process, a reduction in weight with retained strength, and cosmetic improvements allowing for a variety of options for color and decorative transfer patterns (Thermoplastics). Although thermoplastics are not as rigid as carbon fiber, they still offer man benefits for the patient and are a great option for patient use. There are different types of plastics used in prosthetics and orthotics. For prosthetics, thermoplastics are used for diagnostic or test sockets for the patients when they are working out the fit of the socket before they are transferred to a carbon fiber socket. The thermoplastics used are Thermolyn also know and Orffitrans; commonly used for below the knee sockets, and Vivak also known as DurrPlex; commonly used in above the knee sockets. There are 2 common thermoplastics used in orthotics; Copolymer and Polypropylene. Polypropylene, also known as Polypro, has high elasticity and stiffness and is good for producing very thin-walled, lightweight, and stable orthotic devices, although can be brittle and easily broken. Copolymer, also known and Copoly, has a high impact strength and is easily formed with low temperatures, which makes it easily adjustable to suit the patient’s needs (Smit). These materials allow for the best possible device to be created for the patient, different strengths, rigidity and weights allow for a variety of options to create the best possible custom device based on the patient’s activity level and use of the device.
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<TASK DESCRIPTION> Only use the provided text to answer the question, no outside sources. <QUESTION> Explain the differences and advantages between carbon fiber and thermoplastics in prosthetic design. Which material would be better for designing leg limbs for individuals who like to participate in sports? <TEXT> There are two common types of materials that are used in the field of prosthetics and orthotics; these materials are thermoplastics and carbon fiber. Each of these types of materials have different uses and applications and are used based on the needs of each patient and the type of device they are receiving. Carbon is among one of the most valuable materials used in orthopedic applications. Carbon is very light, rigid, and able to hold its shape under stress. This is due to its high tensile strength under both tension and compression. Carbon has a bi-directional woven pattern that allows for an increase in the fracture resistance, allowing for a uniform strength throughout the device (Berry). This means that the carbon socket (prosthetics) or the brace (orthotics) is very durable and can withstand a lot of pressure from patient use. Carbon fiber is used in prosthetics for the definitive socket that the patient will receive after the test socket has been approved by the patient. The design of the socket is determined by the type of prosthesis that the patient is receiving and the patient and customize the outer design of the socket to their liking. In orthotics, carbon fiber is used based on the type of brace and activity level of the patient. Carbon fiber allows for increased rigidity in the brace which is needed for braces that allow for an articulating ankle or for braces that need increased stability. The use of thermoplastics delivers many design improvements over carbon and other traditional systems due to design options that allow increased contact and support on the limb, simple fabrication process, a reduction in weight with retained strength, and cosmetic improvements allowing for a variety of options for color and decorative transfer patterns (Thermoplastics). Although thermoplastics are not as rigid as carbon fiber, they still offer man benefits for the patient and are a great option for patient use. There are different types of plastics used in prosthetics and orthotics. For prosthetics, thermoplastics are used for diagnostic or test sockets for the patients when they are working out the fit of the socket before they are transferred to a carbon fiber socket. The thermoplastics used are Thermolyn also know and Orffitrans; commonly used for below the knee sockets, and Vivak also known as DurrPlex; commonly used in above the knee sockets. There are 2 common thermoplastics used in orthotics; Copolymer and Polypropylene. Polypropylene, also known as Polypro, has high elasticity and stiffness and is good for producing very thin-walled, lightweight, and stable orthotic devices, although can be brittle and easily broken. Copolymer, also known and Copoly, has a high impact strength and is easily formed with low temperatures, which makes it easily adjustable to suit the patient’s needs (Smit). These materials allow for the best possible device to be created for the patient, different strengths, rigidity and weights allow for a variety of options to create the best possible custom device based on the patient’s activity level and use of the device. https://www.infinitetech.org/carbon-fiber-vs-thermoplastic-in-prosthetics-and-orthotics
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<TASK DESCRIPTION> Only use the provided text to answer the question, no outside sources. <QUESTION> [user request] <TEXT> [context document]
EVIDENCE:
There are two common types of materials that are used in the field of prosthetics and orthotics; these materials are thermoplastics and carbon fiber. Each of these types of materials have different uses and applications and are used based on the needs of each patient and the type of device they are receiving. Carbon is among one of the most valuable materials used in orthopedic applications. Carbon is very light, rigid, and able to hold its shape under stress. This is due to its high tensile strength under both tension and compression. Carbon has a bi-directional woven pattern that allows for an increase in the fracture resistance, allowing for a uniform strength throughout the device (Berry). This means that the carbon socket (prosthetics) or the brace (orthotics) is very durable and can withstand a lot of pressure from patient use. Carbon fiber is used in prosthetics for the definitive socket that the patient will receive after the test socket has been approved by the patient. The design of the socket is determined by the type of prosthesis that the patient is receiving and the patient and customize the outer design of the socket to their liking. In orthotics, carbon fiber is used based on the type of brace and activity level of the patient. Carbon fiber allows for increased rigidity in the brace which is needed for braces that allow for an articulating ankle or for braces that need increased stability. The use of thermoplastics delivers many design improvements over carbon and other traditional systems due to design options that allow increased contact and support on the limb, simple fabrication process, a reduction in weight with retained strength, and cosmetic improvements allowing for a variety of options for color and decorative transfer patterns (Thermoplastics). Although thermoplastics are not as rigid as carbon fiber, they still offer man benefits for the patient and are a great option for patient use. There are different types of plastics used in prosthetics and orthotics. For prosthetics, thermoplastics are used for diagnostic or test sockets for the patients when they are working out the fit of the socket before they are transferred to a carbon fiber socket. The thermoplastics used are Thermolyn also know and Orffitrans; commonly used for below the knee sockets, and Vivak also known as DurrPlex; commonly used in above the knee sockets. There are 2 common thermoplastics used in orthotics; Copolymer and Polypropylene. Polypropylene, also known as Polypro, has high elasticity and stiffness and is good for producing very thin-walled, lightweight, and stable orthotic devices, although can be brittle and easily broken. Copolymer, also known and Copoly, has a high impact strength and is easily formed with low temperatures, which makes it easily adjustable to suit the patient’s needs (Smit). These materials allow for the best possible device to be created for the patient, different strengths, rigidity and weights allow for a variety of options to create the best possible custom device based on the patient’s activity level and use of the device.
USER:
Explain the differences and advantages between carbon fiber and thermoplastics in prosthetic design. Which material would be better for designing leg limbs for individuals who like to participate in sports?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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You must only respond to the prompt solely using the information provided in the context block and no other sources. Your role is to explain complicated medical information using clear and understandable language.
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Explain the methods used for the treatment of asthma as outlined in the context document.
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4.5. Treatment of asthma is aimed at prevention of troublesome symptoms, enabling levels of activity and lifestyle that are as normal as possible, maintaining the best possible level of lung function and preventing recurring attacks, in particular those that are severe or life threatening. 4.6. Treatment strategy is complex and includes procedures for avoidance of allergens or environmental provocation of attacks, and drug treatment with a variety of therapeutic agents. 4.7. Drug treatment. This involves the use of several types of drugs by varying methods of delivery. Evolving research has regularly produced new preparations over recent years. 4.7.1. The mainstay of treatment that is responsible for more than 90% of prescriptions for asthma is the use of inhaled β2-adrenoreceptor agonists, which mimic the bronchodilator action of adrenaline, and inhaled corticosteroids, which reduce the inflammatory response in the bronchial mucosa. These are used either separately or in combined preparations. The inhaled β2-agonists generally are used intermittently as “relievers” to abort an acute attack whereas inhaled corticosteroids are used regularly in the longer term for prevention. Inhalation therapy is given by a variety of methods using aerosol, dry powder or nebulisation. The use of “spacer” devices can facilitate delivery of aerosol preparations. Longer acting β2-agonists such as salmeterol and formaterol are now available to enhance control but these drugs should be used separately. 4.7.2. Oral β2-agonists may be used in more difficult cases and oral corticosteroids may be used to resolve a more severe attack. Long-term use of oral corticosteroids is avoided in most cases because of the potentially serious systemic side effects. 4.7.3. Other bronchodilator drugs such as the methylxanthines (e.g. theophylline and its derivatives) may be used. Several other substances such as sodium cromoglycate, nedocromil sodium, ipratropium, and more recently leukotriene receptor antagonists have been added to the armamentarium for managing difficult asthma. 4.7.4. The British Thoracic Society has produced a set of guidelines for the management of asthma which describe five steps of drug treatment depending on severity and individual response to treatment. Severity is based on a generally accepted scale which is broadly similar to that quoted at section 2.8.17 The five steps are: • Step 1 - mild intermittent asthma. Short acting β2-agonist inhalers needed less than once a day • Step 2 - mild persistent asthma. Regular anti-inflammatory treatment such as inhaled corticosteroids, sodium cromoglycate or nedocromil • Step 3 - moderate persistent asthma that has failed to be controlled at step 2. The addition of long-acting β2-agonist combined with inhaled low dose corticosteroid • Step 4 - severe persistent asthma. The combination of treatment at step 3 with high dose inhaled steroid and the addition of theophylline or leukotriene receptor antagonist • Step 5 - severe persistent asthma not controlled at step 4. The addition of oral corticosteroids 4.8. Most patients treated in the community are at step 1-2 while those needing steps 3-5 represent less than 5% of patients. Approximately 1.2 million people in the UK suffer regular restriction of activity.5 The step of treatment needed for control in an individual can be a useful guide to the severity of asthma, although some who are well controlled at a higher step may be less disabled than others who need a lower step but who comply poorly with treatment. 4.9. Airways remodelling. Chronic long-term asthma, particularly where treatment has been inadequate or compliance poor can result in permanent change in the structure of the air passages, which may lead to permanent loss of lung function with loss of the normal feature of reversibility. Airways remodelling may also contribute to the bronchial hyperresponsiveness seen in more severe asthma despite treatment with corticosteroids. 4.10. Management of asthma must involve active support of the patient with advice and information as well as surveillance of the clinical state and adjustment of treatment. An understanding of the aims of the treatment regime is essential to maintain compliance, particularly at times when symptomatically improved.
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system instruction: You must only respond to the prompt solely using the information provided in the context block and no other sources. Your role is to explain complicated medical information using clear and understandable language. question: Explain the methods used for the treatment of asthma as outlined in the context document. Context block: 4.5. Treatment of asthma is aimed at prevention of troublesome symptoms, enabling levels of activity and lifestyle that are as normal as possible, maintaining the best possible level of lung function and preventing recurring attacks, in particular those that are severe or life threatening. 4.6. Treatment strategy is complex and includes procedures for avoidance of allergens or environmental provocation of attacks, and drug treatment with a variety of therapeutic agents. 4.7. Drug treatment. This involves the use of several types of drugs by varying methods of delivery. Evolving research has regularly produced new preparations over recent years. 4.7.1. The mainstay of treatment that is responsible for more than 90% of prescriptions for asthma is the use of inhaled β2-adrenoreceptor agonists, which mimic the bronchodilator action of adrenaline, and inhaled corticosteroids, which reduce the inflammatory response in the bronchial mucosa. These are used either separately or in combined preparations. The inhaled β2-agonists generally are used intermittently as “relievers” to abort an acute attack whereas inhaled corticosteroids are used regularly in the longer term for prevention. Inhalation therapy is given by a variety of methods using aerosol, dry powder or nebulisation. The use of “spacer” devices can facilitate delivery of aerosol preparations. Longer acting β2-agonists such as salmeterol and formaterol are now available to enhance control but these drugs should be used separately. 4.7.2. Oral β2-agonists may be used in more difficult cases and oral corticosteroids may be used to resolve a more severe attack. Long-term use of oral corticosteroids is avoided in most cases because of the potentially serious systemic side effects. 4.7.3. Other bronchodilator drugs such as the methylxanthines (e.g. theophylline and its derivatives) may be used. Several other substances such as sodium cromoglycate, nedocromil sodium, ipratropium, and more recently leukotriene receptor antagonists have been added to the armamentarium for managing difficult asthma. 4.7.4. The British Thoracic Society has produced a set of guidelines for the management of asthma which describe five steps of drug treatment depending on severity and individual response to treatment. Severity is based on a generally accepted scale which is broadly similar to that quoted at section 2.8.17 The five steps are: • Step 1 - mild intermittent asthma. Short acting β2-agonist inhalers needed less than once a day • Step 2 - mild persistent asthma. Regular anti-inflammatory treatment such as inhaled corticosteroids, sodium cromoglycate or nedocromil • Step 3 - moderate persistent asthma that has failed to be controlled at step 2. The addition of long-acting β2-agonist combined with inhaled low dose corticosteroid • Step 4 - severe persistent asthma. The combination of treatment at step 3 with high dose inhaled steroid and the addition of theophylline or leukotriene receptor antagonist • Step 5 - severe persistent asthma not controlled at step 4. The addition of oral corticosteroids 4.8. Most patients treated in the community are at step 1-2 while those needing steps 3-5 represent less than 5% of patients. Approximately 1.2 million people in the UK suffer regular restriction of activity.5 The step of treatment needed for control in an individual can be a useful guide to the severity of asthma, although some who are well controlled at a higher step may be less disabled than others who need a lower step but who comply poorly with treatment. 4.9. Airways remodelling. Chronic long-term asthma, particularly where treatment has been inadequate or compliance poor can result in permanent change in the structure of the air passages, which may lead to permanent loss of lung function with loss of the normal feature of reversibility. Airways remodelling may also contribute to the bronchial hyperresponsiveness seen in more severe asthma despite treatment with corticosteroids. 4.10. Management of asthma must involve active support of the patient with advice and information as well as surveillance of the clinical state and adjustment of treatment. An understanding of the aims of the treatment regime is essential to maintain compliance, particularly at times when symptomatically improved.
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You must only respond to the prompt solely using the information provided in the context block and no other sources. Your role is to explain complicated medical information using clear and understandable language.
EVIDENCE:
4.5. Treatment of asthma is aimed at prevention of troublesome symptoms, enabling levels of activity and lifestyle that are as normal as possible, maintaining the best possible level of lung function and preventing recurring attacks, in particular those that are severe or life threatening. 4.6. Treatment strategy is complex and includes procedures for avoidance of allergens or environmental provocation of attacks, and drug treatment with a variety of therapeutic agents. 4.7. Drug treatment. This involves the use of several types of drugs by varying methods of delivery. Evolving research has regularly produced new preparations over recent years. 4.7.1. The mainstay of treatment that is responsible for more than 90% of prescriptions for asthma is the use of inhaled β2-adrenoreceptor agonists, which mimic the bronchodilator action of adrenaline, and inhaled corticosteroids, which reduce the inflammatory response in the bronchial mucosa. These are used either separately or in combined preparations. The inhaled β2-agonists generally are used intermittently as “relievers” to abort an acute attack whereas inhaled corticosteroids are used regularly in the longer term for prevention. Inhalation therapy is given by a variety of methods using aerosol, dry powder or nebulisation. The use of “spacer” devices can facilitate delivery of aerosol preparations. Longer acting β2-agonists such as salmeterol and formaterol are now available to enhance control but these drugs should be used separately. 4.7.2. Oral β2-agonists may be used in more difficult cases and oral corticosteroids may be used to resolve a more severe attack. Long-term use of oral corticosteroids is avoided in most cases because of the potentially serious systemic side effects. 4.7.3. Other bronchodilator drugs such as the methylxanthines (e.g. theophylline and its derivatives) may be used. Several other substances such as sodium cromoglycate, nedocromil sodium, ipratropium, and more recently leukotriene receptor antagonists have been added to the armamentarium for managing difficult asthma. 4.7.4. The British Thoracic Society has produced a set of guidelines for the management of asthma which describe five steps of drug treatment depending on severity and individual response to treatment. Severity is based on a generally accepted scale which is broadly similar to that quoted at section 2.8.17 The five steps are: • Step 1 - mild intermittent asthma. Short acting β2-agonist inhalers needed less than once a day • Step 2 - mild persistent asthma. Regular anti-inflammatory treatment such as inhaled corticosteroids, sodium cromoglycate or nedocromil • Step 3 - moderate persistent asthma that has failed to be controlled at step 2. The addition of long-acting β2-agonist combined with inhaled low dose corticosteroid • Step 4 - severe persistent asthma. The combination of treatment at step 3 with high dose inhaled steroid and the addition of theophylline or leukotriene receptor antagonist • Step 5 - severe persistent asthma not controlled at step 4. The addition of oral corticosteroids 4.8. Most patients treated in the community are at step 1-2 while those needing steps 3-5 represent less than 5% of patients. Approximately 1.2 million people in the UK suffer regular restriction of activity.5 The step of treatment needed for control in an individual can be a useful guide to the severity of asthma, although some who are well controlled at a higher step may be less disabled than others who need a lower step but who comply poorly with treatment. 4.9. Airways remodelling. Chronic long-term asthma, particularly where treatment has been inadequate or compliance poor can result in permanent change in the structure of the air passages, which may lead to permanent loss of lung function with loss of the normal feature of reversibility. Airways remodelling may also contribute to the bronchial hyperresponsiveness seen in more severe asthma despite treatment with corticosteroids. 4.10. Management of asthma must involve active support of the patient with advice and information as well as surveillance of the clinical state and adjustment of treatment. An understanding of the aims of the treatment regime is essential to maintain compliance, particularly at times when symptomatically improved.
USER:
Explain the methods used for the treatment of asthma as outlined in the context document.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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| 33
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| 653
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. [user request] [context document]
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What are V2G batteries and how do they work in Oakland Unified School District's new bussing system? What are the pros and are there any cons?
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The wheels on this bus do indeed go round and round. Its wipers swish. And its horn beeps. Hidden in its innards, though, is something special — a motor that doesn’t vroom but pairs with a burgeoning technology that could help the grid proliferate with renewable energy. These new buses, developed by a company called Zum, ride clean and quiet because they’re fully electric. With them, California’s Oakland Unified School District just became the first major district in the United States to transition to 100 percent electrified buses. The vehicles are now transporting 1,300 students to and from school, replacing diesel-chugging buses that pollute the kids’ lungs and the neighborhoods with particulate matter. Like in other American cities, Oakland’s underserved areas tend to be closer to freeways and industrial activity, so air quality in those areas is already terrible compared to the city’s richer parts. Pollution from buses and other vehicles contributes to chronic asthma among students, which leads to chronic absenteeism. Since Oakland Unified only provides bus services for its special-need students, the problem of missing school for preventable health issues is particularly acute for them. “We have already seen the data — more kids riding the buses, that means more of our most vulnerable who are not missing school,” said Kyla Johnson-Trammell, superintendent of Oakland Unified School District, during a press conference Tuesday. “That, over time, means they’re having more learning and achievement goes up.” What’s more, a core challenge of weaning our society off fossil fuels is that utilities will need to produce more electricity, not less of it. “In some places, you’re talking about doubling the amount of energy needed,” said Kevin Schneider, an expert in power systems at Pacific Northwest National Laboratory, who isn’t involved in the Oakland project. Counterintuitively enough, the buses’ massive batteries aren’t straining the grid; they’re benefiting it. Like a growing number of consumer EV models, the buses are equipped with vehicle-to-grid technology, or V2G. That allows them to charge their batteries by plugging into the grid, but also send energy back to the grid if the electrical utility needs extra power. “School buses play a very important role in the community as a transportation provider, but now also as an energy provider,” said Vivek Garg, co-founder and chief operating officer of Zum. And provide the buses must. Demand on the grid tends to spike in the late afternoon, when everyone’s returning home and switching on appliances like air conditioners. Historically, utilities could just spin up more generation at a fossil fuel power plant to meet that demand. But as the grid is loaded with more renewable energy sources, intermittency becomes a challenge: You can’t crank up power in the system if the sun isn’t shining or the wind isn’t blowing. If every EV has V2G capability, that creates a distributed network of batteries for a utility to draw on when demand spikes. The nature of the school bus suits it perfectly for this, because it’s on a fixed schedule, making it a predictable resource for the utility. In the afternoon, Zum’s buses take kids home, then plug back into the grid. “They have more energy in each bus than they need to do their route, so there’s always an ample amount left over,” said Rudi Halbright, product manager of V2G integration at Pacific Gas and Electric Company, the utility that’s partnered with Zum and Oakland Unified for the new system. As the night goes on and demand wanes, the buses charge again to be ready for their morning routes. Then during the day, they charge again, when there’s plentiful solar power on the grid. On weekends or holidays, the buses would be available all day as backup power for the grid. “Sure, they’re going to take a very large amount of charge,” said Kevin Schneider, an expert in power systems at Pacific Northwest National Laboratory, who isn’t involved in the Oakland project. “But things like school buses don’t run that often, so they have a great potential to be a resource.” That resource ain’t free: Utilities pay owners of V2G vehicles to provide power to the grid. (Because V2G is so new, utilities are still experimenting with what this rate structure looks like.) Zum says that that revenue helps bring down the transportation costs of its buses to be on par with cheaper diesel-powered buses. Oakland Unified and other districts can get still more money from the EPA’s Clean School Bus Program, which is handing out $5 billion between 2022 and 2026 to make the switch. The potential of V2G is that there are so many different kinds of electric vehicles (or vehicle types left to electrify). Garbage trucks run early in the day, while delivery trucks and city vehicles do more of a nine-to-five. Passenger vehicles are kind of all over the place, with some people taking them to work, while others sit in garages all day. Basically, lots of batteries — big and small — parked idle at different times to send power back to the grid. All the while, fiercer heat waves will require more energy-hungry air conditioning to keep people healthy. (Though ideally, everyone would get a heat pump instead.) “We’re still going to need more generation, more power lines, but energy storage is going to give us the flexibility so we can deploy it quicker,” Schneider said. In the near future, you may get home on a sweltering day and still be able to switch on your AC — thanks to an electric school bus sitting in a lot.
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. What are V2G batteries and how do they work in Oakland Unified School District's new bussing system? What are the pros and are there any cons? The wheels on this bus do indeed go round and round. Its wipers swish. And its horn beeps. Hidden in its innards, though, is something special — a motor that doesn’t vroom but pairs with a burgeoning technology that could help the grid proliferate with renewable energy. These new buses, developed by a company called Zum, ride clean and quiet because they’re fully electric. With them, California’s Oakland Unified School District just became the first major district in the United States to transition to 100 percent electrified buses. The vehicles are now transporting 1,300 students to and from school, replacing diesel-chugging buses that pollute the kids’ lungs and the neighborhoods with particulate matter. Like in other American cities, Oakland’s underserved areas tend to be closer to freeways and industrial activity, so air quality in those areas is already terrible compared to the city’s richer parts. Pollution from buses and other vehicles contributes to chronic asthma among students, which leads to chronic absenteeism. Since Oakland Unified only provides bus services for its special-need students, the problem of missing school for preventable health issues is particularly acute for them. “We have already seen the data — more kids riding the buses, that means more of our most vulnerable who are not missing school,” said Kyla Johnson-Trammell, superintendent of Oakland Unified School District, during a press conference Tuesday. “That, over time, means they’re having more learning and achievement goes up.” What’s more, a core challenge of weaning our society off fossil fuels is that utilities will need to produce more electricity, not less of it. “In some places, you’re talking about doubling the amount of energy needed,” said Kevin Schneider, an expert in power systems at Pacific Northwest National Laboratory, who isn’t involved in the Oakland project. Counterintuitively enough, the buses’ massive batteries aren’t straining the grid; they’re benefiting it. Like a growing number of consumer EV models, the buses are equipped with vehicle-to-grid technology, or V2G. That allows them to charge their batteries by plugging into the grid, but also send energy back to the grid if the electrical utility needs extra power. “School buses play a very important role in the community as a transportation provider, but now also as an energy provider,” said Vivek Garg, co-founder and chief operating officer of Zum. And provide the buses must. Demand on the grid tends to spike in the late afternoon, when everyone’s returning home and switching on appliances like air conditioners. Historically, utilities could just spin up more generation at a fossil fuel power plant to meet that demand. But as the grid is loaded with more renewable energy sources, intermittency becomes a challenge: You can’t crank up power in the system if the sun isn’t shining or the wind isn’t blowing. If every EV has V2G capability, that creates a distributed network of batteries for a utility to draw on when demand spikes. The nature of the school bus suits it perfectly for this, because it’s on a fixed schedule, making it a predictable resource for the utility. In the afternoon, Zum’s buses take kids home, then plug back into the grid. “They have more energy in each bus than they need to do their route, so there’s always an ample amount left over,” said Rudi Halbright, product manager of V2G integration at Pacific Gas and Electric Company, the utility that’s partnered with Zum and Oakland Unified for the new system. As the night goes on and demand wanes, the buses charge again to be ready for their morning routes. Then during the day, they charge again, when there’s plentiful solar power on the grid. On weekends or holidays, the buses would be available all day as backup power for the grid. “Sure, they’re going to take a very large amount of charge,” said Kevin Schneider, an expert in power systems at Pacific Northwest National Laboratory, who isn’t involved in the Oakland project. “But things like school buses don’t run that often, so they have a great potential to be a resource.” That resource ain’t free: Utilities pay owners of V2G vehicles to provide power to the grid. (Because V2G is so new, utilities are still experimenting with what this rate structure looks like.) Zum says that that revenue helps bring down the transportation costs of its buses to be on par with cheaper diesel-powered buses. Oakland Unified and other districts can get still more money from the EPA’s Clean School Bus Program, which is handing out $5 billion between 2022 and 2026 to make the switch. The potential of V2G is that there are so many different kinds of electric vehicles (or vehicle types left to electrify). Garbage trucks run early in the day, while delivery trucks and city vehicles do more of a nine-to-five. Passenger vehicles are kind of all over the place, with some people taking them to work, while others sit in garages all day. Basically, lots of batteries — big and small — parked idle at different times to send power back to the grid. All the while, fiercer heat waves will require more energy-hungry air conditioning to keep people healthy. (Though ideally, everyone would get a heat pump instead.) “We’re still going to need more generation, more power lines, but energy storage is going to give us the flexibility so we can deploy it quicker,” Schneider said. In the near future, you may get home on a sweltering day and still be able to switch on your AC — thanks to an electric school bus sitting in a lot. https://grist.org/transportation/oakland-electric-school-buses-battery-storage/
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. [user request] [context document]
EVIDENCE:
The wheels on this bus do indeed go round and round. Its wipers swish. And its horn beeps. Hidden in its innards, though, is something special — a motor that doesn’t vroom but pairs with a burgeoning technology that could help the grid proliferate with renewable energy. These new buses, developed by a company called Zum, ride clean and quiet because they’re fully electric. With them, California’s Oakland Unified School District just became the first major district in the United States to transition to 100 percent electrified buses. The vehicles are now transporting 1,300 students to and from school, replacing diesel-chugging buses that pollute the kids’ lungs and the neighborhoods with particulate matter. Like in other American cities, Oakland’s underserved areas tend to be closer to freeways and industrial activity, so air quality in those areas is already terrible compared to the city’s richer parts. Pollution from buses and other vehicles contributes to chronic asthma among students, which leads to chronic absenteeism. Since Oakland Unified only provides bus services for its special-need students, the problem of missing school for preventable health issues is particularly acute for them. “We have already seen the data — more kids riding the buses, that means more of our most vulnerable who are not missing school,” said Kyla Johnson-Trammell, superintendent of Oakland Unified School District, during a press conference Tuesday. “That, over time, means they’re having more learning and achievement goes up.” What’s more, a core challenge of weaning our society off fossil fuels is that utilities will need to produce more electricity, not less of it. “In some places, you’re talking about doubling the amount of energy needed,” said Kevin Schneider, an expert in power systems at Pacific Northwest National Laboratory, who isn’t involved in the Oakland project. Counterintuitively enough, the buses’ massive batteries aren’t straining the grid; they’re benefiting it. Like a growing number of consumer EV models, the buses are equipped with vehicle-to-grid technology, or V2G. That allows them to charge their batteries by plugging into the grid, but also send energy back to the grid if the electrical utility needs extra power. “School buses play a very important role in the community as a transportation provider, but now also as an energy provider,” said Vivek Garg, co-founder and chief operating officer of Zum. And provide the buses must. Demand on the grid tends to spike in the late afternoon, when everyone’s returning home and switching on appliances like air conditioners. Historically, utilities could just spin up more generation at a fossil fuel power plant to meet that demand. But as the grid is loaded with more renewable energy sources, intermittency becomes a challenge: You can’t crank up power in the system if the sun isn’t shining or the wind isn’t blowing. If every EV has V2G capability, that creates a distributed network of batteries for a utility to draw on when demand spikes. The nature of the school bus suits it perfectly for this, because it’s on a fixed schedule, making it a predictable resource for the utility. In the afternoon, Zum’s buses take kids home, then plug back into the grid. “They have more energy in each bus than they need to do their route, so there’s always an ample amount left over,” said Rudi Halbright, product manager of V2G integration at Pacific Gas and Electric Company, the utility that’s partnered with Zum and Oakland Unified for the new system. As the night goes on and demand wanes, the buses charge again to be ready for their morning routes. Then during the day, they charge again, when there’s plentiful solar power on the grid. On weekends or holidays, the buses would be available all day as backup power for the grid. “Sure, they’re going to take a very large amount of charge,” said Kevin Schneider, an expert in power systems at Pacific Northwest National Laboratory, who isn’t involved in the Oakland project. “But things like school buses don’t run that often, so they have a great potential to be a resource.” That resource ain’t free: Utilities pay owners of V2G vehicles to provide power to the grid. (Because V2G is so new, utilities are still experimenting with what this rate structure looks like.) Zum says that that revenue helps bring down the transportation costs of its buses to be on par with cheaper diesel-powered buses. Oakland Unified and other districts can get still more money from the EPA’s Clean School Bus Program, which is handing out $5 billion between 2022 and 2026 to make the switch. The potential of V2G is that there are so many different kinds of electric vehicles (or vehicle types left to electrify). Garbage trucks run early in the day, while delivery trucks and city vehicles do more of a nine-to-five. Passenger vehicles are kind of all over the place, with some people taking them to work, while others sit in garages all day. Basically, lots of batteries — big and small — parked idle at different times to send power back to the grid. All the while, fiercer heat waves will require more energy-hungry air conditioning to keep people healthy. (Though ideally, everyone would get a heat pump instead.) “We’re still going to need more generation, more power lines, but energy storage is going to give us the flexibility so we can deploy it quicker,” Schneider said. In the near future, you may get home on a sweltering day and still be able to switch on your AC — thanks to an electric school bus sitting in a lot.
USER:
What are V2G batteries and how do they work in Oakland Unified School District's new bussing system? What are the pros and are there any cons?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 24
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Answer the question only based on the below text.
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According to this document, summarize any financial figures stated for the 2023 fiscal year.
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OVERVIEW The following overview is a high-level discussion of our operating results, as well as some of the trends and drivers that affect our business. Management believes that an understanding of these trends and drivers provides important context for our results for the fiscal year ended March 31, 2024, as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Form 10-K, including in the “Business” section and the “Risk Factors” above, the remainder of “Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)” or the Consolidated Financial Statements and related Notes. About Electronic Arts Electronic Arts is a global leader in digital interactive entertainment. We develop, market, publish and deliver games, content and services that can be experienced on game consoles, PCs, mobile phones and tablets. At our core is a portfolio of intellectual property from which we create innovative games and experiences that deliver high-quality entertainment and drive engagement across our network of hundreds of millions of unique active accounts. Our portfolio includes brands that we either wholly own (such as Apex Legends, Battlefield, and The Sims) or license from others (such as the licenses within EA SPORTS FC and EA SPORTS Madden NFL). Through our live services offerings, we offer high-quality experiences designed to provide value to players, and extend and enhance gameplay. These live services include extra content, subscription offerings and other revenue generated in addition to the sale of our full games. We are focusing on building games and experiences that grow the global online communities around our key franchises; deepening engagement through connecting interactive storytelling to key intellectual property; and building re-occurring revenue from scaling our live services and growth in our annualized sports franchises, our console, PC and mobile catalog titles. Financial Results Our key financial results for our fiscal year ended March 31, 2024 were as follows: • Total net revenue was $7,562 million, up 2 percent year-over-year. • Live services and other net revenue was $5,547 million, up 1 percent year-over-year. • Gross margin was 77.4 percent, up 2 percentage points year-over-year. • Operating expenses were $4,334 million, up 1 percent year-over-year. • Operating income was $1,518 million, up 14 percent year-over-year. • Net income was $1,273 million with diluted earnings per share of $4.68. • Net cash provided by operating activities was $2,315 million, up 49 percent year-over-year. • Total cash, cash equivalents and short-term investments were $3,262 million. • We repurchased 10.0 million shares of our common stock for $1,300 million. • We paid cash dividends of $205 million during the fiscal year ended March 31, 2024. Trends in Our Business Live Services Business. We offer our players high-quality experiences designed to provide value to players and to extend and enhance gameplay. These live services include extra content, subscription offerings and other revenue generated in addition to the sale of our full games and free-to-play games. Our net revenue attributable to live services and other was $5,547 million, $5,489 million, and $4,998 million for fiscal years 2024, 2023, and 2022, respectively, and we expect that live services net revenue will continue to be material to our business. Within live services and other, net revenue attributable to extra content was $4,463 million, $4,277 million, and $3,910 million for fiscal years 2024, 2023, and 2022, respectively. Extra content net revenue has increased as more players engage with our games and services, and purchase additional content designed to provide value to players and extend and enhance gameplay. Our most popular live services are the extra content purchased for the Ultimate Team mode associated with our sports franchises, that allows players to collect current and former professional players in order to build and compete as a personalized team, and extra content purchased for our Apex Legends franchise. Live services net revenue generated from extra content purchased within the Ultimate Team mode associated with our sports franchises, a substantial portion of which is derived from Ultimate Team within our global football franchise and from our Apex Legends franchise, is material to our business. 20 Digital Delivery of Games. In our industry, players increasingly purchase games digitally as opposed to purchasing physical discs. While this trend, as applied to our business, may not be linear due to a mix of products during a fiscal year, consumer buying patterns and other factors, over time we expect players to purchase an increasingly higher proportion of our games digitally. As a result, we expect net revenue attributable to digital full game downloads to increase over time and net revenue attributable to sales of packaged goods to decrease. Our net revenue attributable to digital full game downloads was $1,343 million, $1,262 million, and $1,282 million during fiscal years 2024, 2023, and 2022, respectively; while our net revenue attributable to packaged goods sales was $672 million, $675 million, and $711 million in fiscal years 2024, 2023, and 2022, respectively. In addition, as measured based on total units sold on Microsoft’s Xbox One and Xbox Series X and Sony’s PlayStation 4 and 5 rather than by net revenue, we estimate that 73 percent, 68 percent, and 65 percent of our total units sold during fiscal years 2024, 2023, and 2022, were sold digitally. Digital full game units are based on sales information provided by Microsoft and Sony; packaged goods units sold through are estimated by obtaining data from significant retail and distribution partners in North America, Europe and Asia, and applying internal sales estimates with respect to retail partners from which we do not obtain data. We believe that these percentages are reasonable estimates of the proportion of our games that are digitally downloaded in relation to our total number of units sold for the applicable period of measurement. Increases in consumer adoption of digital purchase of games combined with increases in our live services revenue generally results in expansion of our gross margin, as costs associated with selling a game digitally is generally less than selling the same game through traditional retail and distribution channels. Increased Competition. Competition in our business is intense. Our competitors range from established interactive entertainment companies to emerging start-ups. In addition, the gaming, technology/internet, and entertainment industries are converging, and we compete with large, diversified technology companies in those industries. Their greater financial or other resources may provide larger budgets to develop and market tools, technologies, products and services that gain consumer success and shift player time and engagement away from our products and services. In addition, our leading position within the interactive entertainment industry makes us a prime target for recruiting our executives, as well as key creative and technical talent, resulting in retention challenges and increased cost to retain and incentivize our key people. Concentration of Sales Among the Most Popular Games. In our industry, we see a large portion of games sales concentrated on the most popular titles. Similarly, a significant portion of our revenue historically has been derived from games based on a few popular franchises, such as EA SPORTS FC, EA SPORTS Madden NFL, Apex Legends, Battlefield, and The Sims. In particular, we have historically derived a significant portion of our net revenue from our global football franchise, the annualized version of which is consistently one of the best-selling games in the marketplace. We transitioned our global football franchise to a new EA SPORTS FC brand in the second quarter of fiscal 2024. Our continued vision for the future of EA SPORTS FC is to create and innovate across platforms, geographies, and business models to expand our global football experiences and entertain even more fans around the world. Re-occurring Revenue Sources. Our business model includes revenue that we deem re-occurring in nature, such as revenue from our live services, annualized sports franchises (e.g., EA SPORTS FC, EA SPORTS Madden NFL), and our console, PC and mobile catalog titles (i.e., titles that did not launch in the current fiscal year). We have been able to forecast revenue from these areas of our business with greater relative confidence than for new games, services and business models. As we continue to incorporate new business models and modalities of play into our games, our goal is to continue to look for opportunities to expand the re-occurring portion of our business.
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System instruction: Answer the question only based on the below text. question: According to this document, summarize any financial figures stated for the 2023 fiscal year. context: OVERVIEW The following overview is a high-level discussion of our operating results, as well as some of the trends and drivers that affect our business. Management believes that an understanding of these trends and drivers provides important context for our results for the fiscal year ended March 31, 2024, as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Form 10-K, including in the “Business” section and the “Risk Factors” above, the remainder of “Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)” or the Consolidated Financial Statements and related Notes. About Electronic Arts Electronic Arts is a global leader in digital interactive entertainment. We develop, market, publish and deliver games, content and services that can be experienced on game consoles, PCs, mobile phones and tablets. At our core is a portfolio of intellectual property from which we create innovative games and experiences that deliver high-quality entertainment and drive engagement across our network of hundreds of millions of unique active accounts. Our portfolio includes brands that we either wholly own (such as Apex Legends, Battlefield, and The Sims) or license from others (such as the licenses within EA SPORTS FC and EA SPORTS Madden NFL). Through our live services offerings, we offer high-quality experiences designed to provide value to players, and extend and enhance gameplay. These live services include extra content, subscription offerings and other revenue generated in addition to the sale of our full games. We are focusing on building games and experiences that grow the global online communities around our key franchises; deepening engagement through connecting interactive storytelling to key intellectual property; and building re-occurring revenue from scaling our live services and growth in our annualized sports franchises, our console, PC and mobile catalog titles. Financial Results Our key financial results for our fiscal year ended March 31, 2024 were as follows: • Total net revenue was $7,562 million, up 2 percent year-over-year. • Live services and other net revenue was $5,547 million, up 1 percent year-over-year. • Gross margin was 77.4 percent, up 2 percentage points year-over-year. • Operating expenses were $4,334 million, up 1 percent year-over-year. • Operating income was $1,518 million, up 14 percent year-over-year. • Net income was $1,273 million with diluted earnings per share of $4.68. • Net cash provided by operating activities was $2,315 million, up 49 percent year-over-year. • Total cash, cash equivalents and short-term investments were $3,262 million. • We repurchased 10.0 million shares of our common stock for $1,300 million. • We paid cash dividends of $205 million during the fiscal year ended March 31, 2024. Trends in Our Business Live Services Business. We offer our players high-quality experiences designed to provide value to players and to extend and enhance gameplay. These live services include extra content, subscription offerings and other revenue generated in addition to the sale of our full games and free-to-play games. Our net revenue attributable to live services and other was $5,547 million, $5,489 million, and $4,998 million for fiscal years 2024, 2023, and 2022, respectively, and we expect that live services net revenue will continue to be material to our business. Within live services and other, net revenue attributable to extra content was $4,463 million, $4,277 million, and $3,910 million for fiscal years 2024, 2023, and 2022, respectively. Extra content net revenue has increased as more players engage with our games and services, and purchase additional content designed to provide value to players and extend and enhance gameplay. Our most popular live services are the extra content purchased for the Ultimate Team mode associated with our sports franchises, that allows players to collect current and former professional players in order to build and compete as a personalized team, and extra content purchased for our Apex Legends franchise. Live services net revenue generated from extra content purchased within the Ultimate Team mode associated with our sports franchises, a substantial portion of which is derived from Ultimate Team within our global football franchise and from our Apex Legends franchise, is material to our business. 20 Digital Delivery of Games. In our industry, players increasingly purchase games digitally as opposed to purchasing physical discs. While this trend, as applied to our business, may not be linear due to a mix of products during a fiscal year, consumer buying patterns and other factors, over time we expect players to purchase an increasingly higher proportion of our games digitally. As a result, we expect net revenue attributable to digital full game downloads to increase over time and net revenue attributable to sales of packaged goods to decrease. Our net revenue attributable to digital full game downloads was $1,343 million, $1,262 million, and $1,282 million during fiscal years 2024, 2023, and 2022, respectively; while our net revenue attributable to packaged goods sales was $672 million, $675 million, and $711 million in fiscal years 2024, 2023, and 2022, respectively. In addition, as measured based on total units sold on Microsoft’s Xbox One and Xbox Series X and Sony’s PlayStation 4 and 5 rather than by net revenue, we estimate that 73 percent, 68 percent, and 65 percent of our total units sold during fiscal years 2024, 2023, and 2022, were sold digitally. Digital full game units are based on sales information provided by Microsoft and Sony; packaged goods units sold through are estimated by obtaining data from significant retail and distribution partners in North America, Europe and Asia, and applying internal sales estimates with respect to retail partners from which we do not obtain data. We believe that these percentages are reasonable estimates of the proportion of our games that are digitally downloaded in relation to our total number of units sold for the applicable period of measurement. Increases in consumer adoption of digital purchase of games combined with increases in our live services revenue generally results in expansion of our gross margin, as costs associated with selling a game digitally is generally less than selling the same game through traditional retail and distribution channels. Increased Competition. Competition in our business is intense. Our competitors range from established interactive entertainment companies to emerging start-ups. In addition, the gaming, technology/internet, and entertainment industries are converging, and we compete with large, diversified technology companies in those industries. Their greater financial or other resources may provide larger budgets to develop and market tools, technologies, products and services that gain consumer success and shift player time and engagement away from our products and services. In addition, our leading position within the interactive entertainment industry makes us a prime target for recruiting our executives, as well as key creative and technical talent, resulting in retention challenges and increased cost to retain and incentivize our key people. Concentration of Sales Among the Most Popular Games. In our industry, we see a large portion of games sales concentrated on the most popular titles. Similarly, a significant portion of our revenue historically has been derived from games based on a few popular franchises, such as EA SPORTS FC, EA SPORTS Madden NFL, Apex Legends, Battlefield, and The Sims. In particular, we have historically derived a significant portion of our net revenue from our global football franchise, the annualized version of which is consistently one of the best-selling games in the marketplace. We transitioned our global football franchise to a new EA SPORTS FC brand in the second quarter of fiscal 2024. Our continued vision for the future of EA SPORTS FC is to create and innovate across platforms, geographies, and business models to expand our global football experiences and entertain even more fans around the world. Re-occurring Revenue Sources. Our business model includes revenue that we deem re-occurring in nature, such as revenue from our live services, annualized sports franchises (e.g., EA SPORTS FC, EA SPORTS Madden NFL), and our console, PC and mobile catalog titles (i.e., titles that did not launch in the current fiscal year). We have been able to forecast revenue from these areas of our business with greater relative confidence than for new games, services and business models. As we continue to incorporate new business models and modalities of play into our games, our goal is to continue to look for opportunities to expand the re-occurring portion of our business.
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Answer the question only based on the below text.
EVIDENCE:
OVERVIEW The following overview is a high-level discussion of our operating results, as well as some of the trends and drivers that affect our business. Management believes that an understanding of these trends and drivers provides important context for our results for the fiscal year ended March 31, 2024, as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Form 10-K, including in the “Business” section and the “Risk Factors” above, the remainder of “Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)” or the Consolidated Financial Statements and related Notes. About Electronic Arts Electronic Arts is a global leader in digital interactive entertainment. We develop, market, publish and deliver games, content and services that can be experienced on game consoles, PCs, mobile phones and tablets. At our core is a portfolio of intellectual property from which we create innovative games and experiences that deliver high-quality entertainment and drive engagement across our network of hundreds of millions of unique active accounts. Our portfolio includes brands that we either wholly own (such as Apex Legends, Battlefield, and The Sims) or license from others (such as the licenses within EA SPORTS FC and EA SPORTS Madden NFL). Through our live services offerings, we offer high-quality experiences designed to provide value to players, and extend and enhance gameplay. These live services include extra content, subscription offerings and other revenue generated in addition to the sale of our full games. We are focusing on building games and experiences that grow the global online communities around our key franchises; deepening engagement through connecting interactive storytelling to key intellectual property; and building re-occurring revenue from scaling our live services and growth in our annualized sports franchises, our console, PC and mobile catalog titles. Financial Results Our key financial results for our fiscal year ended March 31, 2024 were as follows: • Total net revenue was $7,562 million, up 2 percent year-over-year. • Live services and other net revenue was $5,547 million, up 1 percent year-over-year. • Gross margin was 77.4 percent, up 2 percentage points year-over-year. • Operating expenses were $4,334 million, up 1 percent year-over-year. • Operating income was $1,518 million, up 14 percent year-over-year. • Net income was $1,273 million with diluted earnings per share of $4.68. • Net cash provided by operating activities was $2,315 million, up 49 percent year-over-year. • Total cash, cash equivalents and short-term investments were $3,262 million. • We repurchased 10.0 million shares of our common stock for $1,300 million. • We paid cash dividends of $205 million during the fiscal year ended March 31, 2024. Trends in Our Business Live Services Business. We offer our players high-quality experiences designed to provide value to players and to extend and enhance gameplay. These live services include extra content, subscription offerings and other revenue generated in addition to the sale of our full games and free-to-play games. Our net revenue attributable to live services and other was $5,547 million, $5,489 million, and $4,998 million for fiscal years 2024, 2023, and 2022, respectively, and we expect that live services net revenue will continue to be material to our business. Within live services and other, net revenue attributable to extra content was $4,463 million, $4,277 million, and $3,910 million for fiscal years 2024, 2023, and 2022, respectively. Extra content net revenue has increased as more players engage with our games and services, and purchase additional content designed to provide value to players and extend and enhance gameplay. Our most popular live services are the extra content purchased for the Ultimate Team mode associated with our sports franchises, that allows players to collect current and former professional players in order to build and compete as a personalized team, and extra content purchased for our Apex Legends franchise. Live services net revenue generated from extra content purchased within the Ultimate Team mode associated with our sports franchises, a substantial portion of which is derived from Ultimate Team within our global football franchise and from our Apex Legends franchise, is material to our business. 20 Digital Delivery of Games. In our industry, players increasingly purchase games digitally as opposed to purchasing physical discs. While this trend, as applied to our business, may not be linear due to a mix of products during a fiscal year, consumer buying patterns and other factors, over time we expect players to purchase an increasingly higher proportion of our games digitally. As a result, we expect net revenue attributable to digital full game downloads to increase over time and net revenue attributable to sales of packaged goods to decrease. Our net revenue attributable to digital full game downloads was $1,343 million, $1,262 million, and $1,282 million during fiscal years 2024, 2023, and 2022, respectively; while our net revenue attributable to packaged goods sales was $672 million, $675 million, and $711 million in fiscal years 2024, 2023, and 2022, respectively. In addition, as measured based on total units sold on Microsoft’s Xbox One and Xbox Series X and Sony’s PlayStation 4 and 5 rather than by net revenue, we estimate that 73 percent, 68 percent, and 65 percent of our total units sold during fiscal years 2024, 2023, and 2022, were sold digitally. Digital full game units are based on sales information provided by Microsoft and Sony; packaged goods units sold through are estimated by obtaining data from significant retail and distribution partners in North America, Europe and Asia, and applying internal sales estimates with respect to retail partners from which we do not obtain data. We believe that these percentages are reasonable estimates of the proportion of our games that are digitally downloaded in relation to our total number of units sold for the applicable period of measurement. Increases in consumer adoption of digital purchase of games combined with increases in our live services revenue generally results in expansion of our gross margin, as costs associated with selling a game digitally is generally less than selling the same game through traditional retail and distribution channels. Increased Competition. Competition in our business is intense. Our competitors range from established interactive entertainment companies to emerging start-ups. In addition, the gaming, technology/internet, and entertainment industries are converging, and we compete with large, diversified technology companies in those industries. Their greater financial or other resources may provide larger budgets to develop and market tools, technologies, products and services that gain consumer success and shift player time and engagement away from our products and services. In addition, our leading position within the interactive entertainment industry makes us a prime target for recruiting our executives, as well as key creative and technical talent, resulting in retention challenges and increased cost to retain and incentivize our key people. Concentration of Sales Among the Most Popular Games. In our industry, we see a large portion of games sales concentrated on the most popular titles. Similarly, a significant portion of our revenue historically has been derived from games based on a few popular franchises, such as EA SPORTS FC, EA SPORTS Madden NFL, Apex Legends, Battlefield, and The Sims. In particular, we have historically derived a significant portion of our net revenue from our global football franchise, the annualized version of which is consistently one of the best-selling games in the marketplace. We transitioned our global football franchise to a new EA SPORTS FC brand in the second quarter of fiscal 2024. Our continued vision for the future of EA SPORTS FC is to create and innovate across platforms, geographies, and business models to expand our global football experiences and entertain even more fans around the world. Re-occurring Revenue Sources. Our business model includes revenue that we deem re-occurring in nature, such as revenue from our live services, annualized sports franchises (e.g., EA SPORTS FC, EA SPORTS Madden NFL), and our console, PC and mobile catalog titles (i.e., titles that did not launch in the current fiscal year). We have been able to forecast revenue from these areas of our business with greater relative confidence than for new games, services and business models. As we continue to incorporate new business models and modalities of play into our games, our goal is to continue to look for opportunities to expand the re-occurring portion of our business.
USER:
According to this document, summarize any financial figures stated for the 2023 fiscal year.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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| 1,390
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Only use the information found within the provided context. Answer using bullet points with explanations for each.
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What are the most impactful 2023 developments for Hasbro?
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Fiscal year 2023 was a year of transformation for our business. Following the October 2022 announcement of our revised strategic plan, we embarked upon an ambitious, multi-year transformation guided by our revamped strategy. Since that announcement, we have been able to create efficiencies in our supply chain, improve our inventory position, lower our costs, and reinvest back into the business. During fiscal 2023, we strengthened our leadership team with industry veterans and turnaround experts and have focused our strategic investments on our most valuable and profitable franchises across games, toys, licensing and entertainment. This focused strategy also led to the decision to sell certain non-core parts of our business, including the Entertainment One film and television business not relating to Hasbro and family-oriented brands, which we refer to as Hasbro Brands and Family Brands. In 2023, we experienced stronger than expected market headwinds within our Consumer Products business, resulting in our difficult decision to take additional headcount reductions and accelerate the process of certain organizational structure changes that is expected to result in the reallocation of people and resources, both in effort to strengthen our foundation and position Hasbro for growth.
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Only use the information found within the provided context. Answer using bullet points with explanations for each. What are the most impactful 2023 developments for Hasbro? Fiscal year 2023 was a year of transformation for our business. Following the October 2022 announcement of our revised strategic plan, we embarked upon an ambitious, multi-year transformation guided by our revamped strategy. Since that announcement, we have been able to create efficiencies in our supply chain, improve our inventory position, lower our costs, and reinvest back into the business. During fiscal 2023, we strengthened our leadership team with industry veterans and turnaround experts and have focused our strategic investments on our most valuable and profitable franchises across games, toys, licensing and entertainment. This focused strategy also led to the decision to sell certain non-core parts of our business, including the Entertainment One film and television business not relating to Hasbro and family-oriented brands, which we refer to as Hasbro Brands and Family Brands. In 2023, we experienced stronger than expected market headwinds within our Consumer Products business, resulting in our difficult decision to take additional headcount reductions and accelerate the process of certain organizational structure changes that is expected to result in the reallocation of people and resources, both in effort to strengthen our foundation and position Hasbro for growth.
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Only use the information found within the provided context. Answer using bullet points with explanations for each.
EVIDENCE:
Fiscal year 2023 was a year of transformation for our business. Following the October 2022 announcement of our revised strategic plan, we embarked upon an ambitious, multi-year transformation guided by our revamped strategy. Since that announcement, we have been able to create efficiencies in our supply chain, improve our inventory position, lower our costs, and reinvest back into the business. During fiscal 2023, we strengthened our leadership team with industry veterans and turnaround experts and have focused our strategic investments on our most valuable and profitable franchises across games, toys, licensing and entertainment. This focused strategy also led to the decision to sell certain non-core parts of our business, including the Entertainment One film and television business not relating to Hasbro and family-oriented brands, which we refer to as Hasbro Brands and Family Brands. In 2023, we experienced stronger than expected market headwinds within our Consumer Products business, resulting in our difficult decision to take additional headcount reductions and accelerate the process of certain organizational structure changes that is expected to result in the reallocation of people and resources, both in effort to strengthen our foundation and position Hasbro for growth.
USER:
What are the most impactful 2023 developments for Hasbro?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 17
| 9
| 191
| null | 814
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. [user request] [context document]
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My son has severe eczema. I want to understand more about it and how to treat it at home. Using this article, please explain what eczema is and how to treat it. Use at least 400 words.
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Eczema, a.k.a., atopic dermatitis, is a chronic skin condition that causes patches of red, dry, and flaky skin that can trigger maddening itching and sometimes soreness and pain, too—the result of a rogue inflammatory response attacking your skin, which happens to be the largest organ in your body. Its symptoms can vary in both appearance and severity among different people and ethnic groups, per the National Eczema Association(NEA). And sometimes, the way people with eczema describe their condition varies, too. Take the term “papular” eczema. Some info-seekers out there who rely too much on Dr. Google might think this is a legit (and unique) type of atopic dermatitis—but our expert dermatologists are here to set the record straight. Papular Eczema What Is Papular Eczema? “Papular eczema really doesn’t mean something specific but when I imagine it, I imagine bumps rather than plaques,” says Scott Elman, M.D., a dermatologist and assistant professor of clinical dermatology and cutaneous surgery at University of Miami Health in Florida. These bumps, rather than flat, inflamed plaques, may be what eczema more often looks like on darker skin tones, adds Jeff Yu, M.D., a dermatologist at Massachusetts General Hospital and assistant professor of dermatology at Harvard Medical School in Boston. “We use that term but only for certain ethnic groups. We tend to see eczema that’s a little bit bumpier in African Americans and other people of color,” explains Dr. Yu. Meanwhile, Amy Paller, M.D., the chair of the Department of Dermatology at Northwestern Medicine in Evanston, IL, questions the term entirely. “I’ve never heard [of] ‘papular’ eczema,” she says. “We call it atopic dermatitis.” Meaning, people who say they have papular eczema likely mean their eczema is more bumpy than patchy. And those bumps may be more common in darker skin. But at the end of the day, it’s all just atopic dermatitis. Symptoms What Are the Symptoms of Papular Eczema? If your eczema is of the papular variety, you’ll likely see small, raised bumps on your skin rather than large, flat rashes. This symptom is more often seen on the skin of Black and brown people, say our experts. Beyond that, the majority of atopic dermatitis symptoms are the same. Here’s what you might experience, and it can happen anywhere on your body: Darkening of the skin around your eyes Dry, cracked skin Itching Oozing and crusting on the inflamed skin Raw, sensitive skin from scratching Swollen skin with a rash Thickened skin According to Dr. Elman, bumps, rashes, and irritated and inflamed skin can all look different on different people. On lighter skin, these skin symptoms look pink or red. On darker skin, areas affected by eczema may look more purple, burgundy, or brown. “That inflammation is absolutely seen differently on different skin tones,” adds Dr. Elman. “The redness may be more subtle. It could be a bit more purple. And it might be harder to discern on darker skin.” Causes What Causes Eczema? Your skin, when it’s acting like it’s supposed to, serves as a barrier between the inside of your body and the outside world. But, in eczema, “the skin barrier just stops working as well, so the body is exposed to things that it isn’t used to seeing, and that can trigger flares,” says Dr. Elman. A few things might cause that dysfunction in your skin barrier. For starters, your genes. Some people are born with a gene variant that interferes with the skin's ability to protect as it should, acording to Mayo Clinic. Bacteria is another possible culprit, per Mayo. Too much of the bacteria Staphylococcus aureus (or just “staph” for short) on the skin can crowd out the good bacteria and keep your skin barrier from doing its job. Either way, it’s that defective skin barrier that leads to all the problems in eczema. When you have a weak skin barrier, your skin can’t hold in moisture as well. And it’s unable to keep out bacteria, irritants, allergens, and potential environmental triggers like cigarette smoke. That faulty skin barrier—or all the germs and other stuff that creep in as a result—can set off an immune system reaction that leads to that itchy, inflamed, and irritated skin that you probably know all too well, Dr. Elman says. Diagnosis How Is Papular Eczema Diagnosed? There is no blood test, biopsy, or X-ray for atopic dermatitis. Instead, your dermatologist or primary care physician will likely look at your skin to check for the physical signs and symptoms of atopic dermatitis, Dr. Yu explains. Then they might ask whether you have family members with eczema. They may also want to know if you or a family member has food allergies, seasonal allergies or asthma since those can be risk factors for eczema, per the NEA. If your doctor does order some testing for you, these are usually done to rule out other problems, like a specific allergy for which you’d need what’s called a patch test. Home Remedies Home Remedies for Eczema If you’ve got mild eczema, chances are you can get it under control on your own. “Most people who have very mild eczema probably don't end up seeing a dermatologist,” Dr. Yu confirms. According to Dr. Yu, you might be able to keep your symptoms at bay with some of the following DIY and OTC solutions: Moisturize Your Skin It’s critical to moisturize as soon as you get out of the tub or the shower. “It’s important that you’re using moisturizing ointments, something that has the consistency of Vaseline or Aquaphor,” Dr. Yu advises. There’s a specific protocol for moisturizing when you have eczema: After bathing in lukewarm water, pat your skin dry, and never rub it. Apply any topical medications that you use. Then, within three minutes of patting dry, while the skin is still damp, slather on your moisturizer. This “soak and seal” method locks moisture in and reseals that broken skin barrier. Add Some Oatmeal Studies show that colloidal oatmeal can help bring moisture back to eczema skin. You can: Add it to your lukewarm bath Make it into a paste and press it directly into the affected area Use eczema products containing it Soak in a Bleach Bath “When you do a diluted bleach bath, similar to the concentration you find in a swimming pool, it has actually shown to be very anti-inflammatory,” says Dr. Yu. The NEA recommends a 10-minute bleach bath two to three times each week. Add a half-cup of household bleach to a full tub of lukewarm water. Soak for 10 minutes. Rinse off with clean water. Then, pat dry. P.S.: A 10-minute dip in the swimming pool gets the job done, too! Moisturizing Oils Some—but not all—oils can bring relief to eczema-inflamed skin. There’s evidence that sunflower oil, coconut oil, and shea butter have benefits for this type of irritation. But you can’t just grab any old oil from your kitchen. “Stay away from olive oil, advises Dr. Yu. “The fatty acids found in olive oil actually promote the growth of yeast on your skin.” You apply coconut or other oils to the skin twice a day, just as you would any moisturizer. Ideally, one application per day is right after you bathe when your skin is still damp. If coconut oil is your pick, go for “virgin” or “cold-pressed.” Any other extraction method uses chemicals that could irritate your skin even more, say the NEA. Anti-Itch Cream Use OTC Anti-Itch Cream Try an anti-itch cream containing 1% hydrocortisone no more than twice a day on the irritated areas. Apply it after your bath and before you moisturize. This steroid calms down itching, swelling and irritation by quelling the body’s inflammatory response.
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. My son has severe eczema. I want to understand more about it and how to treat it at home. Using this article, please explain what eczema is and how to treat it. Use at least 400 words. Eczema, a.k.a., atopic dermatitis, is a chronic skin condition that causes patches of red, dry, and flaky skin that can trigger maddening itching and sometimes soreness and pain, too—the result of a rogue inflammatory response attacking your skin, which happens to be the largest organ in your body. Its symptoms can vary in both appearance and severity among different people and ethnic groups, per the National Eczema Association(NEA). And sometimes, the way people with eczema describe their condition varies, too. Take the term “papular” eczema. Some info-seekers out there who rely too much on Dr. Google might think this is a legit (and unique) type of atopic dermatitis—but our expert dermatologists are here to set the record straight. Papular Eczema What Is Papular Eczema? “Papular eczema really doesn’t mean something specific but when I imagine it, I imagine bumps rather than plaques,” says Scott Elman, M.D., a dermatologist and assistant professor of clinical dermatology and cutaneous surgery at University of Miami Health in Florida. These bumps, rather than flat, inflamed plaques, may be what eczema more often looks like on darker skin tones, adds Jeff Yu, M.D., a dermatologist at Massachusetts General Hospital and assistant professor of dermatology at Harvard Medical School in Boston. “We use that term but only for certain ethnic groups. We tend to see eczema that’s a little bit bumpier in African Americans and other people of color,” explains Dr. Yu. Meanwhile, Amy Paller, M.D., the chair of the Department of Dermatology at Northwestern Medicine in Evanston, IL, questions the term entirely. “I’ve never heard [of] ‘papular’ eczema,” she says. “We call it atopic dermatitis.” Meaning, people who say they have papular eczema likely mean their eczema is more bumpy than patchy. And those bumps may be more common in darker skin. But at the end of the day, it’s all just atopic dermatitis. Symptoms What Are the Symptoms of Papular Eczema? If your eczema is of the papular variety, you’ll likely see small, raised bumps on your skin rather than large, flat rashes. This symptom is more often seen on the skin of Black and brown people, say our experts. Beyond that, the majority of atopic dermatitis symptoms are the same. Here’s what you might experience, and it can happen anywhere on your body: Darkening of the skin around your eyes Dry, cracked skin Itching Oozing and crusting on the inflamed skin Raw, sensitive skin from scratching Swollen skin with a rash Thickened skin According to Dr. Elman, bumps, rashes, and irritated and inflamed skin can all look different on different people. On lighter skin, these skin symptoms look pink or red. On darker skin, areas affected by eczema may look more purple, burgundy, or brown. “That inflammation is absolutely seen differently on different skin tones,” adds Dr. Elman. “The redness may be more subtle. It could be a bit more purple. And it might be harder to discern on darker skin.” Causes What Causes Eczema? Your skin, when it’s acting like it’s supposed to, serves as a barrier between the inside of your body and the outside world. But, in eczema, “the skin barrier just stops working as well, so the body is exposed to things that it isn’t used to seeing, and that can trigger flares,” says Dr. Elman. A few things might cause that dysfunction in your skin barrier. For starters, your genes. Some people are born with a gene variant that interferes with the skin's ability to protect as it should, acording to Mayo Clinic. Bacteria is another possible culprit, per Mayo. Too much of the bacteria Staphylococcus aureus (or just “staph” for short) on the skin can crowd out the good bacteria and keep your skin barrier from doing its job. Either way, it’s that defective skin barrier that leads to all the problems in eczema. When you have a weak skin barrier, your skin can’t hold in moisture as well. And it’s unable to keep out bacteria, irritants, allergens, and potential environmental triggers like cigarette smoke. That faulty skin barrier—or all the germs and other stuff that creep in as a result—can set off an immune system reaction that leads to that itchy, inflamed, and irritated skin that you probably know all too well, Dr. Elman says. Diagnosis How Is Papular Eczema Diagnosed? There is no blood test, biopsy, or X-ray for atopic dermatitis. Instead, your dermatologist or primary care physician will likely look at your skin to check for the physical signs and symptoms of atopic dermatitis, Dr. Yu explains. Then they might ask whether you have family members with eczema. They may also want to know if you or a family member has food allergies, seasonal allergies or asthma since those can be risk factors for eczema, per the NEA. If your doctor does order some testing for you, these are usually done to rule out other problems, like a specific allergy for which you’d need what’s called a patch test. Home Remedies Home Remedies for Eczema If you’ve got mild eczema, chances are you can get it under control on your own. “Most people who have very mild eczema probably don't end up seeing a dermatologist,” Dr. Yu confirms. According to Dr. Yu, you might be able to keep your symptoms at bay with some of the following DIY and OTC solutions: Moisturize Your Skin It’s critical to moisturize as soon as you get out of the tub or the shower. “It’s important that you’re using moisturizing ointments, something that has the consistency of Vaseline or Aquaphor,” Dr. Yu advises. There’s a specific protocol for moisturizing when you have eczema: After bathing in lukewarm water, pat your skin dry, and never rub it. Apply any topical medications that you use. Then, within three minutes of patting dry, while the skin is still damp, slather on your moisturizer. This “soak and seal” method locks moisture in and reseals that broken skin barrier. Add Some Oatmeal Studies show that colloidal oatmeal can help bring moisture back to eczema skin. You can: Add it to your lukewarm bath Make it into a paste and press it directly into the affected area Use eczema products containing it Soak in a Bleach Bath “When you do a diluted bleach bath, similar to the concentration you find in a swimming pool, it has actually shown to be very anti-inflammatory,” says Dr. Yu. The NEA recommends a 10-minute bleach bath two to three times each week. Add a half-cup of household bleach to a full tub of lukewarm water. Soak for 10 minutes. Rinse off with clean water. Then, pat dry. P.S.: A 10-minute dip in the swimming pool gets the job done, too! Moisturizing Oils Some—but not all—oils can bring relief to eczema-inflamed skin. There’s evidence that sunflower oil, coconut oil, and shea butter have benefits for this type of irritation. But you can’t just grab any old oil from your kitchen. “Stay away from olive oil, advises Dr. Yu. “The fatty acids found in olive oil actually promote the growth of yeast on your skin.” You apply coconut or other oils to the skin twice a day, just as you would any moisturizer. Ideally, one application per day is right after you bathe when your skin is still damp. If coconut oil is your pick, go for “virgin” or “cold-pressed.” Any other extraction method uses chemicals that could irritate your skin even more, say the NEA. Anti-Itch Cream Use OTC Anti-Itch Cream Try an anti-itch cream containing 1% hydrocortisone no more than twice a day on the irritated areas. Apply it after your bath and before you moisturize. This steroid calms down itching, swelling and irritation by quelling the body’s inflammatory response. https://www.healthcentral.com/condition/eczema/papular-eczema
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. [user request] [context document]
EVIDENCE:
Eczema, a.k.a., atopic dermatitis, is a chronic skin condition that causes patches of red, dry, and flaky skin that can trigger maddening itching and sometimes soreness and pain, too—the result of a rogue inflammatory response attacking your skin, which happens to be the largest organ in your body. Its symptoms can vary in both appearance and severity among different people and ethnic groups, per the National Eczema Association(NEA). And sometimes, the way people with eczema describe their condition varies, too. Take the term “papular” eczema. Some info-seekers out there who rely too much on Dr. Google might think this is a legit (and unique) type of atopic dermatitis—but our expert dermatologists are here to set the record straight. Papular Eczema What Is Papular Eczema? “Papular eczema really doesn’t mean something specific but when I imagine it, I imagine bumps rather than plaques,” says Scott Elman, M.D., a dermatologist and assistant professor of clinical dermatology and cutaneous surgery at University of Miami Health in Florida. These bumps, rather than flat, inflamed plaques, may be what eczema more often looks like on darker skin tones, adds Jeff Yu, M.D., a dermatologist at Massachusetts General Hospital and assistant professor of dermatology at Harvard Medical School in Boston. “We use that term but only for certain ethnic groups. We tend to see eczema that’s a little bit bumpier in African Americans and other people of color,” explains Dr. Yu. Meanwhile, Amy Paller, M.D., the chair of the Department of Dermatology at Northwestern Medicine in Evanston, IL, questions the term entirely. “I’ve never heard [of] ‘papular’ eczema,” she says. “We call it atopic dermatitis.” Meaning, people who say they have papular eczema likely mean their eczema is more bumpy than patchy. And those bumps may be more common in darker skin. But at the end of the day, it’s all just atopic dermatitis. Symptoms What Are the Symptoms of Papular Eczema? If your eczema is of the papular variety, you’ll likely see small, raised bumps on your skin rather than large, flat rashes. This symptom is more often seen on the skin of Black and brown people, say our experts. Beyond that, the majority of atopic dermatitis symptoms are the same. Here’s what you might experience, and it can happen anywhere on your body: Darkening of the skin around your eyes Dry, cracked skin Itching Oozing and crusting on the inflamed skin Raw, sensitive skin from scratching Swollen skin with a rash Thickened skin According to Dr. Elman, bumps, rashes, and irritated and inflamed skin can all look different on different people. On lighter skin, these skin symptoms look pink or red. On darker skin, areas affected by eczema may look more purple, burgundy, or brown. “That inflammation is absolutely seen differently on different skin tones,” adds Dr. Elman. “The redness may be more subtle. It could be a bit more purple. And it might be harder to discern on darker skin.” Causes What Causes Eczema? Your skin, when it’s acting like it’s supposed to, serves as a barrier between the inside of your body and the outside world. But, in eczema, “the skin barrier just stops working as well, so the body is exposed to things that it isn’t used to seeing, and that can trigger flares,” says Dr. Elman. A few things might cause that dysfunction in your skin barrier. For starters, your genes. Some people are born with a gene variant that interferes with the skin's ability to protect as it should, acording to Mayo Clinic. Bacteria is another possible culprit, per Mayo. Too much of the bacteria Staphylococcus aureus (or just “staph” for short) on the skin can crowd out the good bacteria and keep your skin barrier from doing its job. Either way, it’s that defective skin barrier that leads to all the problems in eczema. When you have a weak skin barrier, your skin can’t hold in moisture as well. And it’s unable to keep out bacteria, irritants, allergens, and potential environmental triggers like cigarette smoke. That faulty skin barrier—or all the germs and other stuff that creep in as a result—can set off an immune system reaction that leads to that itchy, inflamed, and irritated skin that you probably know all too well, Dr. Elman says. Diagnosis How Is Papular Eczema Diagnosed? There is no blood test, biopsy, or X-ray for atopic dermatitis. Instead, your dermatologist or primary care physician will likely look at your skin to check for the physical signs and symptoms of atopic dermatitis, Dr. Yu explains. Then they might ask whether you have family members with eczema. They may also want to know if you or a family member has food allergies, seasonal allergies or asthma since those can be risk factors for eczema, per the NEA. If your doctor does order some testing for you, these are usually done to rule out other problems, like a specific allergy for which you’d need what’s called a patch test. Home Remedies Home Remedies for Eczema If you’ve got mild eczema, chances are you can get it under control on your own. “Most people who have very mild eczema probably don't end up seeing a dermatologist,” Dr. Yu confirms. According to Dr. Yu, you might be able to keep your symptoms at bay with some of the following DIY and OTC solutions: Moisturize Your Skin It’s critical to moisturize as soon as you get out of the tub or the shower. “It’s important that you’re using moisturizing ointments, something that has the consistency of Vaseline or Aquaphor,” Dr. Yu advises. There’s a specific protocol for moisturizing when you have eczema: After bathing in lukewarm water, pat your skin dry, and never rub it. Apply any topical medications that you use. Then, within three minutes of patting dry, while the skin is still damp, slather on your moisturizer. This “soak and seal” method locks moisture in and reseals that broken skin barrier. Add Some Oatmeal Studies show that colloidal oatmeal can help bring moisture back to eczema skin. You can: Add it to your lukewarm bath Make it into a paste and press it directly into the affected area Use eczema products containing it Soak in a Bleach Bath “When you do a diluted bleach bath, similar to the concentration you find in a swimming pool, it has actually shown to be very anti-inflammatory,” says Dr. Yu. The NEA recommends a 10-minute bleach bath two to three times each week. Add a half-cup of household bleach to a full tub of lukewarm water. Soak for 10 minutes. Rinse off with clean water. Then, pat dry. P.S.: A 10-minute dip in the swimming pool gets the job done, too! Moisturizing Oils Some—but not all—oils can bring relief to eczema-inflamed skin. There’s evidence that sunflower oil, coconut oil, and shea butter have benefits for this type of irritation. But you can’t just grab any old oil from your kitchen. “Stay away from olive oil, advises Dr. Yu. “The fatty acids found in olive oil actually promote the growth of yeast on your skin.” You apply coconut or other oils to the skin twice a day, just as you would any moisturizer. Ideally, one application per day is right after you bathe when your skin is still damp. If coconut oil is your pick, go for “virgin” or “cold-pressed.” Any other extraction method uses chemicals that could irritate your skin even more, say the NEA. Anti-Itch Cream Use OTC Anti-Itch Cream Try an anti-itch cream containing 1% hydrocortisone no more than twice a day on the irritated areas. Apply it after your bath and before you moisturize. This steroid calms down itching, swelling and irritation by quelling the body’s inflammatory response.
USER:
My son has severe eczema. I want to understand more about it and how to treat it at home. Using this article, please explain what eczema is and how to treat it. Use at least 400 words.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 24
| 37
| 1,281
| null | 166
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"================ <TEXT PASSAGE> ======= [context document] ================ <QUESTION> ======= [user request] ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
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Macular degeneration runs in my family and I'm getting older so I've been thinking more about it. What are the risk factors? Also, what are some of the symptoms I should be looking for? Are there some tests I should ask my eye doctor about at my next eye exam?
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Age-related macular degeneration is the most common cause of severe loss of eyesight among people 50 and older. Only the center of vision is affected with this disease. It is important to realize that people rarely go blind from it. AMD affects the central vision, and with it, the ability to see fine details. In AMD, a part of the retina called the macula is damaged. In advanced stages, people lose their ability to drive, to see faces, and to read smaller print. In its early stages, AMD may have no signs or symptoms, so people may not suspect they have it. Types of Age-Related Macular Degeneration and Causes The two primary types of age-related macular degeneration have different causes: Dry. This type is the most common. About 80% of those with AMD have the dry form. Its exact cause is unknown, although both genetic and environmental factors are thought to play a role. This happens as the light-sensitive cells in the macula slowly break down, generally one eye at a time. The loss of vision in this condition is usually slow and gradual. It is believed that the age-related damage of an important support membrane under the retina contributes to dry age-related macular degeneration. Wet. Though this type is less common, it usually leads to more severe vision loss in patients than dry AMD. It is the most common cause of severe loss of vision. Wet AMD happens when abnormal blood vessels start to grow beneath the retina. They leak fluid and blood — hence the name wet AMD — and can create a large blind spot in the center of the visual field. Risk Factors for Age-Related Macular Degeneration There are several risk factors that can contribute to developing age-related macular degeneration, including: Being 50 and older Eating a diet high in saturated fat Smoking High blood pressure or hypertension Age-Related Macular Degeneration Symptoms The following are the most common symptoms of age-related macular degeneration. However, each individual may experience symptoms differently. Symptoms may include: Blurry or fuzzy vision Difficulty recognizing familiar faces Straight lines appear wavy A dark, empty area or blind spot appears in the center of vision Loss of central vision, which is necessary for driving, reading, recognizing faces and performing close-up work The presence of drusen, which are tiny yellow deposits in the retina, is one of the most common early signs of age-related macular degeneration. It may mean the eye is at risk for developing more severe age-related macular degeneration. These will be visible to your doctor during an eye exam. The symptoms of age-related macular degeneration may look like other eye conditions. Speak with an eye care professional for diagnosis. Research ShowsAI Used to Predict Disease Progressioneye Johns Hopkins researchers used an artificial intelligence computer program and other data to predict the likelihood that a person’s disease could progress to the wet form of age-related macular degeneration. Learn more Age-Related Macular Degeneration Diagnosis In addition to a complete medical history and eye exam, your eye doctor may do the following tests to diagnose age-related macular degeneration: Visual acuity test. This common eye chart test measures vision ability at various distances. Pupil dilation. The pupil is widened with eyedrops to allow a close-up examination of the eye’s retina. Fluorescein angiography. Used to detect wet age-related macular degeneration, this diagnostic test involves a special dye injected into a vein in the arm. Pictures are then taken as the dye passes through the blood vessels in the retina, helping the doctor evaluate if the blood vessels are leaking and whether or not the leaking can be treated. Amsler grid. Used to detect wet age-related macular degeneration, this test uses a checkerboardlike grid to determine if the straight lines in the pattern appear wavy or missing to the patient. Both indications may signal the possibility of age-related macular degeneration. Amsler Grid To use the Amsler grid, follow these steps: Wearing any glasses you normally use to read, hold the grid 12 to 15 inches away from your face in good light. Cover one eye. Look directly at the center dot with your uncovered eye and keep your eye focused on it. While looking directly at the center dot, notice in your side vision if all grid lines look straight or if any lines or areas look blurry, wavy, dark or blank. Follow the same steps with the other eye. If you notice any areas of the grid that appear darker, wavy, blank or blurry, contact your ophthalmologist right away. Amsler Grid Age-Related Macular Degeneration Treatment Specific treatment for age-related macular degeneration will be determined by your doctor based on: Your age, overall health and medical history Extent and nature of the disease Your tolerance for specific medications, procedures or low-vision therapies Expectations for the course of the disease Your opinion or preference Currently, there is no treatment for dry age-related macular degeneration, though vision rehabilitation programs and low-vision devices can be used to build visual skills, develop new ways to perform daily living activities and adjust to living with age-related macular degeneration. The main treatment for wet AMD is the injection of medications called anti-VEGF agents. VEGF stands for vascular endothelial growth factor. A high level of VEGF in the eye is linked to the formation of the abnormal blood vessels that cause much of the damage in wet AMD. Anti-VEGF agents are used to combat the disease process and reduce the damaging effects of these leaky abnormal blood vessels. They are also able to effectively stabilize vision in many patients. In some patients, anti-VEGF injections actually improve the level of visual acuity. Anti-VEGF medications are administered by injecting them directly into the affected eye. Although this sounds daunting, the procedure is done with a very fine needle and under the cover of numbing (anesthetic) eyedrops, so patients are usually very comfortable. Anti-VEGF treatment is usually administered regularly over time, requiring multiple injections to maintain the treatment effect, and your retinal physician will discuss the best treatment schedule for you. In selected patients, other treatments, such as laser therapy, can be used, if necessary. Complications of Age-Related Macular Degeneration Age-related macular degeneration can result in severe loss of central vision but rarely causes blindness. It can, however, make it difficult to read, drive or perform other daily activities that require fine central vision. In AMD, the health of the peripheral retina is unaffected, so patients can rest assured that their peripheral (side) vision, and their ability to walk around without bumping into things, is usually preserved.
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"================ <TEXT PASSAGE> ======= Age-related macular degeneration is the most common cause of severe loss of eyesight among people 50 and older. Only the center of vision is affected with this disease. It is important to realize that people rarely go blind from it. AMD affects the central vision, and with it, the ability to see fine details. In AMD, a part of the retina called the macula is damaged. In advanced stages, people lose their ability to drive, to see faces, and to read smaller print. In its early stages, AMD may have no signs or symptoms, so people may not suspect they have it. Types of Age-Related Macular Degeneration and Causes The two primary types of age-related macular degeneration have different causes: Dry. This type is the most common. About 80% of those with AMD have the dry form. Its exact cause is unknown, although both genetic and environmental factors are thought to play a role. This happens as the light-sensitive cells in the macula slowly break down, generally one eye at a time. The loss of vision in this condition is usually slow and gradual. It is believed that the age-related damage of an important support membrane under the retina contributes to dry age-related macular degeneration. Wet. Though this type is less common, it usually leads to more severe vision loss in patients than dry AMD. It is the most common cause of severe loss of vision. Wet AMD happens when abnormal blood vessels start to grow beneath the retina. They leak fluid and blood — hence the name wet AMD — and can create a large blind spot in the center of the visual field. Risk Factors for Age-Related Macular Degeneration There are several risk factors that can contribute to developing age-related macular degeneration, including: Being 50 and older Eating a diet high in saturated fat Smoking High blood pressure or hypertension Age-Related Macular Degeneration Symptoms The following are the most common symptoms of age-related macular degeneration. However, each individual may experience symptoms differently. Symptoms may include: Blurry or fuzzy vision Difficulty recognizing familiar faces Straight lines appear wavy A dark, empty area or blind spot appears in the center of vision Loss of central vision, which is necessary for driving, reading, recognizing faces and performing close-up work The presence of drusen, which are tiny yellow deposits in the retina, is one of the most common early signs of age-related macular degeneration. It may mean the eye is at risk for developing more severe age-related macular degeneration. These will be visible to your doctor during an eye exam. The symptoms of age-related macular degeneration may look like other eye conditions. Speak with an eye care professional for diagnosis. Research ShowsAI Used to Predict Disease Progressioneye Johns Hopkins researchers used an artificial intelligence computer program and other data to predict the likelihood that a person’s disease could progress to the wet form of age-related macular degeneration. Learn more Age-Related Macular Degeneration Diagnosis In addition to a complete medical history and eye exam, your eye doctor may do the following tests to diagnose age-related macular degeneration: Visual acuity test. This common eye chart test measures vision ability at various distances. Pupil dilation. The pupil is widened with eyedrops to allow a close-up examination of the eye’s retina. Fluorescein angiography. Used to detect wet age-related macular degeneration, this diagnostic test involves a special dye injected into a vein in the arm. Pictures are then taken as the dye passes through the blood vessels in the retina, helping the doctor evaluate if the blood vessels are leaking and whether or not the leaking can be treated. Amsler grid. Used to detect wet age-related macular degeneration, this test uses a checkerboardlike grid to determine if the straight lines in the pattern appear wavy or missing to the patient. Both indications may signal the possibility of age-related macular degeneration. Amsler Grid To use the Amsler grid, follow these steps: Wearing any glasses you normally use to read, hold the grid 12 to 15 inches away from your face in good light. Cover one eye. Look directly at the center dot with your uncovered eye and keep your eye focused on it. While looking directly at the center dot, notice in your side vision if all grid lines look straight or if any lines or areas look blurry, wavy, dark or blank. Follow the same steps with the other eye. If you notice any areas of the grid that appear darker, wavy, blank or blurry, contact your ophthalmologist right away. Amsler Grid Age-Related Macular Degeneration Treatment Specific treatment for age-related macular degeneration will be determined by your doctor based on: Your age, overall health and medical history Extent and nature of the disease Your tolerance for specific medications, procedures or low-vision therapies Expectations for the course of the disease Your opinion or preference Currently, there is no treatment for dry age-related macular degeneration, though vision rehabilitation programs and low-vision devices can be used to build visual skills, develop new ways to perform daily living activities and adjust to living with age-related macular degeneration. The main treatment for wet AMD is the injection of medications called anti-VEGF agents. VEGF stands for vascular endothelial growth factor. A high level of VEGF in the eye is linked to the formation of the abnormal blood vessels that cause much of the damage in wet AMD. Anti-VEGF agents are used to combat the disease process and reduce the damaging effects of these leaky abnormal blood vessels. They are also able to effectively stabilize vision in many patients. In some patients, anti-VEGF injections actually improve the level of visual acuity. Anti-VEGF medications are administered by injecting them directly into the affected eye. Although this sounds daunting, the procedure is done with a very fine needle and under the cover of numbing (anesthetic) eyedrops, so patients are usually very comfortable. Anti-VEGF treatment is usually administered regularly over time, requiring multiple injections to maintain the treatment effect, and your retinal physician will discuss the best treatment schedule for you. In selected patients, other treatments, such as laser therapy, can be used, if necessary. Complications of Age-Related Macular Degeneration Age-related macular degeneration can result in severe loss of central vision but rarely causes blindness. It can, however, make it difficult to read, drive or perform other daily activities that require fine central vision. In AMD, the health of the peripheral retina is unaffected, so patients can rest assured that their peripheral (side) vision, and their ability to walk around without bumping into things, is usually preserved. https://www.hopkinsmedicine.org/health/conditions-and-diseases/agerelated-macular-degeneration-amd ================ <QUESTION> ======= Macular degeneration runs in my family and I'm getting older so I've been thinking more about it. What are the risk factors? Also, what are some of the symptoms I should be looking for? Are there some tests I should ask my eye doctor about at my next eye exam? ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
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"================ <TEXT PASSAGE> ======= [context document] ================ <QUESTION> ======= [user request] ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
EVIDENCE:
Age-related macular degeneration is the most common cause of severe loss of eyesight among people 50 and older. Only the center of vision is affected with this disease. It is important to realize that people rarely go blind from it. AMD affects the central vision, and with it, the ability to see fine details. In AMD, a part of the retina called the macula is damaged. In advanced stages, people lose their ability to drive, to see faces, and to read smaller print. In its early stages, AMD may have no signs or symptoms, so people may not suspect they have it. Types of Age-Related Macular Degeneration and Causes The two primary types of age-related macular degeneration have different causes: Dry. This type is the most common. About 80% of those with AMD have the dry form. Its exact cause is unknown, although both genetic and environmental factors are thought to play a role. This happens as the light-sensitive cells in the macula slowly break down, generally one eye at a time. The loss of vision in this condition is usually slow and gradual. It is believed that the age-related damage of an important support membrane under the retina contributes to dry age-related macular degeneration. Wet. Though this type is less common, it usually leads to more severe vision loss in patients than dry AMD. It is the most common cause of severe loss of vision. Wet AMD happens when abnormal blood vessels start to grow beneath the retina. They leak fluid and blood — hence the name wet AMD — and can create a large blind spot in the center of the visual field. Risk Factors for Age-Related Macular Degeneration There are several risk factors that can contribute to developing age-related macular degeneration, including: Being 50 and older Eating a diet high in saturated fat Smoking High blood pressure or hypertension Age-Related Macular Degeneration Symptoms The following are the most common symptoms of age-related macular degeneration. However, each individual may experience symptoms differently. Symptoms may include: Blurry or fuzzy vision Difficulty recognizing familiar faces Straight lines appear wavy A dark, empty area or blind spot appears in the center of vision Loss of central vision, which is necessary for driving, reading, recognizing faces and performing close-up work The presence of drusen, which are tiny yellow deposits in the retina, is one of the most common early signs of age-related macular degeneration. It may mean the eye is at risk for developing more severe age-related macular degeneration. These will be visible to your doctor during an eye exam. The symptoms of age-related macular degeneration may look like other eye conditions. Speak with an eye care professional for diagnosis. Research ShowsAI Used to Predict Disease Progressioneye Johns Hopkins researchers used an artificial intelligence computer program and other data to predict the likelihood that a person’s disease could progress to the wet form of age-related macular degeneration. Learn more Age-Related Macular Degeneration Diagnosis In addition to a complete medical history and eye exam, your eye doctor may do the following tests to diagnose age-related macular degeneration: Visual acuity test. This common eye chart test measures vision ability at various distances. Pupil dilation. The pupil is widened with eyedrops to allow a close-up examination of the eye’s retina. Fluorescein angiography. Used to detect wet age-related macular degeneration, this diagnostic test involves a special dye injected into a vein in the arm. Pictures are then taken as the dye passes through the blood vessels in the retina, helping the doctor evaluate if the blood vessels are leaking and whether or not the leaking can be treated. Amsler grid. Used to detect wet age-related macular degeneration, this test uses a checkerboardlike grid to determine if the straight lines in the pattern appear wavy or missing to the patient. Both indications may signal the possibility of age-related macular degeneration. Amsler Grid To use the Amsler grid, follow these steps: Wearing any glasses you normally use to read, hold the grid 12 to 15 inches away from your face in good light. Cover one eye. Look directly at the center dot with your uncovered eye and keep your eye focused on it. While looking directly at the center dot, notice in your side vision if all grid lines look straight or if any lines or areas look blurry, wavy, dark or blank. Follow the same steps with the other eye. If you notice any areas of the grid that appear darker, wavy, blank or blurry, contact your ophthalmologist right away. Amsler Grid Age-Related Macular Degeneration Treatment Specific treatment for age-related macular degeneration will be determined by your doctor based on: Your age, overall health and medical history Extent and nature of the disease Your tolerance for specific medications, procedures or low-vision therapies Expectations for the course of the disease Your opinion or preference Currently, there is no treatment for dry age-related macular degeneration, though vision rehabilitation programs and low-vision devices can be used to build visual skills, develop new ways to perform daily living activities and adjust to living with age-related macular degeneration. The main treatment for wet AMD is the injection of medications called anti-VEGF agents. VEGF stands for vascular endothelial growth factor. A high level of VEGF in the eye is linked to the formation of the abnormal blood vessels that cause much of the damage in wet AMD. Anti-VEGF agents are used to combat the disease process and reduce the damaging effects of these leaky abnormal blood vessels. They are also able to effectively stabilize vision in many patients. In some patients, anti-VEGF injections actually improve the level of visual acuity. Anti-VEGF medications are administered by injecting them directly into the affected eye. Although this sounds daunting, the procedure is done with a very fine needle and under the cover of numbing (anesthetic) eyedrops, so patients are usually very comfortable. Anti-VEGF treatment is usually administered regularly over time, requiring multiple injections to maintain the treatment effect, and your retinal physician will discuss the best treatment schedule for you. In selected patients, other treatments, such as laser therapy, can be used, if necessary. Complications of Age-Related Macular Degeneration Age-related macular degeneration can result in severe loss of central vision but rarely causes blindness. It can, however, make it difficult to read, drive or perform other daily activities that require fine central vision. In AMD, the health of the peripheral retina is unaffected, so patients can rest assured that their peripheral (side) vision, and their ability to walk around without bumping into things, is usually preserved.
USER:
Macular degeneration runs in my family and I'm getting older so I've been thinking more about it. What are the risk factors? Also, what are some of the symptoms I should be looking for? Are there some tests I should ask my eye doctor about at my next eye exam?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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| 49
| 50
| 1,090
| null | 215
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Give a maximum of three bullet points for each, and use only the information provided in the given text below.
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Provide some potential benefits and risks of the IoT.
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The IoT is not separate from the Internet, but rather, a potentially huge extension and expansion of it. The “things” that form the basis of the IoT are objects. They could be virtually anything— streetlights, thermostats, electric meters,11 fitness trackers, factory equipment, automobiles, unmanned aircraft systems (UASs or drones),12 or even cows or sheep in a field.13 What makes an object part of the IoT is embedded or attached computer chips or similar components that give the object both a unique identifier and Internet connectivity. Objects with such components are often called “smart”—such as smart meters and smart cars. Internet connectivity allows a smart object to communicate with computers and with other smart objects. Connections of smart objects to the Internet can be wired, such as through Ethernet cables, or wireless, such as via a Wi-Fi or cellular network. To enable precise communications, each IoT object must be uniquely identifiable. That is accomplished through an Internet Protocol (IP) address, a number assigned to each Internet connected device, whether a desktop computer, a mobile phone, a printer, or an IoT object.14 Those IP addresses ensure that the device or object sending or receiving information is correctly identified. What kinds of information do IoT objects communicate? The answer depends on the nature of the object, and it can be simple or complex. For example, a smart thermometer might have only one sensor, used to communicate ambient temperature to a remote weather-monitoring center. A wireless medical device might, in contrast, use various sensors to communicate a person’s body temperature, pulse, blood pressure, and other variables to a medical service provider via a computer or mobile phone. Smart objects can also be involved in command networks. For example, industrial control systems can adjust manufacturing processes based on input from both other IoT objects and human operators. Network connectivity can permit such operations to be performed in “real time”—that is, almost instantaneously. Smart objects can form systems that communicate information and commands among themselves, usually in concert with computers they connect to. This kind of communication enables the use of smart systems in homes, vehicles, factories, and even entire cities. Smart systems allow for automated and remote control of many processes. A smart home can permit remote control of lighting, security, HVAC (heating, ventilating, and air conditioning), and appliances. In a smart city, an intelligent transportation system (ITS) may permit vehicles to communicate with other vehicles and roadways to determine the fastest route to a destination, avoiding traffic jams, and traffic signals can be adjusted based on congestion information received from cameras and other sensors.15 Buildings might automatically adjust electric usage, based on information sent from remote thermometers and other sensors.16 An Industrial Internet application can permit companies to monitor production systems and adjust processes, remotely control and synchronize machinery operations, track inventory and supply chains, and perform other tasks.17 IoT connections and communications can be created across a broad range of objects and networks and can transform previously independent processes into integrated systems. These integrated systems can potentially have substantial effects on homes and communities, factories and cities, and every sector of the economy, both domestically and globally. What Impacts Will the IoT Have? The IoT may significantly affect many aspects of the economy and society, although the full extent and nature of its eventual impacts remains uncertain. Many observers predict that the growth of the IoT will bring positive benefits through enhanced integration, efficiency, and productivity across many sectors of the U.S. and global economies.18 Among those commonly mentioned are agriculture, energy, health care, manufacturing, and transportation. Significant impacts may also be felt more broadly on economic growth, infrastructure and cities, and individual consumers. However, both policy and technical challenges, including security and privacy issues, might inhibit the growth and impact of IoT innovations. Economic Growth Several economic analyses have predicted that the IoT will contribute significantly to economic growth over the next decade, but the predictions vary substantially in magnitude. The current global IoT market has been valued at about $2 trillion, with estimates of its predicted value over the next 5 to 10 years varying from $4 trillion to $11 trillion.19 Such variability demonstrates the difficulty of making economic forecasts in the face of various uncertainties, including a lack of consensus among researchers about exactly what the IoT is and how it will develop.20 Economic Sectors Agriculture The IoT can be leveraged by the agriculture industry through precision agriculture, with the goal of optimizing production and efficiency while reducing costs and environmental impacts. For farming operations, it involves analysis of detailed, often real-time data on weather, soil and air quality, water supply, pest populations, crop maturity, and other factors such as the cost and availability of equipment and labor.21 Field sensors test soil moisture and chemical balance, which can be coupled with location technologies to enable precise irrigation and fertilization.22 Drones and satellites can be used to take detailed images of fields, giving farmers information about crop yield, nutrient deficiencies, and weed locations.23 For ranching and animal operations, radio frequency identification (RFID) chips and electronic identification readers (EID) help monitor animal movements, feeding patterns, and breeding capabilities, while maintaining detailed records on individual animals.24 Energy Within the energy sector, the IoT may impact both production and delivery, for example through facilitating monitoring of oil wellheads and pipelines.25 When IoT components are embedded into parts of the electrical grid, the resulting infrastructure is commonly referred to as the “smart grid.”26 This use of IoT enables greater control by utilities over the flow of electricity and can enhance the efficiency of grid operations.27 It can also expedite the integration of microgenerators into the grid.28 Smart-grid technology can also provide consumers with greater knowledge and control of their energy usage through the use of smart meters in the home or office.29 Connection of smart meters to a building’s HVAC, lighting, and other systems can result in “smart buildings” that integrate the operation of those systems.30 Smart buildings use sensors and other data to automatically adjust room temperatures, lighting, and overall energy usage, resulting in greater efficiency and lower energy cost.31 Information from adjacent buildings may be further integrated to provide additional efficiencies in a neighborhood or larger division in a city.
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Provide some potential benefits and risks of the IoT. Give a maximum of three bullet points for each, and use only the information provided in the given text below. The IoT is not separate from the Internet, but rather, a potentially huge extension and expansion of it. The “things” that form the basis of the IoT are objects. They could be virtually anything— streetlights, thermostats, electric meters,11 fitness trackers, factory equipment, automobiles, unmanned aircraft systems (UASs or drones),12 or even cows or sheep in a field.13 What makes an object part of the IoT is embedded or attached computer chips or similar components that give the object both a unique identifier and Internet connectivity. Objects with such components are often called “smart”—such as smart meters and smart cars. Internet connectivity allows a smart object to communicate with computers and with other smart objects. Connections of smart objects to the Internet can be wired, such as through Ethernet cables, or wireless, such as via a Wi-Fi or cellular network. To enable precise communications, each IoT object must be uniquely identifiable. That is accomplished through an Internet Protocol (IP) address, a number assigned to each Internet connected device, whether a desktop computer, a mobile phone, a printer, or an IoT object.14 Those IP addresses ensure that the device or object sending or receiving information is correctly identified. What kinds of information do IoT objects communicate? The answer depends on the nature of the object, and it can be simple or complex. For example, a smart thermometer might have only one sensor, used to communicate ambient temperature to a remote weather-monitoring center. A wireless medical device might, in contrast, use various sensors to communicate a person’s body temperature, pulse, blood pressure, and other variables to a medical service provider via a computer or mobile phone. Smart objects can also be involved in command networks. For example, industrial control systems can adjust manufacturing processes based on input from both other IoT objects and human operators. Network connectivity can permit such operations to be performed in “real time”—that is, almost instantaneously. Smart objects can form systems that communicate information and commands among themselves, usually in concert with computers they connect to. This kind of communication enables the use of smart systems in homes, vehicles, factories, and even entire cities. Smart systems allow for automated and remote control of many processes. A smart home can permit remote control of lighting, security, HVAC (heating, ventilating, and air conditioning), and appliances. In a smart city, an intelligent transportation system (ITS) may permit vehicles to communicate with other vehicles and roadways to determine the fastest route to a destination, avoiding traffic jams, and traffic signals can be adjusted based on congestion information received from cameras and other sensors.15 Buildings might automatically adjust electric usage, based on information sent from remote thermometers and other sensors.16 An Industrial Internet application can permit companies to monitor production systems and adjust processes, remotely control and synchronize machinery operations, track inventory and supply chains, and perform other tasks.17 IoT connections and communications can be created across a broad range of objects and networks and can transform previously independent processes into integrated systems. These integrated systems can potentially have substantial effects on homes and communities, factories and cities, and every sector of the economy, both domestically and globally. What Impacts Will the IoT Have? The IoT may significantly affect many aspects of the economy and society, although the full extent and nature of its eventual impacts remains uncertain. Many observers predict that the growth of the IoT will bring positive benefits through enhanced integration, efficiency, and productivity across many sectors of the U.S. and global economies.18 Among those commonly mentioned are agriculture, energy, health care, manufacturing, and transportation. Significant impacts may also be felt more broadly on economic growth, infrastructure and cities, and individual consumers. However, both policy and technical challenges, including security and privacy issues, might inhibit the growth and impact of IoT innovations. Economic Growth Several economic analyses have predicted that the IoT will contribute significantly to economic growth over the next decade, but the predictions vary substantially in magnitude. The current global IoT market has been valued at about $2 trillion, with estimates of its predicted value over the next 5 to 10 years varying from $4 trillion to $11 trillion.19 Such variability demonstrates the difficulty of making economic forecasts in the face of various uncertainties, including a lack of consensus among researchers about exactly what the IoT is and how it will develop.20 Economic Sectors Agriculture The IoT can be leveraged by the agriculture industry through precision agriculture, with the goal of optimizing production and efficiency while reducing costs and environmental impacts. For farming operations, it involves analysis of detailed, often real-time data on weather, soil and air quality, water supply, pest populations, crop maturity, and other factors such as the cost and availability of equipment and labor.21 Field sensors test soil moisture and chemical balance, which can be coupled with location technologies to enable precise irrigation and fertilization.22 Drones and satellites can be used to take detailed images of fields, giving farmers information about crop yield, nutrient deficiencies, and weed locations.23 For ranching and animal operations, radio frequency identification (RFID) chips and electronic identification readers (EID) help monitor animal movements, feeding patterns, and breeding capabilities, while maintaining detailed records on individual animals.24 Energy Within the energy sector, the IoT may impact both production and delivery, for example through facilitating monitoring of oil wellheads and pipelines.25 When IoT components are embedded into parts of the electrical grid, the resulting infrastructure is commonly referred to as the “smart grid.”26 This use of IoT enables greater control by utilities over the flow of electricity and can enhance the efficiency of grid operations.27 It can also expedite the integration of microgenerators into the grid.28 Smart-grid technology can also provide consumers with greater knowledge and control of their energy usage through the use of smart meters in the home or office.29 Connection of smart meters to a building’s HVAC, lighting, and other systems can result in “smart buildings” that integrate the operation of those systems.30 Smart buildings use sensors and other data to automatically adjust room temperatures, lighting, and overall energy usage, resulting in greater efficiency and lower energy cost.31 Information from adjacent buildings may be further integrated to provide additional efficiencies in a neighborhood or larger division in a city.
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Give a maximum of three bullet points for each, and use only the information provided in the given text below.
EVIDENCE:
The IoT is not separate from the Internet, but rather, a potentially huge extension and expansion of it. The “things” that form the basis of the IoT are objects. They could be virtually anything— streetlights, thermostats, electric meters,11 fitness trackers, factory equipment, automobiles, unmanned aircraft systems (UASs or drones),12 or even cows or sheep in a field.13 What makes an object part of the IoT is embedded or attached computer chips or similar components that give the object both a unique identifier and Internet connectivity. Objects with such components are often called “smart”—such as smart meters and smart cars. Internet connectivity allows a smart object to communicate with computers and with other smart objects. Connections of smart objects to the Internet can be wired, such as through Ethernet cables, or wireless, such as via a Wi-Fi or cellular network. To enable precise communications, each IoT object must be uniquely identifiable. That is accomplished through an Internet Protocol (IP) address, a number assigned to each Internet connected device, whether a desktop computer, a mobile phone, a printer, or an IoT object.14 Those IP addresses ensure that the device or object sending or receiving information is correctly identified. What kinds of information do IoT objects communicate? The answer depends on the nature of the object, and it can be simple or complex. For example, a smart thermometer might have only one sensor, used to communicate ambient temperature to a remote weather-monitoring center. A wireless medical device might, in contrast, use various sensors to communicate a person’s body temperature, pulse, blood pressure, and other variables to a medical service provider via a computer or mobile phone. Smart objects can also be involved in command networks. For example, industrial control systems can adjust manufacturing processes based on input from both other IoT objects and human operators. Network connectivity can permit such operations to be performed in “real time”—that is, almost instantaneously. Smart objects can form systems that communicate information and commands among themselves, usually in concert with computers they connect to. This kind of communication enables the use of smart systems in homes, vehicles, factories, and even entire cities. Smart systems allow for automated and remote control of many processes. A smart home can permit remote control of lighting, security, HVAC (heating, ventilating, and air conditioning), and appliances. In a smart city, an intelligent transportation system (ITS) may permit vehicles to communicate with other vehicles and roadways to determine the fastest route to a destination, avoiding traffic jams, and traffic signals can be adjusted based on congestion information received from cameras and other sensors.15 Buildings might automatically adjust electric usage, based on information sent from remote thermometers and other sensors.16 An Industrial Internet application can permit companies to monitor production systems and adjust processes, remotely control and synchronize machinery operations, track inventory and supply chains, and perform other tasks.17 IoT connections and communications can be created across a broad range of objects and networks and can transform previously independent processes into integrated systems. These integrated systems can potentially have substantial effects on homes and communities, factories and cities, and every sector of the economy, both domestically and globally. What Impacts Will the IoT Have? The IoT may significantly affect many aspects of the economy and society, although the full extent and nature of its eventual impacts remains uncertain. Many observers predict that the growth of the IoT will bring positive benefits through enhanced integration, efficiency, and productivity across many sectors of the U.S. and global economies.18 Among those commonly mentioned are agriculture, energy, health care, manufacturing, and transportation. Significant impacts may also be felt more broadly on economic growth, infrastructure and cities, and individual consumers. However, both policy and technical challenges, including security and privacy issues, might inhibit the growth and impact of IoT innovations. Economic Growth Several economic analyses have predicted that the IoT will contribute significantly to economic growth over the next decade, but the predictions vary substantially in magnitude. The current global IoT market has been valued at about $2 trillion, with estimates of its predicted value over the next 5 to 10 years varying from $4 trillion to $11 trillion.19 Such variability demonstrates the difficulty of making economic forecasts in the face of various uncertainties, including a lack of consensus among researchers about exactly what the IoT is and how it will develop.20 Economic Sectors Agriculture The IoT can be leveraged by the agriculture industry through precision agriculture, with the goal of optimizing production and efficiency while reducing costs and environmental impacts. For farming operations, it involves analysis of detailed, often real-time data on weather, soil and air quality, water supply, pest populations, crop maturity, and other factors such as the cost and availability of equipment and labor.21 Field sensors test soil moisture and chemical balance, which can be coupled with location technologies to enable precise irrigation and fertilization.22 Drones and satellites can be used to take detailed images of fields, giving farmers information about crop yield, nutrient deficiencies, and weed locations.23 For ranching and animal operations, radio frequency identification (RFID) chips and electronic identification readers (EID) help monitor animal movements, feeding patterns, and breeding capabilities, while maintaining detailed records on individual animals.24 Energy Within the energy sector, the IoT may impact both production and delivery, for example through facilitating monitoring of oil wellheads and pipelines.25 When IoT components are embedded into parts of the electrical grid, the resulting infrastructure is commonly referred to as the “smart grid.”26 This use of IoT enables greater control by utilities over the flow of electricity and can enhance the efficiency of grid operations.27 It can also expedite the integration of microgenerators into the grid.28 Smart-grid technology can also provide consumers with greater knowledge and control of their energy usage through the use of smart meters in the home or office.29 Connection of smart meters to a building’s HVAC, lighting, and other systems can result in “smart buildings” that integrate the operation of those systems.30 Smart buildings use sensors and other data to automatically adjust room temperatures, lighting, and overall energy usage, resulting in greater efficiency and lower energy cost.31 Information from adjacent buildings may be further integrated to provide additional efficiencies in a neighborhood or larger division in a city.
USER:
Provide some potential benefits and risks of the IoT.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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[question] [user request] ===================== [text] [context document] ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
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Summarize Section 1 in simple terms with a bullet point for each paragraph. Exclude the paragraph about the history of the section, and limit each bullet point to 30 words or less. Then, explain the importance of a pre-kindergarten program.
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SECTION 1. Public education.— (a) The education of children is a fundamental value of the people of the State of Florida. It is, therefore, a paramount duty of the state to make adequate provision for the education of all children residing within its borders. Adequate provision shall be made by law for a uniform, efficient, safe, secure, and high quality system of free public schools that allows students to obtain a high quality education and for the establishment, maintenance, and operation of institutions of higher learning and other public education programs that the needs of the people may require. To assure that children attending public schools obtain a high quality education, the legislature shall make adequate provision to ensure that, by the beginning of the 2010 school year, there are a sufficient number of classrooms so that: (1) The maximum number of students who are assigned to each teacher who is teaching in public school classrooms for prekindergarten through grade 3 does not exceed 18 students; (2) The maximum number of students who are assigned to each teacher who is teaching in public school classrooms for grades 4 through 8 does not exceed 22 students; and (3) The maximum number of students who are assigned to each teacher who is teaching in public school classrooms for grades 9 through 12 does not exceed 25 students. The class size requirements of this subsection do not apply to extracurricular classes. Payment of the costs associated with reducing class size to meet these requirements is the responsibility of the state and not of local schools districts. Beginning with the 2003-2004 fiscal year, the legislature shall provide sufficient funds to reduce the average number of students in each classroom by at least two students per year until the maximum number of students per classroom does not exceed the requirements of this subsection. (b) Every four-year old child in Florida shall be provided by the State a high quality pre-kindergarten learning opportunity in the form of an early childhood development and education program which shall be voluntary, high quality, free, and delivered according to professionally accepted standards. An early childhood development and education program means an organized program designed to address and enhance each child’s ability to make age appropriate progress in an appropriate range of settings in the development of language and cognitive capabilities and emotional, social, regulatory and moral capacities through education in basic skills and such other skills as the Legislature may determine to be appropriate. (c) The early childhood education and development programs provided by reason of subparagraph (b) shall be implemented no later than the beginning of the 2005 school year through funds generated in addition to those used for existing education, health, and development programs. Existing education, health, and development programs are those funded by the State as of January 1, 2002 that provided for child or adult education, health care, or development. History.—Am. proposed by Constitution Revision Commission, Revision No. 6, 1998, filed with the Secretary of State May 5, 1998; adopted 1998; Ams. by Initiative Petitions filed with the Secretary of State April 13, 2001, and January 25, 2002; adopted 2002. SECTION 2. State board of education.—The state board of education shall be a body corporate and have such supervision of the system of free public education as is provided by law. The state board of education shall consist of seven members appointed by the governor to staggered 4-year terms, subject to confirmation by the senate. The state board of education shall appoint the commissioner of education. History.—Am. proposed by Constitution Revision Commission, Revision No. 8, 1998, filed with the Secretary of State May 5, 1998; adopted 1998. SECTION 3. Terms of appointive board members.—Members of any appointive board dealing with education may serve terms in excess of four years as provided by law. SECTION 4. School districts; school boards.— (a) Each county shall constitute a school district; provided, two or more contiguous counties, upon vote of the electors of each county pursuant to law, may be combined into one school district. In each school district there shall be a school board composed of five or more members chosen by vote of the electors in a nonpartisan election for appropriately staggered terms of four years, as provided by law. (b) The school board shall operate, control and supervise all free public schools within the school district and determine the rate of school district taxes within the limits prescribed herein. Two or more school districts may operate and finance joint educational programs. History.—Am. proposed by Constitution Revision Commission, Revision No. 11, 1998, filed with the Secretary of State May 5, 1998; adopted 1998. SECTION 5. Superintendent of schools.—In each school district there shall be a superintendent of schools who shall be elected at the general election in each year the number of which is a multiple of four for a term of four years; or, when provided by resolution of the district school board, or by special law, approved by vote of the electors, the district school superintendent in any school district shall be employed by the district school board as provided by general law. The resolution or special law may be rescinded or repealed by either procedure after four years. History.—Am. proposed by Constitution Revision Commission, Revision No. 13, 1998, filed with the Secretary of State May 5, 1998; adopted 1998. SECTION 6. State school fund.—The income derived from the state school fund shall, and the principal of the fund may, be appropriated, but only to the support and maintenance of free public schools. SECTION 7. State University System.— (a) PURPOSES. In order to achieve excellence through teaching students, advancing research and providing public service for the benefit of Florida’s citizens, their communities and economies, the people hereby establish a system of governance for the state university system of Florida. (b) STATE UNIVERSITY SYSTEM. There shall be a single state university system comprised of all public universities. A board of trustees shall administer each public university and a board of governors shall govern the state university system. (c) LOCAL BOARDS OF TRUSTEES. Each local constituent university shall be administered by a board of trustees consisting of thirteen members dedicated to the purposes of the state university system. The board of governors shall establish the powers and duties of the boards of trustees. Each board of trustees shall consist of six citizen members appointed by the governor and five citizen members appointed by the board of governors. The appointed members shall be confirmed by the senate and serve staggered terms of five years as provided by law. The chair of the faculty senate, or the equivalent, and the president of the student body of the university shall also be members.
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[question] Summarize Section 1 in simple terms with a bullet point for each paragraph. Exclude the paragraph about the history of the section, and limit each bullet point to 30 words or less. Then, explain the importance of a pre-kindergarten program. ===================== [text] SECTION 1. Public education.— (a) The education of children is a fundamental value of the people of the State of Florida. It is, therefore, a paramount duty of the state to make adequate provision for the education of all children residing within its borders. Adequate provision shall be made by law for a uniform, efficient, safe, secure, and high quality system of free public schools that allows students to obtain a high quality education and for the establishment, maintenance, and operation of institutions of higher learning and other public education programs that the needs of the people may require. To assure that children attending public schools obtain a high quality education, the legislature shall make adequate provision to ensure that, by the beginning of the 2010 school year, there are a sufficient number of classrooms so that: (1) The maximum number of students who are assigned to each teacher who is teaching in public school classrooms for prekindergarten through grade 3 does not exceed 18 students; (2) The maximum number of students who are assigned to each teacher who is teaching in public school classrooms for grades 4 through 8 does not exceed 22 students; and (3) The maximum number of students who are assigned to each teacher who is teaching in public school classrooms for grades 9 through 12 does not exceed 25 students. The class size requirements of this subsection do not apply to extracurricular classes. Payment of the costs associated with reducing class size to meet these requirements is the responsibility of the state and not of local schools districts. Beginning with the 2003-2004 fiscal year, the legislature shall provide sufficient funds to reduce the average number of students in each classroom by at least two students per year until the maximum number of students per classroom does not exceed the requirements of this subsection. (b) Every four-year old child in Florida shall be provided by the State a high quality pre-kindergarten learning opportunity in the form of an early childhood development and education program which shall be voluntary, high quality, free, and delivered according to professionally accepted standards. An early childhood development and education program means an organized program designed to address and enhance each child’s ability to make age appropriate progress in an appropriate range of settings in the development of language and cognitive capabilities and emotional, social, regulatory and moral capacities through education in basic skills and such other skills as the Legislature may determine to be appropriate. (c) The early childhood education and development programs provided by reason of subparagraph (b) shall be implemented no later than the beginning of the 2005 school year through funds generated in addition to those used for existing education, health, and development programs. Existing education, health, and development programs are those funded by the State as of January 1, 2002 that provided for child or adult education, health care, or development. History.—Am. proposed by Constitution Revision Commission, Revision No. 6, 1998, filed with the Secretary of State May 5, 1998; adopted 1998; Ams. by Initiative Petitions filed with the Secretary of State April 13, 2001, and January 25, 2002; adopted 2002. SECTION 2. State board of education.—The state board of education shall be a body corporate and have such supervision of the system of free public education as is provided by law. The state board of education shall consist of seven members appointed by the governor to staggered 4-year terms, subject to confirmation by the senate. The state board of education shall appoint the commissioner of education. History.—Am. proposed by Constitution Revision Commission, Revision No. 8, 1998, filed with the Secretary of State May 5, 1998; adopted 1998. SECTION 3. Terms of appointive board members.—Members of any appointive board dealing with education may serve terms in excess of four years as provided by law. SECTION 4. School districts; school boards.— (a) Each county shall constitute a school district; provided, two or more contiguous counties, upon vote of the electors of each county pursuant to law, may be combined into one school district. In each school district there shall be a school board composed of five or more members chosen by vote of the electors in a nonpartisan election for appropriately staggered terms of four years, as provided by law. (b) The school board shall operate, control and supervise all free public schools within the school district and determine the rate of school district taxes within the limits prescribed herein. Two or more school districts may operate and finance joint educational programs. History.—Am. proposed by Constitution Revision Commission, Revision No. 11, 1998, filed with the Secretary of State May 5, 1998; adopted 1998. SECTION 5. Superintendent of schools.—In each school district there shall be a superintendent of schools who shall be elected at the general election in each year the number of which is a multiple of four for a term of four years; or, when provided by resolution of the district school board, or by special law, approved by vote of the electors, the district school superintendent in any school district shall be employed by the district school board as provided by general law. The resolution or special law may be rescinded or repealed by either procedure after four years. History.—Am. proposed by Constitution Revision Commission, Revision No. 13, 1998, filed with the Secretary of State May 5, 1998; adopted 1998. SECTION 6. State school fund.—The income derived from the state school fund shall, and the principal of the fund may, be appropriated, but only to the support and maintenance of free public schools. SECTION 7. State University System.— (a) PURPOSES. In order to achieve excellence through teaching students, advancing research and providing public service for the benefit of Florida’s citizens, their communities and economies, the people hereby establish a system of governance for the state university system of Florida. (b) STATE UNIVERSITY SYSTEM. There shall be a single state university system comprised of all public universities. A board of trustees shall administer each public university and a board of governors shall govern the state university system. (c) LOCAL BOARDS OF TRUSTEES. Each local constituent university shall be administered by a board of trustees consisting of thirteen members dedicated to the purposes of the state university system. The board of governors shall establish the powers and duties of the boards of trustees. Each board of trustees shall consist of six citizen members appointed by the governor and five citizen members appointed by the board of governors. The appointed members shall be confirmed by the senate and serve staggered terms of five years as provided by law. The chair of the faculty senate, or the equivalent, and the president of the student body of the university shall also be members. https://www.flsenate.gov/Laws/Constitution#A9 ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
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[question] [user request] ===================== [text] [context document] ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
EVIDENCE:
SECTION 1. Public education.— (a) The education of children is a fundamental value of the people of the State of Florida. It is, therefore, a paramount duty of the state to make adequate provision for the education of all children residing within its borders. Adequate provision shall be made by law for a uniform, efficient, safe, secure, and high quality system of free public schools that allows students to obtain a high quality education and for the establishment, maintenance, and operation of institutions of higher learning and other public education programs that the needs of the people may require. To assure that children attending public schools obtain a high quality education, the legislature shall make adequate provision to ensure that, by the beginning of the 2010 school year, there are a sufficient number of classrooms so that: (1) The maximum number of students who are assigned to each teacher who is teaching in public school classrooms for prekindergarten through grade 3 does not exceed 18 students; (2) The maximum number of students who are assigned to each teacher who is teaching in public school classrooms for grades 4 through 8 does not exceed 22 students; and (3) The maximum number of students who are assigned to each teacher who is teaching in public school classrooms for grades 9 through 12 does not exceed 25 students. The class size requirements of this subsection do not apply to extracurricular classes. Payment of the costs associated with reducing class size to meet these requirements is the responsibility of the state and not of local schools districts. Beginning with the 2003-2004 fiscal year, the legislature shall provide sufficient funds to reduce the average number of students in each classroom by at least two students per year until the maximum number of students per classroom does not exceed the requirements of this subsection. (b) Every four-year old child in Florida shall be provided by the State a high quality pre-kindergarten learning opportunity in the form of an early childhood development and education program which shall be voluntary, high quality, free, and delivered according to professionally accepted standards. An early childhood development and education program means an organized program designed to address and enhance each child’s ability to make age appropriate progress in an appropriate range of settings in the development of language and cognitive capabilities and emotional, social, regulatory and moral capacities through education in basic skills and such other skills as the Legislature may determine to be appropriate. (c) The early childhood education and development programs provided by reason of subparagraph (b) shall be implemented no later than the beginning of the 2005 school year through funds generated in addition to those used for existing education, health, and development programs. Existing education, health, and development programs are those funded by the State as of January 1, 2002 that provided for child or adult education, health care, or development. History.—Am. proposed by Constitution Revision Commission, Revision No. 6, 1998, filed with the Secretary of State May 5, 1998; adopted 1998; Ams. by Initiative Petitions filed with the Secretary of State April 13, 2001, and January 25, 2002; adopted 2002. SECTION 2. State board of education.—The state board of education shall be a body corporate and have such supervision of the system of free public education as is provided by law. The state board of education shall consist of seven members appointed by the governor to staggered 4-year terms, subject to confirmation by the senate. The state board of education shall appoint the commissioner of education. History.—Am. proposed by Constitution Revision Commission, Revision No. 8, 1998, filed with the Secretary of State May 5, 1998; adopted 1998. SECTION 3. Terms of appointive board members.—Members of any appointive board dealing with education may serve terms in excess of four years as provided by law. SECTION 4. School districts; school boards.— (a) Each county shall constitute a school district; provided, two or more contiguous counties, upon vote of the electors of each county pursuant to law, may be combined into one school district. In each school district there shall be a school board composed of five or more members chosen by vote of the electors in a nonpartisan election for appropriately staggered terms of four years, as provided by law. (b) The school board shall operate, control and supervise all free public schools within the school district and determine the rate of school district taxes within the limits prescribed herein. Two or more school districts may operate and finance joint educational programs. History.—Am. proposed by Constitution Revision Commission, Revision No. 11, 1998, filed with the Secretary of State May 5, 1998; adopted 1998. SECTION 5. Superintendent of schools.—In each school district there shall be a superintendent of schools who shall be elected at the general election in each year the number of which is a multiple of four for a term of four years; or, when provided by resolution of the district school board, or by special law, approved by vote of the electors, the district school superintendent in any school district shall be employed by the district school board as provided by general law. The resolution or special law may be rescinded or repealed by either procedure after four years. History.—Am. proposed by Constitution Revision Commission, Revision No. 13, 1998, filed with the Secretary of State May 5, 1998; adopted 1998. SECTION 6. State school fund.—The income derived from the state school fund shall, and the principal of the fund may, be appropriated, but only to the support and maintenance of free public schools. SECTION 7. State University System.— (a) PURPOSES. In order to achieve excellence through teaching students, advancing research and providing public service for the benefit of Florida’s citizens, their communities and economies, the people hereby establish a system of governance for the state university system of Florida. (b) STATE UNIVERSITY SYSTEM. There shall be a single state university system comprised of all public universities. A board of trustees shall administer each public university and a board of governors shall govern the state university system. (c) LOCAL BOARDS OF TRUSTEES. Each local constituent university shall be administered by a board of trustees consisting of thirteen members dedicated to the purposes of the state university system. The board of governors shall establish the powers and duties of the boards of trustees. Each board of trustees shall consist of six citizen members appointed by the governor and five citizen members appointed by the board of governors. The appointed members shall be confirmed by the senate and serve staggered terms of five years as provided by law. The chair of the faculty senate, or the equivalent, and the president of the student body of the university shall also be members.
USER:
Summarize Section 1 in simple terms with a bullet point for each paragraph. Exclude the paragraph about the history of the section, and limit each bullet point to 30 words or less. Then, explain the importance of a pre-kindergarten program.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 28
| 40
| 1,122
| null | 527
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Draw information from the context only to inform your response.
|
Discuss the concept of fast fashion and its effect on workers as outlined in the text.
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I. Introduction Fast fashion is an approach to the design, creation, and marketing of clothing with an emphasis on making trends quickly and cheaply available to consumers.2 The term was coined by the New York Times in the early 2000s when describing Zara’s mission to take a garment from the design stage to being sold in stores in just fifteen days.3 The idea behind this phenomenon is to get the newest styles on the market as fast as possible so that consumers can get them at the height of their popularity.4 Increased consumption in wealthy, first-world countries has driven the success of fast fashion and placed a significant strain on garment factories and their workers.5 Because fashion is one of the most labor-dependent industries—as each piece of apparel must be handmade along a lengthy supply chain—brands have looked to outsource labor overseas to minimize costs and maximize profits.6 The goal of outsourcing is to locate low-cost production sources in emerging economies, like Bangladesh, where input costs are low and productivity is high.7 As retail prices have decreased and production prices have increased, there continues to be pressure on manufacturers’ margins.8 Because of this cycle, garment workers are often subjected to poor employment conditions and factories are less able to invest in the improvement of labor conditions or increase workers’ pay.9 For decades, brands have turned a blind eye to these key issues, continuing to profit off cheap, forced labor.10 Zara, H&M, and Topshop were among the first companies to take looks and designs from top fashion houses and reproduce them quickly and cheaply.11 Key characteristics of fast fashion brands include: (1) having thousands of styles, particularly those that touch on the latest trends; (2) extremely short turnaround times between when a trend is seen on the catwalk and when it hits the shelves; (3) offshore manufacturing where labor is cheap; (4) limited quantities of particular garments; and (5) cheap, low-quality materials.12 This note will explore how the fast fashion cycle perpetuates neglect of consumer responsibility, social and ecological harm, capitalization of fast production and cheap prices, and labor exploitation. II. Background A. A Journey Down the Supply Chain As clothes have gotten cheaper, trend cycles have sped up, and shopping has become a hobby, consumers, perhaps unknowingly, have perpetuated a cycle of abusive labor practices in overseas garment factories.13 Because labor costs remain high in the Western Hemisphere, production has largely moved overseas and fashion companies industry-wide are utilizing subcontracting to produce their garments.14 Subcontracting is the process by which a company divides parts of the supply chain across multiple countries and into multiple parts, including design, spinning, yarn production, dyeing, cutting, stitching, and final garment production.15 The general supply chain involves multiple steps: (1) cotton is grown and sold to the global market; (2) spinners use cotton or synthetic fibers to produce yarn or fabric; (3) garment factories cut and sew the fabric and add trim to produce garments; (4) garment factories that lack capacity for some processes subcontract them to other facilities; (5) garments are shipped to the brands that place the order; (6) brands distribute the garments to retail and online stores; and (7) consumers purchase the garments.16 Subcontracting allows for the success of fast fashion because it permits companies to utilize the low cost of overseas labor as subcontracted units are not regulated.17 It is not uncommon that the clothing consumers buy in store has already been in multiple different countries or factories before hitting the shelves.18 Manufacturing supply chains in the fashion industry are known for being rife with abuse, forced labor, and extremely low wages.19 Buyers often participate in a practice called “underground bidding,” where they use the quoted prices of one factory to get another factory to lower their prices.20 The company then selects the factory that commits to the fastest turnaround time and the lowest price, effectively pushing down wages and worsening working conditions.21 This perpetuates a skewed power dynamic where buyers dominate, as factories accept low prices for orders while remaining under pressure to maintain high product quality and productivity levels with very little financial resources.22 As delivery time for orders has decreased ten to twenty percent over the last five years, urgent orders have become more frequent.23 Consequently, workers are forced to work overtime hours, often without overtime pay, in order to meet these quick turnaround times and order changes.24 B. Working Conditions in Overseas Garment Factories Workers in fashion supply chains often endure unimaginable conditions in garment factories, where buildings lack fire alarms, and managers can lock doors and keep workers in until they complete the orders.25 Other dangerous conditions include crumbling buildings, broken alarms, and missing sprinklers and fire barriers.26 In countries like Bangladesh, local laws regulating fire safety, pay, and working conditions are not well-enforced as there are not enough inspectors and there is significant potential for the corruption of officials.27 Specifically, the Bangladesh government has failed to enforce national building codes, especially in buildings owned by wellconnected landlords.28 Thus, garment workers often endure brutal, unsafe working conditions at the mercy of their employer.29 In 2013, an eight-story clothing manufacturing building in Dhaka, Bangladesh collapsed, killing over one thousand garment workers.30 Just five months earlier, at least 112 workers died in a factory fire in Tazreen on the outskirts of Dhaka.31 Following these incidents, many major United States (U.S.) retailers joined safety-monitoring groups that required them to stop selling clothing from factories that violated safety standards.32 But Amazon—one of the world’s largest retailers— did not join this coalition and continues to sell clothing made from factories operating under similar conditions.33 Amazon has stated that it does not inspect the factories that produce the clothing they buy from wholesalers or other third-party sellers.34 In fact, the company will only remove a product from their site if they become aware that the product came from a factory that may not meet their supply chain standards.35 With a marketplace as large as Amazon’s, this is clearly a problem as it keeps unsafe workplaces up and running.36 While consumers may not currently be aware that the clothing they are buying originated in a factory where workers are subject to long hours and serious injuries, it is important that it is made known and steps are taken to end such practices. III. Development and Problems A. Absence of Worker Protections in the Garment Industries Stark contrasts exist between garment workers’ rights in countries like the U.S. and Bangladesh.37 While workers in the U.S. have protection under the Fair Labor Standards Act (FLSA) and through regulatory oversight, Bangladesh lacks a well-functioning labor inspection system or enforcement mechanisms.38 Moreover, because supply chains are organizationally fragmented and geographically dispersed, it becomes difficult for garment workers to unionize and fight for change.39 1. Minimum Wage A living wage is the lowest wage paid to a full-time worker—earned in no more than forty-eight hours per week—needed to cover basics like food, decent housing, healthcare, clothing, transportation, utilities, childcare, education, and other essential needs, in addition to some savings for the future and unexpected events.40 The legal minimum wage for garment workers in Bangladesh is approximately 8000 taka per month, which amounts to $79 USD.41 But instead of paying workers a legal minimum wage, some factories will utilize a piece-rate system in which they pay workers pennies per garment sewn—a practice also used in the U.S.42 Under this system, workers are paid $0.02 to $0.06 per garment, which can translate to, at most, $6 per hour.43 Although the Bangladesh government sets a minimum wage, it is not properly enforced, resulting in many workers making much less.44 In a research study examining the working conditions and lives of garment workers in Bangladesh and Vietnam, one hundred percent of garment workers interviewed in Bangladesh earned below a living wage.45 Of those interviewed, ninety percent said they could not afford enough food for themselves or their families, seventy-two percent could not afford medical treatment when they got sick or injured, seventy-six percent had no running water inside their home, and thirty-three percent had been separated from their children, primarily due to insufficient income.46 Moreover, Fifty-six percent of workers reported that they experienced wage cuts, although technically illegal in Bangladesh, for things such as not meeting targets, absence, late attendance, poor quality, product mistakes, or refusing to do overtime or night duty. In order to make ends meet, parents often remove their children from school to start working in garment factories—some as young as eleven years old.
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System Instructions: Draw information from the context only to inform your response. Prompt: Discuss the concept of fast fashion and its effect on workers as outlined in the text. Context: I. Introduction Fast fashion is an approach to the design, creation, and marketing of clothing with an emphasis on making trends quickly and cheaply available to consumers.2 The term was coined by the New York Times in the early 2000s when describing Zara’s mission to take a garment from the design stage to being sold in stores in just fifteen days.3 The idea behind this phenomenon is to get the newest styles on the market as fast as possible so that consumers can get them at the height of their popularity.4 Increased consumption in wealthy, first-world countries has driven the success of fast fashion and placed a significant strain on garment factories and their workers.5 Because fashion is one of the most labor-dependent industries—as each piece of apparel must be handmade along a lengthy supply chain—brands have looked to outsource labor overseas to minimize costs and maximize profits.6 The goal of outsourcing is to locate low-cost production sources in emerging economies, like Bangladesh, where input costs are low and productivity is high.7 As retail prices have decreased and production prices have increased, there continues to be pressure on manufacturers’ margins.8 Because of this cycle, garment workers are often subjected to poor employment conditions and factories are less able to invest in the improvement of labor conditions or increase workers’ pay.9 For decades, brands have turned a blind eye to these key issues, continuing to profit off cheap, forced labor.10 Zara, H&M, and Topshop were among the first companies to take looks and designs from top fashion houses and reproduce them quickly and cheaply.11 Key characteristics of fast fashion brands include: (1) having thousands of styles, particularly those that touch on the latest trends; (2) extremely short turnaround times between when a trend is seen on the catwalk and when it hits the shelves; (3) offshore manufacturing where labor is cheap; (4) limited quantities of particular garments; and (5) cheap, low-quality materials.12 This note will explore how the fast fashion cycle perpetuates neglect of consumer responsibility, social and ecological harm, capitalization of fast production and cheap prices, and labor exploitation. II. Background A. A Journey Down the Supply Chain As clothes have gotten cheaper, trend cycles have sped up, and shopping has become a hobby, consumers, perhaps unknowingly, have perpetuated a cycle of abusive labor practices in overseas garment factories.13 Because labor costs remain high in the Western Hemisphere, production has largely moved overseas and fashion companies industry-wide are utilizing subcontracting to produce their garments.14 Subcontracting is the process by which a company divides parts of the supply chain across multiple countries and into multiple parts, including design, spinning, yarn production, dyeing, cutting, stitching, and final garment production.15 The general supply chain involves multiple steps: (1) cotton is grown and sold to the global market; (2) spinners use cotton or synthetic fibers to produce yarn or fabric; (3) garment factories cut and sew the fabric and add trim to produce garments; (4) garment factories that lack capacity for some processes subcontract them to other facilities; (5) garments are shipped to the brands that place the order; (6) brands distribute the garments to retail and online stores; and (7) consumers purchase the garments.16 Subcontracting allows for the success of fast fashion because it permits companies to utilize the low cost of overseas labor as subcontracted units are not regulated.17 It is not uncommon that the clothing consumers buy in store has already been in multiple different countries or factories before hitting the shelves.18 Manufacturing supply chains in the fashion industry are known for being rife with abuse, forced labor, and extremely low wages.19 Buyers often participate in a practice called “underground bidding,” where they use the quoted prices of one factory to get another factory to lower their prices.20 The company then selects the factory that commits to the fastest turnaround time and the lowest price, effectively pushing down wages and worsening working conditions.21 This perpetuates a skewed power dynamic where buyers dominate, as factories accept low prices for orders while remaining under pressure to maintain high product quality and productivity levels with very little financial resources.22 As delivery time for orders has decreased ten to twenty percent over the last five years, urgent orders have become more frequent.23 Consequently, workers are forced to work overtime hours, often without overtime pay, in order to meet these quick turnaround times and order changes.24 B. Working Conditions in Overseas Garment Factories Workers in fashion supply chains often endure unimaginable conditions in garment factories, where buildings lack fire alarms, and managers can lock doors and keep workers in until they complete the orders.25 Other dangerous conditions include crumbling buildings, broken alarms, and missing sprinklers and fire barriers.26 In countries like Bangladesh, local laws regulating fire safety, pay, and working conditions are not well-enforced as there are not enough inspectors and there is significant potential for the corruption of officials.27 Specifically, the Bangladesh government has failed to enforce national building codes, especially in buildings owned by wellconnected landlords.28 Thus, garment workers often endure brutal, unsafe working conditions at the mercy of their employer.29 In 2013, an eight-story clothing manufacturing building in Dhaka, Bangladesh collapsed, killing over one thousand garment workers.30 Just five months earlier, at least 112 workers died in a factory fire in Tazreen on the outskirts of Dhaka.31 Following these incidents, many major United States (U.S.) retailers joined safety-monitoring groups that required them to stop selling clothing from factories that violated safety standards.32 But Amazon—one of the world’s largest retailers— did not join this coalition and continues to sell clothing made from factories operating under similar conditions.33 Amazon has stated that it does not inspect the factories that produce the clothing they buy from wholesalers or other third-party sellers.34 In fact, the company will only remove a product from their site if they become aware that the product came from a factory that may not meet their supply chain standards.35 With a marketplace as large as Amazon’s, this is clearly a problem as it keeps unsafe workplaces up and running.36 While consumers may not currently be aware that the clothing they are buying originated in a factory where workers are subject to long hours and serious injuries, it is important that it is made known and steps are taken to end such practices. III. Development and Problems A. Absence of Worker Protections in the Garment Industries Stark contrasts exist between garment workers’ rights in countries like the U.S. and Bangladesh.37 While workers in the U.S. have protection under the Fair Labor Standards Act (FLSA) and through regulatory oversight, Bangladesh lacks a well-functioning labor inspection system or enforcement mechanisms.38 Moreover, because supply chains are organizationally fragmented and geographically dispersed, it becomes difficult for garment workers to unionize and fight for change.39 1. Minimum Wage A living wage is the lowest wage paid to a full-time worker—earned in no more than forty-eight hours per week—needed to cover basics like food, decent housing, healthcare, clothing, transportation, utilities, childcare, education, and other essential needs, in addition to some savings for the future and unexpected events.40 The legal minimum wage for garment workers in Bangladesh is approximately 8000 taka per month, which amounts to $79 USD.41 But instead of paying workers a legal minimum wage, some factories will utilize a piece-rate system in which they pay workers pennies per garment sewn—a practice also used in the U.S.42 Under this system, workers are paid $0.02 to $0.06 per garment, which can translate to, at most, $6 per hour.43 Although the Bangladesh government sets a minimum wage, it is not properly enforced, resulting in many workers making much less.44 In a research study examining the working conditions and lives of garment workers in Bangladesh and Vietnam, one hundred percent of garment workers interviewed in Bangladesh earned below a living wage.45 Of those interviewed, ninety percent said they could not afford enough food for themselves or their families, seventy-two percent could not afford medical treatment when they got sick or injured, seventy-six percent had no running water inside their home, and thirty-three percent had been separated from their children, primarily due to insufficient income.46 Moreover, Fifty-six percent of workers reported that they experienced wage cuts, although technically illegal in Bangladesh, for things such as not meeting targets, absence, late attendance, poor quality, product mistakes, or refusing to do overtime or night duty. In order to make ends meet, parents often remove their children from school to start working in garment factories—some as young as eleven years old.
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Draw information from the context only to inform your response.
EVIDENCE:
I. Introduction Fast fashion is an approach to the design, creation, and marketing of clothing with an emphasis on making trends quickly and cheaply available to consumers.2 The term was coined by the New York Times in the early 2000s when describing Zara’s mission to take a garment from the design stage to being sold in stores in just fifteen days.3 The idea behind this phenomenon is to get the newest styles on the market as fast as possible so that consumers can get them at the height of their popularity.4 Increased consumption in wealthy, first-world countries has driven the success of fast fashion and placed a significant strain on garment factories and their workers.5 Because fashion is one of the most labor-dependent industries—as each piece of apparel must be handmade along a lengthy supply chain—brands have looked to outsource labor overseas to minimize costs and maximize profits.6 The goal of outsourcing is to locate low-cost production sources in emerging economies, like Bangladesh, where input costs are low and productivity is high.7 As retail prices have decreased and production prices have increased, there continues to be pressure on manufacturers’ margins.8 Because of this cycle, garment workers are often subjected to poor employment conditions and factories are less able to invest in the improvement of labor conditions or increase workers’ pay.9 For decades, brands have turned a blind eye to these key issues, continuing to profit off cheap, forced labor.10 Zara, H&M, and Topshop were among the first companies to take looks and designs from top fashion houses and reproduce them quickly and cheaply.11 Key characteristics of fast fashion brands include: (1) having thousands of styles, particularly those that touch on the latest trends; (2) extremely short turnaround times between when a trend is seen on the catwalk and when it hits the shelves; (3) offshore manufacturing where labor is cheap; (4) limited quantities of particular garments; and (5) cheap, low-quality materials.12 This note will explore how the fast fashion cycle perpetuates neglect of consumer responsibility, social and ecological harm, capitalization of fast production and cheap prices, and labor exploitation. II. Background A. A Journey Down the Supply Chain As clothes have gotten cheaper, trend cycles have sped up, and shopping has become a hobby, consumers, perhaps unknowingly, have perpetuated a cycle of abusive labor practices in overseas garment factories.13 Because labor costs remain high in the Western Hemisphere, production has largely moved overseas and fashion companies industry-wide are utilizing subcontracting to produce their garments.14 Subcontracting is the process by which a company divides parts of the supply chain across multiple countries and into multiple parts, including design, spinning, yarn production, dyeing, cutting, stitching, and final garment production.15 The general supply chain involves multiple steps: (1) cotton is grown and sold to the global market; (2) spinners use cotton or synthetic fibers to produce yarn or fabric; (3) garment factories cut and sew the fabric and add trim to produce garments; (4) garment factories that lack capacity for some processes subcontract them to other facilities; (5) garments are shipped to the brands that place the order; (6) brands distribute the garments to retail and online stores; and (7) consumers purchase the garments.16 Subcontracting allows for the success of fast fashion because it permits companies to utilize the low cost of overseas labor as subcontracted units are not regulated.17 It is not uncommon that the clothing consumers buy in store has already been in multiple different countries or factories before hitting the shelves.18 Manufacturing supply chains in the fashion industry are known for being rife with abuse, forced labor, and extremely low wages.19 Buyers often participate in a practice called “underground bidding,” where they use the quoted prices of one factory to get another factory to lower their prices.20 The company then selects the factory that commits to the fastest turnaround time and the lowest price, effectively pushing down wages and worsening working conditions.21 This perpetuates a skewed power dynamic where buyers dominate, as factories accept low prices for orders while remaining under pressure to maintain high product quality and productivity levels with very little financial resources.22 As delivery time for orders has decreased ten to twenty percent over the last five years, urgent orders have become more frequent.23 Consequently, workers are forced to work overtime hours, often without overtime pay, in order to meet these quick turnaround times and order changes.24 B. Working Conditions in Overseas Garment Factories Workers in fashion supply chains often endure unimaginable conditions in garment factories, where buildings lack fire alarms, and managers can lock doors and keep workers in until they complete the orders.25 Other dangerous conditions include crumbling buildings, broken alarms, and missing sprinklers and fire barriers.26 In countries like Bangladesh, local laws regulating fire safety, pay, and working conditions are not well-enforced as there are not enough inspectors and there is significant potential for the corruption of officials.27 Specifically, the Bangladesh government has failed to enforce national building codes, especially in buildings owned by wellconnected landlords.28 Thus, garment workers often endure brutal, unsafe working conditions at the mercy of their employer.29 In 2013, an eight-story clothing manufacturing building in Dhaka, Bangladesh collapsed, killing over one thousand garment workers.30 Just five months earlier, at least 112 workers died in a factory fire in Tazreen on the outskirts of Dhaka.31 Following these incidents, many major United States (U.S.) retailers joined safety-monitoring groups that required them to stop selling clothing from factories that violated safety standards.32 But Amazon—one of the world’s largest retailers— did not join this coalition and continues to sell clothing made from factories operating under similar conditions.33 Amazon has stated that it does not inspect the factories that produce the clothing they buy from wholesalers or other third-party sellers.34 In fact, the company will only remove a product from their site if they become aware that the product came from a factory that may not meet their supply chain standards.35 With a marketplace as large as Amazon’s, this is clearly a problem as it keeps unsafe workplaces up and running.36 While consumers may not currently be aware that the clothing they are buying originated in a factory where workers are subject to long hours and serious injuries, it is important that it is made known and steps are taken to end such practices. III. Development and Problems A. Absence of Worker Protections in the Garment Industries Stark contrasts exist between garment workers’ rights in countries like the U.S. and Bangladesh.37 While workers in the U.S. have protection under the Fair Labor Standards Act (FLSA) and through regulatory oversight, Bangladesh lacks a well-functioning labor inspection system or enforcement mechanisms.38 Moreover, because supply chains are organizationally fragmented and geographically dispersed, it becomes difficult for garment workers to unionize and fight for change.39 1. Minimum Wage A living wage is the lowest wage paid to a full-time worker—earned in no more than forty-eight hours per week—needed to cover basics like food, decent housing, healthcare, clothing, transportation, utilities, childcare, education, and other essential needs, in addition to some savings for the future and unexpected events.40 The legal minimum wage for garment workers in Bangladesh is approximately 8000 taka per month, which amounts to $79 USD.41 But instead of paying workers a legal minimum wage, some factories will utilize a piece-rate system in which they pay workers pennies per garment sewn—a practice also used in the U.S.42 Under this system, workers are paid $0.02 to $0.06 per garment, which can translate to, at most, $6 per hour.43 Although the Bangladesh government sets a minimum wage, it is not properly enforced, resulting in many workers making much less.44 In a research study examining the working conditions and lives of garment workers in Bangladesh and Vietnam, one hundred percent of garment workers interviewed in Bangladesh earned below a living wage.45 Of those interviewed, ninety percent said they could not afford enough food for themselves or their families, seventy-two percent could not afford medical treatment when they got sick or injured, seventy-six percent had no running water inside their home, and thirty-three percent had been separated from their children, primarily due to insufficient income.46 Moreover, Fifty-six percent of workers reported that they experienced wage cuts, although technically illegal in Bangladesh, for things such as not meeting targets, absence, late attendance, poor quality, product mistakes, or refusing to do overtime or night duty. In order to make ends meet, parents often remove their children from school to start working in garment factories—some as young as eleven years old.
USER:
Discuss the concept of fast fashion and its effect on workers as outlined in the text.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 10
| 16
| 1,415
| null | 54
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<TASK DESCRIPTION> Only use the provided text to answer the question, no outside sources. <QUESTION> [user request] <TEXT> [context document]
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I have the Iphone 15, but the 16 is coming out, and I need to decide if I want to upgrade again. please list the features only the 16 has that the 15 doesn't have, make sure to list any drawbacks the new features may have. Highlight camera features, but I don't care about the size. I need a summary of the features at the end. Do not mention the other phone in the summary.
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While Apple's latest models bring a variety of enhancements, the most significant change is support for Apple Intelligence, a new AI system that transforms how you interact with your device by offering smarter notifications, text summarization, and contextual information. The iPhone 16 also features the Action Button and Camera Control button, which provide more intuitive ways to access key functions. Design and Displays The iPhone 16 introduces several design and display upgrades over the iPhone 15. The shift to vertically arranged cameras facilitates spatial video capture and looks more modern. Durability is also improved with the next-generation Ceramic Shield, which is twice as strong as the previous version. Additionally, the customizable Action Button replaces the traditional Ring/Silent switch and a new Camera Control button streamlines photography. iPhone 15 iPhone 16 Diagonally arranged rear cameras Vertically arranged rear cameras ~2–4 nits minimum brightness 1 nit minimum brightness Ceramic Shield front glass Next-generation Ceramic Shield front glass (2x stronger) Improved thermal design for better heat dissipation Easier battery service Ring/Silent switch Action Button Camera Control capacitive button with sapphire crystal cover Available in Green, Blue, Pink, Black, and Yellow finishes Available in Teal, Ultramarine, Pink, Black, and White finishes Artificial Intelligence The iPhone 16 includes support for Apple Intelligence, a significant upgrade absent in the iPhone 15. This artificial intelligence system enhances the iPhone's ability to understand and process personal context, offering features like Visual Intelligence, which can recognize objects and scenes through the camera and provide relevant information, such as restaurant or product details. iPhone 16 Apple Intelligence (including priority notifications, text summarization, system-wide writing tools, audio transcription, Genmoji creation, personalized suggestions, and more) Visual Intelligence, allowing users to pull up contextual information about objects or scenes in front of the camera (such as restaurant details or product info) Apple Intelligence features like priority notifications, text summarization, and system-wide writing tools can significantly enhance the experience of using the device, making the iPhone 16 a substantial upgrade over the iPhone 15 in this area. Chip, Memory, and Connectivity The iPhone 16 brings notable improvements in performance and connectivity over the iPhone 15, driven by the A18 chip built with TSMC's 3nm process, which is more efficient and powerful than the iPhone 15's A16 chip. The 6-core CPU is up to 30% faster, while the upgraded 16-core Neural Engine is optimized for running generative models, doubling the speed of machine learning tasks. In terms of graphics, the iPhone 16's 5-core GPU delivers a 40% boost in performance and introduces hardware-accelerated ray tracing, enhancing gaming and visual effects. Memory and connectivity also see significant upgrades, with the iPhone 16 offering 8GB of RAM, a 33% increase over the iPhone 15, and the introduction of Wi-Fi 7 and Thread networking for better wireless performance and smart home integration. iPhone 15 iPhone 16 A16 Bionic chip (TSMC's "N4P" enhanced 5nm process) A18 chip (TSMC's "N3E" enhanced 3nm process) 6-core CPU 6-core CPU (up to 30% faster) 16-core Neural Engine Upgraded 16-core Neural Engine optimized for generative models (runs ML models 2x faster) 5-core GPU 5-core GPU (up to 40% faster) Hardware-accelerated ray tracing 6GB memory 8GB memory (+33%) Wi-Fi 6 Wi‑Fi 7 (802.11be) with 2x2 MIMO Thread networking technology The performance gains with the A18 chip and enhanced GPU are particularly meaningful for users who engage in gaming, video editing, or other graphics-heavy tasks. The hardware-accelerated ray tracing will greatly benefit gamers, making the iPhone 16 capable of rendering more realistic lighting and shadows. Meanwhile, the Neural Engine upgrade doubles the speed of machine learning tasks such as Apple Intelligence. For everyday users, the jump from 6GB to 8GB of memory ensures better multitasking and future-proofing, while Wi-Fi 7 and Thread networking will improve connectivity speeds and compatibility with smart home devices. The iPhone 16's improvements are substantial for users who demand higher performance and future-ready wireless tech, though those who use their devices more casually might notice less immediate impact. The iPhone 16 enhances the already impressive camera setup from the iPhone 15. The Ultra Wide camera has been upgraded with an ƒ/2.2 aperture, providing better low-light performance compared to the ƒ/2.4 aperture on the iPhone 15. The iPhone 16 also introduces Macro photography and Macro video recording, enabling users to capture detailed close-up shots, while the Camera Control button brings new levels of ease and precision to shooting photos and videos. iPhone 15 iPhone 16 48-megapixel Main camera with ƒ/1.6 aperture 48-megapixel Fusion camera with ƒ/1.6 aperture 12-megapixel Ultra Wide camera with ƒ/2.4 aperture 12-megapixel Ultra Wide camera with ƒ/2.2 aperture for improved-low light performance Anti-reflective coating on Fusion camera lens Macro photography and Macro video recording, including slo‑mo and time‑lapse Photographic Styles Next-generation Photographic Styles Spatial video recording at 1080p at 30 fps 4K video recording at 24 fps, 25 fps, 30 fps or 60 fps 4K Dolby Vision video recording at 24 fps, 25 fps, 30 fps or 60 fps 1080p HD video recording at 25 fps, 30 fps or 60 fps 1080p Dolby Vision video recording at 25 fps, 30 fps or 60 fps Cinematic mode up to 4K HDR at 30 fps Cinematic mode up to 4K Dolby Vision at 30 fps QuickTake video QuickTake video (up to 4K at 60 fps in Dolby Vision HDR) Launch the Camera App: Pressing the Camera Control button immediately opens the camera app. Capture Photos: A single press of the button captures a photo, providing a quick and tactile way to take pictures. Record Videos: A press and hold action allows you to start recording a video. Half-Press for Focus and Exposure (upcoming feature): A light, half-press will lock focus and exposure, allowing you to reframe the shot without losing focus. Trackpad-Like Control: The capacitive sensor on the button acts like a trackpad, enabling gestures to control zoom, cycle through filters, or switch between lenses by sliding your finger across the button. Third-Party App Integration: The Camera Control button can also be used to trigger third-party camera apps, giving more flexibility to users who prefer other photography tools. Camera Function Overlay: A light touch gesture reveals a clean preview and quick access to key camera controls like zoom or exposure settings. Visual Intelligence Activation: The Camera Control button is integrated with Visual Intelligence, allowing users to pull up contextual information about objects or scenes in front of the camera. The iPhone 16 brings several enhancements to audio recording over the iPhone 15. While the iPhone 15 offers stereo recording, the iPhone 16 introduces Spatial Audio recording, providing a more immersive sound experience, particularly with playback on the Apple Vision Pro headset. Additional features like wind noise reduction and the new Audio Mix function further improve the quality and flexibility of recorded audio, making the iPhone 16 a more capable device for capturing high-quality sound. iPhone 15 iPhone 16 Stereo recording Spatial Audio and stereo recording Wind noise reduction Audio Mix Battery Life and Charging The iPhone 16 brings noticeable improvements in battery life and charging efficiency compared to the iPhone 15. With up to 22 hours of battery life on the iPhone 16 and 27 hours on the iPhone 16 Plus, the new models offer a modest boost. In addition, MagSafe wireless charging is now significantly faster, supporting up to 25W with a 30W adapter, a 66.67% increase over the iPhone 15's 15W limit. iPhone 15: Up to 20 hours of battery life iPhone 15 Plus: Up to 26 hours of battery life iPhone 16: Up to 22 hours of battery life iPhone 16 Plus: Up to 27 hours of battery life MagSafe wireless charging up to 15W with 20W adapter or higher MagSafe wireless charging up to 25W with 30W adapter or higher (+66.67%)
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<TASK DESCRIPTION> Only use the provided text to answer the question, no outside sources. <QUESTION> I have the Iphone 15, but the 16 is coming out, and I need to decide if I want to upgrade again. please list the features only the 16 has that the 15 doesn't have, make sure to list any drawbacks the new features may have. Highlight camera features, but I don't care about the size. I need a summary of the features at the end. Do not mention the other phone in the summary. <TEXT> While Apple's latest models bring a variety of enhancements, the most significant change is support for Apple Intelligence, a new AI system that transforms how you interact with your device by offering smarter notifications, text summarization, and contextual information. The iPhone 16 also features the Action Button and Camera Control button, which provide more intuitive ways to access key functions. Design and Displays The iPhone 16 introduces several design and display upgrades over the iPhone 15. The shift to vertically arranged cameras facilitates spatial video capture and looks more modern. Durability is also improved with the next-generation Ceramic Shield, which is twice as strong as the previous version. Additionally, the customizable Action Button replaces the traditional Ring/Silent switch and a new Camera Control button streamlines photography. iPhone 15 iPhone 16 Diagonally arranged rear cameras Vertically arranged rear cameras ~2–4 nits minimum brightness 1 nit minimum brightness Ceramic Shield front glass Next-generation Ceramic Shield front glass (2x stronger) Improved thermal design for better heat dissipation Easier battery service Ring/Silent switch Action Button Camera Control capacitive button with sapphire crystal cover Available in Green, Blue, Pink, Black, and Yellow finishes Available in Teal, Ultramarine, Pink, Black, and White finishes Artificial Intelligence The iPhone 16 includes support for Apple Intelligence, a significant upgrade absent in the iPhone 15. This artificial intelligence system enhances the iPhone's ability to understand and process personal context, offering features like Visual Intelligence, which can recognize objects and scenes through the camera and provide relevant information, such as restaurant or product details. iPhone 16 Apple Intelligence (including priority notifications, text summarization, system-wide writing tools, audio transcription, Genmoji creation, personalized suggestions, and more) Visual Intelligence, allowing users to pull up contextual information about objects or scenes in front of the camera (such as restaurant details or product info) Apple Intelligence features like priority notifications, text summarization, and system-wide writing tools can significantly enhance the experience of using the device, making the iPhone 16 a substantial upgrade over the iPhone 15 in this area. Chip, Memory, and Connectivity The iPhone 16 brings notable improvements in performance and connectivity over the iPhone 15, driven by the A18 chip built with TSMC's 3nm process, which is more efficient and powerful than the iPhone 15's A16 chip. The 6-core CPU is up to 30% faster, while the upgraded 16-core Neural Engine is optimized for running generative models, doubling the speed of machine learning tasks. In terms of graphics, the iPhone 16's 5-core GPU delivers a 40% boost in performance and introduces hardware-accelerated ray tracing, enhancing gaming and visual effects. Memory and connectivity also see significant upgrades, with the iPhone 16 offering 8GB of RAM, a 33% increase over the iPhone 15, and the introduction of Wi-Fi 7 and Thread networking for better wireless performance and smart home integration. iPhone 15 iPhone 16 A16 Bionic chip (TSMC's "N4P" enhanced 5nm process) A18 chip (TSMC's "N3E" enhanced 3nm process) 6-core CPU 6-core CPU (up to 30% faster) 16-core Neural Engine Upgraded 16-core Neural Engine optimized for generative models (runs ML models 2x faster) 5-core GPU 5-core GPU (up to 40% faster) Hardware-accelerated ray tracing 6GB memory 8GB memory (+33%) Wi-Fi 6 Wi‑Fi 7 (802.11be) with 2x2 MIMO Thread networking technology The performance gains with the A18 chip and enhanced GPU are particularly meaningful for users who engage in gaming, video editing, or other graphics-heavy tasks. The hardware-accelerated ray tracing will greatly benefit gamers, making the iPhone 16 capable of rendering more realistic lighting and shadows. Meanwhile, the Neural Engine upgrade doubles the speed of machine learning tasks such as Apple Intelligence. For everyday users, the jump from 6GB to 8GB of memory ensures better multitasking and future-proofing, while Wi-Fi 7 and Thread networking will improve connectivity speeds and compatibility with smart home devices. The iPhone 16's improvements are substantial for users who demand higher performance and future-ready wireless tech, though those who use their devices more casually might notice less immediate impact. The iPhone 16 enhances the already impressive camera setup from the iPhone 15. The Ultra Wide camera has been upgraded with an ƒ/2.2 aperture, providing better low-light performance compared to the ƒ/2.4 aperture on the iPhone 15. The iPhone 16 also introduces Macro photography and Macro video recording, enabling users to capture detailed close-up shots, while the Camera Control button brings new levels of ease and precision to shooting photos and videos. iPhone 15 iPhone 16 48-megapixel Main camera with ƒ/1.6 aperture 48-megapixel Fusion camera with ƒ/1.6 aperture 12-megapixel Ultra Wide camera with ƒ/2.4 aperture 12-megapixel Ultra Wide camera with ƒ/2.2 aperture for improved-low light performance Anti-reflective coating on Fusion camera lens Macro photography and Macro video recording, including slo‑mo and time‑lapse Photographic Styles Next-generation Photographic Styles Spatial video recording at 1080p at 30 fps 4K video recording at 24 fps, 25 fps, 30 fps or 60 fps 4K Dolby Vision video recording at 24 fps, 25 fps, 30 fps or 60 fps 1080p HD video recording at 25 fps, 30 fps or 60 fps 1080p Dolby Vision video recording at 25 fps, 30 fps or 60 fps Cinematic mode up to 4K HDR at 30 fps Cinematic mode up to 4K Dolby Vision at 30 fps QuickTake video QuickTake video (up to 4K at 60 fps in Dolby Vision HDR) Launch the Camera App: Pressing the Camera Control button immediately opens the camera app. Capture Photos: A single press of the button captures a photo, providing a quick and tactile way to take pictures. Record Videos: A press and hold action allows you to start recording a video. Half-Press for Focus and Exposure (upcoming feature): A light, half-press will lock focus and exposure, allowing you to reframe the shot without losing focus. Trackpad-Like Control: The capacitive sensor on the button acts like a trackpad, enabling gestures to control zoom, cycle through filters, or switch between lenses by sliding your finger across the button. Third-Party App Integration: The Camera Control button can also be used to trigger third-party camera apps, giving more flexibility to users who prefer other photography tools. Camera Function Overlay: A light touch gesture reveals a clean preview and quick access to key camera controls like zoom or exposure settings. Visual Intelligence Activation: The Camera Control button is integrated with Visual Intelligence, allowing users to pull up contextual information about objects or scenes in front of the camera. The iPhone 16 brings several enhancements to audio recording over the iPhone 15. While the iPhone 15 offers stereo recording, the iPhone 16 introduces Spatial Audio recording, providing a more immersive sound experience, particularly with playback on the Apple Vision Pro headset. Additional features like wind noise reduction and the new Audio Mix function further improve the quality and flexibility of recorded audio, making the iPhone 16 a more capable device for capturing high-quality sound. iPhone 15 iPhone 16 Stereo recording Spatial Audio and stereo recording Wind noise reduction Audio Mix Battery Life and Charging The iPhone 16 brings noticeable improvements in battery life and charging efficiency compared to the iPhone 15. With up to 22 hours of battery life on the iPhone 16 and 27 hours on the iPhone 16 Plus, the new models offer a modest boost. In addition, MagSafe wireless charging is now significantly faster, supporting up to 25W with a 30W adapter, a 66.67% increase over the iPhone 15's 15W limit. iPhone 15: Up to 20 hours of battery life iPhone 15 Plus: Up to 26 hours of battery life iPhone 16: Up to 22 hours of battery life iPhone 16 Plus: Up to 27 hours of battery life MagSafe wireless charging up to 15W with 20W adapter or higher MagSafe wireless charging up to 25W with 30W adapter or higher (+66.67%) https://www.macrumors.com/guide/iphone-15-vs-iphone-16/
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<TASK DESCRIPTION> Only use the provided text to answer the question, no outside sources. <QUESTION> [user request] <TEXT> [context document]
EVIDENCE:
While Apple's latest models bring a variety of enhancements, the most significant change is support for Apple Intelligence, a new AI system that transforms how you interact with your device by offering smarter notifications, text summarization, and contextual information. The iPhone 16 also features the Action Button and Camera Control button, which provide more intuitive ways to access key functions. Design and Displays The iPhone 16 introduces several design and display upgrades over the iPhone 15. The shift to vertically arranged cameras facilitates spatial video capture and looks more modern. Durability is also improved with the next-generation Ceramic Shield, which is twice as strong as the previous version. Additionally, the customizable Action Button replaces the traditional Ring/Silent switch and a new Camera Control button streamlines photography. iPhone 15 iPhone 16 Diagonally arranged rear cameras Vertically arranged rear cameras ~2–4 nits minimum brightness 1 nit minimum brightness Ceramic Shield front glass Next-generation Ceramic Shield front glass (2x stronger) Improved thermal design for better heat dissipation Easier battery service Ring/Silent switch Action Button Camera Control capacitive button with sapphire crystal cover Available in Green, Blue, Pink, Black, and Yellow finishes Available in Teal, Ultramarine, Pink, Black, and White finishes Artificial Intelligence The iPhone 16 includes support for Apple Intelligence, a significant upgrade absent in the iPhone 15. This artificial intelligence system enhances the iPhone's ability to understand and process personal context, offering features like Visual Intelligence, which can recognize objects and scenes through the camera and provide relevant information, such as restaurant or product details. iPhone 16 Apple Intelligence (including priority notifications, text summarization, system-wide writing tools, audio transcription, Genmoji creation, personalized suggestions, and more) Visual Intelligence, allowing users to pull up contextual information about objects or scenes in front of the camera (such as restaurant details or product info) Apple Intelligence features like priority notifications, text summarization, and system-wide writing tools can significantly enhance the experience of using the device, making the iPhone 16 a substantial upgrade over the iPhone 15 in this area. Chip, Memory, and Connectivity The iPhone 16 brings notable improvements in performance and connectivity over the iPhone 15, driven by the A18 chip built with TSMC's 3nm process, which is more efficient and powerful than the iPhone 15's A16 chip. The 6-core CPU is up to 30% faster, while the upgraded 16-core Neural Engine is optimized for running generative models, doubling the speed of machine learning tasks. In terms of graphics, the iPhone 16's 5-core GPU delivers a 40% boost in performance and introduces hardware-accelerated ray tracing, enhancing gaming and visual effects. Memory and connectivity also see significant upgrades, with the iPhone 16 offering 8GB of RAM, a 33% increase over the iPhone 15, and the introduction of Wi-Fi 7 and Thread networking for better wireless performance and smart home integration. iPhone 15 iPhone 16 A16 Bionic chip (TSMC's "N4P" enhanced 5nm process) A18 chip (TSMC's "N3E" enhanced 3nm process) 6-core CPU 6-core CPU (up to 30% faster) 16-core Neural Engine Upgraded 16-core Neural Engine optimized for generative models (runs ML models 2x faster) 5-core GPU 5-core GPU (up to 40% faster) Hardware-accelerated ray tracing 6GB memory 8GB memory (+33%) Wi-Fi 6 Wi‑Fi 7 (802.11be) with 2x2 MIMO Thread networking technology The performance gains with the A18 chip and enhanced GPU are particularly meaningful for users who engage in gaming, video editing, or other graphics-heavy tasks. The hardware-accelerated ray tracing will greatly benefit gamers, making the iPhone 16 capable of rendering more realistic lighting and shadows. Meanwhile, the Neural Engine upgrade doubles the speed of machine learning tasks such as Apple Intelligence. For everyday users, the jump from 6GB to 8GB of memory ensures better multitasking and future-proofing, while Wi-Fi 7 and Thread networking will improve connectivity speeds and compatibility with smart home devices. The iPhone 16's improvements are substantial for users who demand higher performance and future-ready wireless tech, though those who use their devices more casually might notice less immediate impact. The iPhone 16 enhances the already impressive camera setup from the iPhone 15. The Ultra Wide camera has been upgraded with an ƒ/2.2 aperture, providing better low-light performance compared to the ƒ/2.4 aperture on the iPhone 15. The iPhone 16 also introduces Macro photography and Macro video recording, enabling users to capture detailed close-up shots, while the Camera Control button brings new levels of ease and precision to shooting photos and videos. iPhone 15 iPhone 16 48-megapixel Main camera with ƒ/1.6 aperture 48-megapixel Fusion camera with ƒ/1.6 aperture 12-megapixel Ultra Wide camera with ƒ/2.4 aperture 12-megapixel Ultra Wide camera with ƒ/2.2 aperture for improved-low light performance Anti-reflective coating on Fusion camera lens Macro photography and Macro video recording, including slo‑mo and time‑lapse Photographic Styles Next-generation Photographic Styles Spatial video recording at 1080p at 30 fps 4K video recording at 24 fps, 25 fps, 30 fps or 60 fps 4K Dolby Vision video recording at 24 fps, 25 fps, 30 fps or 60 fps 1080p HD video recording at 25 fps, 30 fps or 60 fps 1080p Dolby Vision video recording at 25 fps, 30 fps or 60 fps Cinematic mode up to 4K HDR at 30 fps Cinematic mode up to 4K Dolby Vision at 30 fps QuickTake video QuickTake video (up to 4K at 60 fps in Dolby Vision HDR) Launch the Camera App: Pressing the Camera Control button immediately opens the camera app. Capture Photos: A single press of the button captures a photo, providing a quick and tactile way to take pictures. Record Videos: A press and hold action allows you to start recording a video. Half-Press for Focus and Exposure (upcoming feature): A light, half-press will lock focus and exposure, allowing you to reframe the shot without losing focus. Trackpad-Like Control: The capacitive sensor on the button acts like a trackpad, enabling gestures to control zoom, cycle through filters, or switch between lenses by sliding your finger across the button. Third-Party App Integration: The Camera Control button can also be used to trigger third-party camera apps, giving more flexibility to users who prefer other photography tools. Camera Function Overlay: A light touch gesture reveals a clean preview and quick access to key camera controls like zoom or exposure settings. Visual Intelligence Activation: The Camera Control button is integrated with Visual Intelligence, allowing users to pull up contextual information about objects or scenes in front of the camera. The iPhone 16 brings several enhancements to audio recording over the iPhone 15. While the iPhone 15 offers stereo recording, the iPhone 16 introduces Spatial Audio recording, providing a more immersive sound experience, particularly with playback on the Apple Vision Pro headset. Additional features like wind noise reduction and the new Audio Mix function further improve the quality and flexibility of recorded audio, making the iPhone 16 a more capable device for capturing high-quality sound. iPhone 15 iPhone 16 Stereo recording Spatial Audio and stereo recording Wind noise reduction Audio Mix Battery Life and Charging The iPhone 16 brings noticeable improvements in battery life and charging efficiency compared to the iPhone 15. With up to 22 hours of battery life on the iPhone 16 and 27 hours on the iPhone 16 Plus, the new models offer a modest boost. In addition, MagSafe wireless charging is now significantly faster, supporting up to 25W with a 30W adapter, a 66.67% increase over the iPhone 15's 15W limit. iPhone 15: Up to 20 hours of battery life iPhone 15 Plus: Up to 26 hours of battery life iPhone 16: Up to 22 hours of battery life iPhone 16 Plus: Up to 27 hours of battery life MagSafe wireless charging up to 15W with 20W adapter or higher MagSafe wireless charging up to 25W with 30W adapter or higher (+66.67%)
USER:
I have the Iphone 15, but the 16 is coming out, and I need to decide if I want to upgrade again. please list the features only the 16 has that the 15 doesn't have, make sure to list any drawbacks the new features may have. Highlight camera features, but I don't care about the size. I need a summary of the features at the end. Do not mention the other phone in the summary.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
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| 1,283
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Using the provided information only, list the answers in bullet points with concise explanations.
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When is prompt outside help needed?
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Please note that Oura Services are not intended to diagnose, treat, cure, or prevent any disease or medical condition. The information and guidance in Oura Services are there for informational purposes only and cannot replace the services of health professionals or physicians. You should always consult a physician if you have any questions regarding a medical condition or any changes you intend to make to your sleep or activity based on information or guidance from Oura Services. Never disregard or delay in seeking professional medical advice because of something you’ve read from Oura Services. We are not responsible for any health problems that may result from information or guidance you receive from Oura Services. If you make any change to your sleep or activity based on Oura Services, you agree that you do so fully at your own risk. It is important to be sensitive to your body’s responses. For example, if you feel unexpected, repeated or long term pain, fatigue or discomfort due to having made changes to your sleep or activity, it is recommended that you consult a physician before continuing with such changes. The information and guidance in Oura Services may be misleading if your physiological functions and responses differ significantly from population averages due to medical conditions or rare natural differences. Please be cautious that the ring or any other Oura product you wear does not get caught on fixed structures or heavy objects when moving yourself or said heavier objects. If you experience redness or skin irritation on your finger due to the ring or any other Oura product, remove it immediately. If symptoms persist longer than 2-3 days of not using your Oura product, please contact a dermatologist. Finger size can vary depending on the time of the day, and sometimes it may be difficult to remove the ring from your finger. In case the ring gets stuck: → Use cold water and gentle soap to wet your finger, and slowly twist the ring to remove it. → Hold your hand up above your heart until the blood pressure gets lower, and then try to remove it. → In cases of emergency and/or discomfort, when you can’t remove the ring yourself, seek immediate medical attention. Use a soft cloth or hand wash with mild soap and water to clean the ring. Your Oura Ring can be worn during showers, baths, swimming, and snorkeling. Try to avoid wearing the ring when strength training, working with a shovel or other heavy tools, or carrying heavy objects made of metal, ceramics or stone. In addition, try to avoid wearing the ring next to other rings or objects which are made of metal, ceramics, stones or diamonds. The Oura Ring may get scratched and can itself scratch softer metal jewelry or other objects in close contact with the ring like phone covers made of gold, silver, or aluminum. Some ceramic phone covers with a soft coating may also get scratched. Keep the ring away from children. This product is not intended for individuals under the age of 18. Seek immediate medical attention if you know or suspect that a child has swallowed the ring. Do not leave the ring exposed to heat, such as in a vehicle or in the sun. Do not puncture the ring or its battery. Please avoid handling batteries, or working on devices and with machinery that contain batteries while wearing your Oura Ring. In certain cases, where both the cathode and the anode of another battery touch the ring, there is a risk of a short circuit which is similar to standard metallic rings. This can result in a potentially dangerous shock. Please take the proper precautions to avoid these situations.
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Using the provided information only, list the answers in bullet points with concise explanations. When is prompt outside help needed? [Please note that Oura Services are not intended to diagnose, treat, cure, or prevent any disease or medical condition. The information and guidance in Oura Services are there for informational purposes only and cannot replace the services of health professionals or physicians. You should always consult a physician if you have any questions regarding a medical condition or any changes you intend to make to your sleep or activity based on information or guidance from Oura Services. Never disregard or delay in seeking professional medical advice because of something you’ve read from Oura Services. We are not responsible for any health problems that may result from information or guidance you receive from Oura Services. If you make any change to your sleep or activity based on Oura Services, you agree that you do so fully at your own risk. It is important to be sensitive to your body’s responses. For example, if you feel unexpected, repeated or long term pain, fatigue or discomfort due to having made changes to your sleep or activity, it is recommended that you consult a physician before continuing with such changes. The information and guidance in Oura Services may be misleading if your physiological functions and responses differ significantly from population averages due to medical conditions or rare natural differences. Please be cautious that the ring or any other Oura product you wear does not get caught on fixed structures or heavy objects when moving yourself or said heavier objects. If you experience redness or skin irritation on your finger due to the ring or any other Oura product, remove it immediately. If symptoms persist longer than 2-3 days of not using your Oura product, please contact a dermatologist. Finger size can vary depending on the time of the day, and sometimes it may be difficult to remove the ring from your finger. In case the ring gets stuck: → Use cold water and gentle soap to wet your finger, and slowly twist the ring to remove it. → Hold your hand up above your heart until the blood pressure gets lower, and then try to remove it. → In cases of emergency and/or discomfort, when you can’t remove the ring yourself, seek immediate medical attention. Use a soft cloth or hand wash with mild soap and water to clean the ring. Your Oura Ring can be worn during showers, baths, swimming, and snorkeling. Try to avoid wearing the ring when strength training, working with a shovel or other heavy tools, or carrying heavy objects made of metal, ceramics or stone. In addition, try to avoid wearing the ring next to other rings or objects which are made of metal, ceramics, stones or diamonds. The Oura Ring may get scratched and can itself scratch softer metal jewelry or other objects in close contact with the ring like phone covers made of gold, silver, or aluminum. Some ceramic phone covers with a soft coating may also get scratched. Keep the ring away from children. This product is not intended for individuals under the age of 18. Seek immediate medical attention if you know or suspect that a child has swallowed the ring. Do not leave the ring exposed to heat, such as in a vehicle or in the sun. Do not puncture the ring or its battery. Please avoid handling batteries, or working on devices and with machinery that contain batteries while wearing your Oura Ring. In certain cases, where both the cathode and the anode of another battery touch the ring, there is a risk of a short circuit which is similar to standard metallic rings. This can result in a potentially dangerous shock. Please take the proper precautions to avoid these situations.]
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Using the provided information only, list the answers in bullet points with concise explanations.
EVIDENCE:
Please note that Oura Services are not intended to diagnose, treat, cure, or prevent any disease or medical condition. The information and guidance in Oura Services are there for informational purposes only and cannot replace the services of health professionals or physicians. You should always consult a physician if you have any questions regarding a medical condition or any changes you intend to make to your sleep or activity based on information or guidance from Oura Services. Never disregard or delay in seeking professional medical advice because of something you’ve read from Oura Services. We are not responsible for any health problems that may result from information or guidance you receive from Oura Services. If you make any change to your sleep or activity based on Oura Services, you agree that you do so fully at your own risk. It is important to be sensitive to your body’s responses. For example, if you feel unexpected, repeated or long term pain, fatigue or discomfort due to having made changes to your sleep or activity, it is recommended that you consult a physician before continuing with such changes. The information and guidance in Oura Services may be misleading if your physiological functions and responses differ significantly from population averages due to medical conditions or rare natural differences. Please be cautious that the ring or any other Oura product you wear does not get caught on fixed structures or heavy objects when moving yourself or said heavier objects. If you experience redness or skin irritation on your finger due to the ring or any other Oura product, remove it immediately. If symptoms persist longer than 2-3 days of not using your Oura product, please contact a dermatologist. Finger size can vary depending on the time of the day, and sometimes it may be difficult to remove the ring from your finger. In case the ring gets stuck: → Use cold water and gentle soap to wet your finger, and slowly twist the ring to remove it. → Hold your hand up above your heart until the blood pressure gets lower, and then try to remove it. → In cases of emergency and/or discomfort, when you can’t remove the ring yourself, seek immediate medical attention. Use a soft cloth or hand wash with mild soap and water to clean the ring. Your Oura Ring can be worn during showers, baths, swimming, and snorkeling. Try to avoid wearing the ring when strength training, working with a shovel or other heavy tools, or carrying heavy objects made of metal, ceramics or stone. In addition, try to avoid wearing the ring next to other rings or objects which are made of metal, ceramics, stones or diamonds. The Oura Ring may get scratched and can itself scratch softer metal jewelry or other objects in close contact with the ring like phone covers made of gold, silver, or aluminum. Some ceramic phone covers with a soft coating may also get scratched. Keep the ring away from children. This product is not intended for individuals under the age of 18. Seek immediate medical attention if you know or suspect that a child has swallowed the ring. Do not leave the ring exposed to heat, such as in a vehicle or in the sun. Do not puncture the ring or its battery. Please avoid handling batteries, or working on devices and with machinery that contain batteries while wearing your Oura Ring. In certain cases, where both the cathode and the anode of another battery touch the ring, there is a risk of a short circuit which is similar to standard metallic rings. This can result in a potentially dangerous shock. Please take the proper precautions to avoid these situations.
USER:
When is prompt outside help needed?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
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"================ <TEXT PASSAGE> ======= [context document] ================ <QUESTION> ======= [user request] ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
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I am doing some research into my asthma and I want a little help understanding what's happening to me. Can you explain more about the symptoms and causes?
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Asthma is a prevalent chronic inflammatory respiratory condition affecting millions of people worldwide and presents substantial challenges in both diagnosis and management. This respiratory condition is characterized by inflammation of the airways, causing intermittent airflow obstruction and bronchial hyperresponsiveness. The hallmark asthma symptoms include coughing, wheezing, and shortness of breath, which can be frequently exacerbated by triggers ranging from allergens to viral infections. Despite treatment advancements, disparities persist in asthma care, with variations in access to diagnosis, treatment, and patient education across different demographics. Severity varies from intermittent symptoms to life-threatening airway closure. Healthcare professionals establish a definitive diagnosis through patient history, physical examination, pulmonary function testing, and appropriate laboratory testing. Spirometry with a post-bronchodilator response (BDR) is the primary diagnostic test. Treatment focuses on providing continued education, routine symptom assessment, access to fast-acting bronchodilators, and appropriate controller medications tailored to disease severity. Childhood Wheezing caused by viral infections, particularly respiratory syncytial virus and human rhinovirus, may predispose infants and young children to develop asthma later in life. In addition, early-life exposure to air pollution, including combustion by-products from gas-fired appliances and indoor fires, obesity, and early puberty, also increases the risk of asthma. Adulthood The most significant risk factors for adult-onset asthma include tobacco smoke, occupational exposure, and adults with rhinitis or atopy. Studies also suggest a modest increase in asthma incidence among postmenopausal women taking hormone replacement therapy. Furthermore, the following factors can contribute to asthma and airway hyperreactivity: Exposure to environmental allergens such as house dust mites, animal allergens (especially from cats and dogs), cockroach allergens, and fungi Physical activity or exercise Conditions such as hyperventilation, gastroesophageal reflux disease, and chronic sinusitis Hypersensitivity to aspirin or nonsteroidal anti-inflammatory drugs (NSAIDs), as well as sulfite sensitivity Use of β-adrenergic receptor blockers, including ophthalmic preparations Exposure to irritants such as household sprays and paint fumes Contact with various high- and low-molecular-weight compounds found in insects, plants, latex, gums, diisocyanates, anhydrides, wood dust, and solder fluxes, which are associated with occupational asthma Emotional factors or stress Aspirin-Exacerbated Respiratory Disease Aspirin-exacerbated respiratory disease (AERD) is a condition characterized by a combination of asthma, chronic rhinosinusitis with nasal polyposis, and NSAID intolerance. Patients with AERD present with upper and lower respiratory tract symptoms after ingesting aspirin or NSAIDs that inhibit cyclooxygenase-1 (COX-1). This condition arises from dysregulated arachidonic acid metabolism and the overproduction of leukotrienes involving the 5-lipoxygenase and cyclooxygenase pathways. AERD affects approximately 7% of adults with asthma. Occupational-Induced Asthma Two types of occupational asthma exist based on their appearance after a latency period: Occupational asthma triggered by workplace sensitizers results from an allergic or immunological process associated with a latency period induced by both low- and high-molecular-weight agents. High-molecular-weight substances, such as flour, contain proteins and polysaccharides of plant or animal origin. Low-molecular-weight substances, like formaldehyde, form a sensitizing neoantigen when combined with a human protein. Occupational asthma caused by irritants involves a nonallergic or nonimmunological process induced by gases, fumes, smoke, and aerosols. Asthma prevalence in the United States differs among demographic groups, including age, gender, race, and socioeconomic status. The United States Centers for Disease Control and Prevention (CDC) estimates that around 25 million Americans are currently affected by asthma. Among individuals younger than 18, boys exhibit a higher prevalence compared to girls, while among adults, women are more commonly affected than men. Additionally, asthma prevalence is notably higher among Black individuals, with a prevalence of 10.1%, compared to White individuals at 8.1%. Hispanic Americans generally have a lower prevalence of 6.4%, except for those from Puerto Rico, where the prevalence rises to 12.8%. Moreover, underrepresented minorities and individuals living below the poverty line experience the highest incidence of asthma, along with heightened rates of asthma-related morbidity and mortality. Similar to worldwide data, the mortality rate of asthma in the United States has also undergone a consistent decline. The current mortality rate is 9.86 per million compared to 15.09 per million in 2001. However, mortality rates remain consistently higher for Black patients compared to their White counterparts. According to the CDC, from 1999 to 2016, asthma death rates among adults aged 55 to 64 were 16.32 per 1 million persons, 9.95 per 1 million for females, 9.39 per 1 million for individuals who were not Hispanic or Latino, and notably higher at 25.60 per 1 million for Black patients. Physical Examination During physical examination, widespread, high-pitched wheezes are a characteristic finding associated with asthma. However, wheezing is not specific to asthma and is typically absent between acute exacerbations. Findings suggestive of a severe asthma exacerbation include tachypnea, tachycardia, a prolonged expiratory phase, reduced air movement, difficulty speaking in complete sentences or phrases, discomfort when lying supine due to breathlessness, and adopting a "tripod position."[27] The use of the accessory muscles of breathing during inspiration and pulsus paradoxus are additional indicators of a severe asthma attack. Healthcare professionals may identify extrapulmonary findings that support the diagnosis of asthma, such as pale, boggy nasal mucous membranes, posterior pharyngeal cobblestoning, nasal polyps, and atopic dermatitis. Nasal polyps should prompt further inquiry about anosmia, chronic sinusitis, and aspirin sensitivity to evaluate for AERD. Although AERD is uncommon in children or adolescents, the presence of nasal polyps in a child with lower respiratory disease should prompt an evaluation for cystic fibrosis. Clubbing, characterized by bulbous fusiform enlargement of the distal portion of a digit, is not associated with asthma and should prompt evaluation for alternative diagnoses. Please see StatPearls' companion resource, "Nail Clubbing," for further information.
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"================ <TEXT PASSAGE> ======= Asthma is a prevalent chronic inflammatory respiratory condition affecting millions of people worldwide and presents substantial challenges in both diagnosis and management. This respiratory condition is characterized by inflammation of the airways, causing intermittent airflow obstruction and bronchial hyperresponsiveness. The hallmark asthma symptoms include coughing, wheezing, and shortness of breath, which can be frequently exacerbated by triggers ranging from allergens to viral infections. Despite treatment advancements, disparities persist in asthma care, with variations in access to diagnosis, treatment, and patient education across different demographics. Severity varies from intermittent symptoms to life-threatening airway closure. Healthcare professionals establish a definitive diagnosis through patient history, physical examination, pulmonary function testing, and appropriate laboratory testing. Spirometry with a post-bronchodilator response (BDR) is the primary diagnostic test. Treatment focuses on providing continued education, routine symptom assessment, access to fast-acting bronchodilators, and appropriate controller medications tailored to disease severity. Childhood Wheezing caused by viral infections, particularly respiratory syncytial virus and human rhinovirus, may predispose infants and young children to develop asthma later in life. In addition, early-life exposure to air pollution, including combustion by-products from gas-fired appliances and indoor fires, obesity, and early puberty, also increases the risk of asthma. Adulthood The most significant risk factors for adult-onset asthma include tobacco smoke, occupational exposure, and adults with rhinitis or atopy. Studies also suggest a modest increase in asthma incidence among postmenopausal women taking hormone replacement therapy. Furthermore, the following factors can contribute to asthma and airway hyperreactivity: Exposure to environmental allergens such as house dust mites, animal allergens (especially from cats and dogs), cockroach allergens, and fungi Physical activity or exercise Conditions such as hyperventilation, gastroesophageal reflux disease, and chronic sinusitis Hypersensitivity to aspirin or nonsteroidal anti-inflammatory drugs (NSAIDs), as well as sulfite sensitivity Use of β-adrenergic receptor blockers, including ophthalmic preparations Exposure to irritants such as household sprays and paint fumes Contact with various high- and low-molecular-weight compounds found in insects, plants, latex, gums, diisocyanates, anhydrides, wood dust, and solder fluxes, which are associated with occupational asthma Emotional factors or stress Aspirin-Exacerbated Respiratory Disease Aspirin-exacerbated respiratory disease (AERD) is a condition characterized by a combination of asthma, chronic rhinosinusitis with nasal polyposis, and NSAID intolerance. Patients with AERD present with upper and lower respiratory tract symptoms after ingesting aspirin or NSAIDs that inhibit cyclooxygenase-1 (COX-1). This condition arises from dysregulated arachidonic acid metabolism and the overproduction of leukotrienes involving the 5-lipoxygenase and cyclooxygenase pathways. AERD affects approximately 7% of adults with asthma. Occupational-Induced Asthma Two types of occupational asthma exist based on their appearance after a latency period: Occupational asthma triggered by workplace sensitizers results from an allergic or immunological process associated with a latency period induced by both low- and high-molecular-weight agents. High-molecular-weight substances, such as flour, contain proteins and polysaccharides of plant or animal origin. Low-molecular-weight substances, like formaldehyde, form a sensitizing neoantigen when combined with a human protein. Occupational asthma caused by irritants involves a nonallergic or nonimmunological process induced by gases, fumes, smoke, and aerosols. Asthma prevalence in the United States differs among demographic groups, including age, gender, race, and socioeconomic status. The United States Centers for Disease Control and Prevention (CDC) estimates that around 25 million Americans are currently affected by asthma. Among individuals younger than 18, boys exhibit a higher prevalence compared to girls, while among adults, women are more commonly affected than men. Additionally, asthma prevalence is notably higher among Black individuals, with a prevalence of 10.1%, compared to White individuals at 8.1%. Hispanic Americans generally have a lower prevalence of 6.4%, except for those from Puerto Rico, where the prevalence rises to 12.8%. Moreover, underrepresented minorities and individuals living below the poverty line experience the highest incidence of asthma, along with heightened rates of asthma-related morbidity and mortality. Similar to worldwide data, the mortality rate of asthma in the United States has also undergone a consistent decline. The current mortality rate is 9.86 per million compared to 15.09 per million in 2001. However, mortality rates remain consistently higher for Black patients compared to their White counterparts. According to the CDC, from 1999 to 2016, asthma death rates among adults aged 55 to 64 were 16.32 per 1 million persons, 9.95 per 1 million for females, 9.39 per 1 million for individuals who were not Hispanic or Latino, and notably higher at 25.60 per 1 million for Black patients. Physical Examination During physical examination, widespread, high-pitched wheezes are a characteristic finding associated with asthma. However, wheezing is not specific to asthma and is typically absent between acute exacerbations. Findings suggestive of a severe asthma exacerbation include tachypnea, tachycardia, a prolonged expiratory phase, reduced air movement, difficulty speaking in complete sentences or phrases, discomfort when lying supine due to breathlessness, and adopting a "tripod position."[27] The use of the accessory muscles of breathing during inspiration and pulsus paradoxus are additional indicators of a severe asthma attack. Healthcare professionals may identify extrapulmonary findings that support the diagnosis of asthma, such as pale, boggy nasal mucous membranes, posterior pharyngeal cobblestoning, nasal polyps, and atopic dermatitis. Nasal polyps should prompt further inquiry about anosmia, chronic sinusitis, and aspirin sensitivity to evaluate for AERD. Although AERD is uncommon in children or adolescents, the presence of nasal polyps in a child with lower respiratory disease should prompt an evaluation for cystic fibrosis. Clubbing, characterized by bulbous fusiform enlargement of the distal portion of a digit, is not associated with asthma and should prompt evaluation for alternative diagnoses. Please see StatPearls' companion resource, "Nail Clubbing," for further information. https://www.ncbi.nlm.nih.gov/books/NBK430901/ ================ <QUESTION> ======= I am doing some research into my asthma and I want a little help understanding what's happening to me. Can you explain more about the symptoms and causes? ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
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"================ <TEXT PASSAGE> ======= [context document] ================ <QUESTION> ======= [user request] ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
EVIDENCE:
Asthma is a prevalent chronic inflammatory respiratory condition affecting millions of people worldwide and presents substantial challenges in both diagnosis and management. This respiratory condition is characterized by inflammation of the airways, causing intermittent airflow obstruction and bronchial hyperresponsiveness. The hallmark asthma symptoms include coughing, wheezing, and shortness of breath, which can be frequently exacerbated by triggers ranging from allergens to viral infections. Despite treatment advancements, disparities persist in asthma care, with variations in access to diagnosis, treatment, and patient education across different demographics. Severity varies from intermittent symptoms to life-threatening airway closure. Healthcare professionals establish a definitive diagnosis through patient history, physical examination, pulmonary function testing, and appropriate laboratory testing. Spirometry with a post-bronchodilator response (BDR) is the primary diagnostic test. Treatment focuses on providing continued education, routine symptom assessment, access to fast-acting bronchodilators, and appropriate controller medications tailored to disease severity. Childhood Wheezing caused by viral infections, particularly respiratory syncytial virus and human rhinovirus, may predispose infants and young children to develop asthma later in life. In addition, early-life exposure to air pollution, including combustion by-products from gas-fired appliances and indoor fires, obesity, and early puberty, also increases the risk of asthma. Adulthood The most significant risk factors for adult-onset asthma include tobacco smoke, occupational exposure, and adults with rhinitis or atopy. Studies also suggest a modest increase in asthma incidence among postmenopausal women taking hormone replacement therapy. Furthermore, the following factors can contribute to asthma and airway hyperreactivity: Exposure to environmental allergens such as house dust mites, animal allergens (especially from cats and dogs), cockroach allergens, and fungi Physical activity or exercise Conditions such as hyperventilation, gastroesophageal reflux disease, and chronic sinusitis Hypersensitivity to aspirin or nonsteroidal anti-inflammatory drugs (NSAIDs), as well as sulfite sensitivity Use of β-adrenergic receptor blockers, including ophthalmic preparations Exposure to irritants such as household sprays and paint fumes Contact with various high- and low-molecular-weight compounds found in insects, plants, latex, gums, diisocyanates, anhydrides, wood dust, and solder fluxes, which are associated with occupational asthma Emotional factors or stress Aspirin-Exacerbated Respiratory Disease Aspirin-exacerbated respiratory disease (AERD) is a condition characterized by a combination of asthma, chronic rhinosinusitis with nasal polyposis, and NSAID intolerance. Patients with AERD present with upper and lower respiratory tract symptoms after ingesting aspirin or NSAIDs that inhibit cyclooxygenase-1 (COX-1). This condition arises from dysregulated arachidonic acid metabolism and the overproduction of leukotrienes involving the 5-lipoxygenase and cyclooxygenase pathways. AERD affects approximately 7% of adults with asthma. Occupational-Induced Asthma Two types of occupational asthma exist based on their appearance after a latency period: Occupational asthma triggered by workplace sensitizers results from an allergic or immunological process associated with a latency period induced by both low- and high-molecular-weight agents. High-molecular-weight substances, such as flour, contain proteins and polysaccharides of plant or animal origin. Low-molecular-weight substances, like formaldehyde, form a sensitizing neoantigen when combined with a human protein. Occupational asthma caused by irritants involves a nonallergic or nonimmunological process induced by gases, fumes, smoke, and aerosols. Asthma prevalence in the United States differs among demographic groups, including age, gender, race, and socioeconomic status. The United States Centers for Disease Control and Prevention (CDC) estimates that around 25 million Americans are currently affected by asthma. Among individuals younger than 18, boys exhibit a higher prevalence compared to girls, while among adults, women are more commonly affected than men. Additionally, asthma prevalence is notably higher among Black individuals, with a prevalence of 10.1%, compared to White individuals at 8.1%. Hispanic Americans generally have a lower prevalence of 6.4%, except for those from Puerto Rico, where the prevalence rises to 12.8%. Moreover, underrepresented minorities and individuals living below the poverty line experience the highest incidence of asthma, along with heightened rates of asthma-related morbidity and mortality. Similar to worldwide data, the mortality rate of asthma in the United States has also undergone a consistent decline. The current mortality rate is 9.86 per million compared to 15.09 per million in 2001. However, mortality rates remain consistently higher for Black patients compared to their White counterparts. According to the CDC, from 1999 to 2016, asthma death rates among adults aged 55 to 64 were 16.32 per 1 million persons, 9.95 per 1 million for females, 9.39 per 1 million for individuals who were not Hispanic or Latino, and notably higher at 25.60 per 1 million for Black patients. Physical Examination During physical examination, widespread, high-pitched wheezes are a characteristic finding associated with asthma. However, wheezing is not specific to asthma and is typically absent between acute exacerbations. Findings suggestive of a severe asthma exacerbation include tachypnea, tachycardia, a prolonged expiratory phase, reduced air movement, difficulty speaking in complete sentences or phrases, discomfort when lying supine due to breathlessness, and adopting a "tripod position."[27] The use of the accessory muscles of breathing during inspiration and pulsus paradoxus are additional indicators of a severe asthma attack. Healthcare professionals may identify extrapulmonary findings that support the diagnosis of asthma, such as pale, boggy nasal mucous membranes, posterior pharyngeal cobblestoning, nasal polyps, and atopic dermatitis. Nasal polyps should prompt further inquiry about anosmia, chronic sinusitis, and aspirin sensitivity to evaluate for AERD. Although AERD is uncommon in children or adolescents, the presence of nasal polyps in a child with lower respiratory disease should prompt an evaluation for cystic fibrosis. Clubbing, characterized by bulbous fusiform enlargement of the distal portion of a digit, is not associated with asthma and should prompt evaluation for alternative diagnoses. Please see StatPearls' companion resource, "Nail Clubbing," for further information.
USER:
I am doing some research into my asthma and I want a little help understanding what's happening to me. Can you explain more about the symptoms and causes?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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You can only produce an answer using the context provided to you.
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Which batteries are in the early stages of commercialisation?
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Chapter 4: Batteries for Grid Applications Overview Batteries are devices that store energy chemically. This report focuses on “secondary” batteries, which must be charged before use and which can be discharged and recharged (cycled) many times before the end of their useful life. For electric power grid applications, there are four main battery types of interest: Lead-acid High temperature “sodium-beta” Liquid electrolyte “flow” batteries Other emerging chemistries84 Lead-acid batteries have been used for more than a century in grid applications and in conventional vehicles for starting, lighting, and ignition (SLI). They continue to be the technology of choice for vehicle SLI applications due to their low cost. Consequently, they are manufactured on a mass scale. In 2010, approximately 120 million lead-acid batteries were shipped in North America alone.85 Lead-acid batteries are commonly used by utilities to serve as uninterruptible power supplies in substations, and have been used at utility scale in several demonstration projects to provide grid support.86 Use of lead acid batteries for grid applications is limited by relatively short cycle life. R&D efforts are focused on improved cycle-life, which could result in greater use in utility-scale applications. Sodium-beta batteries include sodium-sulfur (NaS) units, first developed in the 1960s,87 and commercially available from a single vendor (NGK Insulators, Ltd.) in Japan with over 270 MW deployed worldwide.88 A NaS battery was first deployed in the United States in 2002. 89 There are now a number of U.S. demonstration projects, including several listed in Table 3. The focus of NaS deployments in the United States has been in electric distribution deferral projects, acting to reduce peak demand on distribution systems, but they also can serve multiple grid support services. An alternative high-temperature battery, sodium-nickel-chloride, is in the early stages of commercialization. “Flow” batteries, in which a liquid electrolyte flows through a chemical cell to produce electricity, are in the early stages of commercialization. In grid applications there has been some deployment of two types of flow battery: vanadium redox and zinc-bromide. There are a number of international installations of vanadium redox units, including a 250 kW installation in the United States to relieve a congested transmission line. 91 There are also a number of zinc-bromine demonstration projects.92 Several other flow battery chemistries have been pursued or are under development, but are less mature. In addition to the three battery types discussed above, there are several emerging technologies based on new battery chemistries which may also have potential in grid applications. Several of these emerging technologies are being supported by DOE efforts such as ARPA-E and are discussed briefly in the R&D section of this chapter. Technology Description and Performance Lead-Acid The lead-acid battery consists of a lead dioxide positive electrode (cathode), a lead negative electrode (anode), and an aqueous sulfuric acid electrolyte which carries the charge between the two. During discharge, each electrode is converted to lead sulfate, consuming sulfuric acid from the electrolyte. When recharging, the lead sulfate is converted back to sulfuric acid, leaving a layer of lead dioxide on the cathode and pure lead on the anode. In such conventional “wet” (flooded) cells, water in the electrolyte is broken down to hydrogen and oxygen during the charging process. In a vented wet cell design, these gases escape into the atmosphere, requiring the occasional addition of water to the system. In sealed wet cell designs, the loss of these gases is prevented and their conversion back to water is possible, reducing maintenance requirements. However, if the battery is overcharged or charged too quickly, the rate of gas generation can surpass that of water recombination, which can cause an explosion. In “valve regulated gel” designs, silica is added to the electrolyte to cause it to gel. In “absorbed glass mat” designs, the electrolyte is suspended in a fiberglass mat. The latter are sometimes referred to as “dry” because the fiberglass mat is not completely saturated with acid and there is no excess liquid. Both designs operate under slight constant pressure. Both also eliminate the risk of electrolyte leakage and offer improved safety by using valves to regulate internal pressure due to gas build up, but at significantly higher cost than wet cells described above.93 Lead-acid is currently the lowest-cost battery chemistry on a dollar-per-kWh basis. However, it also has relatively low specific energy (energy per unit mass) on the order of 35 Wh/kg and relatively poor “cycle life,” which is the number of charge-discharge cycles it can provide before its capacity falls too far below a certain percentage (e.g., 80%) of its initial capacity. While the low energy density of lead-acid will likely limit its use in transportation applications, increase in cycle life could make lead-acid cost-effective in grid applications. The cycle life of lead-acid batteries is highly dependent on both the rate and depth of discharge due to corrosion and material shedding off of electrode plates inside the battery. High depth of discharge (DoD) operation intensifies both issues. At 100% DoD (discharging the battery completely) cycle life can be less than 100 full cycles for some lead-acid technologies. During high rate, partial state-of-charge operation, lead sulfate accumulation on the anode can be the primary cause of degradation. These processes are also sensitive to high temperature, where the rule of thumb is to reduce battery life by half for every 8°C (14°F) increase in temperature above ambient. 94 Manufacturers’ warrantees provide some indication of minimum performance expectations, with service life of three to five years for deep cycle batteries, designed to be mostly discharged time after time. SLI batteries in cars have expected service lives of five to seven years, with up to 30 discharges per year depending on the rate of discharge. Temperature also affects capacity, with a battery at -4°C (25°F) having between roughly 70% and 80% of the capacity of a battery at 24°C (75°F).95 For many applications of lead-acid batteries, including SLI and uninterruptible power supply (UPS), efficiency of the batteries is relatively unimportant. One estimate for the DC-DC (direct current) efficiency of utility-scale lead acid battery is 81%, and AC-AC (alternating current) efficiency of 70%-72%.9 High Temperature Sodium-Beta Sodium-beta batteries use molten (liquid) sodium for the anode, with sodium ions transporting the electric charge. The two main types of sodium-beta batteries are distinguished by the type of cathode they use. The sodium-sulfur (Na-S) type employs a liquid sulfur cathode, while the sodium-nickel chloride (Na-NiCl2) type employs a solid metal chloride cathode. Both types include a beta-alumina solid electrolyte material separating the cathode and anode. This ceramic material offers ionic conductivity similar to that of typical aqueous electrolytes, but only at high temperature. Consequently, sodium-beta batteries ordinarily must operate at temperatures around 300°C (572°F). 97 The impermeability of the solid electrolyte to liquid electrodes and its minimal electrical conductivity eliminates self discharge and allows high efficiency.98 Technical challenges associated with sodium-beta battery chemistry generally stem from the high temperature requirements. To maintain a 300°C operating point the battery must have insulation and active heating. If it is not maintained at such a temperature, the resulting freeze-thaw cycles and thermal expansion can lead to mechanical stresses, damaging seals and other cell components, including the electrolyte. 99 The fragile nature of the electrolyte is also a concern, particularly for Na-S cells. In the event of damage to the solid electrolyte, a breach could allow the two liquid electrodes to mix, possibly causing an explosion and fire. 100 Na-S batteries are manufactured commercially for a variety of grid services ranging from shortterm rapid discharge services to long-term energy management services.101 The DC-DC efficiency is about 85%. Calculation of the AC-AC efficiency is complicated by the need for additional heating. The standby heat loss for each 50 kW module is between 2.2 and 3.4 kW. As a result of this heat loss, plus losses in the power conversion equipment, the AC-AC efficiency for loadleveling services is estimated in the range of 75%-80%.102 Expected service life is 15 years at 90% DoD and 4500 cycles.103 The primary sodium-beta alternative to the Na-S chemistry, the Na-NiCl2 cell (typically called the ZEBRA cell).104 Although ZEBRA batteries have been under development for over 20 years, they are only in the early stages of commercialization. 105 Nickel chloride cathodes offer several potential advantages including higher operating voltage, increased operational temperature range (due in part to the lower melting point of the secondary electrolyte), a slightly less corrosive cathode, and somewhat safer cell construction, since handling of metallic sodium—which is potentially explosive—can be avoided. 106 They are likely to offer a slightly reduced energy density.107
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Context: Chapter 4: Batteries for Grid Applications Overview Batteries are devices that store energy chemically. This report focuses on “secondary” batteries, which must be charged before use and which can be discharged and recharged (cycled) many times before the end of their useful life. For electric power grid applications, there are four main battery types of interest: Lead-acid High temperature “sodium-beta” Liquid electrolyte “flow” batteries Other emerging chemistries84 Lead-acid batteries have been used for more than a century in grid applications and in conventional vehicles for starting, lighting, and ignition (SLI). They continue to be the technology of choice for vehicle SLI applications due to their low cost. Consequently, they are manufactured on a mass scale. In 2010, approximately 120 million lead-acid batteries were shipped in North America alone.85 Lead-acid batteries are commonly used by utilities to serve as uninterruptible power supplies in substations, and have been used at utility scale in several demonstration projects to provide grid support.86 Use of lead acid batteries for grid applications is limited by relatively short cycle life. R&D efforts are focused on improved cycle-life, which could result in greater use in utility-scale applications. Sodium-beta batteries include sodium-sulfur (NaS) units, first developed in the 1960s,87 and commercially available from a single vendor (NGK Insulators, Ltd.) in Japan with over 270 MW deployed worldwide.88 A NaS battery was first deployed in the United States in 2002. 89 There are now a number of U.S. demonstration projects, including several listed in Table 3. The focus of NaS deployments in the United States has been in electric distribution deferral projects, acting to reduce peak demand on distribution systems, but they also can serve multiple grid support services. An alternative high-temperature battery, sodium-nickel-chloride, is in the early stages of commercialization. “Flow” batteries, in which a liquid electrolyte flows through a chemical cell to produce electricity, are in the early stages of commercialization. In grid applications there has been some deployment of two types of flow battery: vanadium redox and zinc-bromide. There are a number of international installations of vanadium redox units, including a 250 kW installation in the United States to relieve a congested transmission line. 91 There are also a number of zinc-bromine demonstration projects.92 Several other flow battery chemistries have been pursued or are under development, but are less mature. In addition to the three battery types discussed above, there are several emerging technologies based on new battery chemistries which may also have potential in grid applications. Several of these emerging technologies are being supported by DOE efforts such as ARPA-E and are discussed briefly in the R&D section of this chapter. Technology Description and Performance Lead-Acid The lead-acid battery consists of a lead dioxide positive electrode (cathode), a lead negative electrode (anode), and an aqueous sulfuric acid electrolyte which carries the charge between the two. During discharge, each electrode is converted to lead sulfate, consuming sulfuric acid from the electrolyte. When recharging, the lead sulfate is converted back to sulfuric acid, leaving a layer of lead dioxide on the cathode and pure lead on the anode. In such conventional “wet” (flooded) cells, water in the electrolyte is broken down to hydrogen and oxygen during the charging process. In a vented wet cell design, these gases escape into the atmosphere, requiring the occasional addition of water to the system. In sealed wet cell designs, the loss of these gases is prevented and their conversion back to water is possible, reducing maintenance requirements. However, if the battery is overcharged or charged too quickly, the rate of gas generation can surpass that of water recombination, which can cause an explosion. In “valve regulated gel” designs, silica is added to the electrolyte to cause it to gel. In “absorbed glass mat” designs, the electrolyte is suspended in a fiberglass mat. The latter are sometimes referred to as “dry” because the fiberglass mat is not completely saturated with acid and there is no excess liquid. Both designs operate under slight constant pressure. Both also eliminate the risk of electrolyte leakage and offer improved safety by using valves to regulate internal pressure due to gas build up, but at significantly higher cost than wet cells described above.93 Lead-acid is currently the lowest-cost battery chemistry on a dollar-per-kWh basis. However, it also has relatively low specific energy (energy per unit mass) on the order of 35 Wh/kg and relatively poor “cycle life,” which is the number of charge-discharge cycles it can provide before its capacity falls too far below a certain percentage (e.g., 80%) of its initial capacity. While the low energy density of lead-acid will likely limit its use in transportation applications, increase in cycle life could make lead-acid cost-effective in grid applications. The cycle life of lead-acid batteries is highly dependent on both the rate and depth of discharge due to corrosion and material shedding off of electrode plates inside the battery. High depth of discharge (DoD) operation intensifies both issues. At 100% DoD (discharging the battery completely) cycle life can be less than 100 full cycles for some lead-acid technologies. During high rate, partial state-of-charge operation, lead sulfate accumulation on the anode can be the primary cause of degradation. These processes are also sensitive to high temperature, where the rule of thumb is to reduce battery life by half for every 8°C (14°F) increase in temperature above ambient. 94 Manufacturers’ warrantees provide some indication of minimum performance expectations, with service life of three to five years for deep cycle batteries, designed to be mostly discharged time after time. SLI batteries in cars have expected service lives of five to seven years, with up to 30 discharges per year depending on the rate of discharge. Temperature also affects capacity, with a battery at -4°C (25°F) having between roughly 70% and 80% of the capacity of a battery at 24°C (75°F).95 For many applications of lead-acid batteries, including SLI and uninterruptible power supply (UPS), efficiency of the batteries is relatively unimportant. One estimate for the DC-DC (direct current) efficiency of utility-scale lead acid battery is 81%, and AC-AC (alternating current) efficiency of 70%-72%.9 High Temperature Sodium-Beta Sodium-beta batteries use molten (liquid) sodium for the anode, with sodium ions transporting the electric charge. The two main types of sodium-beta batteries are distinguished by the type of cathode they use. The sodium-sulfur (Na-S) type employs a liquid sulfur cathode, while the sodium-nickel chloride (Na-NiCl2) type employs a solid metal chloride cathode. Both types include a beta-alumina solid electrolyte material separating the cathode and anode. This ceramic material offers ionic conductivity similar to that of typical aqueous electrolytes, but only at high temperature. Consequently, sodium-beta batteries ordinarily must operate at temperatures around 300°C (572°F). 97 The impermeability of the solid electrolyte to liquid electrodes and its minimal electrical conductivity eliminates self discharge and allows high efficiency.98 Technical challenges associated with sodium-beta battery chemistry generally stem from the high temperature requirements. To maintain a 300°C operating point the battery must have insulation and active heating. If it is not maintained at such a temperature, the resulting freeze-thaw cycles and thermal expansion can lead to mechanical stresses, damaging seals and other cell components, including the electrolyte. 99 The fragile nature of the electrolyte is also a concern, particularly for Na-S cells. In the event of damage to the solid electrolyte, a breach could allow the two liquid electrodes to mix, possibly causing an explosion and fire. 100 Na-S batteries are manufactured commercially for a variety of grid services ranging from shortterm rapid discharge services to long-term energy management services.101 The DC-DC efficiency is about 85%. Calculation of the AC-AC efficiency is complicated by the need for additional heating. The standby heat loss for each 50 kW module is between 2.2 and 3.4 kW. As a result of this heat loss, plus losses in the power conversion equipment, the AC-AC efficiency for loadleveling services is estimated in the range of 75%-80%.102 Expected service life is 15 years at 90% DoD and 4500 cycles.103 The primary sodium-beta alternative to the Na-S chemistry, the Na-NiCl2 cell (typically called the ZEBRA cell).104 Although ZEBRA batteries have been under development for over 20 years, they are only in the early stages of commercialization. 105 Nickel chloride cathodes offer several potential advantages including higher operating voltage, increased operational temperature range (due in part to the lower melting point of the secondary electrolyte), a slightly less corrosive cathode, and somewhat safer cell construction, since handling of metallic sodium—which is potentially explosive—can be avoided. 106 They are likely to offer a slightly reduced energy density.107 Question: Which batteries are in the early stages of commercialisation? System instruction: You can only produce an answer using the context provided to you.
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You can only produce an answer using the context provided to you.
EVIDENCE:
Chapter 4: Batteries for Grid Applications Overview Batteries are devices that store energy chemically. This report focuses on “secondary” batteries, which must be charged before use and which can be discharged and recharged (cycled) many times before the end of their useful life. For electric power grid applications, there are four main battery types of interest: Lead-acid High temperature “sodium-beta” Liquid electrolyte “flow” batteries Other emerging chemistries84 Lead-acid batteries have been used for more than a century in grid applications and in conventional vehicles for starting, lighting, and ignition (SLI). They continue to be the technology of choice for vehicle SLI applications due to their low cost. Consequently, they are manufactured on a mass scale. In 2010, approximately 120 million lead-acid batteries were shipped in North America alone.85 Lead-acid batteries are commonly used by utilities to serve as uninterruptible power supplies in substations, and have been used at utility scale in several demonstration projects to provide grid support.86 Use of lead acid batteries for grid applications is limited by relatively short cycle life. R&D efforts are focused on improved cycle-life, which could result in greater use in utility-scale applications. Sodium-beta batteries include sodium-sulfur (NaS) units, first developed in the 1960s,87 and commercially available from a single vendor (NGK Insulators, Ltd.) in Japan with over 270 MW deployed worldwide.88 A NaS battery was first deployed in the United States in 2002. 89 There are now a number of U.S. demonstration projects, including several listed in Table 3. The focus of NaS deployments in the United States has been in electric distribution deferral projects, acting to reduce peak demand on distribution systems, but they also can serve multiple grid support services. An alternative high-temperature battery, sodium-nickel-chloride, is in the early stages of commercialization. “Flow” batteries, in which a liquid electrolyte flows through a chemical cell to produce electricity, are in the early stages of commercialization. In grid applications there has been some deployment of two types of flow battery: vanadium redox and zinc-bromide. There are a number of international installations of vanadium redox units, including a 250 kW installation in the United States to relieve a congested transmission line. 91 There are also a number of zinc-bromine demonstration projects.92 Several other flow battery chemistries have been pursued or are under development, but are less mature. In addition to the three battery types discussed above, there are several emerging technologies based on new battery chemistries which may also have potential in grid applications. Several of these emerging technologies are being supported by DOE efforts such as ARPA-E and are discussed briefly in the R&D section of this chapter. Technology Description and Performance Lead-Acid The lead-acid battery consists of a lead dioxide positive electrode (cathode), a lead negative electrode (anode), and an aqueous sulfuric acid electrolyte which carries the charge between the two. During discharge, each electrode is converted to lead sulfate, consuming sulfuric acid from the electrolyte. When recharging, the lead sulfate is converted back to sulfuric acid, leaving a layer of lead dioxide on the cathode and pure lead on the anode. In such conventional “wet” (flooded) cells, water in the electrolyte is broken down to hydrogen and oxygen during the charging process. In a vented wet cell design, these gases escape into the atmosphere, requiring the occasional addition of water to the system. In sealed wet cell designs, the loss of these gases is prevented and their conversion back to water is possible, reducing maintenance requirements. However, if the battery is overcharged or charged too quickly, the rate of gas generation can surpass that of water recombination, which can cause an explosion. In “valve regulated gel” designs, silica is added to the electrolyte to cause it to gel. In “absorbed glass mat” designs, the electrolyte is suspended in a fiberglass mat. The latter are sometimes referred to as “dry” because the fiberglass mat is not completely saturated with acid and there is no excess liquid. Both designs operate under slight constant pressure. Both also eliminate the risk of electrolyte leakage and offer improved safety by using valves to regulate internal pressure due to gas build up, but at significantly higher cost than wet cells described above.93 Lead-acid is currently the lowest-cost battery chemistry on a dollar-per-kWh basis. However, it also has relatively low specific energy (energy per unit mass) on the order of 35 Wh/kg and relatively poor “cycle life,” which is the number of charge-discharge cycles it can provide before its capacity falls too far below a certain percentage (e.g., 80%) of its initial capacity. While the low energy density of lead-acid will likely limit its use in transportation applications, increase in cycle life could make lead-acid cost-effective in grid applications. The cycle life of lead-acid batteries is highly dependent on both the rate and depth of discharge due to corrosion and material shedding off of electrode plates inside the battery. High depth of discharge (DoD) operation intensifies both issues. At 100% DoD (discharging the battery completely) cycle life can be less than 100 full cycles for some lead-acid technologies. During high rate, partial state-of-charge operation, lead sulfate accumulation on the anode can be the primary cause of degradation. These processes are also sensitive to high temperature, where the rule of thumb is to reduce battery life by half for every 8°C (14°F) increase in temperature above ambient. 94 Manufacturers’ warrantees provide some indication of minimum performance expectations, with service life of three to five years for deep cycle batteries, designed to be mostly discharged time after time. SLI batteries in cars have expected service lives of five to seven years, with up to 30 discharges per year depending on the rate of discharge. Temperature also affects capacity, with a battery at -4°C (25°F) having between roughly 70% and 80% of the capacity of a battery at 24°C (75°F).95 For many applications of lead-acid batteries, including SLI and uninterruptible power supply (UPS), efficiency of the batteries is relatively unimportant. One estimate for the DC-DC (direct current) efficiency of utility-scale lead acid battery is 81%, and AC-AC (alternating current) efficiency of 70%-72%.9 High Temperature Sodium-Beta Sodium-beta batteries use molten (liquid) sodium for the anode, with sodium ions transporting the electric charge. The two main types of sodium-beta batteries are distinguished by the type of cathode they use. The sodium-sulfur (Na-S) type employs a liquid sulfur cathode, while the sodium-nickel chloride (Na-NiCl2) type employs a solid metal chloride cathode. Both types include a beta-alumina solid electrolyte material separating the cathode and anode. This ceramic material offers ionic conductivity similar to that of typical aqueous electrolytes, but only at high temperature. Consequently, sodium-beta batteries ordinarily must operate at temperatures around 300°C (572°F). 97 The impermeability of the solid electrolyte to liquid electrodes and its minimal electrical conductivity eliminates self discharge and allows high efficiency.98 Technical challenges associated with sodium-beta battery chemistry generally stem from the high temperature requirements. To maintain a 300°C operating point the battery must have insulation and active heating. If it is not maintained at such a temperature, the resulting freeze-thaw cycles and thermal expansion can lead to mechanical stresses, damaging seals and other cell components, including the electrolyte. 99 The fragile nature of the electrolyte is also a concern, particularly for Na-S cells. In the event of damage to the solid electrolyte, a breach could allow the two liquid electrodes to mix, possibly causing an explosion and fire. 100 Na-S batteries are manufactured commercially for a variety of grid services ranging from shortterm rapid discharge services to long-term energy management services.101 The DC-DC efficiency is about 85%. Calculation of the AC-AC efficiency is complicated by the need for additional heating. The standby heat loss for each 50 kW module is between 2.2 and 3.4 kW. As a result of this heat loss, plus losses in the power conversion equipment, the AC-AC efficiency for loadleveling services is estimated in the range of 75%-80%.102 Expected service life is 15 years at 90% DoD and 4500 cycles.103 The primary sodium-beta alternative to the Na-S chemistry, the Na-NiCl2 cell (typically called the ZEBRA cell).104 Although ZEBRA batteries have been under development for over 20 years, they are only in the early stages of commercialization. 105 Nickel chloride cathodes offer several potential advantages including higher operating voltage, increased operational temperature range (due in part to the lower melting point of the secondary electrolyte), a slightly less corrosive cathode, and somewhat safer cell construction, since handling of metallic sodium—which is potentially explosive—can be avoided. 106 They are likely to offer a slightly reduced energy density.107
USER:
Which batteries are in the early stages of commercialisation?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 12
| 9
| 1,424
| null | 725
|
"================ <TEXT PASSAGE> ======= [context document] ================ <QUESTION> ======= [user request] ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
|
Given the recent advancements of mRNA technology, how might future influenza vaccines be designed to provide a more comprehensive protection against emerging variants, potentially reducing the need for annual revaccinations?
|
Annually, seasonal influenza is responsible for millions of infections and hundreds of thousands of deaths. The current method for managing influenza is vaccination using a standardized amount of the influenza virus’ primary surface antigen, hemagglutinin (HA), as the intended target of the immune response. This vaccination strategy results in vaccines with variable efficacy year to year due to antigenic drift of HA, which can be further exacerbated by manufacturing processes optimizing growth of vaccine virus in eggs. Due to these limitations, alternative vaccine platforms are actively being explored to improve influenza vaccine efficacy, including cell-based, recombinant protein, and mRNA vaccines. mRNA’s rapid, in vitro production makes it an appealing platform for influenza vaccination, and the success of SARS-CoV-2 mRNA vaccines in the clinic has encouraged the development of mRNA vaccines for other pathogens. Here, the immunogenicity and protective efficacy of a quadrivalent mRNA vaccine encoding HA from four seasonal influenza viruses, A/California/07/2009 (H1N1), A/Hong Kong/4801/2014 (H3N2), B/Brisbane/60/2008 (B-Victoria lineage), and B/Phuket/3073/2013 (B-Yamagata lineage), was evaluated. In mice, a 120 μg total dose of this quadrivalent mRNA vaccine induced robust antibody titers against each subtype that were commensurate with titers when each antigen was administered alone. Following A/California/04/2009 challenge, mice were fully protected from morbidity and mortality, even at doses as low as 1 μg of each antigen. Additionally, a single administration of 10 μg of quadrivalent mRNA was sufficient to prevent weight loss caused by A/California/04/2009. These results support the promise of this mRNA vaccine for prevention and mitigation of influenza vaccine.The results presented here are encouraging and support the effectiveness of GLB quadrivalent influenza mRNA vaccines in generating HA-targeted neutralizing antibody responses which have been well-documented to correlate with protection from disease44,45,46. In addition to antibodies targeting HA, T cells are also an important immune mediator of infection and deserve analyses in future studies47. The presence of pre-existing CD4+ T cells has been shown to correlate with protection from influenza disease in humans, while memory CD8+ T cell activity is associated with protection from emerging influenza viruses48,49,50. An early study of influenza mRNA vaccines by Petsch et al. found mice vaccinated with PR8 HA mRNA exhibited CD4+ responses against a variety of MHC class II PR8 peptides as well as greater CD8+ cytotoxic activity than controls when tested with MHC class I PR8 peptides. The mRNA platform is a powerful development in vaccine technology, not only in regards to their flexibility, speed, and scalability, but in that they offer an alternative approach to the development of a universal influenza vaccine. To that end, in a 2022 paper by Arevalo et al., vaccination with mRNA encoding 20 different HAs, representative of all A and B subtypes, induced humoral responses against all antigens and protected mice and ferrets from influenza challenge with matched and mismatched strains22. Furthermore, a natural extension of immunization with multivalent HA mRNA vaccines are multi-antigenic mRNA vaccines. In 2020 Freyn et al. reported broad protection in mice vaccinated with modified mRNA encoding conserved sequences from HA, NA, M2, and NP on a single strand of mRNA at a dose as low as 50 ng23. A recent study of a pentavalent modified mRNA vaccine targeting HA, NA, NP, and matrix protein 2 (M2) from B/Victoria/2/1987-like lineage and HA from B/Yamagata/16/1988-like lineage was found to induce broadly cross-reactive antibodies against ancestral and contemporary B viruses from both lineages, as well as protect mice from morbidity and mortality following challenge with a panel of influenza B viruses24. Similarly, a 2022 study of mRNA vaccines containing HA, NA, NP, and M2 targeting group 2 influenza viruses was found to protect mice from all challenge viruses, even when administered as a single dose of 125 ng25. These results demonstrate the promise of mRNA vaccines to improve breadth and efficacy of influenza vaccines.
|
"================ <TEXT PASSAGE> ======= Annually, seasonal influenza is responsible for millions of infections and hundreds of thousands of deaths. The current method for managing influenza is vaccination using a standardized amount of the influenza virus’ primary surface antigen, hemagglutinin (HA), as the intended target of the immune response. This vaccination strategy results in vaccines with variable efficacy year to year due to antigenic drift of HA, which can be further exacerbated by manufacturing processes optimizing growth of vaccine virus in eggs. Due to these limitations, alternative vaccine platforms are actively being explored to improve influenza vaccine efficacy, including cell-based, recombinant protein, and mRNA vaccines. mRNA’s rapid, in vitro production makes it an appealing platform for influenza vaccination, and the success of SARS-CoV-2 mRNA vaccines in the clinic has encouraged the development of mRNA vaccines for other pathogens. Here, the immunogenicity and protective efficacy of a quadrivalent mRNA vaccine encoding HA from four seasonal influenza viruses, A/California/07/2009 (H1N1), A/Hong Kong/4801/2014 (H3N2), B/Brisbane/60/2008 (B-Victoria lineage), and B/Phuket/3073/2013 (B-Yamagata lineage), was evaluated. In mice, a 120 μg total dose of this quadrivalent mRNA vaccine induced robust antibody titers against each subtype that were commensurate with titers when each antigen was administered alone. Following A/California/04/2009 challenge, mice were fully protected from morbidity and mortality, even at doses as low as 1 μg of each antigen. Additionally, a single administration of 10 μg of quadrivalent mRNA was sufficient to prevent weight loss caused by A/California/04/2009. These results support the promise of this mRNA vaccine for prevention and mitigation of influenza vaccine.The results presented here are encouraging and support the effectiveness of GLB quadrivalent influenza mRNA vaccines in generating HA-targeted neutralizing antibody responses which have been well-documented to correlate with protection from disease44,45,46. In addition to antibodies targeting HA, T cells are also an important immune mediator of infection and deserve analyses in future studies47. The presence of pre-existing CD4+ T cells has been shown to correlate with protection from influenza disease in humans, while memory CD8+ T cell activity is associated with protection from emerging influenza viruses48,49,50. An early study of influenza mRNA vaccines by Petsch et al. found mice vaccinated with PR8 HA mRNA exhibited CD4+ responses against a variety of MHC class II PR8 peptides as well as greater CD8+ cytotoxic activity than controls when tested with MHC class I PR8 peptides. The mRNA platform is a powerful development in vaccine technology, not only in regards to their flexibility, speed, and scalability, but in that they offer an alternative approach to the development of a universal influenza vaccine. To that end, in a 2022 paper by Arevalo et al., vaccination with mRNA encoding 20 different HAs, representative of all A and B subtypes, induced humoral responses against all antigens and protected mice and ferrets from influenza challenge with matched and mismatched strains22. Furthermore, a natural extension of immunization with multivalent HA mRNA vaccines are multi-antigenic mRNA vaccines. In 2020 Freyn et al. reported broad protection in mice vaccinated with modified mRNA encoding conserved sequences from HA, NA, M2, and NP on a single strand of mRNA at a dose as low as 50 ng23. A recent study of a pentavalent modified mRNA vaccine targeting HA, NA, NP, and matrix protein 2 (M2) from B/Victoria/2/1987-like lineage and HA from B/Yamagata/16/1988-like lineage was found to induce broadly cross-reactive antibodies against ancestral and contemporary B viruses from both lineages, as well as protect mice from morbidity and mortality following challenge with a panel of influenza B viruses24. Similarly, a 2022 study of mRNA vaccines containing HA, NA, NP, and M2 targeting group 2 influenza viruses was found to protect mice from all challenge viruses, even when administered as a single dose of 125 ng25. These results demonstrate the promise of mRNA vaccines to improve breadth and efficacy of influenza vaccines. https://www.nature.com/articles/s41541-023-00752-5#:~:text=Seasonal%20quadrivalent%20mRNA%20vaccine%20prevents%20and%20mitigates%20influenza%20infection%20%7C%20npj%20Vaccines ================ <QUESTION> ======= Given the recent advancements of mRNA technology, how might future influenza vaccines be designed to provide a more comprehensive protection against emerging variants, potentially reducing the need for annual revaccinations? ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
|
"================ <TEXT PASSAGE> ======= [context document] ================ <QUESTION> ======= [user request] ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
EVIDENCE:
Annually, seasonal influenza is responsible for millions of infections and hundreds of thousands of deaths. The current method for managing influenza is vaccination using a standardized amount of the influenza virus’ primary surface antigen, hemagglutinin (HA), as the intended target of the immune response. This vaccination strategy results in vaccines with variable efficacy year to year due to antigenic drift of HA, which can be further exacerbated by manufacturing processes optimizing growth of vaccine virus in eggs. Due to these limitations, alternative vaccine platforms are actively being explored to improve influenza vaccine efficacy, including cell-based, recombinant protein, and mRNA vaccines. mRNA’s rapid, in vitro production makes it an appealing platform for influenza vaccination, and the success of SARS-CoV-2 mRNA vaccines in the clinic has encouraged the development of mRNA vaccines for other pathogens. Here, the immunogenicity and protective efficacy of a quadrivalent mRNA vaccine encoding HA from four seasonal influenza viruses, A/California/07/2009 (H1N1), A/Hong Kong/4801/2014 (H3N2), B/Brisbane/60/2008 (B-Victoria lineage), and B/Phuket/3073/2013 (B-Yamagata lineage), was evaluated. In mice, a 120 μg total dose of this quadrivalent mRNA vaccine induced robust antibody titers against each subtype that were commensurate with titers when each antigen was administered alone. Following A/California/04/2009 challenge, mice were fully protected from morbidity and mortality, even at doses as low as 1 μg of each antigen. Additionally, a single administration of 10 μg of quadrivalent mRNA was sufficient to prevent weight loss caused by A/California/04/2009. These results support the promise of this mRNA vaccine for prevention and mitigation of influenza vaccine.The results presented here are encouraging and support the effectiveness of GLB quadrivalent influenza mRNA vaccines in generating HA-targeted neutralizing antibody responses which have been well-documented to correlate with protection from disease44,45,46. In addition to antibodies targeting HA, T cells are also an important immune mediator of infection and deserve analyses in future studies47. The presence of pre-existing CD4+ T cells has been shown to correlate with protection from influenza disease in humans, while memory CD8+ T cell activity is associated with protection from emerging influenza viruses48,49,50. An early study of influenza mRNA vaccines by Petsch et al. found mice vaccinated with PR8 HA mRNA exhibited CD4+ responses against a variety of MHC class II PR8 peptides as well as greater CD8+ cytotoxic activity than controls when tested with MHC class I PR8 peptides. The mRNA platform is a powerful development in vaccine technology, not only in regards to their flexibility, speed, and scalability, but in that they offer an alternative approach to the development of a universal influenza vaccine. To that end, in a 2022 paper by Arevalo et al., vaccination with mRNA encoding 20 different HAs, representative of all A and B subtypes, induced humoral responses against all antigens and protected mice and ferrets from influenza challenge with matched and mismatched strains22. Furthermore, a natural extension of immunization with multivalent HA mRNA vaccines are multi-antigenic mRNA vaccines. In 2020 Freyn et al. reported broad protection in mice vaccinated with modified mRNA encoding conserved sequences from HA, NA, M2, and NP on a single strand of mRNA at a dose as low as 50 ng23. A recent study of a pentavalent modified mRNA vaccine targeting HA, NA, NP, and matrix protein 2 (M2) from B/Victoria/2/1987-like lineage and HA from B/Yamagata/16/1988-like lineage was found to induce broadly cross-reactive antibodies against ancestral and contemporary B viruses from both lineages, as well as protect mice from morbidity and mortality following challenge with a panel of influenza B viruses24. Similarly, a 2022 study of mRNA vaccines containing HA, NA, NP, and M2 targeting group 2 influenza viruses was found to protect mice from all challenge viruses, even when administered as a single dose of 125 ng25. These results demonstrate the promise of mRNA vaccines to improve breadth and efficacy of influenza vaccines.
USER:
Given the recent advancements of mRNA technology, how might future influenza vaccines be designed to provide a more comprehensive protection against emerging variants, potentially reducing the need for annual revaccinations?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 49
| 30
| 630
| null | 857
|
Only use the information shared in the context to answer the questions. Do not rely on external sources or your inherent knowledge to answer the question. If a meaningful answer cannot be generated from the context, acknowledge that and ask for a related document or offer to help answer something else; do not hallucinate.
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Explain all the eligibility processes from the context in detail.
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Direct Certification Direct certification is a process through which state agencies and school districts automatically certify children for free meals based on documentation of the child’s status in a program or category without the need for a household application.74 States are required to conduct direct certification with SNAP and have the option of conducting direct certification with the other programs and categories that convey categorical eligibility. For SNAP and other federal programs, the direct certification process typically involves state agencies (e.g., state SNAP and state educational agencies) cross-checking program rolls.75 A list of matched children is sent to the school district, which certifies children for free meals without the need for a household application.76 For foster, homeless, migrant, and runaway children, direct certification typically involves school district communication with a local or state official who can provide documentation of the child’s status in one of these categories.77 The 2004 child nutrition reauthorization act (P.L. 108-265) required states to conduct direct certification with SNAP, with nationwide implementation taking effect in school year 2008-2009. As of school year 2018-2019 (the most recent data available), USDA reported that 98% of children in SNAP households were directly certified for free school meals.78 The HHFKA made further policy changes to expand direct certification. One of those changes was the initiation of a demonstration project to test direct certification with Medicaid (see the text box below). The law also funded performance incentive grants for high-performing states and authorized corrective action plans for low-performing states in direct certification activities.79 Direct Certification with Medicaid Demonstration The HHFKA initiated a demonstration project to conduct direct certification of children individually participating in Medicaid and children in Medicaid households. Unlike the other programs used to directly certify children for school meals, Medicaid does not convey categorical eligibility for free school meals, but rather identifies children in households that would meet the income eligibility thresholds for either free or reduced-price school meals.80 Following the demonstration authority in the HHFKA as well as pilot authority in the Richard B. Russell National School Lunch Act, some states are currently directly certifying children based on Medicaid data.81 As of school year 2023-2024, there were 38 states operating direct certification with Medicaid. Two states used Medicaid to directly certify children for free meals only (130% of the poverty level or below).82 Thirty-six states were operating under an expanded direct certification demonstration project to test direct certification with Medicaid for free and reduced-price meals (up to 185% of the poverty level).83 Verification of Eligibility Each fall, districts are required to verify a sample of approved household applications on file, with a focus on applications close to the eligibility threshold (“error-prone” applications).86 School districts may also conduct verification of questionable applications. Verification is not required for children who are directly certified for free or reduced-price meals. (Note that districts participating in Provisions 1, 2, and 3 must meet verification requirements for the years in which they administer household applications.) Many districts employ direct verification (matching data from other low-income programs) to conduct their verification activities, but if data cannot be verified in this way, schools must contact households to verify the information provided on the application. A child’s eligibility status may stay the same or change (e.g., from free meals to reduced-price meals or loss of eligibility) as a result of verification of household income, or if the household does not respond to verification outreach (in which case eligibility would be lost, though that decision can be appealed). Reimbursement School food authorities must keep track of the daily number of meals they serve in each category (free, reduced-price, and paid) that meet federal nutrition requirements. School food authorities then submit claims for reimbursement to the state agency, which submits the claims to FNS. Approved reimbursements are distributed to school food authorities by the state agency, usually on a monthly basis. Per statute, reimbursement rates are adjusted for inflation annually.87 Table 4 shows NSLP and SBP reimbursement rates for school year 2023-2024. (Note that school food authorities also receive a per-lunch commodity reimbursement, discussed previously under “Commodity Assistance”.) The law provides a higher reimbursement rate for meals meeting certain criteria. For example, school food authorities that are compliant with the updated federal nutrition standards for school meals receive an additional 8 cents per lunch. 88 School food authorities also receive an additional 2 cents per lunch if they serve 60% or more of their lunches at a free or reduced price. For breakfasts, school food authorities receive higher reimbursements if they serve 40% or more lunches at a free or reduced price (referred to as severe need schools). Once school food authorities receive the cash reimbursements, they can use the funds to support almost any aspect of the school food service operation. However, federal cash reimbursements must go into a nonprofit school food service account that is subject to federal regulations.89 Payments for non-program foods (e.g., vending machine sales) must also accrue to the nonprofit school food service account.90 FNS periodically studies the costs of producing a reimbursable meal. In April 2019, FNS released a School Nutrition and Meal Cost Study, which found that the average reported cost of producing a reimbursable lunch was $3.81 in school year 2014-2015 (reported costs were defined as those charged to the school food service account).91 This exceeded the average federal cash reimbursement ($3.32) for lunches in school year 2014-2015. When unreported costs were included (costs outside of the food service account; for example, labor costs associated with processing applications), the cost of producing the average reimbursable lunch was $6.02. As noted previously, children’s payments and state and local funds may also cover meal costs.
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#SYSTEM INSTRUCTIONS Only use the information shared in the context to answer the questions. Do not rely on external sources or your inherent knowledge to answer the question. If a meaningful answer cannot be generated from the context, acknowledge that and ask for a related document or offer to help answer something else; do not hallucinate. #CONTEXT Direct Certification Direct certification is a process through which state agencies and school districts automatically certify children for free meals based on documentation of the child’s status in a program or category without the need for a household application.74 States are required to conduct direct certification with SNAP and have the option of conducting direct certification with the other programs and categories that convey categorical eligibility. For SNAP and other federal programs, the direct certification process typically involves state agencies (e.g., state SNAP and state educational agencies) cross-checking program rolls.75 A list of matched children is sent to the school district, which certifies children for free meals without the need for a household application.76 For foster, homeless, migrant, and runaway children, direct certification typically involves school district communication with a local or state official who can provide documentation of the child’s status in one of these categories.77 The 2004 child nutrition reauthorization act (P.L. 108-265) required states to conduct direct certification with SNAP, with nationwide implementation taking effect in school year 2008-2009. As of school year 2018-2019 (the most recent data available), USDA reported that 98% of children in SNAP households were directly certified for free school meals.78 The HHFKA made further policy changes to expand direct certification. One of those changes was the initiation of a demonstration project to test direct certification with Medicaid (see the text box below). The law also funded performance incentive grants for high-performing states and authorized corrective action plans for low-performing states in direct certification activities.79 Direct Certification with Medicaid Demonstration The HHFKA initiated a demonstration project to conduct direct certification of children individually participating in Medicaid and children in Medicaid households. Unlike the other programs used to directly certify children for school meals, Medicaid does not convey categorical eligibility for free school meals, but rather identifies children in households that would meet the income eligibility thresholds for either free or reduced-price school meals.80 Following the demonstration authority in the HHFKA as well as pilot authority in the Richard B. Russell National School Lunch Act, some states are currently directly certifying children based on Medicaid data.81 As of school year 2023-2024, there were 38 states operating direct certification with Medicaid. Two states used Medicaid to directly certify children for free meals only (130% of the poverty level or below).82 Thirty-six states were operating under an expanded direct certification demonstration project to test direct certification with Medicaid for free and reduced-price meals (up to 185% of the poverty level).83 Verification of Eligibility Each fall, districts are required to verify a sample of approved household applications on file, with a focus on applications close to the eligibility threshold (“error-prone” applications).86 School districts may also conduct verification of questionable applications. Verification is not required for children who are directly certified for free or reduced-price meals. (Note that districts participating in Provisions 1, 2, and 3 must meet verification requirements for the years in which they administer household applications.) Many districts employ direct verification (matching data from other low-income programs) to conduct their verification activities, but if data cannot be verified in this way, schools must contact households to verify the information provided on the application. A child’s eligibility status may stay the same or change (e.g., from free meals to reduced-price meals or loss of eligibility) as a result of verification of household income, or if the household does not respond to verification outreach (in which case eligibility would be lost, though that decision can be appealed). Reimbursement School food authorities must keep track of the daily number of meals they serve in each category (free, reduced-price, and paid) that meet federal nutrition requirements. School food authorities then submit claims for reimbursement to the state agency, which submits the claims to FNS. Approved reimbursements are distributed to school food authorities by the state agency, usually on a monthly basis. Per statute, reimbursement rates are adjusted for inflation annually.87 Table 4 shows NSLP and SBP reimbursement rates for school year 2023-2024. (Note that school food authorities also receive a per-lunch commodity reimbursement, discussed previously under “Commodity Assistance”.) The law provides a higher reimbursement rate for meals meeting certain criteria. For example, school food authorities that are compliant with the updated federal nutrition standards for school meals receive an additional 8 cents per lunch. 88 School food authorities also receive an additional 2 cents per lunch if they serve 60% or more of their lunches at a free or reduced price. For breakfasts, school food authorities receive higher reimbursements if they serve 40% or more lunches at a free or reduced price (referred to as severe need schools). Once school food authorities receive the cash reimbursements, they can use the funds to support almost any aspect of the school food service operation. However, federal cash reimbursements must go into a nonprofit school food service account that is subject to federal regulations.89 Payments for non-program foods (e.g., vending machine sales) must also accrue to the nonprofit school food service account.90 FNS periodically studies the costs of producing a reimbursable meal. In April 2019, FNS released a School Nutrition and Meal Cost Study, which found that the average reported cost of producing a reimbursable lunch was $3.81 in school year 2014-2015 (reported costs were defined as those charged to the school food service account).91 This exceeded the average federal cash reimbursement ($3.32) for lunches in school year 2014-2015. When unreported costs were included (costs outside of the food service account; for example, labor costs associated with processing applications), the cost of producing the average reimbursable lunch was $6.02. As noted previously, children’s payments and state and local funds may also cover meal costs. #QUESTION Explain all the eligibility processes from the context in detail.
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Only use the information shared in the context to answer the questions. Do not rely on external sources or your inherent knowledge to answer the question. If a meaningful answer cannot be generated from the context, acknowledge that and ask for a related document or offer to help answer something else; do not hallucinate.
EVIDENCE:
Direct Certification Direct certification is a process through which state agencies and school districts automatically certify children for free meals based on documentation of the child’s status in a program or category without the need for a household application.74 States are required to conduct direct certification with SNAP and have the option of conducting direct certification with the other programs and categories that convey categorical eligibility. For SNAP and other federal programs, the direct certification process typically involves state agencies (e.g., state SNAP and state educational agencies) cross-checking program rolls.75 A list of matched children is sent to the school district, which certifies children for free meals without the need for a household application.76 For foster, homeless, migrant, and runaway children, direct certification typically involves school district communication with a local or state official who can provide documentation of the child’s status in one of these categories.77 The 2004 child nutrition reauthorization act (P.L. 108-265) required states to conduct direct certification with SNAP, with nationwide implementation taking effect in school year 2008-2009. As of school year 2018-2019 (the most recent data available), USDA reported that 98% of children in SNAP households were directly certified for free school meals.78 The HHFKA made further policy changes to expand direct certification. One of those changes was the initiation of a demonstration project to test direct certification with Medicaid (see the text box below). The law also funded performance incentive grants for high-performing states and authorized corrective action plans for low-performing states in direct certification activities.79 Direct Certification with Medicaid Demonstration The HHFKA initiated a demonstration project to conduct direct certification of children individually participating in Medicaid and children in Medicaid households. Unlike the other programs used to directly certify children for school meals, Medicaid does not convey categorical eligibility for free school meals, but rather identifies children in households that would meet the income eligibility thresholds for either free or reduced-price school meals.80 Following the demonstration authority in the HHFKA as well as pilot authority in the Richard B. Russell National School Lunch Act, some states are currently directly certifying children based on Medicaid data.81 As of school year 2023-2024, there were 38 states operating direct certification with Medicaid. Two states used Medicaid to directly certify children for free meals only (130% of the poverty level or below).82 Thirty-six states were operating under an expanded direct certification demonstration project to test direct certification with Medicaid for free and reduced-price meals (up to 185% of the poverty level).83 Verification of Eligibility Each fall, districts are required to verify a sample of approved household applications on file, with a focus on applications close to the eligibility threshold (“error-prone” applications).86 School districts may also conduct verification of questionable applications. Verification is not required for children who are directly certified for free or reduced-price meals. (Note that districts participating in Provisions 1, 2, and 3 must meet verification requirements for the years in which they administer household applications.) Many districts employ direct verification (matching data from other low-income programs) to conduct their verification activities, but if data cannot be verified in this way, schools must contact households to verify the information provided on the application. A child’s eligibility status may stay the same or change (e.g., from free meals to reduced-price meals or loss of eligibility) as a result of verification of household income, or if the household does not respond to verification outreach (in which case eligibility would be lost, though that decision can be appealed). Reimbursement School food authorities must keep track of the daily number of meals they serve in each category (free, reduced-price, and paid) that meet federal nutrition requirements. School food authorities then submit claims for reimbursement to the state agency, which submits the claims to FNS. Approved reimbursements are distributed to school food authorities by the state agency, usually on a monthly basis. Per statute, reimbursement rates are adjusted for inflation annually.87 Table 4 shows NSLP and SBP reimbursement rates for school year 2023-2024. (Note that school food authorities also receive a per-lunch commodity reimbursement, discussed previously under “Commodity Assistance”.) The law provides a higher reimbursement rate for meals meeting certain criteria. For example, school food authorities that are compliant with the updated federal nutrition standards for school meals receive an additional 8 cents per lunch. 88 School food authorities also receive an additional 2 cents per lunch if they serve 60% or more of their lunches at a free or reduced price. For breakfasts, school food authorities receive higher reimbursements if they serve 40% or more lunches at a free or reduced price (referred to as severe need schools). Once school food authorities receive the cash reimbursements, they can use the funds to support almost any aspect of the school food service operation. However, federal cash reimbursements must go into a nonprofit school food service account that is subject to federal regulations.89 Payments for non-program foods (e.g., vending machine sales) must also accrue to the nonprofit school food service account.90 FNS periodically studies the costs of producing a reimbursable meal. In April 2019, FNS released a School Nutrition and Meal Cost Study, which found that the average reported cost of producing a reimbursable lunch was $3.81 in school year 2014-2015 (reported costs were defined as those charged to the school food service account).91 This exceeded the average federal cash reimbursement ($3.32) for lunches in school year 2014-2015. When unreported costs were included (costs outside of the food service account; for example, labor costs associated with processing applications), the cost of producing the average reimbursable lunch was $6.02. As noted previously, children’s payments and state and local funds may also cover meal costs.
USER:
Explain all the eligibility processes from the context in detail.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 54
| 10
| 942
| null | 650
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Your answer must exclusively be derived from the content block, no internal knowledge or external sources are permissible. Your answer should aim to be under 100 words, if it has to be more than 100 words, you must use at least 150.
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What are the main features of Ether?
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Cryptocurrencies may be used to facilitate transactions and may be held as speculative investments. Since 2009, when Satoshi Nakamoto launched the first cryptocurrency blockchain, thousands of cryptocurrencies and different classes of other digital assets have emerged. This section provides a non-exhaustive survey of various cryptocurrencies and some representative features. Cryptocurrencies The term cryptocurrency generally refers to blockchain-based digital currencies maintained on decentralized networks. For the purposes of this report, cryptocurrencies refers to a type of digital asset. Stablecoins (see “Stablecoins” below) are a subset of cryptocurrency. Non-fungible tokens and digital (or metaverse) real estate are other types of digital assets. They use similar technology but are beyond the scope of this report. Other terms used synonymously with cryptocurrency are crypto asset and tokens, among others. The term cryptocurrencies and citation of broad market capitalization often include stablecoins (see “Stablecoins”), which have their own distinct set of properties—most notably that they try to maintain a peg to some underlying asset. The two most prevalent cryptocurrencies are Bitcoin and Ether, which combined represent around 61% of the entire crypto market.27 The cryptocurrency market, which consists of between 13,000 and 20,000 cryptocurrencies, according to industry tracking websites, has been characterized by near constant and rapid price increases and price decreases.28 Most recently, after experiencing exponential growth from 2020 to a record high of nearly $3 trillion in November 2021, the market capitalization fell to less than $800 billion in November 2022. Bitcoin fell from nearly $69,000 to a two-year low of below $16,000 during this time.29 This trend has been referred to as crypto winter. A host of cryptocurrency project and company failures in summer and fall 2022, including the collapse of FTX, perhaps the most notable to date, were caused—and exacerbated—by this broader market downturn.30 As of the time of this report, the total crypto market capitalization is around $1 trillion.31 Bitcoin Bitcoin was the first cryptocurrency to gain widespread adoption. Bitcoin runs on a public blockchain, secured by cryptography, and uses the proof of work consensus mechanism described above to validate transactions. It also exhibits unique characteristics. For example, the mining and hashing and use of Bitcoin block rewards creates a relationship intended to keep block mining (approval) times roughly stable.32 The hashing complexity is intended to ensure block approval rates of 10 minutes.33 If the number of miners or the computing capacity being used increases— perhaps because the Bitcoin block reward induces more miners to compete or deploy more advanced equipment—thus mining blocks faster than 10 minutes (on average), the proof difficulty increases. Alternatively, if the network and its participants mine blocks at a slower rate (perhaps because the number of miners falls), the proof of work difficulty falls, ensuring that the number of active miners is capable of meeting the 10-minute goal.34 The effort required of the proof of work favors miners with greater computational power requiring significant amounts of energy.35 Other notable and interrelated Bitcoin features include transactions fees, a hard cap on the number of Bitcoin, and block reward halving. The limit on block approval rates means that transactions are slow compared to traditional payment systems.36 Network participants can pay transaction fees to incentivize miners to process their transactions more quickly. Although the block reward (which is hard-coded into the design) is still the primary form of compensation, transaction fees are expected to grow as block rewards shrink.37 For approximately every 210,000 blocks, the system “halves” the block reward miners receive for validating transactions. Halving occurs roughly every four years.38 The original block reward was 50 Bitcoin. As of 2022, after three halvings, miners are rewarded 6.25 for each block mined.39 Finally, the number of Bitcoin created is capped at 21 million, when creation of new Bitcoin is to cease.40 Ethereum Ether is the cryptocurrency native to the Ethereum blockchain, which claims to “build on Bitcoin, with some big differences.”41 In an assessment of Bitcoin, Vitalik Buterin—Ethereum’s founder—described Bitcoin as having a “weak version of a concept of ‘smart’ contracts.”42 Smart contracts are programs or software that can self-execute when various participants meet some predetermined set of criteria. Ethereum thus set out to create an “alternative protocol for building decentralized applications … allowing anyone to write smart contracts and decentralized applications where they can create their own arbitrary rules for ownership, transaction formats and state transition functions.”43 In cryptocurrency and decentralized finance (see “Decentralized Finance (DeFi)” below), smart contracts are often used to facilitate trades between users without an intermediary. Ethereum shares some similarities with Bitcoin, including pseudonymity, immutability, decentralization, and broadly speaking its basic functions as a unit of account and medium of exchange, among others. However, there are some important differences. Because of the enhanced programmability offered, the Ethereum network has become a favorite foundation for cryptocurrency projects that require a certain level of flexibility afforded by smart contracts, including the creation of additional tokens and the implementation of broader decentralized finance, or DeFi, projects.44 Bitcoin has only ever been mineable—developed from nothing and with no initial allotment or pre-sale of coins to participants—and has a hard cap of 21 million Bitcoin. This is not the case with Ether. Ether pre-sold a majority of the initially created cryptocurrency (83.5% at the time) in a pre-mine in 2014 and set aside the remainder for accrued expenses and a post-sale reserve.45 As Ether became mineable and network mining activities created more Ether, the share of pre-mined crypto (those that were purchased prior to the network going live) fell as a percentage of the total outstanding. While there is no hard cap on the amount of Ether that may ever enter the system, the network recently implemented various upgrades that sought to both limit the creation of new Ether and reduce existing supply.46 The first of the two changes implemented in the “London upgrade” affected Ether supply. As a result of this upgrade, the network burns—or removes from circulation—a certain amount of Ether from the supply with each transaction.47 In addition, the recent and more momentous upgrade, called “the Merge,” drastically reduced the network block reward.48 Therefore, new Ether supply increases at a much slower pace than before the Merge.49 The Merge was arguably one of the biggest things to happen to the Ethereum network since its inception. The Merge shifted the network from proof of work to a proof of stake consensus protocol.50 Ethereum, like Bitcoin, was initiated using proof of work but with the ambition from its origins of shifting consensus protocols.51 Proof of stake is an alternative method for securing a blockchain that proponents believe is less energy intensive.52 Proof of work requires miners to compete with each other to solve computationally intensive, cryptographically secured puzzles, which prioritize network nodes with computation power. In proof of stake, by contrast, any validating node that “stakes,” or deposits, at least 32 Ether enters a pool of potential validators that may be randomly selected to submit the next block.53 The network can seize validator-staked Ether for malicious activity or other offenses. Ethereum’s founder claimed that the shift would reduce the Ethereum network’s power consumption and emissions by greater than 99% and reduce global energy consumption by 0.2%.54 Stablecoins55 Cryptocurrencies such as Bitcoin and Ether fluctuate in value based on market supply and demand. By contrast, stablecoins are digital assets “designed to maintain a stable value relative to a national currency or other reference assets.”56 For example, the Tether stablecoin is tied to the U.S. dollar and set equal in value to $1.57 Total market capitalization for stablecoins is more than $140 billion.58 One primary use of stablecoins is trading of other cryptocurrencies. According to an industry data source, nearly 75% of trading on all crypto platforms is between stablecoins and other tokens.59 Proponents often point to stablecoins’ relative stability as an advantage for their use in payments. However, despite their name, stablecoins do not always maintain their stable value. While stablecoins typically attempt to maintain a peg to a fiat currency, issuers may attempt to achieve this goal in different ways. Certain stablecoins attempt to achieve this peg by holding “reserve assets.”60 Others may use algorithms or smart contracts to manage the supply of tokens and guide their value to various reference assets.61
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System Instructions: [Your answer must exclusively be derived from the content block, no internal knowledge or external sources are permissible. Your answer should aim to be under 100 words, if it has to be more than 100 words, you must use at least 150.] Question: [What are the main features of Ether?] Context Block: [Cryptocurrencies may be used to facilitate transactions and may be held as speculative investments. Since 2009, when Satoshi Nakamoto launched the first cryptocurrency blockchain, thousands of cryptocurrencies and different classes of other digital assets have emerged. This section provides a non-exhaustive survey of various cryptocurrencies and some representative features. Cryptocurrencies The term cryptocurrency generally refers to blockchain-based digital currencies maintained on decentralized networks. For the purposes of this report, cryptocurrencies refers to a type of digital asset. Stablecoins (see “Stablecoins” below) are a subset of cryptocurrency. Non-fungible tokens and digital (or metaverse) real estate are other types of digital assets. They use similar technology but are beyond the scope of this report. Other terms used synonymously with cryptocurrency are crypto asset and tokens, among others. The term cryptocurrencies and citation of broad market capitalization often include stablecoins (see “Stablecoins”), which have their own distinct set of properties—most notably that they try to maintain a peg to some underlying asset. The two most prevalent cryptocurrencies are Bitcoin and Ether, which combined represent around 61% of the entire crypto market.27 The cryptocurrency market, which consists of between 13,000 and 20,000 cryptocurrencies, according to industry tracking websites, has been characterized by near constant and rapid price increases and price decreases.28 Most recently, after experiencing exponential growth from 2020 to a record high of nearly $3 trillion in November 2021, the market capitalization fell to less than $800 billion in November 2022. Bitcoin fell from nearly $69,000 to a two-year low of below $16,000 during this time.29 This trend has been referred to as crypto winter. A host of cryptocurrency project and company failures in summer and fall 2022, including the collapse of FTX, perhaps the most notable to date, were caused—and exacerbated—by this broader market downturn.30 As of the time of this report, the total crypto market capitalization is around $1 trillion.31 Bitcoin Bitcoin was the first cryptocurrency to gain widespread adoption. Bitcoin runs on a public blockchain, secured by cryptography, and uses the proof of work consensus mechanism described above to validate transactions. It also exhibits unique characteristics. For example, the mining and hashing and use of Bitcoin block rewards creates a relationship intended to keep block mining (approval) times roughly stable.32 The hashing complexity is intended to ensure block approval rates of 10 minutes.33 If the number of miners or the computing capacity being used increases— perhaps because the Bitcoin block reward induces more miners to compete or deploy more advanced equipment—thus mining blocks faster than 10 minutes (on average), the proof difficulty increases. Alternatively, if the network and its participants mine blocks at a slower rate (perhaps because the number of miners falls), the proof of work difficulty falls, ensuring that the number of active miners is capable of meeting the 10-minute goal.34 The effort required of the proof of work favors miners with greater computational power requiring significant amounts of energy.35 Other notable and interrelated Bitcoin features include transactions fees, a hard cap on the number of Bitcoin, and block reward halving. The limit on block approval rates means that transactions are slow compared to traditional payment systems.36 Network participants can pay transaction fees to incentivize miners to process their transactions more quickly. Although the block reward (which is hard-coded into the design) is still the primary form of compensation, transaction fees are expected to grow as block rewards shrink.37 For approximately every 210,000 blocks, the system “halves” the block reward miners receive for validating transactions. Halving occurs roughly every four years.38 The original block reward was 50 Bitcoin. As of 2022, after three halvings, miners are rewarded 6.25 for each block mined.39 Finally, the number of Bitcoin created is capped at 21 million, when creation of new Bitcoin is to cease.40 Ethereum Ether is the cryptocurrency native to the Ethereum blockchain, which claims to “build on Bitcoin, with some big differences.”41 In an assessment of Bitcoin, Vitalik Buterin—Ethereum’s founder—described Bitcoin as having a “weak version of a concept of ‘smart’ contracts.”42 Smart contracts are programs or software that can self-execute when various participants meet some predetermined set of criteria. Ethereum thus set out to create an “alternative protocol for building decentralized applications … allowing anyone to write smart contracts and decentralized applications where they can create their own arbitrary rules for ownership, transaction formats and state transition functions.”43 In cryptocurrency and decentralized finance (see “Decentralized Finance (DeFi)” below), smart contracts are often used to facilitate trades between users without an intermediary. Ethereum shares some similarities with Bitcoin, including pseudonymity, immutability, decentralization, and broadly speaking its basic functions as a unit of account and medium of exchange, among others. However, there are some important differences. Because of the enhanced programmability offered, the Ethereum network has become a favorite foundation for cryptocurrency projects that require a certain level of flexibility afforded by smart contracts, including the creation of additional tokens and the implementation of broader decentralized finance, or DeFi, projects.44 Bitcoin has only ever been mineable—developed from nothing and with no initial allotment or pre-sale of coins to participants—and has a hard cap of 21 million Bitcoin. This is not the case with Ether. Ether pre-sold a majority of the initially created cryptocurrency (83.5% at the time) in a pre-mine in 2014 and set aside the remainder for accrued expenses and a post-sale reserve.45 As Ether became mineable and network mining activities created more Ether, the share of pre-mined crypto (those that were purchased prior to the network going live) fell as a percentage of the total outstanding. While there is no hard cap on the amount of Ether that may ever enter the system, the network recently implemented various upgrades that sought to both limit the creation of new Ether and reduce existing supply.46 The first of the two changes implemented in the “London upgrade” affected Ether supply. As a result of this upgrade, the network burns—or removes from circulation—a certain amount of Ether from the supply with each transaction.47 In addition, the recent and more momentous upgrade, called “the Merge,” drastically reduced the network block reward.48 Therefore, new Ether supply increases at a much slower pace than before the Merge.49 The Merge was arguably one of the biggest things to happen to the Ethereum network since its inception. The Merge shifted the network from proof of work to a proof of stake consensus protocol.50 Ethereum, like Bitcoin, was initiated using proof of work but with the ambition from its origins of shifting consensus protocols.51 Proof of stake is an alternative method for securing a blockchain that proponents believe is less energy intensive.52 Proof of work requires miners to compete with each other to solve computationally intensive, cryptographically secured puzzles, which prioritize network nodes with computation power. In proof of stake, by contrast, any validating node that “stakes,” or deposits, at least 32 Ether enters a pool of potential validators that may be randomly selected to submit the next block.53 The network can seize validator-staked Ether for malicious activity or other offenses. Ethereum’s founder claimed that the shift would reduce the Ethereum network’s power consumption and emissions by greater than 99% and reduce global energy consumption by 0.2%.54 Stablecoins55 Cryptocurrencies such as Bitcoin and Ether fluctuate in value based on market supply and demand. By contrast, stablecoins are digital assets “designed to maintain a stable value relative to a national currency or other reference assets.”56 For example, the Tether stablecoin is tied to the U.S. dollar and set equal in value to $1.57 Total market capitalization for stablecoins is more than $140 billion.58 One primary use of stablecoins is trading of other cryptocurrencies. According to an industry data source, nearly 75% of trading on all crypto platforms is between stablecoins and other tokens.59 Proponents often point to stablecoins’ relative stability as an advantage for their use in payments. However, despite their name, stablecoins do not always maintain their stable value. While stablecoins typically attempt to maintain a peg to a fiat currency, issuers may attempt to achieve this goal in different ways. Certain stablecoins attempt to achieve this peg by holding “reserve assets.”60 Others may use algorithms or smart contracts to manage the supply of tokens and guide their value to various reference assets.61]
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Your answer must exclusively be derived from the content block, no internal knowledge or external sources are permissible. Your answer should aim to be under 100 words, if it has to be more than 100 words, you must use at least 150.
EVIDENCE:
Cryptocurrencies may be used to facilitate transactions and may be held as speculative investments. Since 2009, when Satoshi Nakamoto launched the first cryptocurrency blockchain, thousands of cryptocurrencies and different classes of other digital assets have emerged. This section provides a non-exhaustive survey of various cryptocurrencies and some representative features. Cryptocurrencies The term cryptocurrency generally refers to blockchain-based digital currencies maintained on decentralized networks. For the purposes of this report, cryptocurrencies refers to a type of digital asset. Stablecoins (see “Stablecoins” below) are a subset of cryptocurrency. Non-fungible tokens and digital (or metaverse) real estate are other types of digital assets. They use similar technology but are beyond the scope of this report. Other terms used synonymously with cryptocurrency are crypto asset and tokens, among others. The term cryptocurrencies and citation of broad market capitalization often include stablecoins (see “Stablecoins”), which have their own distinct set of properties—most notably that they try to maintain a peg to some underlying asset. The two most prevalent cryptocurrencies are Bitcoin and Ether, which combined represent around 61% of the entire crypto market.27 The cryptocurrency market, which consists of between 13,000 and 20,000 cryptocurrencies, according to industry tracking websites, has been characterized by near constant and rapid price increases and price decreases.28 Most recently, after experiencing exponential growth from 2020 to a record high of nearly $3 trillion in November 2021, the market capitalization fell to less than $800 billion in November 2022. Bitcoin fell from nearly $69,000 to a two-year low of below $16,000 during this time.29 This trend has been referred to as crypto winter. A host of cryptocurrency project and company failures in summer and fall 2022, including the collapse of FTX, perhaps the most notable to date, were caused—and exacerbated—by this broader market downturn.30 As of the time of this report, the total crypto market capitalization is around $1 trillion.31 Bitcoin Bitcoin was the first cryptocurrency to gain widespread adoption. Bitcoin runs on a public blockchain, secured by cryptography, and uses the proof of work consensus mechanism described above to validate transactions. It also exhibits unique characteristics. For example, the mining and hashing and use of Bitcoin block rewards creates a relationship intended to keep block mining (approval) times roughly stable.32 The hashing complexity is intended to ensure block approval rates of 10 minutes.33 If the number of miners or the computing capacity being used increases— perhaps because the Bitcoin block reward induces more miners to compete or deploy more advanced equipment—thus mining blocks faster than 10 minutes (on average), the proof difficulty increases. Alternatively, if the network and its participants mine blocks at a slower rate (perhaps because the number of miners falls), the proof of work difficulty falls, ensuring that the number of active miners is capable of meeting the 10-minute goal.34 The effort required of the proof of work favors miners with greater computational power requiring significant amounts of energy.35 Other notable and interrelated Bitcoin features include transactions fees, a hard cap on the number of Bitcoin, and block reward halving. The limit on block approval rates means that transactions are slow compared to traditional payment systems.36 Network participants can pay transaction fees to incentivize miners to process their transactions more quickly. Although the block reward (which is hard-coded into the design) is still the primary form of compensation, transaction fees are expected to grow as block rewards shrink.37 For approximately every 210,000 blocks, the system “halves” the block reward miners receive for validating transactions. Halving occurs roughly every four years.38 The original block reward was 50 Bitcoin. As of 2022, after three halvings, miners are rewarded 6.25 for each block mined.39 Finally, the number of Bitcoin created is capped at 21 million, when creation of new Bitcoin is to cease.40 Ethereum Ether is the cryptocurrency native to the Ethereum blockchain, which claims to “build on Bitcoin, with some big differences.”41 In an assessment of Bitcoin, Vitalik Buterin—Ethereum’s founder—described Bitcoin as having a “weak version of a concept of ‘smart’ contracts.”42 Smart contracts are programs or software that can self-execute when various participants meet some predetermined set of criteria. Ethereum thus set out to create an “alternative protocol for building decentralized applications … allowing anyone to write smart contracts and decentralized applications where they can create their own arbitrary rules for ownership, transaction formats and state transition functions.”43 In cryptocurrency and decentralized finance (see “Decentralized Finance (DeFi)” below), smart contracts are often used to facilitate trades between users without an intermediary. Ethereum shares some similarities with Bitcoin, including pseudonymity, immutability, decentralization, and broadly speaking its basic functions as a unit of account and medium of exchange, among others. However, there are some important differences. Because of the enhanced programmability offered, the Ethereum network has become a favorite foundation for cryptocurrency projects that require a certain level of flexibility afforded by smart contracts, including the creation of additional tokens and the implementation of broader decentralized finance, or DeFi, projects.44 Bitcoin has only ever been mineable—developed from nothing and with no initial allotment or pre-sale of coins to participants—and has a hard cap of 21 million Bitcoin. This is not the case with Ether. Ether pre-sold a majority of the initially created cryptocurrency (83.5% at the time) in a pre-mine in 2014 and set aside the remainder for accrued expenses and a post-sale reserve.45 As Ether became mineable and network mining activities created more Ether, the share of pre-mined crypto (those that were purchased prior to the network going live) fell as a percentage of the total outstanding. While there is no hard cap on the amount of Ether that may ever enter the system, the network recently implemented various upgrades that sought to both limit the creation of new Ether and reduce existing supply.46 The first of the two changes implemented in the “London upgrade” affected Ether supply. As a result of this upgrade, the network burns—or removes from circulation—a certain amount of Ether from the supply with each transaction.47 In addition, the recent and more momentous upgrade, called “the Merge,” drastically reduced the network block reward.48 Therefore, new Ether supply increases at a much slower pace than before the Merge.49 The Merge was arguably one of the biggest things to happen to the Ethereum network since its inception. The Merge shifted the network from proof of work to a proof of stake consensus protocol.50 Ethereum, like Bitcoin, was initiated using proof of work but with the ambition from its origins of shifting consensus protocols.51 Proof of stake is an alternative method for securing a blockchain that proponents believe is less energy intensive.52 Proof of work requires miners to compete with each other to solve computationally intensive, cryptographically secured puzzles, which prioritize network nodes with computation power. In proof of stake, by contrast, any validating node that “stakes,” or deposits, at least 32 Ether enters a pool of potential validators that may be randomly selected to submit the next block.53 The network can seize validator-staked Ether for malicious activity or other offenses. Ethereum’s founder claimed that the shift would reduce the Ethereum network’s power consumption and emissions by greater than 99% and reduce global energy consumption by 0.2%.54 Stablecoins55 Cryptocurrencies such as Bitcoin and Ether fluctuate in value based on market supply and demand. By contrast, stablecoins are digital assets “designed to maintain a stable value relative to a national currency or other reference assets.”56 For example, the Tether stablecoin is tied to the U.S. dollar and set equal in value to $1.57 Total market capitalization for stablecoins is more than $140 billion.58 One primary use of stablecoins is trading of other cryptocurrencies. According to an industry data source, nearly 75% of trading on all crypto platforms is between stablecoins and other tokens.59 Proponents often point to stablecoins’ relative stability as an advantage for their use in payments. However, despite their name, stablecoins do not always maintain their stable value. While stablecoins typically attempt to maintain a peg to a fiat currency, issuers may attempt to achieve this goal in different ways. Certain stablecoins attempt to achieve this peg by holding “reserve assets.”60 Others may use algorithms or smart contracts to manage the supply of tokens and guide their value to various reference assets.61
USER:
What are the main features of Ether?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
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What is considered the president's core constitutional powers and what is the case law that the court relies on to reach this core? Please list the case law at the end of your response in bulleted form. Give me the full case citation so I can look them up myself later.
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The D. C. Circuit affirmed. 91 F. 4th 1173 (2024) (per curiam). Citing Marbury v. Madison, 1 Cranch 137 (1803), the court distinguished between two kinds of official acts: discretionary and ministerial. 91 F. 4th, at 1189–1190. It observed that “although discretionary acts are ‘only politically examinable,’ the judiciary has the power to hear cases” involving ministerial acts that an officer is directed to perform by the legislature. Ibid. (quoting Marbury, 1 Cranch, at 166). From this distinction, the D. C. Circuit concluded that the “separation of powers doctrine, as expounded in Marbury and its progeny, necessarily permits the Judiciary to oversee the federal criminal prosecution of a former President for his official acts because the fact of the prosecution means that the former President has allegedly acted in defiance of the Congress’s laws.” 91 F. 4th, at 1191. In the court’s view, the fact that Trump’s actions “allegedly violated generally applicable criminal laws” meant that those actions “were not properly within the scope of his lawful discretion.” Id., at 1192. The D. C. Circuit thus concluded that Trump had “no structural immunity from the charges in the Indictment.” Ibid. Like the District Court, the D. C. We granted certiorari to consider the following question: “Whether and if so to what extent does a former President enjoy presidential immunity from criminal prosecution for conduct alleged to involve official acts during his tenure in office.” 601 U. S. ___ (2024). II This case is the first criminal prosecution in our Nation’s history of a former President for actions taken during his Presidency. We are called upon to consider whether and under what circumstances such a prosecution may proceed. Doing so requires careful assessment of the scope of Presidential power under the Constitution. We undertake that responsibility conscious that we must not confuse “the issue of a power’s validity with the cause it is invoked to promote,” but must instead focus on the “enduring consequences upon the balanced power structure of our Republic.” Youngstown Sheet & Tube Co. v. Sawyer, 343 U. S. 579, 634 (1952) (Jackson, J., concurring). The parties before us do not dispute that a former President can be subject to criminal prosecution for unofficial acts committed while in office. See Tr. of Oral Arg. 28. They also agree that some of the conduct described in the indictment includes actions taken by Trump in his unofficial capacity. See id., at 28–30, 36–37, 124. They disagree, however, about whether a former President can be prosecuted for his official actions. Trump contends that just as a President is absolutely immune from civil damages liability for acts within the outer perimeter of his official responsibilities, Fitzgerald, 457 U. S., at 756, he must be absolutely immune from criminal prosecution for such acts. Brief for Petitioner 10. And Trump argues that the bulk of the indictment’s allegations involve conduct in 6 TRUMP v. UNITED STATES Opinion of the Court his official capacity as President. See Tr. of Oral Arg. 30– 32. Although the Government agrees that some official actions are included in the indictment’s allegations, see id., at 125, it maintains that a former President does not enjoy immunity from criminal prosecution for any actions, regardless of how they are characterized. See Brief for United States 9. We conclude that under our constitutional structure of separated powers, the nature of Presidential power requires that a former President have some immunity from criminal prosecution for official acts during his tenure in office. At least with respect to the President’s exercise of his core constitutional powers, this immunity must be absolute. As for his remaining official actions, he is also entitled to immunity. At the current stage of proceedings in this case, however, we need not and do not decide whether that immunity must be absolute, or instead whether a presumptive immunity is sufficient. A Article II of the Constitution provides that “[t]he executive Power shall be vested in a President of the United States of America.” §1, cl. 1. The President’s duties are of “unrivaled gravity and breadth.” Trump v. Vance, 591 U. S. 786, 800 (2020). They include, for instance, commanding the Armed Forces of the United States; granting reprieves and pardons for offenses against the United States; and appointing public ministers and consuls, the Justices of this Court, and Officers of the United States. See §2. He also has important foreign relations responsibilities: making treaties, appointing ambassadors, recognizing foreign governments, meeting foreign leaders, overseeing international diplomacy and intelligence gathering, and managing matters related to terrorism, trade, and immigration. See §§2, 3. Domestically, he must “take Care that the Laws be faithfully executed,” §3, and he bears responsibility for the Cite as: 603 U. S. ____ (2024) 7 Opinion of the Court actions of the many departments and agencies within the Executive Branch. He also plays a role in lawmaking by recommending to Congress the measures he thinks wise and signing or vetoing the bills Congress passes. See Art. I, §7, cl. 2; Art. II, §3. No matter the context, the President’s authority to act necessarily “stem[s] either from an act of Congress or from the Constitution itself.” Youngstown, 343 U. S., at 585. In the latter case, the President’s authority is sometimes “conclusive and preclusive.” Id., at 638 (Jackson, J., concurring). When the President exercises such authority, he may act even when the measures he takes are “incompatible with the expressed or implied will of Congress.” Id., at 637. The exclusive constitutional authority of the President “disabl[es] the Congress from acting upon the subject.” Id., at 637–638. And the courts have “no power to control [the President’s] discretion” when he acts pursuant to the powers invested exclusively in him by the Constitution. Marbury, 1 Cranch, at 166. 8 TRUMP v. UNITED STATES Opinion of the Court (1872). But in 1870, Congress enacted a provision that prohibited using the President’s pardon as evidence of restoration of property rights. Id., at 143–144. Chief Justice Chase held the provision unconstitutional because it “impair[ed] the effect of a pardon, and thus infring[ed] the constitutional power of the Executive.” Id., at 147. “To the executive alone is intrusted the power of pardon,” and the “legislature cannot change the effect of such a pardon any more than the executive can change a law.” Id., at 147–148. The President’s authority to pardon, in other words, is “conclusive and preclusive,” “disabling the Congress from acting upon the subject.” Youngstown, 343 U. S., at 637–638 (Jackson, J., concurring). Some of the President’s other constitutional powers also fit that description. “The President’s power to remove—and thus supervise—those who wield executive power on his behalf,” for instance, “follows from the text of Article II.” Seila Law LLC v. Consumer Financial Protection Bureau, 591 U. S. 197, 204 (2020). We have thus held that Congress lacks authority to control the President’s “unrestricted power of removal” with respect to “executive officers of the United States whom he has appointed.” Myers v. United States, 272 U. S. 52, 106, 176 (1926); see Youngstown, 343 U. S., at 638, n. 4 (Jackson, J., concurring) (citing the President’s “exclusive power of removal in executive agencies” as an example of “conclusive and preclusive” constitutional authority); cf. Seila Law, 591 U. S., at 215 (noting only “two exceptions to the President’s unrestricted removal power”). The power “to control recognition determinations” of foreign countries is likewise an “exclusive power of the President.” Zivotofsky v. Kerry, 576 U. S. 1, 32 (2015). Congressional commands contrary to the President’s recognition determinations are thus invalid. Ibid.
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== What is considered the president's core constitutional powers and what is the case law that the court relies on to reach this core? Please list the case law at the end of your response in bulleted form. Give me the full case citation so I can look them up myself later. {passage 0} ========== The D. C. Circuit affirmed. 91 F. 4th 1173 (2024) (per curiam). Citing Marbury v. Madison, 1 Cranch 137 (1803), the court distinguished between two kinds of official acts: discretionary and ministerial. 91 F. 4th, at 1189–1190. It observed that “although discretionary acts are ‘only politically examinable,’ the judiciary has the power to hear cases” involving ministerial acts that an officer is directed to perform by the legislature. Ibid. (quoting Marbury, 1 Cranch, at 166). From this distinction, the D. C. Circuit concluded that the “separation of powers doctrine, as expounded in Marbury and its progeny, necessarily permits the Judiciary to oversee the federal criminal prosecution of a former President for his official acts because the fact of the prosecution means that the former President has allegedly acted in defiance of the Congress’s laws.” 91 F. 4th, at 1191. In the court’s view, the fact that Trump’s actions “allegedly violated generally applicable criminal laws” meant that those actions “were not properly within the scope of his lawful discretion.” Id., at 1192. The D. C. Circuit thus concluded that Trump had “no structural immunity from the charges in the Indictment.” Ibid. Like the District Court, the D. C. We granted certiorari to consider the following question: “Whether and if so to what extent does a former President enjoy presidential immunity from criminal prosecution for conduct alleged to involve official acts during his tenure in office.” 601 U. S. ___ (2024). II This case is the first criminal prosecution in our Nation’s history of a former President for actions taken during his Presidency. We are called upon to consider whether and under what circumstances such a prosecution may proceed. Doing so requires careful assessment of the scope of Presidential power under the Constitution. We undertake that responsibility conscious that we must not confuse “the issue of a power’s validity with the cause it is invoked to promote,” but must instead focus on the “enduring consequences upon the balanced power structure of our Republic.” Youngstown Sheet & Tube Co. v. Sawyer, 343 U. S. 579, 634 (1952) (Jackson, J., concurring). The parties before us do not dispute that a former President can be subject to criminal prosecution for unofficial acts committed while in office. See Tr. of Oral Arg. 28. They also agree that some of the conduct described in the indictment includes actions taken by Trump in his unofficial capacity. See id., at 28–30, 36–37, 124. They disagree, however, about whether a former President can be prosecuted for his official actions. Trump contends that just as a President is absolutely immune from civil damages liability for acts within the outer perimeter of his official responsibilities, Fitzgerald, 457 U. S., at 756, he must be absolutely immune from criminal prosecution for such acts. Brief for Petitioner 10. And Trump argues that the bulk of the indictment’s allegations involve conduct in 6 TRUMP v. UNITED STATES Opinion of the Court his official capacity as President. See Tr. of Oral Arg. 30– 32. Although the Government agrees that some official actions are included in the indictment’s allegations, see id., at 125, it maintains that a former President does not enjoy immunity from criminal prosecution for any actions, regardless of how they are characterized. See Brief for United States 9. We conclude that under our constitutional structure of separated powers, the nature of Presidential power requires that a former President have some immunity from criminal prosecution for official acts during his tenure in office. At least with respect to the President’s exercise of his core constitutional powers, this immunity must be absolute. As for his remaining official actions, he is also entitled to immunity. At the current stage of proceedings in this case, however, we need not and do not decide whether that immunity must be absolute, or instead whether a presumptive immunity is sufficient. A Article II of the Constitution provides that “[t]he executive Power shall be vested in a President of the United States of America.” §1, cl. 1. The President’s duties are of “unrivaled gravity and breadth.” Trump v. Vance, 591 U. S. 786, 800 (2020). They include, for instance, commanding the Armed Forces of the United States; granting reprieves and pardons for offenses against the United States; and appointing public ministers and consuls, the Justices of this Court, and Officers of the United States. See §2. He also has important foreign relations responsibilities: making treaties, appointing ambassadors, recognizing foreign governments, meeting foreign leaders, overseeing international diplomacy and intelligence gathering, and managing matters related to terrorism, trade, and immigration. See §§2, 3. Domestically, he must “take Care that the Laws be faithfully executed,” §3, and he bears responsibility for the Cite as: 603 U. S. ____ (2024) 7 Opinion of the Court actions of the many departments and agencies within the Executive Branch. He also plays a role in lawmaking by recommending to Congress the measures he thinks wise and signing or vetoing the bills Congress passes. See Art. I, §7, cl. 2; Art. II, §3. No matter the context, the President’s authority to act necessarily “stem[s] either from an act of Congress or from the Constitution itself.” Youngstown, 343 U. S., at 585. In the latter case, the President’s authority is sometimes “conclusive and preclusive.” Id., at 638 (Jackson, J., concurring). When the President exercises such authority, he may act even when the measures he takes are “incompatible with the expressed or implied will of Congress.” Id., at 637. The exclusive constitutional authority of the President “disabl[es] the Congress from acting upon the subject.” Id., at 637–638. And the courts have “no power to control [the President’s] discretion” when he acts pursuant to the powers invested exclusively in him by the Constitution. Marbury, 1 Cranch, at 166. 8 TRUMP v. UNITED STATES Opinion of the Court (1872). But in 1870, Congress enacted a provision that prohibited using the President’s pardon as evidence of restoration of property rights. Id., at 143–144. Chief Justice Chase held the provision unconstitutional because it “impair[ed] the effect of a pardon, and thus infring[ed] the constitutional power of the Executive.” Id., at 147. “To the executive alone is intrusted the power of pardon,” and the “legislature cannot change the effect of such a pardon any more than the executive can change a law.” Id., at 147–148. The President’s authority to pardon, in other words, is “conclusive and preclusive,” “disabling the Congress from acting upon the subject.” Youngstown, 343 U. S., at 637–638 (Jackson, J., concurring). Some of the President’s other constitutional powers also fit that description. “The President’s power to remove—and thus supervise—those who wield executive power on his behalf,” for instance, “follows from the text of Article II.” Seila Law LLC v. Consumer Financial Protection Bureau, 591 U. S. 197, 204 (2020). We have thus held that Congress lacks authority to control the President’s “unrestricted power of removal” with respect to “executive officers of the United States whom he has appointed.” Myers v. United States, 272 U. S. 52, 106, 176 (1926); see Youngstown, 343 U. S., at 638, n. 4 (Jackson, J., concurring) (citing the President’s “exclusive power of removal in executive agencies” as an example of “conclusive and preclusive” constitutional authority); cf. Seila Law, 591 U. S., at 215 (noting only “two exceptions to the President’s unrestricted removal power”). The power “to control recognition determinations” of foreign countries is likewise an “exclusive power of the President.” Zivotofsky v. Kerry, 576 U. S. 1, 32 (2015). Congressional commands contrary to the President’s recognition determinations are thus invalid. Ibid. https://www.supremecourt.gov/opinions/23pdf/23-939_e2pg.pdf
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
EVIDENCE:
The D. C. Circuit affirmed. 91 F. 4th 1173 (2024) (per curiam). Citing Marbury v. Madison, 1 Cranch 137 (1803), the court distinguished between two kinds of official acts: discretionary and ministerial. 91 F. 4th, at 1189–1190. It observed that “although discretionary acts are ‘only politically examinable,’ the judiciary has the power to hear cases” involving ministerial acts that an officer is directed to perform by the legislature. Ibid. (quoting Marbury, 1 Cranch, at 166). From this distinction, the D. C. Circuit concluded that the “separation of powers doctrine, as expounded in Marbury and its progeny, necessarily permits the Judiciary to oversee the federal criminal prosecution of a former President for his official acts because the fact of the prosecution means that the former President has allegedly acted in defiance of the Congress’s laws.” 91 F. 4th, at 1191. In the court’s view, the fact that Trump’s actions “allegedly violated generally applicable criminal laws” meant that those actions “were not properly within the scope of his lawful discretion.” Id., at 1192. The D. C. Circuit thus concluded that Trump had “no structural immunity from the charges in the Indictment.” Ibid. Like the District Court, the D. C. We granted certiorari to consider the following question: “Whether and if so to what extent does a former President enjoy presidential immunity from criminal prosecution for conduct alleged to involve official acts during his tenure in office.” 601 U. S. ___ (2024). II This case is the first criminal prosecution in our Nation’s history of a former President for actions taken during his Presidency. We are called upon to consider whether and under what circumstances such a prosecution may proceed. Doing so requires careful assessment of the scope of Presidential power under the Constitution. We undertake that responsibility conscious that we must not confuse “the issue of a power’s validity with the cause it is invoked to promote,” but must instead focus on the “enduring consequences upon the balanced power structure of our Republic.” Youngstown Sheet & Tube Co. v. Sawyer, 343 U. S. 579, 634 (1952) (Jackson, J., concurring). The parties before us do not dispute that a former President can be subject to criminal prosecution for unofficial acts committed while in office. See Tr. of Oral Arg. 28. They also agree that some of the conduct described in the indictment includes actions taken by Trump in his unofficial capacity. See id., at 28–30, 36–37, 124. They disagree, however, about whether a former President can be prosecuted for his official actions. Trump contends that just as a President is absolutely immune from civil damages liability for acts within the outer perimeter of his official responsibilities, Fitzgerald, 457 U. S., at 756, he must be absolutely immune from criminal prosecution for such acts. Brief for Petitioner 10. And Trump argues that the bulk of the indictment’s allegations involve conduct in 6 TRUMP v. UNITED STATES Opinion of the Court his official capacity as President. See Tr. of Oral Arg. 30– 32. Although the Government agrees that some official actions are included in the indictment’s allegations, see id., at 125, it maintains that a former President does not enjoy immunity from criminal prosecution for any actions, regardless of how they are characterized. See Brief for United States 9. We conclude that under our constitutional structure of separated powers, the nature of Presidential power requires that a former President have some immunity from criminal prosecution for official acts during his tenure in office. At least with respect to the President’s exercise of his core constitutional powers, this immunity must be absolute. As for his remaining official actions, he is also entitled to immunity. At the current stage of proceedings in this case, however, we need not and do not decide whether that immunity must be absolute, or instead whether a presumptive immunity is sufficient. A Article II of the Constitution provides that “[t]he executive Power shall be vested in a President of the United States of America.” §1, cl. 1. The President’s duties are of “unrivaled gravity and breadth.” Trump v. Vance, 591 U. S. 786, 800 (2020). They include, for instance, commanding the Armed Forces of the United States; granting reprieves and pardons for offenses against the United States; and appointing public ministers and consuls, the Justices of this Court, and Officers of the United States. See §2. He also has important foreign relations responsibilities: making treaties, appointing ambassadors, recognizing foreign governments, meeting foreign leaders, overseeing international diplomacy and intelligence gathering, and managing matters related to terrorism, trade, and immigration. See §§2, 3. Domestically, he must “take Care that the Laws be faithfully executed,” §3, and he bears responsibility for the Cite as: 603 U. S. ____ (2024) 7 Opinion of the Court actions of the many departments and agencies within the Executive Branch. He also plays a role in lawmaking by recommending to Congress the measures he thinks wise and signing or vetoing the bills Congress passes. See Art. I, §7, cl. 2; Art. II, §3. No matter the context, the President’s authority to act necessarily “stem[s] either from an act of Congress or from the Constitution itself.” Youngstown, 343 U. S., at 585. In the latter case, the President’s authority is sometimes “conclusive and preclusive.” Id., at 638 (Jackson, J., concurring). When the President exercises such authority, he may act even when the measures he takes are “incompatible with the expressed or implied will of Congress.” Id., at 637. The exclusive constitutional authority of the President “disabl[es] the Congress from acting upon the subject.” Id., at 637–638. And the courts have “no power to control [the President’s] discretion” when he acts pursuant to the powers invested exclusively in him by the Constitution. Marbury, 1 Cranch, at 166. 8 TRUMP v. UNITED STATES Opinion of the Court (1872). But in 1870, Congress enacted a provision that prohibited using the President’s pardon as evidence of restoration of property rights. Id., at 143–144. Chief Justice Chase held the provision unconstitutional because it “impair[ed] the effect of a pardon, and thus infring[ed] the constitutional power of the Executive.” Id., at 147. “To the executive alone is intrusted the power of pardon,” and the “legislature cannot change the effect of such a pardon any more than the executive can change a law.” Id., at 147–148. The President’s authority to pardon, in other words, is “conclusive and preclusive,” “disabling the Congress from acting upon the subject.” Youngstown, 343 U. S., at 637–638 (Jackson, J., concurring). Some of the President’s other constitutional powers also fit that description. “The President’s power to remove—and thus supervise—those who wield executive power on his behalf,” for instance, “follows from the text of Article II.” Seila Law LLC v. Consumer Financial Protection Bureau, 591 U. S. 197, 204 (2020). We have thus held that Congress lacks authority to control the President’s “unrestricted power of removal” with respect to “executive officers of the United States whom he has appointed.” Myers v. United States, 272 U. S. 52, 106, 176 (1926); see Youngstown, 343 U. S., at 638, n. 4 (Jackson, J., concurring) (citing the President’s “exclusive power of removal in executive agencies” as an example of “conclusive and preclusive” constitutional authority); cf. Seila Law, 591 U. S., at 215 (noting only “two exceptions to the President’s unrestricted removal power”). The power “to control recognition determinations” of foreign countries is likewise an “exclusive power of the President.” Zivotofsky v. Kerry, 576 U. S. 1, 32 (2015). Congressional commands contrary to the President’s recognition determinations are thus invalid. Ibid.
USER:
What is considered the president's core constitutional powers and what is the case law that the court relies on to reach this core? Please list the case law at the end of your response in bulleted form. Give me the full case citation so I can look them up myself later.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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This task requires you to answer questions based solely on the information provided in the prompt. You are not allowed to use any external resources or prior knowledge. Draw your answer from the context block only.
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Isn't the theater required to provide me with an initial set-up of tea bags in my housing if I am an actor working under the terms of this contract?
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(J) (1) In order to facilitate the Actor’s planning, the Theatre will provide the Actor, no later than one week prior to the Actor’s arrival, with a description of the housing, including furnishings and appliances that will be available. (2) The following shall be the minimum furnishings supplied in each Actor’s housing: bed and mattress in good condition, nightstand, reading lamp, armchair or sofa, table and chairs, lamp, dresser, mirror, hangers, linens/towels, pillows, blankets, wastebasket, radio alarm clock, and television and cable, where available and necessary for adequate reception. In multi-bedroom units or dormitories, the television and armchairs or sofa may be provided in the common area. Theatre shall make available irons and ironing boards. (3) The following shall be the minimum kitchen equipment supplied in each Actor’s housing: pots and pans with lids, cooking utensils, silverware for four, not fewer than four plates, cups and glasses, can opener, kitchen knives and colander. Where housekeeping is not provided, a broom and dustpan as well as a mop and pail shall be furnished. If the housing contains a microwave oven, microwave-safe accessories shall also be furnished. (4) Theatre shall provide an initial set-up of the following items in Actor’s housing prior to Actor’s arrival: toilet paper, paper towels, hand soap, dish soap, salt & pepper, sugar, coffee, tea, garbage bags, and sponge.
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system instruction: [This task requires you to answer questions based solely on the information provided in the prompt. You are not allowed to use any external resources or prior knowledge. Draw your answer from the context block only.] question: [Isn't the theater required to provide me with an initial set-up of tea bags in my housing if I am an actor working under the terms of this contract?] context block: [(J) (1) In order to facilitate the Actor’s planning, the Theatre will provide the Actor, no later than one week prior to the Actor’s arrival, with a description of the housing, including furnishings and appliances that will be available. (2) The following shall be the minimum furnishings supplied in each Actor’s housing: bed and mattress in good condition, nightstand, reading lamp, armchair or sofa, table and chairs, lamp, dresser, mirror, hangers, linens/towels, pillows, blankets, wastebasket, radio alarm clock, and television and cable, where available and necessary for adequate reception. In multi-bedroom units or dormitories, the television and armchairs or sofa may be provided in the common area. Theatre shall make available irons and ironing boards. (3) The following shall be the minimum kitchen equipment supplied in each Actor’s housing: pots and pans with lids, cooking utensils, silverware for four, not fewer than four plates, cups and glasses, can opener, kitchen knives and colander. Where housekeeping is not provided, a broom and dustpan as well as a mop and pail shall be furnished. If the housing contains a microwave oven, microwave-safe accessories shall also be furnished. (4) Theatre shall provide an initial set-up of the following items in Actor’s housing prior to Actor’s arrival: toilet paper, paper towels, hand soap, dish soap, salt & pepper, sugar, coffee, tea, garbage bags, and sponge.]
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This task requires you to answer questions based solely on the information provided in the prompt. You are not allowed to use any external resources or prior knowledge. Draw your answer from the context block only.
EVIDENCE:
(J) (1) In order to facilitate the Actor’s planning, the Theatre will provide the Actor, no later than one week prior to the Actor’s arrival, with a description of the housing, including furnishings and appliances that will be available. (2) The following shall be the minimum furnishings supplied in each Actor’s housing: bed and mattress in good condition, nightstand, reading lamp, armchair or sofa, table and chairs, lamp, dresser, mirror, hangers, linens/towels, pillows, blankets, wastebasket, radio alarm clock, and television and cable, where available and necessary for adequate reception. In multi-bedroom units or dormitories, the television and armchairs or sofa may be provided in the common area. Theatre shall make available irons and ironing boards. (3) The following shall be the minimum kitchen equipment supplied in each Actor’s housing: pots and pans with lids, cooking utensils, silverware for four, not fewer than four plates, cups and glasses, can opener, kitchen knives and colander. Where housekeeping is not provided, a broom and dustpan as well as a mop and pail shall be furnished. If the housing contains a microwave oven, microwave-safe accessories shall also be furnished. (4) Theatre shall provide an initial set-up of the following items in Actor’s housing prior to Actor’s arrival: toilet paper, paper towels, hand soap, dish soap, salt & pepper, sugar, coffee, tea, garbage bags, and sponge.
USER:
Isn't the theater required to provide me with an initial set-up of tea bags in my housing if I am an actor working under the terms of this contract?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Only refer to the document to answer the question. Only answer the question, do not add extra chatter or descriptions. Your answer should not be in bullet point format.
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Explain what effect frequent trading of ETF Shares has on shareholders.
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**Risks of Exchange-Traded Shares** ETF Shares are not individually redeemable. They can be redeemed with the issuing Fund at NAV only by certain authorized broker-dealers and only in large blocks known as Creation Units. Consequently, if you want to liquidate some or all of your ETF Shares, you must sell them on the secondary market at prevailing market prices. The market price of ETF Shares may differ from NAV. Although it is expected that the market price of an ETF Share typically will approximate its NAV, there may be times when the market price and the NAV differ significantly. Thus, you may pay more (premium) or less (discount) than NAV when you buy ETF Shares on the secondary market, and you may receive more or less than NAV when you sell those shares. These discounts and premiums are likely to be greatest during times of market disruption or extreme market volatility. Vanguard’s website at vanguard.com shows the previous day’s closing NAV and closing market price for the Fund’s ETF Shares. The website also discloses, in the Premium/Discount Analysis section of the ETF Shares’ Price & Performance page, how frequently the Fund’s ETF Shares traded at a premium or discount to NAV (based on closing NAVs and market prices) and the magnitudes of such premiums and discounts. An active trading market may not exist. Although Vanguard ETF Shares are listed on a national securities exchange, it is possible that an active trading market may not be maintained. Although this could happen at any time, it is more likely to occur during times of severe market disruption. If you attempt to sell your ETF Shares when an active trading market is not functioning, you may have to sell at a significant discount to NAV. In extreme cases, you may not be able to sell your shares at all. Trading may be halted. Trading of Vanguard ETF Shares on an exchange may be halted by the activation of individual or marketwide trading halts (which halt trading for a specific period of time when the price of a particular security or overall market prices decline by a specified percentage). Trading of ETF Shares may also be halted if (1) the shares are delisted from the listing exchange without first being listed on another exchange or (2) exchange officials determine that such action is appropriate in the interest of a fair and orderly market or for the protection of investors. Conversion Privilege Owners of conventional shares issued by the Fund may convert those shares to ETF Shares of equivalent value of the same fund. Please note that investors who own conventional shares through a 401(k) plan or other employer-sponsored 15 retirement or benefit plan generally may not convert those shares to ETF Shares and should check with their plan sponsor or recordkeeper. ETF Shares, whether acquired through a conversion or purchased on the secondary market, cannot be converted to conventional shares by a shareholder. Also, ETF Shares of one fund cannot be exchanged for ETF Shares of another fund. You must hold ETF Shares in a brokerage account. Thus, before converting conventional shares to ETF Shares, you must have an existing, or open a new, brokerage account. This account may be with Vanguard Brokerage Services® or with any other brokerage firm. To initiate a conversion of conventional shares to ETF Shares, please contact your broker. Vanguard Brokerage Services does not impose a fee on conversions from Vanguard conventional shares to Vanguard ETF Shares. However, other brokerage firms may charge a fee to process a conversion. Vanguard reserves the right, in the future, to impose a transaction fee on conversions or to limit, temporarily suspend, or terminate the conversion privilege. Converting conventional shares to ETF Shares is generally accomplished as follows. First, after your broker notifies Vanguard of your request to convert, Vanguard will transfer your conventional shares from your account to the broker’s omnibus account with Vanguard (an account maintained by the broker on behalf of all its customers who hold conventional Vanguard fund shares through the broker). After the transfer, Vanguard’s records will reflect your broker, not you, as the owner of the shares. Next, your broker will instruct Vanguard to convert the appropriate number or dollar amount of conventional shares in its omnibus account to ETF Shares of equivalent value, based on the respective NAVs of the two share classes. Your Fund’s transfer agent will reflect ownership of all ETF Shares in the name of the Depository Trust Company (DTC). The DTC will keep track of which ETF Shares belong to your broker, and your broker, in turn, will keep track of which ETF Shares belong to you. Because the DTC is unable to handle fractional shares, only whole shares can be converted. For example, if you owned 300.25 conventional shares, and this was equivalent in value to 90.75 ETF Shares, the DTC account would receive 90 ETF Shares. Conventional shares with a value equal to 0.75 ETF Shares (in this example, that would be 2.481 conventional shares) would remain in the broker’s omnibus account with Vanguard. Your broker then could either (1) credit your account with 0.75 ETF Shares or (2) redeem the 2.481 conventional shares for cash at NAV and deliver that cash to your account. If your broker chose to redeem your conventional shares, you would realize a gain or loss on the redemption that must be reported on your tax return (unless you hold the shares 16 in an IRA or other tax-deferred account). Please consult your broker for information on how it will handle the conversion process, including whether it will impose a fee to process a conversion. If you convert your conventional shares to ETF Shares through Vanguard Brokerage Services, all conventional shares for which you request conversion will be converted to ETF Shares of equivalent value. Because no fractional shares will have to be sold, the transaction will not be taxable. Here are some important points to keep in mind when converting conventional shares of a Vanguard fund to ETF Shares: • The conversion process can take anywhere from several days to several weeks, depending on your broker. Vanguard generally will process conversion requests either on the day they are received or on the next business day. Vanguard imposes conversion blackout windows around the dates when a fund with ETF Shares declares dividends. This is necessary to prevent a shareholder from collecting a dividend from both the conventional share class currently held and also from the ETF share class to which the shares will be converted. • Until the conversion process is complete, you will remain fully invested in a fund’s conventional shares, and your investment will increase or decrease in value in tandem with the NAV of those shares. • The conversion transaction is nontaxable except, if applicable, to the very limited extent previously described. Shareholder Rights The Fund’s Agreement and Declaration of Trust, as amended, requires a shareholder bringing a derivative action on behalf of Vanguard Index Funds (the Trust) that is subject to a pre-suit demand to collectively hold at least 10% of the outstanding shares of the Trust or at least 10% of the outstanding shares of the series or class to which the demand relates and to undertake to reimburse the Trust for the expense of any counsel or advisors used when considering the merits of the demand in the event that the board of trustees determines not to bring such action. In each case, these requirements do not apply to claims arising under the federal securities laws to the extent that any such federal securities laws, rules, or regulations do not permit such application. A precautionary note to investment companies: The Fund’s ETF Shares are issued by a registered investment company, and therefore the acquisition of such shares by other investment companies and private funds is subject to the restrictions of Section 12(d)(1) of the Investment Company Act of 1940 (the 1940 Act). SEC Rule 12d1-4 under the 1940 Act permits registered investment companies to invest in other registered investment companies beyond the limits 17 in Section 12(d)(1), subject to certain conditions, including that funds with different investment advisors must enter into a fund of funds investment agreement. Frequent Trading and Market-Timing Unlike frequent trading of a Vanguard fund’s conventional (i.e., not exchange-traded) classes of shares, frequent trading of ETF Shares does not disrupt portfolio management or otherwise harm fund shareholders. The vast majority of trading in ETF Shares occurs on the secondary market. Because these trades do not involve the issuing fund, they do not harm the fund or its shareholders. Certain broker-dealers are authorized to purchase and redeem ETF Shares directly with the issuing fund. Because these trades typically are effected in kind (i.e., for securities and not for cash), or are assessed a transaction fee when effected in cash, they do not cause any of the harmful effects to the issuing fund (as previously noted) that may result from frequent trading. For these reasons, the board of trustees of each fund that issues ETF Shares has determined that it is not necessary to adopt policies and procedures to detect and deter frequent trading and market-timing of ETF Shares. Portfolio Holdings Please consult the Fund’s Statement of Additional Information or our website for a description of the policies and procedures that govern disclosure of the Fund’s portfolio holdings. Turnover Rate Although the Fund generally seeks to invest for the long term, it may sell securities regardless of how long they have been held. Generally, an index fund sells securities in response to redemption requests from shareholders of conventional (i.e., not exchange-traded) shares or to changes in the composition of its target index. Turnover rates for large-cap stock index funds tend to be low because large-cap indexes—such as the S&P 500 Index—typically do not change significantly from year to year. The Financial Highlights section of this prospectus shows historical turnover rates for the Fund. A turnover rate of 100%, for example, would mean that the Fund had sold and replaced securities valued at 100% of its net assets within a one-year period. In general, the greater the turnover rate, the greater the impact transaction costs will have on a fund’s return. Also, funds with high turnover rates may be more likely to generate capital gains, including short-term capital gains, that must be distributed to shareholders and will be taxable to shareholders investing through a taxable account.
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[article] ========== **Risks of Exchange-Traded Shares** ETF Shares are not individually redeemable. They can be redeemed with the issuing Fund at NAV only by certain authorized broker-dealers and only in large blocks known as Creation Units. Consequently, if you want to liquidate some or all of your ETF Shares, you must sell them on the secondary market at prevailing market prices. The market price of ETF Shares may differ from NAV. Although it is expected that the market price of an ETF Share typically will approximate its NAV, there may be times when the market price and the NAV differ significantly. Thus, you may pay more (premium) or less (discount) than NAV when you buy ETF Shares on the secondary market, and you may receive more or less than NAV when you sell those shares. These discounts and premiums are likely to be greatest during times of market disruption or extreme market volatility. Vanguard’s website at vanguard.com shows the previous day’s closing NAV and closing market price for the Fund’s ETF Shares. The website also discloses, in the Premium/Discount Analysis section of the ETF Shares’ Price & Performance page, how frequently the Fund’s ETF Shares traded at a premium or discount to NAV (based on closing NAVs and market prices) and the magnitudes of such premiums and discounts. An active trading market may not exist. Although Vanguard ETF Shares are listed on a national securities exchange, it is possible that an active trading market may not be maintained. Although this could happen at any time, it is more likely to occur during times of severe market disruption. If you attempt to sell your ETF Shares when an active trading market is not functioning, you may have to sell at a significant discount to NAV. In extreme cases, you may not be able to sell your shares at all. Trading may be halted. Trading of Vanguard ETF Shares on an exchange may be halted by the activation of individual or marketwide trading halts (which halt trading for a specific period of time when the price of a particular security or overall market prices decline by a specified percentage). Trading of ETF Shares may also be halted if (1) the shares are delisted from the listing exchange without first being listed on another exchange or (2) exchange officials determine that such action is appropriate in the interest of a fair and orderly market or for the protection of investors. Conversion Privilege Owners of conventional shares issued by the Fund may convert those shares to ETF Shares of equivalent value of the same fund. Please note that investors who own conventional shares through a 401(k) plan or other employer-sponsored 15 retirement or benefit plan generally may not convert those shares to ETF Shares and should check with their plan sponsor or recordkeeper. ETF Shares, whether acquired through a conversion or purchased on the secondary market, cannot be converted to conventional shares by a shareholder. Also, ETF Shares of one fund cannot be exchanged for ETF Shares of another fund. You must hold ETF Shares in a brokerage account. Thus, before converting conventional shares to ETF Shares, you must have an existing, or open a new, brokerage account. This account may be with Vanguard Brokerage Services® or with any other brokerage firm. To initiate a conversion of conventional shares to ETF Shares, please contact your broker. Vanguard Brokerage Services does not impose a fee on conversions from Vanguard conventional shares to Vanguard ETF Shares. However, other brokerage firms may charge a fee to process a conversion. Vanguard reserves the right, in the future, to impose a transaction fee on conversions or to limit, temporarily suspend, or terminate the conversion privilege. Converting conventional shares to ETF Shares is generally accomplished as follows. First, after your broker notifies Vanguard of your request to convert, Vanguard will transfer your conventional shares from your account to the broker’s omnibus account with Vanguard (an account maintained by the broker on behalf of all its customers who hold conventional Vanguard fund shares through the broker). After the transfer, Vanguard’s records will reflect your broker, not you, as the owner of the shares. Next, your broker will instruct Vanguard to convert the appropriate number or dollar amount of conventional shares in its omnibus account to ETF Shares of equivalent value, based on the respective NAVs of the two share classes. Your Fund’s transfer agent will reflect ownership of all ETF Shares in the name of the Depository Trust Company (DTC). The DTC will keep track of which ETF Shares belong to your broker, and your broker, in turn, will keep track of which ETF Shares belong to you. Because the DTC is unable to handle fractional shares, only whole shares can be converted. For example, if you owned 300.25 conventional shares, and this was equivalent in value to 90.75 ETF Shares, the DTC account would receive 90 ETF Shares. Conventional shares with a value equal to 0.75 ETF Shares (in this example, that would be 2.481 conventional shares) would remain in the broker’s omnibus account with Vanguard. Your broker then could either (1) credit your account with 0.75 ETF Shares or (2) redeem the 2.481 conventional shares for cash at NAV and deliver that cash to your account. If your broker chose to redeem your conventional shares, you would realize a gain or loss on the redemption that must be reported on your tax return (unless you hold the shares 16 in an IRA or other tax-deferred account). Please consult your broker for information on how it will handle the conversion process, including whether it will impose a fee to process a conversion. If you convert your conventional shares to ETF Shares through Vanguard Brokerage Services, all conventional shares for which you request conversion will be converted to ETF Shares of equivalent value. Because no fractional shares will have to be sold, the transaction will not be taxable. Here are some important points to keep in mind when converting conventional shares of a Vanguard fund to ETF Shares: • The conversion process can take anywhere from several days to several weeks, depending on your broker. Vanguard generally will process conversion requests either on the day they are received or on the next business day. Vanguard imposes conversion blackout windows around the dates when a fund with ETF Shares declares dividends. This is necessary to prevent a shareholder from collecting a dividend from both the conventional share class currently held and also from the ETF share class to which the shares will be converted. • Until the conversion process is complete, you will remain fully invested in a fund’s conventional shares, and your investment will increase or decrease in value in tandem with the NAV of those shares. • The conversion transaction is nontaxable except, if applicable, to the very limited extent previously described. Shareholder Rights The Fund’s Agreement and Declaration of Trust, as amended, requires a shareholder bringing a derivative action on behalf of Vanguard Index Funds (the Trust) that is subject to a pre-suit demand to collectively hold at least 10% of the outstanding shares of the Trust or at least 10% of the outstanding shares of the series or class to which the demand relates and to undertake to reimburse the Trust for the expense of any counsel or advisors used when considering the merits of the demand in the event that the board of trustees determines not to bring such action. In each case, these requirements do not apply to claims arising under the federal securities laws to the extent that any such federal securities laws, rules, or regulations do not permit such application. A precautionary note to investment companies: The Fund’s ETF Shares are issued by a registered investment company, and therefore the acquisition of such shares by other investment companies and private funds is subject to the restrictions of Section 12(d)(1) of the Investment Company Act of 1940 (the 1940 Act). SEC Rule 12d1-4 under the 1940 Act permits registered investment companies to invest in other registered investment companies beyond the limits 17 in Section 12(d)(1), subject to certain conditions, including that funds with different investment advisors must enter into a fund of funds investment agreement. Frequent Trading and Market-Timing Unlike frequent trading of a Vanguard fund’s conventional (i.e., not exchange-traded) classes of shares, frequent trading of ETF Shares does not disrupt portfolio management or otherwise harm fund shareholders. The vast majority of trading in ETF Shares occurs on the secondary market. Because these trades do not involve the issuing fund, they do not harm the fund or its shareholders. Certain broker-dealers are authorized to purchase and redeem ETF Shares directly with the issuing fund. Because these trades typically are effected in kind (i.e., for securities and not for cash), or are assessed a transaction fee when effected in cash, they do not cause any of the harmful effects to the issuing fund (as previously noted) that may result from frequent trading. For these reasons, the board of trustees of each fund that issues ETF Shares has determined that it is not necessary to adopt policies and procedures to detect and deter frequent trading and market-timing of ETF Shares. Portfolio Holdings Please consult the Fund’s Statement of Additional Information or our website for a description of the policies and procedures that govern disclosure of the Fund’s portfolio holdings. Turnover Rate Although the Fund generally seeks to invest for the long term, it may sell securities regardless of how long they have been held. Generally, an index fund sells securities in response to redemption requests from shareholders of conventional (i.e., not exchange-traded) shares or to changes in the composition of its target index. Turnover rates for large-cap stock index funds tend to be low because large-cap indexes—such as the S&P 500 Index—typically do not change significantly from year to year. The Financial Highlights section of this prospectus shows historical turnover rates for the Fund. A turnover rate of 100%, for example, would mean that the Fund had sold and replaced securities valued at 100% of its net assets within a one-year period. In general, the greater the turnover rate, the greater the impact transaction costs will have on a fund’s return. Also, funds with high turnover rates may be more likely to generate capital gains, including short-term capital gains, that must be distributed to shareholders and will be taxable to shareholders investing through a taxable account. ---------------- [query] ========== Explain what effect frequent trading of ETF Shares has on shareholders. ---------------- [task] ========== Only refer to the document to answer the question. Only answer the question, do not add extra chatter or descriptions. Your answer should not be in bullet point format.
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Only refer to the document to answer the question. Only answer the question, do not add extra chatter or descriptions. Your answer should not be in bullet point format.
EVIDENCE:
**Risks of Exchange-Traded Shares** ETF Shares are not individually redeemable. They can be redeemed with the issuing Fund at NAV only by certain authorized broker-dealers and only in large blocks known as Creation Units. Consequently, if you want to liquidate some or all of your ETF Shares, you must sell them on the secondary market at prevailing market prices. The market price of ETF Shares may differ from NAV. Although it is expected that the market price of an ETF Share typically will approximate its NAV, there may be times when the market price and the NAV differ significantly. Thus, you may pay more (premium) or less (discount) than NAV when you buy ETF Shares on the secondary market, and you may receive more or less than NAV when you sell those shares. These discounts and premiums are likely to be greatest during times of market disruption or extreme market volatility. Vanguard’s website at vanguard.com shows the previous day’s closing NAV and closing market price for the Fund’s ETF Shares. The website also discloses, in the Premium/Discount Analysis section of the ETF Shares’ Price & Performance page, how frequently the Fund’s ETF Shares traded at a premium or discount to NAV (based on closing NAVs and market prices) and the magnitudes of such premiums and discounts. An active trading market may not exist. Although Vanguard ETF Shares are listed on a national securities exchange, it is possible that an active trading market may not be maintained. Although this could happen at any time, it is more likely to occur during times of severe market disruption. If you attempt to sell your ETF Shares when an active trading market is not functioning, you may have to sell at a significant discount to NAV. In extreme cases, you may not be able to sell your shares at all. Trading may be halted. Trading of Vanguard ETF Shares on an exchange may be halted by the activation of individual or marketwide trading halts (which halt trading for a specific period of time when the price of a particular security or overall market prices decline by a specified percentage). Trading of ETF Shares may also be halted if (1) the shares are delisted from the listing exchange without first being listed on another exchange or (2) exchange officials determine that such action is appropriate in the interest of a fair and orderly market or for the protection of investors. Conversion Privilege Owners of conventional shares issued by the Fund may convert those shares to ETF Shares of equivalent value of the same fund. Please note that investors who own conventional shares through a 401(k) plan or other employer-sponsored 15 retirement or benefit plan generally may not convert those shares to ETF Shares and should check with their plan sponsor or recordkeeper. ETF Shares, whether acquired through a conversion or purchased on the secondary market, cannot be converted to conventional shares by a shareholder. Also, ETF Shares of one fund cannot be exchanged for ETF Shares of another fund. You must hold ETF Shares in a brokerage account. Thus, before converting conventional shares to ETF Shares, you must have an existing, or open a new, brokerage account. This account may be with Vanguard Brokerage Services® or with any other brokerage firm. To initiate a conversion of conventional shares to ETF Shares, please contact your broker. Vanguard Brokerage Services does not impose a fee on conversions from Vanguard conventional shares to Vanguard ETF Shares. However, other brokerage firms may charge a fee to process a conversion. Vanguard reserves the right, in the future, to impose a transaction fee on conversions or to limit, temporarily suspend, or terminate the conversion privilege. Converting conventional shares to ETF Shares is generally accomplished as follows. First, after your broker notifies Vanguard of your request to convert, Vanguard will transfer your conventional shares from your account to the broker’s omnibus account with Vanguard (an account maintained by the broker on behalf of all its customers who hold conventional Vanguard fund shares through the broker). After the transfer, Vanguard’s records will reflect your broker, not you, as the owner of the shares. Next, your broker will instruct Vanguard to convert the appropriate number or dollar amount of conventional shares in its omnibus account to ETF Shares of equivalent value, based on the respective NAVs of the two share classes. Your Fund’s transfer agent will reflect ownership of all ETF Shares in the name of the Depository Trust Company (DTC). The DTC will keep track of which ETF Shares belong to your broker, and your broker, in turn, will keep track of which ETF Shares belong to you. Because the DTC is unable to handle fractional shares, only whole shares can be converted. For example, if you owned 300.25 conventional shares, and this was equivalent in value to 90.75 ETF Shares, the DTC account would receive 90 ETF Shares. Conventional shares with a value equal to 0.75 ETF Shares (in this example, that would be 2.481 conventional shares) would remain in the broker’s omnibus account with Vanguard. Your broker then could either (1) credit your account with 0.75 ETF Shares or (2) redeem the 2.481 conventional shares for cash at NAV and deliver that cash to your account. If your broker chose to redeem your conventional shares, you would realize a gain or loss on the redemption that must be reported on your tax return (unless you hold the shares 16 in an IRA or other tax-deferred account). Please consult your broker for information on how it will handle the conversion process, including whether it will impose a fee to process a conversion. If you convert your conventional shares to ETF Shares through Vanguard Brokerage Services, all conventional shares for which you request conversion will be converted to ETF Shares of equivalent value. Because no fractional shares will have to be sold, the transaction will not be taxable. Here are some important points to keep in mind when converting conventional shares of a Vanguard fund to ETF Shares: • The conversion process can take anywhere from several days to several weeks, depending on your broker. Vanguard generally will process conversion requests either on the day they are received or on the next business day. Vanguard imposes conversion blackout windows around the dates when a fund with ETF Shares declares dividends. This is necessary to prevent a shareholder from collecting a dividend from both the conventional share class currently held and also from the ETF share class to which the shares will be converted. • Until the conversion process is complete, you will remain fully invested in a fund’s conventional shares, and your investment will increase or decrease in value in tandem with the NAV of those shares. • The conversion transaction is nontaxable except, if applicable, to the very limited extent previously described. Shareholder Rights The Fund’s Agreement and Declaration of Trust, as amended, requires a shareholder bringing a derivative action on behalf of Vanguard Index Funds (the Trust) that is subject to a pre-suit demand to collectively hold at least 10% of the outstanding shares of the Trust or at least 10% of the outstanding shares of the series or class to which the demand relates and to undertake to reimburse the Trust for the expense of any counsel or advisors used when considering the merits of the demand in the event that the board of trustees determines not to bring such action. In each case, these requirements do not apply to claims arising under the federal securities laws to the extent that any such federal securities laws, rules, or regulations do not permit such application. A precautionary note to investment companies: The Fund’s ETF Shares are issued by a registered investment company, and therefore the acquisition of such shares by other investment companies and private funds is subject to the restrictions of Section 12(d)(1) of the Investment Company Act of 1940 (the 1940 Act). SEC Rule 12d1-4 under the 1940 Act permits registered investment companies to invest in other registered investment companies beyond the limits 17 in Section 12(d)(1), subject to certain conditions, including that funds with different investment advisors must enter into a fund of funds investment agreement. Frequent Trading and Market-Timing Unlike frequent trading of a Vanguard fund’s conventional (i.e., not exchange-traded) classes of shares, frequent trading of ETF Shares does not disrupt portfolio management or otherwise harm fund shareholders. The vast majority of trading in ETF Shares occurs on the secondary market. Because these trades do not involve the issuing fund, they do not harm the fund or its shareholders. Certain broker-dealers are authorized to purchase and redeem ETF Shares directly with the issuing fund. Because these trades typically are effected in kind (i.e., for securities and not for cash), or are assessed a transaction fee when effected in cash, they do not cause any of the harmful effects to the issuing fund (as previously noted) that may result from frequent trading. For these reasons, the board of trustees of each fund that issues ETF Shares has determined that it is not necessary to adopt policies and procedures to detect and deter frequent trading and market-timing of ETF Shares. Portfolio Holdings Please consult the Fund’s Statement of Additional Information or our website for a description of the policies and procedures that govern disclosure of the Fund’s portfolio holdings. Turnover Rate Although the Fund generally seeks to invest for the long term, it may sell securities regardless of how long they have been held. Generally, an index fund sells securities in response to redemption requests from shareholders of conventional (i.e., not exchange-traded) shares or to changes in the composition of its target index. Turnover rates for large-cap stock index funds tend to be low because large-cap indexes—such as the S&P 500 Index—typically do not change significantly from year to year. The Financial Highlights section of this prospectus shows historical turnover rates for the Fund. A turnover rate of 100%, for example, would mean that the Fund had sold and replaced securities valued at 100% of its net assets within a one-year period. In general, the greater the turnover rate, the greater the impact transaction costs will have on a fund’s return. Also, funds with high turnover rates may be more likely to generate capital gains, including short-term capital gains, that must be distributed to shareholders and will be taxable to shareholders investing through a taxable account.
USER:
Explain what effect frequent trading of ETF Shares has on shareholders.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Create your response by referencing the provided text. Limit your response to 100 words. If you cannot answer using the context alone, say "I can't determine the answer without more context."
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What's nifedipine?
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Aortic Regurgitation Essentials of Diagnosis • Causes include congenital bicuspid valve, endocarditis, rheumatic heart disease, Marfan’s syndrome, aortic dissection, ankylosing spondylitis, reactive arthritis, and syphilis • Acute aortic regurgitation: Abrupt onset of pulmonary edema • Chronic aortic regurgitation: Asymptomatic until middle age, when symptoms of left heart failure develop insidiously • Soft, high-pitched, decrescendo holodiastolic murmur in chronic aortic regurgitation; occasionally, an accompanying apical lowpitched diastolic rumble (Austin Flint murmur) in nonrheumatic patients; in acute aortic regurgitation, the diastolic murmur can be short (or not even heard) and harsh • Acute aortic regurgitation: Reduced S1 and an S3; rales • Chronic aortic regurgitation: Reduced S1, wide pulse pressure, waterhammer pulse, subungual capillary pulsations (Quincke’s sign), rapid rise and fall of pulse (Corrigan’s pulse), and a diastolic murmur over a partially compressed femoral artery (Duroziez’s sign) • ECG shows left ventricular hypertrophy • Echo Doppler confirms diagnosis, estimates severity ■ Differential Diagnosis • Pulmonary hypertension with Graham Steell murmur • Mitral, or rarely, tricuspid stenosis • Left ventricular failure due to other cause • Dock’s murmur of left anterior descending artery stenosis ■ Treatment • Vasodilators (eg, nifedipine and ACE inhibitors) do not delay the progression to valve replacement in patients with mild to moderate aortic regurgitation • In chronic aortic regurgitation, surgery reserved for patients with symptoms or ejection function < 50% on echocardiography • Acute regurgitation caused by aortic dissection or endocarditis requires surgical replacement of the valve ■ Pearl The Hodgkin-Key murmur of aortic regurgitation is harsh and raspy, caused by leaflet eventration typical of luetic aortopathy. Reference Kamath AR, Varadarajan P, Turk R, Sampat U, Patel R, Khandhar S, Pai RG. Survival in patients with severe aortic regurgitation and severe left ventricular dysfunction is improved by aortic valve replacement. Circulation 2009; 120(suppl):S134. [PMID: 19752358] Aortic Stenosis ■ Essentials of Diagnosis • Causes include congenital bicuspid valve and progressive calcification with aging of a normal three-leaflet valve; rheumatic fever rarely, if ever, causes isolated aortic stenosis • Dyspnea, angina, and syncope singly or in any combination; sudden death in less than 1% of asymptomatic patients • Weak and delayed carotid pulses (pulsus parvus et tardus); a soft, absent, or paradoxically split S2; a harsh diamond-shaped systolic ejection murmur to the right of the sternum, often radiating to the neck, but on occasion heard apically (Gallavardin’s phenomenon) • Left ventricular hypertrophy by ECG and chest x-ray may show calcification in the aortic valve • Echo confirms diagnosis and estimates valve area and gradient; cardiac catheterization confirms severity if there is discrepancy between physical exam and echo; concomitant coronary atherosclerotic disease present in 50% ■ Differential Diagnosis • Mitral regurgitation • Hypertrophic obstructive or dilated cardiomyopathy • Atrial or ventricular septal defect • Syncope due to other causes • Ischemic heart disease without valvular abnormality ■ Treatment • Surgery is indicated for all patients with severe aortic stenosis (mean aortic valve gradient > 40 mm Hg or valve area ≤ 1.0 cm2 ) and the presence of symptoms or ejection fraction < 50% • Percutaneous balloon valvuloplasty for temporary (6 months) relief of symptoms in poor surgical candidates ■ Pearl In many cases, the softer the murmur, the worse the stenosis. Reference Dal-Bianco JP, Khandheria BK, Mookadam F, Gentile F, Sengupta PP. Management of asymptomatic severe aortic stenosis. J Am Coll Cardiol 2008;52:1279. [PMID: 18929238]
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Create your response by referencing the provided text. Limit your response to 100 words. If you cannot answer using the context alone, say "I can't determine the answer without more context." Aortic Regurgitation Essentials of Diagnosis • Causes include congenital bicuspid valve, endocarditis, rheumatic heart disease, Marfan’s syndrome, aortic dissection, ankylosing spondylitis, reactive arthritis, and syphilis • Acute aortic regurgitation: Abrupt onset of pulmonary edema • Chronic aortic regurgitation: Asymptomatic until middle age, when symptoms of left heart failure develop insidiously • Soft, high-pitched, decrescendo holodiastolic murmur in chronic aortic regurgitation; occasionally, an accompanying apical lowpitched diastolic rumble (Austin Flint murmur) in nonrheumatic patients; in acute aortic regurgitation, the diastolic murmur can be short (or not even heard) and harsh • Acute aortic regurgitation: Reduced S1 and an S3; rales • Chronic aortic regurgitation: Reduced S1, wide pulse pressure, waterhammer pulse, subungual capillary pulsations (Quincke’s sign), rapid rise and fall of pulse (Corrigan’s pulse), and a diastolic murmur over a partially compressed femoral artery (Duroziez’s sign) • ECG shows left ventricular hypertrophy • Echo Doppler confirms diagnosis, estimates severity ■ Differential Diagnosis • Pulmonary hypertension with Graham Steell murmur • Mitral, or rarely, tricuspid stenosis • Left ventricular failure due to other cause • Dock’s murmur of left anterior descending artery stenosis ■ Treatment • Vasodilators (eg, nifedipine and ACE inhibitors) do not delay the progression to valve replacement in patients with mild to moderate aortic regurgitation • In chronic aortic regurgitation, surgery reserved for patients with symptoms or ejection function < 50% on echocardiography • Acute regurgitation caused by aortic dissection or endocarditis requires surgical replacement of the valve ■ Pearl The Hodgkin-Key murmur of aortic regurgitation is harsh and raspy, caused by leaflet eventration typical of luetic aortopathy. Reference Kamath AR, Varadarajan P, Turk R, Sampat U, Patel R, Khandhar S, Pai RG. Survival in patients with severe aortic regurgitation and severe left ventricular dysfunction is improved by aortic valve replacement. Circulation 2009; 120(suppl):S134. [PMID: 19752358] Aortic Stenosis ■ Essentials of Diagnosis • Causes include congenital bicuspid valve and progressive calcification with aging of a normal three-leaflet valve; rheumatic fever rarely, if ever, causes isolated aortic stenosis • Dyspnea, angina, and syncope singly or in any combination; sudden death in less than 1% of asymptomatic patients • Weak and delayed carotid pulses (pulsus parvus et tardus); a soft, absent, or paradoxically split S2; a harsh diamond-shaped systolic ejection murmur to the right of the sternum, often radiating to the neck, but on occasion heard apically (Gallavardin’s phenomenon) • Left ventricular hypertrophy by ECG and chest x-ray may show calcification in the aortic valve • Echo confirms diagnosis and estimates valve area and gradient; cardiac catheterization confirms severity if there is discrepancy between physical exam and echo; concomitant coronary atherosclerotic disease present in 50% ■ Differential Diagnosis • Mitral regurgitation • Hypertrophic obstructive or dilated cardiomyopathy • Atrial or ventricular septal defect • Syncope due to other causes • Ischemic heart disease without valvular abnormality ■ Treatment • Surgery is indicated for all patients with severe aortic stenosis (mean aortic valve gradient > 40 mm Hg or valve area ≤ 1.0 cm2 ) and the presence of symptoms or ejection fraction < 50% • Percutaneous balloon valvuloplasty for temporary (6 months) relief of symptoms in poor surgical candidates ■ Pearl In many cases, the softer the murmur, the worse the stenosis. Reference Dal-Bianco JP, Khandheria BK, Mookadam F, Gentile F, Sengupta PP. Management of asymptomatic severe aortic stenosis. J Am Coll Cardiol 2008;52:1279. [PMID: 18929238] What's nifedipine?
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Create your response by referencing the provided text. Limit your response to 100 words. If you cannot answer using the context alone, say "I can't determine the answer without more context."
EVIDENCE:
Aortic Regurgitation Essentials of Diagnosis • Causes include congenital bicuspid valve, endocarditis, rheumatic heart disease, Marfan’s syndrome, aortic dissection, ankylosing spondylitis, reactive arthritis, and syphilis • Acute aortic regurgitation: Abrupt onset of pulmonary edema • Chronic aortic regurgitation: Asymptomatic until middle age, when symptoms of left heart failure develop insidiously • Soft, high-pitched, decrescendo holodiastolic murmur in chronic aortic regurgitation; occasionally, an accompanying apical lowpitched diastolic rumble (Austin Flint murmur) in nonrheumatic patients; in acute aortic regurgitation, the diastolic murmur can be short (or not even heard) and harsh • Acute aortic regurgitation: Reduced S1 and an S3; rales • Chronic aortic regurgitation: Reduced S1, wide pulse pressure, waterhammer pulse, subungual capillary pulsations (Quincke’s sign), rapid rise and fall of pulse (Corrigan’s pulse), and a diastolic murmur over a partially compressed femoral artery (Duroziez’s sign) • ECG shows left ventricular hypertrophy • Echo Doppler confirms diagnosis, estimates severity ■ Differential Diagnosis • Pulmonary hypertension with Graham Steell murmur • Mitral, or rarely, tricuspid stenosis • Left ventricular failure due to other cause • Dock’s murmur of left anterior descending artery stenosis ■ Treatment • Vasodilators (eg, nifedipine and ACE inhibitors) do not delay the progression to valve replacement in patients with mild to moderate aortic regurgitation • In chronic aortic regurgitation, surgery reserved for patients with symptoms or ejection function < 50% on echocardiography • Acute regurgitation caused by aortic dissection or endocarditis requires surgical replacement of the valve ■ Pearl The Hodgkin-Key murmur of aortic regurgitation is harsh and raspy, caused by leaflet eventration typical of luetic aortopathy. Reference Kamath AR, Varadarajan P, Turk R, Sampat U, Patel R, Khandhar S, Pai RG. Survival in patients with severe aortic regurgitation and severe left ventricular dysfunction is improved by aortic valve replacement. Circulation 2009; 120(suppl):S134. [PMID: 19752358] Aortic Stenosis ■ Essentials of Diagnosis • Causes include congenital bicuspid valve and progressive calcification with aging of a normal three-leaflet valve; rheumatic fever rarely, if ever, causes isolated aortic stenosis • Dyspnea, angina, and syncope singly or in any combination; sudden death in less than 1% of asymptomatic patients • Weak and delayed carotid pulses (pulsus parvus et tardus); a soft, absent, or paradoxically split S2; a harsh diamond-shaped systolic ejection murmur to the right of the sternum, often radiating to the neck, but on occasion heard apically (Gallavardin’s phenomenon) • Left ventricular hypertrophy by ECG and chest x-ray may show calcification in the aortic valve • Echo confirms diagnosis and estimates valve area and gradient; cardiac catheterization confirms severity if there is discrepancy between physical exam and echo; concomitant coronary atherosclerotic disease present in 50% ■ Differential Diagnosis • Mitral regurgitation • Hypertrophic obstructive or dilated cardiomyopathy • Atrial or ventricular septal defect • Syncope due to other causes • Ischemic heart disease without valvular abnormality ■ Treatment • Surgery is indicated for all patients with severe aortic stenosis (mean aortic valve gradient > 40 mm Hg or valve area ≤ 1.0 cm2 ) and the presence of symptoms or ejection fraction < 50% • Percutaneous balloon valvuloplasty for temporary (6 months) relief of symptoms in poor surgical candidates ■ Pearl In many cases, the softer the murmur, the worse the stenosis. Reference Dal-Bianco JP, Khandheria BK, Mookadam F, Gentile F, Sengupta PP. Management of asymptomatic severe aortic stenosis. J Am Coll Cardiol 2008;52:1279. [PMID: 18929238]
USER:
What's nifedipine?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
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Through the financial troubles and attempt to fix the economy, how much money has Zimbabwe raised through trading bonds explain in 7 to 10 sentences?
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In the multicurrency era, domestic public debt reforms include the adoption of the cash budgeting system and introduction of new government securities in secondary market. According to the 2009 budget statement, the Government of National Unity (GNU) effected the cash budgeting system to circumvent further accrual of domestic debt. The cash budgeting system restricted government expenditures to available revenue instead of the cash flow profile associated with approved estimates. The cash budgeting system insulated monetary operations from fiscal operations and the domestic debt market was made inactive. However, in 2014, the government abandoned the cash budgeting system leading to the rejuvenation of excessive fiscal deficits, which aggravated domestic public borrowing and a slowdown in economic growth (IMF, 2015). As a control measure to the rising domestic public indebtedness, the Minister of Finance and Economic Development was instructed by the parliament to set out clearly in the fiscal policy the volume of net treasury securities issuance to be conducted for fiscal policy purposes each year, and how the raised money would be used (ZEPARU, 2013). Also, in a move meant to end quasi-fiscal activities by the reserve bank, the GNU in 2009 appointed the Commercial Bank of Zimbabwe as the state’s bank while modalities were being put in place to restore financial sanity at the apex bank (GoZ, 2009a; 2009b). In 2014, the government for the first time started to trade infrastructure bonds (GoZ, 2014b). The introduction of the 5-year tenor infrastructure bonds at a fixed interest of 9.5 percent, has not only enhanced financial deepening in the economy but also contributed to a paradigm shift in the structure of government debt. Also, the introduction of long term debt instruments by the government was intended at minimising rollover risk and lessen borrowing expenses associated with short term debt (Infrastructure Development Bank of Zimbabwe “IDBZ”, 2016). Until now, the government has raised US$5 million, $15 million and $22 million in 2015, 2016 and 2017, respectively, through the trading of infrastructure bonds on the capital markets (IDBZ, 2015, 2016; GoZ, 2017). At present, the government debt securities are being traded on the Zimbabwe Stock Exchange in the same manner as other stocks. To provide for the management of public debt in Zimbabwe on a statutory basis, mainly foreign public debt, the public debt reforms included public sector financial reforms and the institutionalisation and operationalisation of a Debt Management Office, which is currently housed in the Ministry of Finance and Economic Development. The responsibilities of the Debt Office are among others, to ensure public debt database validation and reconciliation with all creditors and to provide for the raising, management and servicing of loans by the state The Public Management Act Amended (2015) further stipulates that the Debt Office shall (1) formulate and publish a Medium Term Debt Management Strategy, (2) formulate and publish an annual borrowing plan, which includes a borrowing limit, and (3) undertake an annual debt sustainability analyses (MOFED, 2012).In 2011, the GNU instituted several foreign policy shifts, intended at reducing the country’s foreign public debt overhang, by re-engaging with creditors and the global community. The intention of the new re engagement policy reform was to seek comprehensive debt relief initiatives, as well as opening up new lines of offshore financing.
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== Through the financial troubles and attempt to fix the economy, how much money has Zimbabwe raised through trading bonds explain in 7 to 10 sentences? {passage 0} ========== In the multicurrency era, domestic public debt reforms include the adoption of the cash budgeting system and introduction of new government securities in secondary market. According to the 2009 budget statement, the Government of National Unity (GNU) effected the cash budgeting system to circumvent further accrual of domestic debt. The cash budgeting system restricted government expenditures to available revenue instead of the cash flow profile associated with approved estimates. The cash budgeting system insulated monetary operations from fiscal operations and the domestic debt market was made inactive. However, in 2014, the government abandoned the cash budgeting system leading to the rejuvenation of excessive fiscal deficits, which aggravated domestic public borrowing and a slowdown in economic growth (IMF, 2015). As a control measure to the rising domestic public indebtedness, the Minister of Finance and Economic Development was instructed by the parliament to set out clearly in the fiscal policy the volume of net treasury securities issuance to be conducted for fiscal policy purposes each year, and how the raised money would be used (ZEPARU, 2013). Also, in a move meant to end quasi-fiscal activities by the reserve bank, the GNU in 2009 appointed the Commercial Bank of Zimbabwe as the state’s bank while modalities were being put in place to restore financial sanity at the apex bank (GoZ, 2009a; 2009b). In 2014, the government for the first time started to trade infrastructure bonds (GoZ, 2014b). The introduction of the 5-year tenor infrastructure bonds at a fixed interest of 9.5 percent, has not only enhanced financial deepening in the economy but also contributed to a paradigm shift in the structure of government debt. Also, the introduction of long term debt instruments by the government was intended at minimising rollover risk and lessen borrowing expenses associated with short term debt (Infrastructure Development Bank of Zimbabwe “IDBZ”, 2016). Until now, the government has raised US$5 million, $15 million and $22 million in 2015, 2016 and 2017, respectively, through the trading of infrastructure bonds on the capital markets (IDBZ, 2015, 2016; GoZ, 2017). At present, the government debt securities are being traded on the Zimbabwe Stock Exchange in the same manner as other stocks. To provide for the management of public debt in Zimbabwe on a statutory basis, mainly foreign public debt, the public debt reforms included public sector financial reforms and the institutionalisation and operationalisation of a Debt Management Office, which is currently housed in the Ministry of Finance and Economic Development. The responsibilities of the Debt Office are among others, to ensure public debt database validation and reconciliation with all creditors and to provide for the raising, management and servicing of loans by the state The Public Management Act Amended (2015) further stipulates that the Debt Office shall (1) formulate and publish a Medium Term Debt Management Strategy, (2) formulate and publish an annual borrowing plan, which includes a borrowing limit, and (3) undertake an annual debt sustainability analyses (MOFED, 2012).In 2011, the GNU instituted several foreign policy shifts, intended at reducing the country’s foreign public debt overhang, by re-engaging with creditors and the global community. The intention of the new re engagement policy reform was to seek comprehensive debt relief initiatives, as well as opening up new lines of offshore financing. http://www.ijqr.net/journal/v12-n1/6.pdf
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
EVIDENCE:
In the multicurrency era, domestic public debt reforms include the adoption of the cash budgeting system and introduction of new government securities in secondary market. According to the 2009 budget statement, the Government of National Unity (GNU) effected the cash budgeting system to circumvent further accrual of domestic debt. The cash budgeting system restricted government expenditures to available revenue instead of the cash flow profile associated with approved estimates. The cash budgeting system insulated monetary operations from fiscal operations and the domestic debt market was made inactive. However, in 2014, the government abandoned the cash budgeting system leading to the rejuvenation of excessive fiscal deficits, which aggravated domestic public borrowing and a slowdown in economic growth (IMF, 2015). As a control measure to the rising domestic public indebtedness, the Minister of Finance and Economic Development was instructed by the parliament to set out clearly in the fiscal policy the volume of net treasury securities issuance to be conducted for fiscal policy purposes each year, and how the raised money would be used (ZEPARU, 2013). Also, in a move meant to end quasi-fiscal activities by the reserve bank, the GNU in 2009 appointed the Commercial Bank of Zimbabwe as the state’s bank while modalities were being put in place to restore financial sanity at the apex bank (GoZ, 2009a; 2009b). In 2014, the government for the first time started to trade infrastructure bonds (GoZ, 2014b). The introduction of the 5-year tenor infrastructure bonds at a fixed interest of 9.5 percent, has not only enhanced financial deepening in the economy but also contributed to a paradigm shift in the structure of government debt. Also, the introduction of long term debt instruments by the government was intended at minimising rollover risk and lessen borrowing expenses associated with short term debt (Infrastructure Development Bank of Zimbabwe “IDBZ”, 2016). Until now, the government has raised US$5 million, $15 million and $22 million in 2015, 2016 and 2017, respectively, through the trading of infrastructure bonds on the capital markets (IDBZ, 2015, 2016; GoZ, 2017). At present, the government debt securities are being traded on the Zimbabwe Stock Exchange in the same manner as other stocks. To provide for the management of public debt in Zimbabwe on a statutory basis, mainly foreign public debt, the public debt reforms included public sector financial reforms and the institutionalisation and operationalisation of a Debt Management Office, which is currently housed in the Ministry of Finance and Economic Development. The responsibilities of the Debt Office are among others, to ensure public debt database validation and reconciliation with all creditors and to provide for the raising, management and servicing of loans by the state The Public Management Act Amended (2015) further stipulates that the Debt Office shall (1) formulate and publish a Medium Term Debt Management Strategy, (2) formulate and publish an annual borrowing plan, which includes a borrowing limit, and (3) undertake an annual debt sustainability analyses (MOFED, 2012).In 2011, the GNU instituted several foreign policy shifts, intended at reducing the country’s foreign public debt overhang, by re-engaging with creditors and the global community. The intention of the new re engagement policy reform was to seek comprehensive debt relief initiatives, as well as opening up new lines of offshore financing.
USER:
Through the financial troubles and attempt to fix the economy, how much money has Zimbabwe raised through trading bonds explain in 7 to 10 sentences?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Carefully review the text below, then answer the question that follows. You should ONLY use information found in the included text to respond.
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What impact did the Norman Conquest have on Old and Middle English dialects and their conditions?
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1. Chapter One 1.1. Historical Background English as a separate and distinct entity appeared in the great Germanic century, but it was until the beginning of the seventh that the language defiantly emerged from the confusion and turmoil of the conquest of Britain and began to take its place among the modern tongues of Europe. If we take a look to the history of the British Isles, we find that it has been visited by many people from the European mainland and the visitors must have liked what they have found, because often the visits turned into invasions or attempted invasions Before the dawn of recorded history, the British Isles had been visited, overrun, and conquered by two separate groups of Celtic invaders, speaking tongues which were the remote ancestors of present-day Gaelic and Welsh. (Pei,1953:12) During the earlier part of the eleventh century, Edward, the son of Ethelred the Unready and of the daughter of a Norman duke, was being brought up in Normandy, and when he at last came to the throne in 1042 the influence of his upbringing naturally remained, and his friends and supporters were both spiritual and temporal French. This certainly prepared the way for the Norman Conquest. (Jespersen, 1955:105) The Normans adopted a northern dialect of Old French known as Anglo-Norman(Carpenter,2004:79-80), which they spoke with certain characteristics and it was this dialect which was carried into English in the eleventh century and which was developed there into a specific variety known as Anglo- Norman. 1.2. English Language before the coming of the Normans Before the Norman Conquest, the people of England spoke Old English or what was called Anglo-Saxon. This language was Germanic in vocabulary, with few borrowings. It had many declensions of substantives. There was one declension which formed its genitive singular in –es and its nominative plural in –as; and there were other declensions in which –a, -an, -e appear as endings for the genitive singular m and –a, -an, -e,-u for the nominative plural. Out of all these the –es and –as declension is the online that remains in general use. If we take a look to the case-endings in Old English ; we find that –es was the only one that meant anything other than a genitive singular and –as which only meant a nominative or accusative plural. Thus hanan stands for the genitive, dative, and accusative singular and the nominative and accusative plural of hana, a cock. So it is a popular error to suppose that it was in the consequence of the Norman Conquest that the –es and –as declension came to sup ride all the rest. In fact, the change began in the Northern dialect.( Bradley, 1955:35) It is estimated that in the field of vocabulary about 450 Latin words came into Old English before the Norman Conquest. This is a surprisingly large total to those who think of the Anglo-Saxon era as the period of pure Germanium in the language. It is those words that would normally have entered English from 1066 on, and it is clear that even without the French cultural importation, present-day English would not be altogether a simon-pure Germanic tongue. Just before the coming of the Normans, Old English was a deft blend of west Germanic and Scandinavian, with the former still predominating and respectable amount of Latin- Greek borrowings, about half of them of a religious nature. 2. Chapter two ?ً 2.1. what is the Norman Conquest.. The Norman Conquest is the invasion and conquering of the Normans to England in 1066.It began when William of Normandy invaded England and seized its throne. .2. The Roots of the Norman Conquest. 2 When William the Bastard, Duke of Normandy, descend of Rollo (leader of Norsemen) and son of a tanner's daughter , conceived the ambitious plan of making himself master of the great island beyond the sea, he did not minimize the difficulty of invasion . He knew that Anglo-Saxons and Danes had been forged into a united, and hardy race by the wise policies of Alfred and Cnut, and that the armies of his opponent Harold were strong. Historians estimate that of the vast host gathered by William for the invasion of England only one third of them were of native Normans. These men were land hungry. It was their expectations that in case of victory the lands of England would be wrested from their Anglo-Saxon owners and given to them. They were not disappointed for William kept his promises. When the Norman host disembarked at Hastings, Anglo-Saxon England was already carved up in advance a fact which Harold's men did not know. Being fresh from a victory , they won against the king of Norway, supported by Harold's brother. They may have thought that in case of defeat, their lot would be no worse than had been their ancestor's in the Danelagh. The Normans would be absorbed, Anglicized as to language and customs, and all would go on as before. In the final analysis, they were perhaps right. However, centuries had to elapse before this would come to pass.(Encyclopaedia Britanica,v.5:881-882) The Norman victory was complete, so was the conquest. For five years after the fateful day the Saxons thugs and earls were forcibly deprived of their lands and privileges by the insolent invaders, continued to rebel and resist, while William and his mercenaries raged through the land. After that the resistance died away. The Saxon nobility robbed in everything in favor of William's followers; sank suddenly to the level of their own peasantry, while the ancient free men of England, now undistinguished from the churls, turned into villains of the new seigneurs. Saxon England was laid low .Norman England had replaced it.(Campbell,1982:240) Yet Saxon England was not quite dead. The new court, clergy and nobility knew and spoke only French and Latin. However the subject population lived on and so did its language; a language now scorned for literary purposes as the language of an inferior race. (Pei, 1953:33) From what has been mentioned above, it is noticed that the Normans were looked at as an alien race; their occupation of the country attracted much more notice and lasted longer than that of the Danes; they become the ruling class. They represented a higher culture than that of the native and had a literature of their own . The Normans became the masters of England and they remained masters for a sufficiently long time to leave impress on the language. The conquerors would have been far less if they had not continued for centuries in actual contact with the French of France. After the conquest, the immigrants formed the upper class of the English society. The following classes of words show this fact: Words relating to government Crown, state, government, reign, realm, sovereign, authority, country, minister, chancellor, authority, parliament, people, nation . Words related to feudalism: Fief, feudal, vassal, liege . Words relating to steps in the scale of rank: Prince, peer, duke, marquis, viscount, baron . Words related to military affairs: War, peace, battle, arms, armour, buckler, mail, lance, officer, dart, lieutenant, sergeant, solider, troops, vessel, navy, admiral, enemy, danger, prison, siege, guard. Words related to law: 124 Justice, just, judge, court, suit, sue, plaintiff, defendant, plea, plead, cause, assize, fee, accuse, crime, traitor, damage, heritage, properly, penalty, injury, privilege, tenure . Words related to church: Religion, service, trinity, savior, virgin, angle, saint, abbey, cloister, friar, clergy, parish, baptism, sacrifice, orison, alter, sermon, preach, pray, prayer, feast . Words related to the pleasure of life: Joy, pleasure, delight, ease, comfort Some of the favorite pastimes were Chase, Cards and Dice, so we find many French words related to them, such as: Brace, couple, lease, falcon, quarry, warren, scent, track, partner, suit, trump Words related to dress: apparel, dress, costume, garment Words related to art: art, beauty, colour, image, design, figure, ornament The long list of words which is mentioned above indicates the fact that French was the rich, powerful, and refined class in the English society. Therefore, it was natural that the lower classes should soon begin to adopt such of the expressions of the rich as they could catch the meaning . 3. Chapter Three 3. 1. The Linguistic Effects of the Norman Conquest on English language The Norman Conquest of Britain has a number of linguistic effects on the language spoken in England at that time. Some of the results of these influences were the following: 1. Change in the conditions of dialects .The conquest placed all four Old English dialects more or less on a level. As such, West Saxon lost its supremacy and the center of culture and learning gradually shifted from Winchester to London. The Old Northumbrian dialect became divided into Scottish and Northern, although little is known of either of these divisions before the end of the 13th century. The Old Mercian dialect was split into East and West Midland. West Saxon became slightly diminished in area and was more appropriately named the South Western dialect. The Kentish dialect was considerably extended and was called South Eastern. All five Middle English dialects (Northern, West Midland, East Midland, South Western, and South Eastern) went their own ways and developed their own characteristics. 2. Change in the writing of English from the clear and easily readable in solar hand of Irish origin to the dialect Carolingian script then in use on the continent. 3. Change in spelling for the sake of clarity. Old English y becomes u, Ý as yi, u as ou (ow when final), u was often written o before and after m, n, u, w; and i was sometimes written y before and after m and n, ew was changed to qu; hw to wh; qu or quh to ch or tch; se to sh; cg to gg and ht to ght. Thus, for example, mycel(much) appeared as muchel; fyr(fire) as fuir; hus (house) as hous; hu(how) as how; snnu (son) as sone; him(him) as hym; cwen as queen; hwelet as what; quat (quart)as quhrt ; dic as ditch; scip as ship, sccage (siege) as segge; and miht as might. The Northern infinitive was already one syllable, whereas the past participle – en inflection of Old English was strictly kept. Old English mutated –ended in the present participle had already become –inde in late Southern and it was this inflection that blended with the –ing suffix of nouns of action that had already become near-gerunds in such compound nouns as athswearing (oath swearing)and writing feather (writing feather pen) The Northern 2nd person singular singis was inherited unchanged from common Germanic. The final t sound in Midland –est. and Southern –st was excrescent comparable with the final t in modern (admist) and (amongst) from older amides and amonges. The Northern 3rd person singular singis had quite different origin. Like the singis of the plural, it resulted almost casually from an inadvertent retraction of the tongue in enunciation from an interdental –th sound to postendal –s. Today the form (singeth) services as a poetic archaism Shakespeare used both –eth and –s endings (It "mercy"blesseth him that gives and him that takes) 3.1.1. The Changes in Sounds and stress which took place after the Norman Conquest French words which adopted in English suffered a great change in sounds; they have participated in all sound changes that have taken place in English since their adaptation. Thus, words with the long [i] sound have had it diphthongized into [ai], e.g. fine, price, lion. The long [u], written ou has become [au], e.g. Old French espouse pronounced /spuize/ now pronounce /spauze/ The English is unable to imitate the French accentuation, that's why there are a great many words now stressed on the final syllable. All English, it is said, had the stress on the final syllable, and this habit was unconsciously extended to foreign words on their first adoption into the language. In the plural, Old French had a nominative without any ending and an accusative in –s; and English popular instinct naturally associated the latter form with the native plural ending in –es. In course of time those words which had for a long time in English as in French formed their plural without any ending (e.g. case) were made to conform to the general rule (sg.case.cases) As to the verbs, the rule is that the stem of French present plural served as basis for the English form; thus (je survis), nouns survivor vous survives, ils survivent became survive ;( je resous), resolvous, etc.became resolve. After what is stated, and in order to prove the great impact the Norman Conquest had left on English, some of the French words with their synonyms in English should be mentioned and they are arranged chronically. A. The foreign words in the twelfth century can be classified as follows:ِa. . Words denoting person or rank:1 Abbat "abbot" canonic "canon" capelein "chaplain" cardinal "cardinal" cuntesse "countess" due "duke" emperice "empress" legat "legate" Ex: pehefde be Emperice in Alamanic & nu was cuntesse in Angou. "Who had been Empress of Germany and now was Countess of Anjou" Com an of Rome Henri was gehaten "a legate called Henry came from Rome" 2. words denoting finance: rent "rent" tresor "treasure" Ex: Wrothe on pe circe & sette parto landes& rentes (worked on the church and endowed it with lands and rents) 3. words denoting law and social relations: acorden "reconcill" justicse "justice" pais "peace" privilegie "privileges" 4. words denoting religion: carite "charity" miracle "miracle" nativite "nativity" procession"procession" 5. words denoting military: werre "war" werrien "to make war against" 6. words denoting nature: 128 Best "beast" Contre "country" Flum "river" Marbre "marble" Leun "lion" Oil "oil" Rose "rose" 7. Words denoting Household and other things: Basi "basin" Coup "cup" Furneis "furnace" Lamp "lamp" 8. words denoting physical action and appearance: Cachen "catch" Changen "change" Chere "face, appearance" Savour "savour" 9. Words denoting moral and Intellectual Clergie "science" Craviant "defeated" Deol "sorrow" Dout "doubt, fear" Fausien "fail" Gin "device" Meistrie "mastery" Reisun "reason" B.some of the French words `during the period between 1200-1250: 1. words denoting person: Ame "friend" Baban "baby" Baptist "Baptist" Kunseiler "councilor" Messager "messenger" Nurice "nurse" Prison "prisoner" 2. words denoting finance: Cwile "quit" Spense "expense" 3. words denoting buildings: Celere "cellar" Cite "city" Knuent "convent" Genere "granary" Tur "tower" 4. words denoting law and social relations: 129 Baundun "power " Crune "villiaains" Juggen "judge" Noces "marriage" Trone "throne" 5. Words denoting religion Calize "chalice" Canoniicl "canonical" Creoisem "to make the sign of the cross on" Eresi "heresy" Feste "festival" Grace "grace" Parais "Paradise" 6. Words denoting military Baret "strife" Calenge "challenge" Gunfanenr "standard bearer" Skirmen "fight" Turnement "tournament" 7. words denoting nature: Bame "balm" Carbin "raven" Cou de gilofre "clove" Gingiuere "ginger" Flur "flour" Fluren "to flower" Licur "liquor" 8. words denoting clothes: Abit "habbit" Atiffen "adorn" Broche "brooch" 9. words denoting household: Beaabelet "jewel" Buste "box" Cage "cage" Chetel "chattels" Crèche "crib" Scorge "scourge" Trufle "trifle" 10. words denoting physical action: Aboutien "lean out" Aspien "spy on" Babelinde "chattering" Buffeten "to buffet" Disturben "disturb" Recoilen "to drive back" Rute "road" 11 . Words denoting moral and Intellectual: Anui "worry" Asprete "bitterness" Comfort "comfort" Kunscence "consciousness" Contumace "contumacy" Creaunt "craven" Debonere "gentle" Deinte "dignity" Delit "delight" Noblesce "nobility" Mesure "moderation" Largesse "generosity" Pacience "pacience" 12. words denoting mental action: Affaiten "dispose" Akointed "acquainted" Asaumple "example" Attente "endeavour" Bisamplen "to moralize" Counsail "advice" Defaut "fault" Paien "please" Preach "preach" Preisen "to praise" Scandle "scandal" C. the French words during the period between 1250-1300 1. words denoting person: Barun "barun" Caynard "eascal" Chanoun "clerk" dam "sir" Sergauuz "sergents" 2. words denoting law and social relations: Eir "heir" Eritage "heritage" Per "peer" Warrant "surely" 3. words denoting religion: Aungel "angel" Auter "alter" Beneisun "benison" 131 Malison "malison" Croize "cross" Preie "pray" 4. words denoting military: Baret "strife" Gisarm "sword" Skriming "large shield" 5. words denoting nature: Bise "beast" Runic "horse" Laumprei "lamprey" Flour "flower" 6. words denoting clothes: Charbuole "carbuncle" Ioupe "losse jacket" 7. Physical action: Aise "ease" Bout "throw" Croune "crown" Couere "recover" Fyn "end" Sane "safe" 8. words denoting food: Broys "broth" Clare "claret" Pastees "sweet special wine" Simenels "bread of fine flour" Super "supper" Ueneysun "venison" 9. Moral and Intellectual: Anuicu "to worry" Chiche "mean" Conseyl "counsel" Faith "faith" Fey "felong" Fol "foolish" Gent "noble" Atendre "tender" 3.2. Was the French influence restricted to one period? The French influence was not restricted to one particular period, and it is interesting to compare the forms of old loan-words with these of recent ones, in which we can recognize traces of the changes the French language has undergone since medieval times, where a ch in an originally French word is pronounced as in change, chaunt, etc;(with the sound /ts/) where it is sounded as in champagne (with simple /s/), we have a recent loan. The word chief is thus shown to belong to the first period, while its doublet chef (=chef de cuisine) is much more modern. It is curious that two pet-names should now be spelled in the same way, Charlie, although they are distinct in pronunciation: the masculine is derived from the old loan Charles and has, therefore, the, the sound [t ] .the feminine is from the recent loan Charlotte with [ ], but they have all of them the same initial sound. Other examples of the same French word appearing in more than one shape according to its age in English are Saloon and salon, suit and suit, liquor and liqueur, rout and route ;the diphthong in the former word is an English development of long[u], quart, pronounced [kw t], and quart, pronounced [kw t] pronounced [k t],"a sequence of four cards in pique," also quarte or carte in fencing. In early middle English, words were borrowed from French containing the sound-group ch [t ](as in English child),e.g. chief, chivalry, duchess, chase ,torch; and [d ](as in gem),e.g. judge (both constants) just, journey, large; these consonant-groups became respectively [ ]and[ ]in later French. Initially,however,[ ] is not found in English without a proposed [d]; thus gentle, genteel, and jaunty represent three larges of the borrowing from the same word. 3.3. How did common people manage to learn so many foreign words? And how far did they assimilate them? We expect to find many changes carried out in the French words after their adoption in order to be easy to learn. In few cases the process of assimilation was facilitate by the fact that a French word happened to resemble an old native one and this is exemplified by the following: The old native verb choose was supplemented with the noun choice, from French choix. Old English hergian and Old French herir run together in Middle English harry. Old English hege and French haie run together in hay "hedge,fence". The word nevew (now spelled nephew)recalled Old English nefa, menege recalled Old English meniegeo. It is important to understand that the French words which were brought into English represent two different dialects. The form of the French language which obtained currency in England as the immediate consequence of the Norman Conquest was the northern dialect-the speech of Normandy and Picardy. But with the accession of the Angevine dynasty in the middle of the twelfth century the dialect of Central France became the language of the court and of the fashionable society. The two dialects differed considerably in pronunciation: for instance, Northern French had [k ]where Central French had [ch] and [ch] where Central French had [s]. One consequence of the two –fold character of the French spoken in England was that very often the same French word was adopted into English twice over, in two different forms and with meanings more or less different. Thus we have in modern English the words catch, warden, launch, wage, which came from Norman French and alongside them there are chase ,guardian ,lance, gage, which represent the same words as pronounced in French The vocabulary of language after the conquest has been enriched by a multitude of new derivation formed with the prefixes and suffixes that already existed in Old English. The native machinery of derivation is no longer found sufficient for the necessities of the language and has been largely supplemented by additions obtained from other languages. The adoption of foreign formative machinery has been rendered possible by the fact that many Latin and French primitive words have been taken English along with their derivations, formed with French or Latin suffixes. Therefore, when such pairs of words as derive and derivation, esteem and estimation, laud and laudation have found their way into the English vocabulary, it is natural that the suffixation should be recognized by English speakers as an allowable means of making "nouns of action" out of verbs. This suffix supplied a real want because the only native means of forming nouns of action was the suffix –ing, which was not quite definite enough in meaning. Many French suffixes, such as –age, -al (as used in withdrawal, upheaval, betrothal);-ment, and -able which have no thing corresponding to them in English have been extensively used in the formation of English derivations.(Henry,1955:86). 3.4. Did the influence of the Norman Conquest continue with the same degree of effect as when it first began? The influence of the Normans did not continue to be as strong as when it first began. So it is naturally expected to find that the French as a second language faced some retreat. The dawn of the 13th century found a trilingual England in which French, Latin, and English live side by side ,each used for a different purpose and with a different function. The first was the literary and courtly tongue, the second was the church and legal documents tongue and the third was the common intercourse tongue. With the loss of Normandy by King John in 1204 (Pei, 1953:44), the English language received the mighty Philip. It is conceivable that up to that time many of England's new landed gentry thought of Normandy as "home" and of England as a colonial possession in which they held their major domains. Now there was no longer a "home "for them, except England. By the time of Edward I, all Englishmen, whether of Saxon or Norman descent, were united ,and in 1295 the king of England charged the French kings ,among other crimes, with wanting to wipe out the English tongue. So it is by the end of the 13th century that French had become almost a foreign tongue in England, though it was gaining influence and prestige on the continent to such an extent that German barons had it taught to their children. However, as far as England was concerned, French was beginning to be taught out of manuals as a cultural tongue and even the children of nobility learned it as a foreign language. It was the Hindered Year's War with its bitter animosity against the French., and the black Death of 1349-1350,which lead to rise in the importance of the laboring classes and their tongue, that gave the death blow to French in England. In 1349 English was reinstated in the schools; in 1362 Parliament forbade the use of French in law courts, on the ground that "French is much unknown". By 1385 English had penetrated the scared precincts of the universities, with John Cornwall and Richard Pencrich leading it at Oxford. By the time of Henry V (1413) English was the official language at the court.
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Carefully review the text below, then answer the question that follows. You should ONLY use information found in the included text to respond. What impact did the Norman Conquest have on Old and Middle English dialects and their conditions? 1. Chapter One 1.1. Historical Background English as a separate and distinct entity appeared in the great Germanic century, but it was until the beginning of the seventh that the language defiantly emerged from the confusion and turmoil of the conquest of Britain and began to take its place among the modern tongues of Europe. If we take a look to the history of the British Isles, we find that it has been visited by many people from the European mainland and the visitors must have liked what they have found, because often the visits turned into invasions or attempted invasions Before the dawn of recorded history, the British Isles had been visited, overrun, and conquered by two separate groups of Celtic invaders, speaking tongues which were the remote ancestors of present-day Gaelic and Welsh. (Pei,1953:12) During the earlier part of the eleventh century, Edward, the son of Ethelred the Unready and of the daughter of a Norman duke, was being brought up in Normandy, and when he at last came to the throne in 1042 the influence of his upbringing naturally remained, and his friends and supporters were both spiritual and temporal French. This certainly prepared the way for the Norman Conquest. (Jespersen, 1955:105) The Normans adopted a northern dialect of Old French known as Anglo-Norman(Carpenter,2004:79-80), which they spoke with certain characteristics and it was this dialect which was carried into English in the eleventh century and which was developed there into a specific variety known as Anglo- Norman. 1.2. English Language before the coming of the Normans Before the Norman Conquest, the people of England spoke Old English or what was called Anglo-Saxon. This language was Germanic in vocabulary, with few borrowings. It had many declensions of substantives. There was one declension which formed its genitive singular in –es and its nominative plural in –as; and there were other declensions in which –a, -an, -e appear as endings for the genitive singular m and –a, -an, -e,-u for the nominative plural. Out of all these the –es and –as declension is the online that remains in general use. If we take a look to the case-endings in Old English ; we find that –es was the only one that meant anything other than a genitive singular and –as which only meant a nominative or accusative plural. Thus hanan stands for the genitive, dative, and accusative singular and the nominative and accusative plural of hana, a cock. So it is a popular error to suppose that it was in the consequence of the Norman Conquest that the –es and –as declension came to sup ride all the rest. In fact, the change began in the Northern dialect.( Bradley, 1955:35) It is estimated that in the field of vocabulary about 450 Latin words came into Old English before the Norman Conquest. This is a surprisingly large total to those who think of the Anglo-Saxon era as the period of pure Germanium in the language. It is those words that would normally have entered English from 1066 on, and it is clear that even without the French cultural importation, present-day English would not be altogether a simon-pure Germanic tongue. Just before the coming of the Normans, Old English was a deft blend of west Germanic and Scandinavian, with the former still predominating and respectable amount of Latin- Greek borrowings, about half of them of a religious nature. 2. Chapter two ?ً 2.1. what is the Norman Conquest.. The Norman Conquest is the invasion and conquering of the Normans to England in 1066.It began when William of Normandy invaded England and seized its throne. .2. The Roots of the Norman Conquest. 2 When William the Bastard, Duke of Normandy, descend of Rollo (leader of Norsemen) and son of a tanner's daughter , conceived the ambitious plan of making himself master of the great island beyond the sea, he did not minimize the difficulty of invasion . He knew that Anglo-Saxons and Danes had been forged into a united, and hardy race by the wise policies of Alfred and Cnut, and that the armies of his opponent Harold were strong. Historians estimate that of the vast host gathered by William for the invasion of England only one third of them were of native Normans. These men were land hungry. It was their expectations that in case of victory the lands of England would be wrested from their Anglo-Saxon owners and given to them. They were not disappointed for William kept his promises. When the Norman host disembarked at Hastings, Anglo-Saxon England was already carved up in advance a fact which Harold's men did not know. Being fresh from a victory , they won against the king of Norway, supported by Harold's brother. They may have thought that in case of defeat, their lot would be no worse than had been their ancestor's in the Danelagh. The Normans would be absorbed, Anglicized as to language and customs, and all would go on as before. In the final analysis, they were perhaps right. However, centuries had to elapse before this would come to pass.(Encyclopaedia Britanica,v.5:881-882) The Norman victory was complete, so was the conquest. For five years after the fateful day the Saxons thugs and earls were forcibly deprived of their lands and privileges by the insolent invaders, continued to rebel and resist, while William and his mercenaries raged through the land. After that the resistance died away. The Saxon nobility robbed in everything in favor of William's followers; sank suddenly to the level of their own peasantry, while the ancient free men of England, now undistinguished from the churls, turned into villains of the new seigneurs. Saxon England was laid low .Norman England had replaced it.(Campbell,1982:240) Yet Saxon England was not quite dead. The new court, clergy and nobility knew and spoke only French and Latin. However the subject population lived on and so did its language; a language now scorned for literary purposes as the language of an inferior race. (Pei, 1953:33) From what has been mentioned above, it is noticed that the Normans were looked at as an alien race; their occupation of the country attracted much more notice and lasted longer than that of the Danes; they become the ruling class. They represented a higher culture than that of the native and had a literature of their own . The Normans became the masters of England and they remained masters for a sufficiently long time to leave impress on the language. The conquerors would have been far less if they had not continued for centuries in actual contact with the French of France. After the conquest, the immigrants formed the upper class of the English society. The following classes of words show this fact: Words relating to government Crown, state, government, reign, realm, sovereign, authority, country, minister, chancellor, authority, parliament, people, nation . Words related to feudalism: Fief, feudal, vassal, liege . Words relating to steps in the scale of rank: Prince, peer, duke, marquis, viscount, baron . Words related to military affairs: War, peace, battle, arms, armour, buckler, mail, lance, officer, dart, lieutenant, sergeant, solider, troops, vessel, navy, admiral, enemy, danger, prison, siege, guard. Words related to law: 124 Justice, just, judge, court, suit, sue, plaintiff, defendant, plea, plead, cause, assize, fee, accuse, crime, traitor, damage, heritage, properly, penalty, injury, privilege, tenure . Words related to church: Religion, service, trinity, savior, virgin, angle, saint, abbey, cloister, friar, clergy, parish, baptism, sacrifice, orison, alter, sermon, preach, pray, prayer, feast . Words related to the pleasure of life: Joy, pleasure, delight, ease, comfort Some of the favorite pastimes were Chase, Cards and Dice, so we find many French words related to them, such as: Brace, couple, lease, falcon, quarry, warren, scent, track, partner, suit, trump Words related to dress: apparel, dress, costume, garment Words related to art: art, beauty, colour, image, design, figure, ornament The long list of words which is mentioned above indicates the fact that French was the rich, powerful, and refined class in the English society. Therefore, it was natural that the lower classes should soon begin to adopt such of the expressions of the rich as they could catch the meaning . 3. Chapter Three 3. 1. The Linguistic Effects of the Norman Conquest on English language The Norman Conquest of Britain has a number of linguistic effects on the language spoken in England at that time. Some of the results of these influences were the following: 1. Change in the conditions of dialects .The conquest placed all four Old English dialects more or less on a level. As such, West Saxon lost its supremacy and the center of culture and learning gradually shifted from Winchester to London. The Old Northumbrian dialect became divided into Scottish and Northern, although little is known of either of these divisions before the end of the 13th century. The Old Mercian dialect was split into East and West Midland. West Saxon became slightly diminished in area and was more appropriately named the South Western dialect. The Kentish dialect was considerably extended and was called South Eastern. All five Middle English dialects (Northern, West Midland, East Midland, South Western, and South Eastern) went their own ways and developed their own characteristics. 2. Change in the writing of English from the clear and easily readable in solar hand of Irish origin to the dialect Carolingian script then in use on the continent. 3. Change in spelling for the sake of clarity. Old English y becomes u, Ý as yi, u as ou (ow when final), u was often written o before and after m, n, u, w; and i was sometimes written y before and after m and n, ew was changed to qu; hw to wh; qu or quh to ch or tch; se to sh; cg to gg and ht to ght. Thus, for example, mycel(much) appeared as muchel; fyr(fire) as fuir; hus (house) as hous; hu(how) as how; snnu (son) as sone; him(him) as hym; cwen as queen; hwelet as what; quat (quart)as quhrt ; dic as ditch; scip as ship, sccage (siege) as segge; and miht as might. The Northern infinitive was already one syllable, whereas the past participle – en inflection of Old English was strictly kept. Old English mutated –ended in the present participle had already become –inde in late Southern and it was this inflection that blended with the –ing suffix of nouns of action that had already become near-gerunds in such compound nouns as athswearing (oath swearing)and writing feather (writing feather pen) The Northern 2nd person singular singis was inherited unchanged from common Germanic. The final t sound in Midland –est. and Southern –st was excrescent comparable with the final t in modern (admist) and (amongst) from older amides and amonges. The Northern 3rd person singular singis had quite different origin. Like the singis of the plural, it resulted almost casually from an inadvertent retraction of the tongue in enunciation from an interdental –th sound to postendal –s. Today the form (singeth) services as a poetic archaism Shakespeare used both –eth and –s endings (It "mercy"blesseth him that gives and him that takes) 3.1.1. The Changes in Sounds and stress which took place after the Norman Conquest French words which adopted in English suffered a great change in sounds; they have participated in all sound changes that have taken place in English since their adaptation. Thus, words with the long [i] sound have had it diphthongized into [ai], e.g. fine, price, lion. The long [u], written ou has become [au], e.g. Old French espouse pronounced /spuize/ now pronounce /spauze/ The English is unable to imitate the French accentuation, that's why there are a great many words now stressed on the final syllable. All English, it is said, had the stress on the final syllable, and this habit was unconsciously extended to foreign words on their first adoption into the language. In the plural, Old French had a nominative without any ending and an accusative in –s; and English popular instinct naturally associated the latter form with the native plural ending in –es. In course of time those words which had for a long time in English as in French formed their plural without any ending (e.g. case) were made to conform to the general rule (sg.case.cases) As to the verbs, the rule is that the stem of French present plural served as basis for the English form; thus (je survis), nouns survivor vous survives, ils survivent became survive ;( je resous), resolvous, etc.became resolve. After what is stated, and in order to prove the great impact the Norman Conquest had left on English, some of the French words with their synonyms in English should be mentioned and they are arranged chronically. A. The foreign words in the twelfth century can be classified as follows:ِa. . Words denoting person or rank:1 Abbat "abbot" canonic "canon" capelein "chaplain" cardinal "cardinal" cuntesse "countess" due "duke" emperice "empress" legat "legate" Ex: pehefde be Emperice in Alamanic & nu was cuntesse in Angou. "Who had been Empress of Germany and now was Countess of Anjou" Com an of Rome Henri was gehaten "a legate called Henry came from Rome" 2. words denoting finance: rent "rent" tresor "treasure" Ex: Wrothe on pe circe & sette parto landes& rentes (worked on the church and endowed it with lands and rents) 3. words denoting law and social relations: acorden "reconcill" justicse "justice" pais "peace" privilegie "privileges" 4. words denoting religion: carite "charity" miracle "miracle" nativite "nativity" procession"procession" 5. words denoting military: werre "war" werrien "to make war against" 6. words denoting nature: 128 Best "beast" Contre "country" Flum "river" Marbre "marble" Leun "lion" Oil "oil" Rose "rose" 7. Words denoting Household and other things: Basi "basin" Coup "cup" Furneis "furnace" Lamp "lamp" 8. words denoting physical action and appearance: Cachen "catch" Changen "change" Chere "face, appearance" Savour "savour" 9. Words denoting moral and Intellectual Clergie "science" Craviant "defeated" Deol "sorrow" Dout "doubt, fear" Fausien "fail" Gin "device" Meistrie "mastery" Reisun "reason" B.some of the French words `during the period between 1200-1250: 1. words denoting person: Ame "friend" Baban "baby" Baptist "Baptist" Kunseiler "councilor" Messager "messenger" Nurice "nurse" Prison "prisoner" 2. words denoting finance: Cwile "quit" Spense "expense" 3. words denoting buildings: Celere "cellar" Cite "city" Knuent "convent" Genere "granary" Tur "tower" 4. words denoting law and social relations: 129 Baundun "power " Crune "villiaains" Juggen "judge" Noces "marriage" Trone "throne" 5. Words denoting religion Calize "chalice" Canoniicl "canonical" Creoisem "to make the sign of the cross on" Eresi "heresy" Feste "festival" Grace "grace" Parais "Paradise" 6. Words denoting military Baret "strife" Calenge "challenge" Gunfanenr "standard bearer" Skirmen "fight" Turnement "tournament" 7. words denoting nature: Bame "balm" Carbin "raven" Cou de gilofre "clove" Gingiuere "ginger" Flur "flour" Fluren "to flower" Licur "liquor" 8. words denoting clothes: Abit "habbit" Atiffen "adorn" Broche "brooch" 9. words denoting household: Beaabelet "jewel" Buste "box" Cage "cage" Chetel "chattels" Crèche "crib" Scorge "scourge" Trufle "trifle" 10. words denoting physical action: Aboutien "lean out" Aspien "spy on" Babelinde "chattering" Buffeten "to buffet" Disturben "disturb" Recoilen "to drive back" Rute "road" 11 . Words denoting moral and Intellectual: Anui "worry" Asprete "bitterness" Comfort "comfort" Kunscence "consciousness" Contumace "contumacy" Creaunt "craven" Debonere "gentle" Deinte "dignity" Delit "delight" Noblesce "nobility" Mesure "moderation" Largesse "generosity" Pacience "pacience" 12. words denoting mental action: Affaiten "dispose" Akointed "acquainted" Asaumple "example" Attente "endeavour" Bisamplen "to moralize" Counsail "advice" Defaut "fault" Paien "please" Preach "preach" Preisen "to praise" Scandle "scandal" C. the French words during the period between 1250-1300 1. words denoting person: Barun "barun" Caynard "eascal" Chanoun "clerk" dam "sir" Sergauuz "sergents" 2. words denoting law and social relations: Eir "heir" Eritage "heritage" Per "peer" Warrant "surely" 3. words denoting religion: Aungel "angel" Auter "alter" Beneisun "benison" 131 Malison "malison" Croize "cross" Preie "pray" 4. words denoting military: Baret "strife" Gisarm "sword" Skriming "large shield" 5. words denoting nature: Bise "beast" Runic "horse" Laumprei "lamprey" Flour "flower" 6. words denoting clothes: Charbuole "carbuncle" Ioupe "losse jacket" 7. Physical action: Aise "ease" Bout "throw" Croune "crown" Couere "recover" Fyn "end" Sane "safe" 8. words denoting food: Broys "broth" Clare "claret" Pastees "sweet special wine" Simenels "bread of fine flour" Super "supper" Ueneysun "venison" 9. Moral and Intellectual: Anuicu "to worry" Chiche "mean" Conseyl "counsel" Faith "faith" Fey "felong" Fol "foolish" Gent "noble" Atendre "tender" 3.2. Was the French influence restricted to one period? The French influence was not restricted to one particular period, and it is interesting to compare the forms of old loan-words with these of recent ones, in which we can recognize traces of the changes the French language has undergone since medieval times, where a ch in an originally French word is pronounced as in change, chaunt, etc;(with the sound /ts/) where it is sounded as in champagne (with simple /s/), we have a recent loan. The word chief is thus shown to belong to the first period, while its doublet chef (=chef de cuisine) is much more modern. It is curious that two pet-names should now be spelled in the same way, Charlie, although they are distinct in pronunciation: the masculine is derived from the old loan Charles and has, therefore, the, the sound [t ] .the feminine is from the recent loan Charlotte with [ ], but they have all of them the same initial sound. Other examples of the same French word appearing in more than one shape according to its age in English are Saloon and salon, suit and suit, liquor and liqueur, rout and route ;the diphthong in the former word is an English development of long[u], quart, pronounced [kw t], and quart, pronounced [kw t] pronounced [k t],"a sequence of four cards in pique," also quarte or carte in fencing. In early middle English, words were borrowed from French containing the sound-group ch [t ](as in English child),e.g. chief, chivalry, duchess, chase ,torch; and [d ](as in gem),e.g. judge (both constants) just, journey, large; these consonant-groups became respectively [ ]and[ ]in later French. Initially,however,[ ] is not found in English without a proposed [d]; thus gentle, genteel, and jaunty represent three larges of the borrowing from the same word. 3.3. How did common people manage to learn so many foreign words? And how far did they assimilate them? We expect to find many changes carried out in the French words after their adoption in order to be easy to learn. In few cases the process of assimilation was facilitate by the fact that a French word happened to resemble an old native one and this is exemplified by the following: The old native verb choose was supplemented with the noun choice, from French choix. Old English hergian and Old French herir run together in Middle English harry. Old English hege and French haie run together in hay "hedge,fence". The word nevew (now spelled nephew)recalled Old English nefa, menege recalled Old English meniegeo. It is important to understand that the French words which were brought into English represent two different dialects. The form of the French language which obtained currency in England as the immediate consequence of the Norman Conquest was the northern dialect-the speech of Normandy and Picardy. But with the accession of the Angevine dynasty in the middle of the twelfth century the dialect of Central France became the language of the court and of the fashionable society. The two dialects differed considerably in pronunciation: for instance, Northern French had [k ]where Central French had [ch] and [ch] where Central French had [s]. One consequence of the two –fold character of the French spoken in England was that very often the same French word was adopted into English twice over, in two different forms and with meanings more or less different. Thus we have in modern English the words catch, warden, launch, wage, which came from Norman French and alongside them there are chase ,guardian ,lance, gage, which represent the same words as pronounced in French The vocabulary of language after the conquest has been enriched by a multitude of new derivation formed with the prefixes and suffixes that already existed in Old English. The native machinery of derivation is no longer found sufficient for the necessities of the language and has been largely supplemented by additions obtained from other languages. The adoption of foreign formative machinery has been rendered possible by the fact that many Latin and French primitive words have been taken English along with their derivations, formed with French or Latin suffixes. Therefore, when such pairs of words as derive and derivation, esteem and estimation, laud and laudation have found their way into the English vocabulary, it is natural that the suffixation should be recognized by English speakers as an allowable means of making "nouns of action" out of verbs. This suffix supplied a real want because the only native means of forming nouns of action was the suffix –ing, which was not quite definite enough in meaning. Many French suffixes, such as –age, -al (as used in withdrawal, upheaval, betrothal);-ment, and -able which have no thing corresponding to them in English have been extensively used in the formation of English derivations.(Henry,1955:86). 3.4. Did the influence of the Norman Conquest continue with the same degree of effect as when it first began? The influence of the Normans did not continue to be as strong as when it first began. So it is naturally expected to find that the French as a second language faced some retreat. The dawn of the 13th century found a trilingual England in which French, Latin, and English live side by side ,each used for a different purpose and with a different function. The first was the literary and courtly tongue, the second was the church and legal documents tongue and the third was the common intercourse tongue. With the loss of Normandy by King John in 1204 (Pei, 1953:44), the English language received the mighty Philip. It is conceivable that up to that time many of England's new landed gentry thought of Normandy as "home" and of England as a colonial possession in which they held their major domains. Now there was no longer a "home "for them, except England. By the time of Edward I, all Englishmen, whether of Saxon or Norman descent, were united ,and in 1295 the king of England charged the French kings ,among other crimes, with wanting to wipe out the English tongue. So it is by the end of the 13th century that French had become almost a foreign tongue in England, though it was gaining influence and prestige on the continent to such an extent that German barons had it taught to their children. However, as far as England was concerned, French was beginning to be taught out of manuals as a cultural tongue and even the children of nobility learned it as a foreign language. It was the Hindered Year's War with its bitter animosity against the French., and the black Death of 1349-1350,which lead to rise in the importance of the laboring classes and their tongue, that gave the death blow to French in England. In 1349 English was reinstated in the schools; in 1362 Parliament forbade the use of French in law courts, on the ground that "French is much unknown". By 1385 English had penetrated the scared precincts of the universities, with John Cornwall and Richard Pencrich leading it at Oxford. By the time of Henry V (1413) English was the official language at the court.
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Carefully review the text below, then answer the question that follows. You should ONLY use information found in the included text to respond.
EVIDENCE:
1. Chapter One 1.1. Historical Background English as a separate and distinct entity appeared in the great Germanic century, but it was until the beginning of the seventh that the language defiantly emerged from the confusion and turmoil of the conquest of Britain and began to take its place among the modern tongues of Europe. If we take a look to the history of the British Isles, we find that it has been visited by many people from the European mainland and the visitors must have liked what they have found, because often the visits turned into invasions or attempted invasions Before the dawn of recorded history, the British Isles had been visited, overrun, and conquered by two separate groups of Celtic invaders, speaking tongues which were the remote ancestors of present-day Gaelic and Welsh. (Pei,1953:12) During the earlier part of the eleventh century, Edward, the son of Ethelred the Unready and of the daughter of a Norman duke, was being brought up in Normandy, and when he at last came to the throne in 1042 the influence of his upbringing naturally remained, and his friends and supporters were both spiritual and temporal French. This certainly prepared the way for the Norman Conquest. (Jespersen, 1955:105) The Normans adopted a northern dialect of Old French known as Anglo-Norman(Carpenter,2004:79-80), which they spoke with certain characteristics and it was this dialect which was carried into English in the eleventh century and which was developed there into a specific variety known as Anglo- Norman. 1.2. English Language before the coming of the Normans Before the Norman Conquest, the people of England spoke Old English or what was called Anglo-Saxon. This language was Germanic in vocabulary, with few borrowings. It had many declensions of substantives. There was one declension which formed its genitive singular in –es and its nominative plural in –as; and there were other declensions in which –a, -an, -e appear as endings for the genitive singular m and –a, -an, -e,-u for the nominative plural. Out of all these the –es and –as declension is the online that remains in general use. If we take a look to the case-endings in Old English ; we find that –es was the only one that meant anything other than a genitive singular and –as which only meant a nominative or accusative plural. Thus hanan stands for the genitive, dative, and accusative singular and the nominative and accusative plural of hana, a cock. So it is a popular error to suppose that it was in the consequence of the Norman Conquest that the –es and –as declension came to sup ride all the rest. In fact, the change began in the Northern dialect.( Bradley, 1955:35) It is estimated that in the field of vocabulary about 450 Latin words came into Old English before the Norman Conquest. This is a surprisingly large total to those who think of the Anglo-Saxon era as the period of pure Germanium in the language. It is those words that would normally have entered English from 1066 on, and it is clear that even without the French cultural importation, present-day English would not be altogether a simon-pure Germanic tongue. Just before the coming of the Normans, Old English was a deft blend of west Germanic and Scandinavian, with the former still predominating and respectable amount of Latin- Greek borrowings, about half of them of a religious nature. 2. Chapter two ?ً 2.1. what is the Norman Conquest.. The Norman Conquest is the invasion and conquering of the Normans to England in 1066.It began when William of Normandy invaded England and seized its throne. .2. The Roots of the Norman Conquest. 2 When William the Bastard, Duke of Normandy, descend of Rollo (leader of Norsemen) and son of a tanner's daughter , conceived the ambitious plan of making himself master of the great island beyond the sea, he did not minimize the difficulty of invasion . He knew that Anglo-Saxons and Danes had been forged into a united, and hardy race by the wise policies of Alfred and Cnut, and that the armies of his opponent Harold were strong. Historians estimate that of the vast host gathered by William for the invasion of England only one third of them were of native Normans. These men were land hungry. It was their expectations that in case of victory the lands of England would be wrested from their Anglo-Saxon owners and given to them. They were not disappointed for William kept his promises. When the Norman host disembarked at Hastings, Anglo-Saxon England was already carved up in advance a fact which Harold's men did not know. Being fresh from a victory , they won against the king of Norway, supported by Harold's brother. They may have thought that in case of defeat, their lot would be no worse than had been their ancestor's in the Danelagh. The Normans would be absorbed, Anglicized as to language and customs, and all would go on as before. In the final analysis, they were perhaps right. However, centuries had to elapse before this would come to pass.(Encyclopaedia Britanica,v.5:881-882) The Norman victory was complete, so was the conquest. For five years after the fateful day the Saxons thugs and earls were forcibly deprived of their lands and privileges by the insolent invaders, continued to rebel and resist, while William and his mercenaries raged through the land. After that the resistance died away. The Saxon nobility robbed in everything in favor of William's followers; sank suddenly to the level of their own peasantry, while the ancient free men of England, now undistinguished from the churls, turned into villains of the new seigneurs. Saxon England was laid low .Norman England had replaced it.(Campbell,1982:240) Yet Saxon England was not quite dead. The new court, clergy and nobility knew and spoke only French and Latin. However the subject population lived on and so did its language; a language now scorned for literary purposes as the language of an inferior race. (Pei, 1953:33) From what has been mentioned above, it is noticed that the Normans were looked at as an alien race; their occupation of the country attracted much more notice and lasted longer than that of the Danes; they become the ruling class. They represented a higher culture than that of the native and had a literature of their own . The Normans became the masters of England and they remained masters for a sufficiently long time to leave impress on the language. The conquerors would have been far less if they had not continued for centuries in actual contact with the French of France. After the conquest, the immigrants formed the upper class of the English society. The following classes of words show this fact: Words relating to government Crown, state, government, reign, realm, sovereign, authority, country, minister, chancellor, authority, parliament, people, nation . Words related to feudalism: Fief, feudal, vassal, liege . Words relating to steps in the scale of rank: Prince, peer, duke, marquis, viscount, baron . Words related to military affairs: War, peace, battle, arms, armour, buckler, mail, lance, officer, dart, lieutenant, sergeant, solider, troops, vessel, navy, admiral, enemy, danger, prison, siege, guard. Words related to law: 124 Justice, just, judge, court, suit, sue, plaintiff, defendant, plea, plead, cause, assize, fee, accuse, crime, traitor, damage, heritage, properly, penalty, injury, privilege, tenure . Words related to church: Religion, service, trinity, savior, virgin, angle, saint, abbey, cloister, friar, clergy, parish, baptism, sacrifice, orison, alter, sermon, preach, pray, prayer, feast . Words related to the pleasure of life: Joy, pleasure, delight, ease, comfort Some of the favorite pastimes were Chase, Cards and Dice, so we find many French words related to them, such as: Brace, couple, lease, falcon, quarry, warren, scent, track, partner, suit, trump Words related to dress: apparel, dress, costume, garment Words related to art: art, beauty, colour, image, design, figure, ornament The long list of words which is mentioned above indicates the fact that French was the rich, powerful, and refined class in the English society. Therefore, it was natural that the lower classes should soon begin to adopt such of the expressions of the rich as they could catch the meaning . 3. Chapter Three 3. 1. The Linguistic Effects of the Norman Conquest on English language The Norman Conquest of Britain has a number of linguistic effects on the language spoken in England at that time. Some of the results of these influences were the following: 1. Change in the conditions of dialects .The conquest placed all four Old English dialects more or less on a level. As such, West Saxon lost its supremacy and the center of culture and learning gradually shifted from Winchester to London. The Old Northumbrian dialect became divided into Scottish and Northern, although little is known of either of these divisions before the end of the 13th century. The Old Mercian dialect was split into East and West Midland. West Saxon became slightly diminished in area and was more appropriately named the South Western dialect. The Kentish dialect was considerably extended and was called South Eastern. All five Middle English dialects (Northern, West Midland, East Midland, South Western, and South Eastern) went their own ways and developed their own characteristics. 2. Change in the writing of English from the clear and easily readable in solar hand of Irish origin to the dialect Carolingian script then in use on the continent. 3. Change in spelling for the sake of clarity. Old English y becomes u, Ý as yi, u as ou (ow when final), u was often written o before and after m, n, u, w; and i was sometimes written y before and after m and n, ew was changed to qu; hw to wh; qu or quh to ch or tch; se to sh; cg to gg and ht to ght. Thus, for example, mycel(much) appeared as muchel; fyr(fire) as fuir; hus (house) as hous; hu(how) as how; snnu (son) as sone; him(him) as hym; cwen as queen; hwelet as what; quat (quart)as quhrt ; dic as ditch; scip as ship, sccage (siege) as segge; and miht as might. The Northern infinitive was already one syllable, whereas the past participle – en inflection of Old English was strictly kept. Old English mutated –ended in the present participle had already become –inde in late Southern and it was this inflection that blended with the –ing suffix of nouns of action that had already become near-gerunds in such compound nouns as athswearing (oath swearing)and writing feather (writing feather pen) The Northern 2nd person singular singis was inherited unchanged from common Germanic. The final t sound in Midland –est. and Southern –st was excrescent comparable with the final t in modern (admist) and (amongst) from older amides and amonges. The Northern 3rd person singular singis had quite different origin. Like the singis of the plural, it resulted almost casually from an inadvertent retraction of the tongue in enunciation from an interdental –th sound to postendal –s. Today the form (singeth) services as a poetic archaism Shakespeare used both –eth and –s endings (It "mercy"blesseth him that gives and him that takes) 3.1.1. The Changes in Sounds and stress which took place after the Norman Conquest French words which adopted in English suffered a great change in sounds; they have participated in all sound changes that have taken place in English since their adaptation. Thus, words with the long [i] sound have had it diphthongized into [ai], e.g. fine, price, lion. The long [u], written ou has become [au], e.g. Old French espouse pronounced /spuize/ now pronounce /spauze/ The English is unable to imitate the French accentuation, that's why there are a great many words now stressed on the final syllable. All English, it is said, had the stress on the final syllable, and this habit was unconsciously extended to foreign words on their first adoption into the language. In the plural, Old French had a nominative without any ending and an accusative in –s; and English popular instinct naturally associated the latter form with the native plural ending in –es. In course of time those words which had for a long time in English as in French formed their plural without any ending (e.g. case) were made to conform to the general rule (sg.case.cases) As to the verbs, the rule is that the stem of French present plural served as basis for the English form; thus (je survis), nouns survivor vous survives, ils survivent became survive ;( je resous), resolvous, etc.became resolve. After what is stated, and in order to prove the great impact the Norman Conquest had left on English, some of the French words with their synonyms in English should be mentioned and they are arranged chronically. A. The foreign words in the twelfth century can be classified as follows:ِa. . Words denoting person or rank:1 Abbat "abbot" canonic "canon" capelein "chaplain" cardinal "cardinal" cuntesse "countess" due "duke" emperice "empress" legat "legate" Ex: pehefde be Emperice in Alamanic & nu was cuntesse in Angou. "Who had been Empress of Germany and now was Countess of Anjou" Com an of Rome Henri was gehaten "a legate called Henry came from Rome" 2. words denoting finance: rent "rent" tresor "treasure" Ex: Wrothe on pe circe & sette parto landes& rentes (worked on the church and endowed it with lands and rents) 3. words denoting law and social relations: acorden "reconcill" justicse "justice" pais "peace" privilegie "privileges" 4. words denoting religion: carite "charity" miracle "miracle" nativite "nativity" procession"procession" 5. words denoting military: werre "war" werrien "to make war against" 6. words denoting nature: 128 Best "beast" Contre "country" Flum "river" Marbre "marble" Leun "lion" Oil "oil" Rose "rose" 7. Words denoting Household and other things: Basi "basin" Coup "cup" Furneis "furnace" Lamp "lamp" 8. words denoting physical action and appearance: Cachen "catch" Changen "change" Chere "face, appearance" Savour "savour" 9. Words denoting moral and Intellectual Clergie "science" Craviant "defeated" Deol "sorrow" Dout "doubt, fear" Fausien "fail" Gin "device" Meistrie "mastery" Reisun "reason" B.some of the French words `during the period between 1200-1250: 1. words denoting person: Ame "friend" Baban "baby" Baptist "Baptist" Kunseiler "councilor" Messager "messenger" Nurice "nurse" Prison "prisoner" 2. words denoting finance: Cwile "quit" Spense "expense" 3. words denoting buildings: Celere "cellar" Cite "city" Knuent "convent" Genere "granary" Tur "tower" 4. words denoting law and social relations: 129 Baundun "power " Crune "villiaains" Juggen "judge" Noces "marriage" Trone "throne" 5. Words denoting religion Calize "chalice" Canoniicl "canonical" Creoisem "to make the sign of the cross on" Eresi "heresy" Feste "festival" Grace "grace" Parais "Paradise" 6. Words denoting military Baret "strife" Calenge "challenge" Gunfanenr "standard bearer" Skirmen "fight" Turnement "tournament" 7. words denoting nature: Bame "balm" Carbin "raven" Cou de gilofre "clove" Gingiuere "ginger" Flur "flour" Fluren "to flower" Licur "liquor" 8. words denoting clothes: Abit "habbit" Atiffen "adorn" Broche "brooch" 9. words denoting household: Beaabelet "jewel" Buste "box" Cage "cage" Chetel "chattels" Crèche "crib" Scorge "scourge" Trufle "trifle" 10. words denoting physical action: Aboutien "lean out" Aspien "spy on" Babelinde "chattering" Buffeten "to buffet" Disturben "disturb" Recoilen "to drive back" Rute "road" 11 . Words denoting moral and Intellectual: Anui "worry" Asprete "bitterness" Comfort "comfort" Kunscence "consciousness" Contumace "contumacy" Creaunt "craven" Debonere "gentle" Deinte "dignity" Delit "delight" Noblesce "nobility" Mesure "moderation" Largesse "generosity" Pacience "pacience" 12. words denoting mental action: Affaiten "dispose" Akointed "acquainted" Asaumple "example" Attente "endeavour" Bisamplen "to moralize" Counsail "advice" Defaut "fault" Paien "please" Preach "preach" Preisen "to praise" Scandle "scandal" C. the French words during the period between 1250-1300 1. words denoting person: Barun "barun" Caynard "eascal" Chanoun "clerk" dam "sir" Sergauuz "sergents" 2. words denoting law and social relations: Eir "heir" Eritage "heritage" Per "peer" Warrant "surely" 3. words denoting religion: Aungel "angel" Auter "alter" Beneisun "benison" 131 Malison "malison" Croize "cross" Preie "pray" 4. words denoting military: Baret "strife" Gisarm "sword" Skriming "large shield" 5. words denoting nature: Bise "beast" Runic "horse" Laumprei "lamprey" Flour "flower" 6. words denoting clothes: Charbuole "carbuncle" Ioupe "losse jacket" 7. Physical action: Aise "ease" Bout "throw" Croune "crown" Couere "recover" Fyn "end" Sane "safe" 8. words denoting food: Broys "broth" Clare "claret" Pastees "sweet special wine" Simenels "bread of fine flour" Super "supper" Ueneysun "venison" 9. Moral and Intellectual: Anuicu "to worry" Chiche "mean" Conseyl "counsel" Faith "faith" Fey "felong" Fol "foolish" Gent "noble" Atendre "tender" 3.2. Was the French influence restricted to one period? The French influence was not restricted to one particular period, and it is interesting to compare the forms of old loan-words with these of recent ones, in which we can recognize traces of the changes the French language has undergone since medieval times, where a ch in an originally French word is pronounced as in change, chaunt, etc;(with the sound /ts/) where it is sounded as in champagne (with simple /s/), we have a recent loan. The word chief is thus shown to belong to the first period, while its doublet chef (=chef de cuisine) is much more modern. It is curious that two pet-names should now be spelled in the same way, Charlie, although they are distinct in pronunciation: the masculine is derived from the old loan Charles and has, therefore, the, the sound [t ] .the feminine is from the recent loan Charlotte with [ ], but they have all of them the same initial sound. Other examples of the same French word appearing in more than one shape according to its age in English are Saloon and salon, suit and suit, liquor and liqueur, rout and route ;the diphthong in the former word is an English development of long[u], quart, pronounced [kw t], and quart, pronounced [kw t] pronounced [k t],"a sequence of four cards in pique," also quarte or carte in fencing. In early middle English, words were borrowed from French containing the sound-group ch [t ](as in English child),e.g. chief, chivalry, duchess, chase ,torch; and [d ](as in gem),e.g. judge (both constants) just, journey, large; these consonant-groups became respectively [ ]and[ ]in later French. Initially,however,[ ] is not found in English without a proposed [d]; thus gentle, genteel, and jaunty represent three larges of the borrowing from the same word. 3.3. How did common people manage to learn so many foreign words? And how far did they assimilate them? We expect to find many changes carried out in the French words after their adoption in order to be easy to learn. In few cases the process of assimilation was facilitate by the fact that a French word happened to resemble an old native one and this is exemplified by the following: The old native verb choose was supplemented with the noun choice, from French choix. Old English hergian and Old French herir run together in Middle English harry. Old English hege and French haie run together in hay "hedge,fence". The word nevew (now spelled nephew)recalled Old English nefa, menege recalled Old English meniegeo. It is important to understand that the French words which were brought into English represent two different dialects. The form of the French language which obtained currency in England as the immediate consequence of the Norman Conquest was the northern dialect-the speech of Normandy and Picardy. But with the accession of the Angevine dynasty in the middle of the twelfth century the dialect of Central France became the language of the court and of the fashionable society. The two dialects differed considerably in pronunciation: for instance, Northern French had [k ]where Central French had [ch] and [ch] where Central French had [s]. One consequence of the two –fold character of the French spoken in England was that very often the same French word was adopted into English twice over, in two different forms and with meanings more or less different. Thus we have in modern English the words catch, warden, launch, wage, which came from Norman French and alongside them there are chase ,guardian ,lance, gage, which represent the same words as pronounced in French The vocabulary of language after the conquest has been enriched by a multitude of new derivation formed with the prefixes and suffixes that already existed in Old English. The native machinery of derivation is no longer found sufficient for the necessities of the language and has been largely supplemented by additions obtained from other languages. The adoption of foreign formative machinery has been rendered possible by the fact that many Latin and French primitive words have been taken English along with their derivations, formed with French or Latin suffixes. Therefore, when such pairs of words as derive and derivation, esteem and estimation, laud and laudation have found their way into the English vocabulary, it is natural that the suffixation should be recognized by English speakers as an allowable means of making "nouns of action" out of verbs. This suffix supplied a real want because the only native means of forming nouns of action was the suffix –ing, which was not quite definite enough in meaning. Many French suffixes, such as –age, -al (as used in withdrawal, upheaval, betrothal);-ment, and -able which have no thing corresponding to them in English have been extensively used in the formation of English derivations.(Henry,1955:86). 3.4. Did the influence of the Norman Conquest continue with the same degree of effect as when it first began? The influence of the Normans did not continue to be as strong as when it first began. So it is naturally expected to find that the French as a second language faced some retreat. The dawn of the 13th century found a trilingual England in which French, Latin, and English live side by side ,each used for a different purpose and with a different function. The first was the literary and courtly tongue, the second was the church and legal documents tongue and the third was the common intercourse tongue. With the loss of Normandy by King John in 1204 (Pei, 1953:44), the English language received the mighty Philip. It is conceivable that up to that time many of England's new landed gentry thought of Normandy as "home" and of England as a colonial possession in which they held their major domains. Now there was no longer a "home "for them, except England. By the time of Edward I, all Englishmen, whether of Saxon or Norman descent, were united ,and in 1295 the king of England charged the French kings ,among other crimes, with wanting to wipe out the English tongue. So it is by the end of the 13th century that French had become almost a foreign tongue in England, though it was gaining influence and prestige on the continent to such an extent that German barons had it taught to their children. However, as far as England was concerned, French was beginning to be taught out of manuals as a cultural tongue and even the children of nobility learned it as a foreign language. It was the Hindered Year's War with its bitter animosity against the French., and the black Death of 1349-1350,which lead to rise in the importance of the laboring classes and their tongue, that gave the death blow to French in England. In 1349 English was reinstated in the schools; in 1362 Parliament forbade the use of French in law courts, on the ground that "French is much unknown". By 1385 English had penetrated the scared precincts of the universities, with John Cornwall and Richard Pencrich leading it at Oxford. By the time of Henry V (1413) English was the official language at the court.
USER:
What impact did the Norman Conquest have on Old and Middle English dialects and their conditions?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Use only the provided text to answer the question. Do not use external information or any prior knowledge. Avoid using contractions in your writing.
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How do the metrics of occupancy rate and property capitalization rate compare in regards to their usefulness to developers?
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Multifamily properties that generate stable revenues (via collection of rents from tenants) have predictable profitability levels, which can make them attractive investments. By contrast, the profit potential of riskier properties, such as those experiencing above-normal vacancy rates and rental income declines (e.g., due to neighborhood location, poor management, or upkeep), may be less predictable yet still be attractive investments. After substantial rehabilitation, a rental property may appeal to tenants with more stable and higher incomes and possibly fetch a higher resale value—or it may still fail to generate the anticipated rental income, resulting in substantially greater losses. Thus, risker financial investment opportunities may translate into greater profits or greater losses. Real estate properties are categorized as Class A, Class B, and Class C, which provides developers and lenders with the financial risk characteristics of the prospective investment properties (defined in more detail in the text box below). Restating the preceding investment strategy, acquiring a riskier Class C property may initially be less expensive and have greater profit potential than a less risky Class A property investment. If, however, a Class C property after rehabilitation would continue to generate low or below-market rents, the losses are likely to be significant. In short, developers decide whether to invest in low- or high-risk multifamily projects. One criterion for determining whether to invest in Class A, Class B, or Class C income- generating properties is current and expected future performance of rents. Anticipated rent growth is a favored metric developers use to evaluate a prospective investment’s profitability.10 Occupancy rates also provide information about anticipated rent increases or decreases. As multifamily properties’ occupancy rates increase (decrease), the overall rental income the properties generate is more likely to increase (decrease).11 A related concept, the property capitalization (cap) rate, is the annual net operating income generated by the property divided by its purchase price. In other words, the cap rate measures a property’s yield, the annual return in the form of (rental) income generated by the investment. (The cap rate does not account for any outstanding debt such as a mortgage amount.) The interpretation of a high cap rate, however, may be ambiguous. Although a higher cap rate may be indicative of higher profit potential, it may also be indicative of a limited ability to raise future rents on some tenants (e.g., the elderly, those with higher delinquency rates, and those currently with long leases).
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system instruction: [Use only the provided text to answer the question. Do not use external information or any prior knowledge. Avoid using contractions in your writing.] question: [How do the metrics of occupancy rate and property capitalization rate compare in regards to their usefulness to developers?] context block: [Multifamily properties that generate stable revenues (via collection of rents from tenants) have predictable profitability levels, which can make them attractive investments. By contrast, the profit potential of riskier properties, such as those experiencing above-normal vacancy rates and rental income declines (e.g., due to neighborhood location, poor management, or upkeep), may be less predictable yet still be attractive investments. After substantial rehabilitation, a rental property may appeal to tenants with more stable and higher incomes and possibly fetch a higher resale value—or it may still fail to generate the anticipated rental income, resulting in substantially greater losses. Thus, risker financial investment opportunities may translate into greater profits or greater losses. Real estate properties are categorized as Class A, Class B, and Class C, which provides developers and lenders with the financial risk characteristics of the prospective investment properties (defined in more detail in the text box below). Restating the preceding investment strategy, acquiring a riskier Class C property may initially be less expensive and have greater profit potential than a less risky Class A property investment. If, however, a Class C property after rehabilitation would continue to generate low or below-market rents, the losses are likely to be significant. In short, developers decide whether to invest in low- or high-risk multifamily projects. One criterion for determining whether to invest in Class A, Class B, or Class C income- generating properties is current and expected future performance of rents. Anticipated rent growth is a favored metric developers use to evaluate a prospective investment’s profitability.10 Occupancy rates also provide information about anticipated rent increases or decreases. As multifamily properties’ occupancy rates increase (decrease), the overall rental income the properties generate is more likely to increase (decrease).11 A related concept, the property capitalization (cap) rate, is the annual net operating income generated by the property divided by its purchase price. In other words, the cap rate measures a property’s yield, the annual return in the form of (rental) income generated by the investment. (The cap rate does not account for any outstanding debt such as a mortgage amount.) The interpretation of a high cap rate, however, may be ambiguous. Although a higher cap rate may be indicative of higher profit potential, it may also be indicative of a limited ability to raise future rents on some tenants (e.g., the elderly, those with higher delinquency rates, and those currently with long leases).]
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Use only the provided text to answer the question. Do not use external information or any prior knowledge. Avoid using contractions in your writing.
EVIDENCE:
Multifamily properties that generate stable revenues (via collection of rents from tenants) have predictable profitability levels, which can make them attractive investments. By contrast, the profit potential of riskier properties, such as those experiencing above-normal vacancy rates and rental income declines (e.g., due to neighborhood location, poor management, or upkeep), may be less predictable yet still be attractive investments. After substantial rehabilitation, a rental property may appeal to tenants with more stable and higher incomes and possibly fetch a higher resale value—or it may still fail to generate the anticipated rental income, resulting in substantially greater losses. Thus, risker financial investment opportunities may translate into greater profits or greater losses. Real estate properties are categorized as Class A, Class B, and Class C, which provides developers and lenders with the financial risk characteristics of the prospective investment properties (defined in more detail in the text box below). Restating the preceding investment strategy, acquiring a riskier Class C property may initially be less expensive and have greater profit potential than a less risky Class A property investment. If, however, a Class C property after rehabilitation would continue to generate low or below-market rents, the losses are likely to be significant. In short, developers decide whether to invest in low- or high-risk multifamily projects. One criterion for determining whether to invest in Class A, Class B, or Class C income- generating properties is current and expected future performance of rents. Anticipated rent growth is a favored metric developers use to evaluate a prospective investment’s profitability.10 Occupancy rates also provide information about anticipated rent increases or decreases. As multifamily properties’ occupancy rates increase (decrease), the overall rental income the properties generate is more likely to increase (decrease).11 A related concept, the property capitalization (cap) rate, is the annual net operating income generated by the property divided by its purchase price. In other words, the cap rate measures a property’s yield, the annual return in the form of (rental) income generated by the investment. (The cap rate does not account for any outstanding debt such as a mortgage amount.) The interpretation of a high cap rate, however, may be ambiguous. Although a higher cap rate may be indicative of higher profit potential, it may also be indicative of a limited ability to raise future rents on some tenants (e.g., the elderly, those with higher delinquency rates, and those currently with long leases).
USER:
How do the metrics of occupancy rate and property capitalization rate compare in regards to their usefulness to developers?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Do not include any information outside of the article provided. Write you answer as a single, complete sentence.
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What percentage of individuals globally report being aware of their chronic hepatitis C virus (HCV) infection?
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**Innovations in Hepatitis C Screening and Treatment** Hepatitis C virus (HCV) infection is a major public health threat worldwide, with approximately 71 million people living with chronic infection.( 1 , 2 ) The approval of direct‐acting antivirals (DAAs) starting in 2014 revolutionized treatment and allows nearly all patients to be cured.( 3 ) The number of individuals initiating HCV treatment has increased from approximately 500,000 in 2014 to over 2 million in 2017.( 4 ) In 2016, the World Health Organization called for HCV to be eliminated as a global public health threat by 2030, setting a goal of reducing new infections by 90%, treating 80% of chronic infections, and reducing mortality by 65%.( 5 ) However, few countries are on track to reaching these HCV elimination targets. Globally, only 19% of chronically infected individuals report being aware of their infection, and 15.3% had been treated with DAAs by the end of 2017.( 1 ) In the United States, HCV remains the most common bloodborne infection, affecting 2 million people,( 2 ) and in 2016, more than half of individuals reported being unaware of their infection.( 6 ) HCV‐related mortality continues to rise, surpassing the combined total of 60 other nationally notifiable infectious conditions, including human immunodeficiency virus (HIV).( 2 , 7 , 8 , 9 ) The United States Preventive Services Task Force, the American Association for the Study of Liver Diseases (AASLD), the Infectious Diseases Society of America (IDSA), and Centers for Disease Control and Prevention (CDC) recently updated their guidelines to recommend universal HCV testing among adults.( 10 , 11 ) The 2020 standard of HCV care has evolved toward universal screening and treatment.( 12 ) However, there is currently a considerable drop‐off between each step of the HCV “cascade to cure,” from screening, diagnosis, evaluation, treatment, cure, prevention of reinfection, and care for cirrhosis (Fig. 1).( 13 ) Low rates of diagnosis result in even lower rates of treatment and ultimately cure. Innovation can help address major barriers in these steps to move us toward HCV elimination (Fig. 2). In this review, we focus on a combination of barriers at the system, provider, and patient level, with an emphasis on how system‐level and provider‐level enhancements are critical in overcoming what have traditionally been deemed patient‐level barriers. Since the interferon era, there has been focus on persons living with HCV in silos, some with blame and consequently stigma for their behaviors, when it is system‐level and provider‐level policies and practices that have presented as barriers that need to be addressed. Implementing interventions tailored toward “hardly reached” populations, the micro‐elimination approach, is a key strategy for achieving HCV elimination.( 14 , 15 ) They complement population‐level macro‐elimination programs. Herein, we highlight interventions that address the HCV cascade to cure in hardly reached populations, including (1) persons who inject drugs (PWIDs) and persons who are marginally housed; (2) correctional populations; and (3) women who are pregnant (Table 1). We hope readers can conceptualize members of these groups as being underserved by traditional engagement efforts, rather than as people with inherent qualities that make them challenging to engage and treat. We also discuss broader efforts to use innovation to eliminate HCV across health systems and countries. The interventions in this review specifically improve screening, case finding, linkage to care (broadly defined as strategies that lead to access to HCV care), treatment delivery and/or adherence, and cure.
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{query} ======= What percentage of individuals globally report being aware of their chronic hepatitis C virus (HCV) infection? ================ {text} ======= **Innovations in Hepatitis C Screening and Treatment** Hepatitis C virus (HCV) infection is a major public health threat worldwide, with approximately 71 million people living with chronic infection.( 1 , 2 ) The approval of direct‐acting antivirals (DAAs) starting in 2014 revolutionized treatment and allows nearly all patients to be cured.( 3 ) The number of individuals initiating HCV treatment has increased from approximately 500,000 in 2014 to over 2 million in 2017.( 4 ) In 2016, the World Health Organization called for HCV to be eliminated as a global public health threat by 2030, setting a goal of reducing new infections by 90%, treating 80% of chronic infections, and reducing mortality by 65%.( 5 ) However, few countries are on track to reaching these HCV elimination targets. Globally, only 19% of chronically infected individuals report being aware of their infection, and 15.3% had been treated with DAAs by the end of 2017.( 1 ) In the United States, HCV remains the most common bloodborne infection, affecting 2 million people,( 2 ) and in 2016, more than half of individuals reported being unaware of their infection.( 6 ) HCV‐related mortality continues to rise, surpassing the combined total of 60 other nationally notifiable infectious conditions, including human immunodeficiency virus (HIV).( 2 , 7 , 8 , 9 ) The United States Preventive Services Task Force, the American Association for the Study of Liver Diseases (AASLD), the Infectious Diseases Society of America (IDSA), and Centers for Disease Control and Prevention (CDC) recently updated their guidelines to recommend universal HCV testing among adults.( 10 , 11 ) The 2020 standard of HCV care has evolved toward universal screening and treatment.( 12 ) However, there is currently a considerable drop‐off between each step of the HCV “cascade to cure,” from screening, diagnosis, evaluation, treatment, cure, prevention of reinfection, and care for cirrhosis (Fig. 1).( 13 ) Low rates of diagnosis result in even lower rates of treatment and ultimately cure. Innovation can help address major barriers in these steps to move us toward HCV elimination (Fig. 2). In this review, we focus on a combination of barriers at the system, provider, and patient level, with an emphasis on how system‐level and provider‐level enhancements are critical in overcoming what have traditionally been deemed patient‐level barriers. Since the interferon era, there has been focus on persons living with HCV in silos, some with blame and consequently stigma for their behaviors, when it is system‐level and provider‐level policies and practices that have presented as barriers that need to be addressed. Implementing interventions tailored toward “hardly reached” populations, the micro‐elimination approach, is a key strategy for achieving HCV elimination.( 14 , 15 ) They complement population‐level macro‐elimination programs. Herein, we highlight interventions that address the HCV cascade to cure in hardly reached populations, including (1) persons who inject drugs (PWIDs) and persons who are marginally housed; (2) correctional populations; and (3) women who are pregnant (Table 1). We hope readers can conceptualize members of these groups as being underserved by traditional engagement efforts, rather than as people with inherent qualities that make them challenging to engage and treat. We also discuss broader efforts to use innovation to eliminate HCV across health systems and countries. The interventions in this review specifically improve screening, case finding, linkage to care (broadly defined as strategies that lead to access to HCV care), treatment delivery and/or adherence, and cure. ================ {task} ======= Do not include any information outside of the article provided. Write you answer as a single, complete sentence.
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Do not include any information outside of the article provided. Write you answer as a single, complete sentence.
EVIDENCE:
**Innovations in Hepatitis C Screening and Treatment** Hepatitis C virus (HCV) infection is a major public health threat worldwide, with approximately 71 million people living with chronic infection.( 1 , 2 ) The approval of direct‐acting antivirals (DAAs) starting in 2014 revolutionized treatment and allows nearly all patients to be cured.( 3 ) The number of individuals initiating HCV treatment has increased from approximately 500,000 in 2014 to over 2 million in 2017.( 4 ) In 2016, the World Health Organization called for HCV to be eliminated as a global public health threat by 2030, setting a goal of reducing new infections by 90%, treating 80% of chronic infections, and reducing mortality by 65%.( 5 ) However, few countries are on track to reaching these HCV elimination targets. Globally, only 19% of chronically infected individuals report being aware of their infection, and 15.3% had been treated with DAAs by the end of 2017.( 1 ) In the United States, HCV remains the most common bloodborne infection, affecting 2 million people,( 2 ) and in 2016, more than half of individuals reported being unaware of their infection.( 6 ) HCV‐related mortality continues to rise, surpassing the combined total of 60 other nationally notifiable infectious conditions, including human immunodeficiency virus (HIV).( 2 , 7 , 8 , 9 ) The United States Preventive Services Task Force, the American Association for the Study of Liver Diseases (AASLD), the Infectious Diseases Society of America (IDSA), and Centers for Disease Control and Prevention (CDC) recently updated their guidelines to recommend universal HCV testing among adults.( 10 , 11 ) The 2020 standard of HCV care has evolved toward universal screening and treatment.( 12 ) However, there is currently a considerable drop‐off between each step of the HCV “cascade to cure,” from screening, diagnosis, evaluation, treatment, cure, prevention of reinfection, and care for cirrhosis (Fig. 1).( 13 ) Low rates of diagnosis result in even lower rates of treatment and ultimately cure. Innovation can help address major barriers in these steps to move us toward HCV elimination (Fig. 2). In this review, we focus on a combination of barriers at the system, provider, and patient level, with an emphasis on how system‐level and provider‐level enhancements are critical in overcoming what have traditionally been deemed patient‐level barriers. Since the interferon era, there has been focus on persons living with HCV in silos, some with blame and consequently stigma for their behaviors, when it is system‐level and provider‐level policies and practices that have presented as barriers that need to be addressed. Implementing interventions tailored toward “hardly reached” populations, the micro‐elimination approach, is a key strategy for achieving HCV elimination.( 14 , 15 ) They complement population‐level macro‐elimination programs. Herein, we highlight interventions that address the HCV cascade to cure in hardly reached populations, including (1) persons who inject drugs (PWIDs) and persons who are marginally housed; (2) correctional populations; and (3) women who are pregnant (Table 1). We hope readers can conceptualize members of these groups as being underserved by traditional engagement efforts, rather than as people with inherent qualities that make them challenging to engage and treat. We also discuss broader efforts to use innovation to eliminate HCV across health systems and countries. The interventions in this review specifically improve screening, case finding, linkage to care (broadly defined as strategies that lead to access to HCV care), treatment delivery and/or adherence, and cure.
USER:
What percentage of individuals globally report being aware of their chronic hepatitis C virus (HCV) infection?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 18
| 16
| 566
| null | 99
|
[This task requires you to answer questions based solely on the information provided in the prompt. You are not allowed to use any external resources or prior knowledge. Your answer should be between five and eight sentences long.]
|
[Will I get hungry and thirstier during a fast?]
|
Intermittent Fasting Myths “It’s just starving yourself.” Fasting is a planned action to avoid food for a set period of time. The body can still use energy from its own fat stores during a fast, so it isn’t being deprived. Starvation is completely different. It is unplanned, it doesn’t have a chosen end point, and the body doesn’t have much stored energy that it can use. It is simply untrue to say that fasting is the same as starving yourself! “It will slow your metabolism.” When someone follows a reduced calorie diet but continues to eat regularly (i.e., “little and often”), insulin levels remain high for most of the day. This stops the body from using stored fat for energy. It responds by reducing the amount of calories it burns, to save what energy it does have (i.e., it slows your metabolism). Fasting is different. During a fast, insulin levels are reduced, so fat stored in the body can be used for energy. This means that metabolism does not need to be slowed down, as the body does not think it is being deprived. “Breakfast is the most important meal of the day.” In the morning, the body’s releases hormones to get us ready to start the day. This causes the release of energy from the body’s stores, which means we don’t actually need to eat something first thing in the morning, as the body is being fed whether you eat something or not! No meal is more important than any other. What does matter is that you get all the nutrients you need from what you do eat. “You’ll be deprived of essential nutrients.” As long as a range of real foods are eaten in the non-fasting periods, there is no reason that people who try intermittent fasting should experience any nutrient deficiencies. “It’ll make your body break down muscle.” If available, the body will always use glucose and/or fat for fuel. Your muscles, and the proteins they are made up of, are only a last resort for this. Studies have shown that intermittent fasting does not cause significant muscle loss, and that levels of a growth hormone that protects muscles from being used for energy are increased during a fast. It is important that sufficient protein is eaten in the non-fasting periods though in order to support the growth and maintenance of muscle mass. “You’ll be hungry all the time and will just eat much more at the next meal.” Studies have shown that missing a meal may result in slightly more food being eaten at the next meal, but the total energy intake will still be less than if you had eaten both meals. Fasting decreases hunger hormones and increases fullness. So although you may feel hungry when you first try fasting, many people actually report reduced hunger once they are used to it. www.xperthealth.org.uk Stay hydrated When you eat, you get some water from your food. So during a fast, you are missing out on some of the fluids you normally get. This can lead to you becoming dehydrated, causing side effects such as tiredness and headaches. Dehydration can also be mistaken for hunger, which can make it more difficult to stick to your planned fast. The best option for staying hydrated is water. If you want to make it a bit more exciting then you can flavour it, with a slice of lemon, orange, lime or cucumber for example. Coffee (black or flavoured with natural extracts), tea (black, green, herbal or fruit), or broth (bone or vegetable) are all also suitable options. Stick with it You may struggle at first if you are not used to going for extended periods of time without food, but much of this could be down to habit. If you have had a set routine for a long time your body will expect to receive food at certain times of the day. So when it doesn’t get the food it is expecting, this can trigger feelings of hunger. Most people adapt quite quickly though, so find it increasingly easy to fast. But in the short-term, make sure you have thought about what you could do to try and distract yourself when you feel hungry. Break your fast with nutritious foods At the end of your fast, have a meal that includes plenty of real, minimally processed food. Make sure this meal includes one or two portions of good quality protein. This will help to satisfy your appetite, and to make sure your body gets plenty of nutrients. Planning a meal that supports your dietary approach but also includes some of your favourite foods to break your fast with can help to motivate you to stick with it too. Make sure you get enough salt People often think salt is unhealthy, but we do need some in our diet. Sodium is an essential nutrient, and the main source of it is salt. When you are not eating (i.e., during a fast), you are not taking in any salt. On top of this, the reduction in insulin levels during fasting results in less salt being held in the blood. Signs of having low sodium levels include dizziness (caused by a drop in blood pressure), muscle cramps, headaches and tiredness. These symptoms can be fixed by making sure you get enough salt and water. Salt can be added to meals in non-fasting periods, or you can get more by having salted water or bone broth during fasting periods. Don’t worry if you regain a bit of weight after a fast When you fast you will lose weight because your body is using up some of your stored fat for fuel. But you will also lose some weight for other reasons, including that there will be less food and waste passing through your body. This means that when you break your fast you might actually regain a little bit of weight. This is completely normal though, so you should not feel disappointed. The good news is that you will still have reduced the amount of fat stored in your body!
|
[Intermittent Fasting Myths “It’s just starving yourself.” Fasting is a planned action to avoid food for a set period of time. The body can still use energy from its own fat stores during a fast, so it isn’t being deprived. Starvation is completely different. It is unplanned, it doesn’t have a chosen end point, and the body doesn’t have much stored energy that it can use. It is simply untrue to say that fasting is the same as starving yourself! “It will slow your metabolism.” When someone follows a reduced calorie diet but continues to eat regularly (i.e., “little and often”), insulin levels remain high for most of the day. This stops the body from using stored fat for energy. It responds by reducing the amount of calories it burns, to save what energy it does have (i.e., it slows your metabolism). Fasting is different. During a fast, insulin levels are reduced, so fat stored in the body can be used for energy. This means that metabolism does not need to be slowed down, as the body does not think it is being deprived. “Breakfast is the most important meal of the day.” In the morning, the body’s releases hormones to get us ready to start the day. This causes the release of energy from the body’s stores, which means we don’t actually need to eat something first thing in the morning, as the body is being fed whether you eat something or not! No meal is more important than any other. What does matter is that you get all the nutrients you need from what you do eat. “You’ll be deprived of essential nutrients.” As long as a range of real foods are eaten in the non-fasting periods, there is no reason that people who try intermittent fasting should experience any nutrient deficiencies. “It’ll make your body break down muscle.” If available, the body will always use glucose and/or fat for fuel. Your muscles, and the proteins they are made up of, are only a last resort for this. Studies have shown that intermittent fasting does not cause significant muscle loss, and that levels of a growth hormone that protects muscles from being used for energy are increased during a fast. It is important that sufficient protein is eaten in the non-fasting periods though in order to support the growth and maintenance of muscle mass. “You’ll be hungry all the time and will just eat much more at the next meal.” Studies have shown that missing a meal may result in slightly more food being eaten at the next meal, but the total energy intake will still be less than if you had eaten both meals. Fasting decreases hunger hormones and increases fullness. So although you may feel hungry when you first try fasting, many people actually report reduced hunger once they are used to it. www.xperthealth.org.uk Stay hydrated When you eat, you get some water from your food. So during a fast, you are missing out on some of the fluids you normally get. This can lead to you becoming dehydrated, causing side effects such as tiredness and headaches. Dehydration can also be mistaken for hunger, which can make it more difficult to stick to your planned fast. The best option for staying hydrated is water. If you want to make it a bit more exciting then you can flavour it, with a slice of lemon, orange, lime or cucumber for example. Coffee (black or flavoured with natural extracts), tea (black, green, herbal or fruit), or broth (bone or vegetable) are all also suitable options. Stick with it You may struggle at first if you are not used to going for extended periods of time without food, but much of this could be down to habit. If you have had a set routine for a long time your body will expect to receive food at certain times of the day. So when it doesn’t get the food it is expecting, this can trigger feelings of hunger. Most people adapt quite quickly though, so find it increasingly easy to fast. But in the short-term, make sure you have thought about what you could do to try and distract yourself when you feel hungry. Break your fast with nutritious foods At the end of your fast, have a meal that includes plenty of real, minimally processed food. Make sure this meal includes one or two portions of good quality protein. This will help to satisfy your appetite, and to make sure your body gets plenty of nutrients. Planning a meal that supports your dietary approach but also includes some of your favourite foods to break your fast with can help to motivate you to stick with it too. Make sure you get enough salt People often think salt is unhealthy, but we do need some in our diet. Sodium is an essential nutrient, and the main source of it is salt. When you are not eating (i.e., during a fast), you are not taking in any salt. On top of this, the reduction in insulin levels during fasting results in less salt being held in the blood. Signs of having low sodium levels include dizziness (caused by a drop in blood pressure), muscle cramps, headaches and tiredness. These symptoms can be fixed by making sure you get enough salt and water. Salt can be added to meals in non-fasting periods, or you can get more by having salted water or bone broth during fasting periods. Don’t worry if you regain a bit of weight after a fast When you fast you will lose weight because your body is using up some of your stored fat for fuel. But you will also lose some weight for other reasons, including that there will be less food and waste passing through your body. This means that when you break your fast you might actually regain a little bit of weight. This is completely normal though, so you should not feel disappointed. The good news is that you will still have reduced the amount of fat stored in your body!] [Will I get hungry and thirstier during a fast?] [This task requires you to answer questions based solely on the information provided in the prompt. You are not allowed to use any external resources or prior knowledge. Your answer should be between five and eight sentences long.]
|
[This task requires you to answer questions based solely on the information provided in the prompt. You are not allowed to use any external resources or prior knowledge. Your answer should be between five and eight sentences long.]
EVIDENCE:
Intermittent Fasting Myths “It’s just starving yourself.” Fasting is a planned action to avoid food for a set period of time. The body can still use energy from its own fat stores during a fast, so it isn’t being deprived. Starvation is completely different. It is unplanned, it doesn’t have a chosen end point, and the body doesn’t have much stored energy that it can use. It is simply untrue to say that fasting is the same as starving yourself! “It will slow your metabolism.” When someone follows a reduced calorie diet but continues to eat regularly (i.e., “little and often”), insulin levels remain high for most of the day. This stops the body from using stored fat for energy. It responds by reducing the amount of calories it burns, to save what energy it does have (i.e., it slows your metabolism). Fasting is different. During a fast, insulin levels are reduced, so fat stored in the body can be used for energy. This means that metabolism does not need to be slowed down, as the body does not think it is being deprived. “Breakfast is the most important meal of the day.” In the morning, the body’s releases hormones to get us ready to start the day. This causes the release of energy from the body’s stores, which means we don’t actually need to eat something first thing in the morning, as the body is being fed whether you eat something or not! No meal is more important than any other. What does matter is that you get all the nutrients you need from what you do eat. “You’ll be deprived of essential nutrients.” As long as a range of real foods are eaten in the non-fasting periods, there is no reason that people who try intermittent fasting should experience any nutrient deficiencies. “It’ll make your body break down muscle.” If available, the body will always use glucose and/or fat for fuel. Your muscles, and the proteins they are made up of, are only a last resort for this. Studies have shown that intermittent fasting does not cause significant muscle loss, and that levels of a growth hormone that protects muscles from being used for energy are increased during a fast. It is important that sufficient protein is eaten in the non-fasting periods though in order to support the growth and maintenance of muscle mass. “You’ll be hungry all the time and will just eat much more at the next meal.” Studies have shown that missing a meal may result in slightly more food being eaten at the next meal, but the total energy intake will still be less than if you had eaten both meals. Fasting decreases hunger hormones and increases fullness. So although you may feel hungry when you first try fasting, many people actually report reduced hunger once they are used to it. www.xperthealth.org.uk Stay hydrated When you eat, you get some water from your food. So during a fast, you are missing out on some of the fluids you normally get. This can lead to you becoming dehydrated, causing side effects such as tiredness and headaches. Dehydration can also be mistaken for hunger, which can make it more difficult to stick to your planned fast. The best option for staying hydrated is water. If you want to make it a bit more exciting then you can flavour it, with a slice of lemon, orange, lime or cucumber for example. Coffee (black or flavoured with natural extracts), tea (black, green, herbal or fruit), or broth (bone or vegetable) are all also suitable options. Stick with it You may struggle at first if you are not used to going for extended periods of time without food, but much of this could be down to habit. If you have had a set routine for a long time your body will expect to receive food at certain times of the day. So when it doesn’t get the food it is expecting, this can trigger feelings of hunger. Most people adapt quite quickly though, so find it increasingly easy to fast. But in the short-term, make sure you have thought about what you could do to try and distract yourself when you feel hungry. Break your fast with nutritious foods At the end of your fast, have a meal that includes plenty of real, minimally processed food. Make sure this meal includes one or two portions of good quality protein. This will help to satisfy your appetite, and to make sure your body gets plenty of nutrients. Planning a meal that supports your dietary approach but also includes some of your favourite foods to break your fast with can help to motivate you to stick with it too. Make sure you get enough salt People often think salt is unhealthy, but we do need some in our diet. Sodium is an essential nutrient, and the main source of it is salt. When you are not eating (i.e., during a fast), you are not taking in any salt. On top of this, the reduction in insulin levels during fasting results in less salt being held in the blood. Signs of having low sodium levels include dizziness (caused by a drop in blood pressure), muscle cramps, headaches and tiredness. These symptoms can be fixed by making sure you get enough salt and water. Salt can be added to meals in non-fasting periods, or you can get more by having salted water or bone broth during fasting periods. Don’t worry if you regain a bit of weight after a fast When you fast you will lose weight because your body is using up some of your stored fat for fuel. But you will also lose some weight for other reasons, including that there will be less food and waste passing through your body. This means that when you break your fast you might actually regain a little bit of weight. This is completely normal though, so you should not feel disappointed. The good news is that you will still have reduced the amount of fat stored in your body!
USER:
[Will I get hungry and thirstier during a fast?]
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 38
| 9
| 1,016
| null | 139
|
You must respond to the prompt using information in the context block. Do not use information from other sources. Always format lists using bullet points.
|
List the potential challenges that each remedy faces in the monopolization case against Google
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On August 5, 2024, the U.S. District Court for the District of Columbia held that Google unlawfully monopolizes the markets for general search services and general search text ads through a series of exclusive contracts with browser developers, mobile device manufacturers, and wireless carriers. The opinion emerges from a lawsuit filed by the Department of Justice (DOJ) and a group of state attorneys general (AGs) in 2020. The DOJ lawsuit was later consolidated with a separate case filed by another group of state AGs that largely adopted the allegations in the DOJ’s complaint. This Legal Sidebar provides an overview of the court’s decision and issues that may arise during the remedies phase of the case. The Challenged Agreements The DOJ’s lawsuit targets distribution contracts that allegedly allow Google to foreclose (i.e., deny access to) significant shares of the markets for general search and general search text ads. Some of the contracts involve browser developers like Apple (the developer of the Safari browser) and Mozilla (the developer of the Firefox browser). Under these agreements, Google pays developers a share of its search ads revenue in exchange for the developers preloading Google as the default search engine for their browsers. Other contracts involve manufacturers of Android mobile devices, such as Motorola and Samsung. These agreements allow manufacturers to preinstall certain proprietary Google apps, like the Google Play Store, on their devices. In exchange for that access, manufacturers must also preload other Google apps, including Google Search and the Chrome browser, which defaults to Google Search. Other agreements involve revenue-sharing arrangements with device manufacturers and wireless carriers. Under these contracts, Google pays manufacturers and carriers a share of its revenue from search ads in exchange for the preinstallation of Google Search at certain access points. Some of these agreements also prohibit Google’s counterparties from preinstalling or promoting alternative general search engines. The Court’s Decision The DOJ’s lawsuit contends that Google’s distribution agreements constitute unlawful monopolization under Section 2 of the Sherman Act because they foreclose substantial shares of the relevant markets and deprive rivals of the scale needed to improve their search engines. The monopolization offense has two elements: (1) the possession of monopoly power, and (2) exclusionary conduct. The following subsections discuss the district court’s analysis of both elements. Monopoly Power The Supreme Court has characterized “monopoly power” as “the power to control prices or exclude competition.” More specifically, monopoly power involves a substantial degree of market power—the ability to raise prices above costs without sacrificing profits. Plaintiffs can establish monopoly power via direct proof that a firm has in fact profitably raised prices substantially above competitive levels or indirect structural evidence that supports an inference of monopoly power. Under the more common indirect approach, plaintiffs can prove monopoly power by showing that the defendant possesses a dominant market share that is protected by entry barriers. To calculate market shares, plaintiffs must define a relevant market in which competition occurs. The scope of the relevant market is determined by the range of reasonable substitutes for the good or service in question. In evaluating substitutability, courts rely on both quantitative evidence and a series of qualitative factors from Brown Shoe Co. v. United States, a 1962 Supreme Court decision. Because of its centrality in establishing market power and monopoly power, market definition is often a dispositive issue in antitrust cases. Applying this legal framework, the district court concluded that Google has monopoly power in two markets: general search services and general search text ads. The court relied on several of the Brown Shoe factors in defining these markets, rejecting Google’s arguments that the relevant markets are broader. Instead of a market for general search, Google had posited a larger market for “query responses” that included vertical search engines (e.g., Expedia, Yelp), social media platforms, and other websites. The court declined to adopt Google’s proposed market, reasoning that vertical search engines do not respond to the range of queries answered by general search engines, even if they can serve as substitutes for discrete purposes. The court concluded that Google has monopoly power in the narrower market for general search based on the firm’s market share of over 89% and significant entry barriers like high capital costs, Google’s control of key distribution channels, brand recognition, and scale. In analyzing the scope of the relevant advertiser-side market, the court recognized markets for both search advertising and general search text ads, rejecting Google’s argument for a broader digital advertising market. Among other things, the court reasoned that search ads (which are displayed in response to specific queries) are not reasonably interchangeable with other types of digital ads because search ads allow advertisers to target customers with greater precision. The court ultimately determined that Google lacks monopoly power in the market for search advertising—which includes search ads on vertical search engines and social media platforms—because of an absence of entry barriers. However, the court found that Google is a monopolist in the narrower market for general search text ads based on the firm’s dominant market share and the entry barriers discussed above. The district court’s decision finds that Google is liable for violating the Sherman Act, but does not impose remedies for those violations. Earlier in the litigation, the court granted the parties’ joint request to bifurcate the liability and remedies phases of the case. The court has ordered the parties to propose a schedule for remedies proceedings by September 4, 2024. Google has said that it plans to appeal the court’s liability decision, but it is unclear whether the appeal will proceed before or after the district court imposes remedies. Congressional Research Service 5 During the remedies phase, the district court will have several options. The narrowest would involve an injunction prohibiting Google’s exclusive contracts. An injunction barring exclusivity was the remedy in United States v. Dentsply, a monopolization case involving exclusive dealing that was resolved in 2006. The most cited antitrust treatise also suggests that, in cases involving a single category of anticompetitive conduct like exclusive dealing, a targeted injunction may be the most appropriate remedy. This type of relief could allow distributors to negotiate default arrangements with other search engines, retain Google as their defaults without receiving payments conditioned on exclusivity, or offer consumers a “choice screen” directing them to select their own default search engine. The court may also consider ordering Google to adopt a choice screen on Android devices, but it likely lacks the authority to require the relevant browser developers to do so because they are not parties to the litigation. Another possibility is a broader injunction requiring Google to share search data with rivals. This type of mandatory pooling could facilitate the emergence of rival search engines, but might also create free-rider problems that disincentivize investments in improving search quality. Such an arrangement might also prove difficult for the court to administer.
|
You must respond to the prompt using information in the context block. Do not use information from other sources. Always format lists using bullet points. List the potential challenges that each remedy faces in the monopolization case against Google On August 5, 2024, the U.S. District Court for the District of Columbia held that Google unlawfully monopolizes the markets for general search services and general search text ads through a series of exclusive contracts with browser developers, mobile device manufacturers, and wireless carriers. The opinion emerges from a lawsuit filed by the Department of Justice (DOJ) and a group of state attorneys general (AGs) in 2020. The DOJ lawsuit was later consolidated with a separate case filed by another group of state AGs that largely adopted the allegations in the DOJ’s complaint. This Legal Sidebar provides an overview of the court’s decision and issues that may arise during the remedies phase of the case. The Challenged Agreements The DOJ’s lawsuit targets distribution contracts that allegedly allow Google to foreclose (i.e., deny access to) significant shares of the markets for general search and general search text ads. Some of the contracts involve browser developers like Apple (the developer of the Safari browser) and Mozilla (the developer of the Firefox browser). Under these agreements, Google pays developers a share of its search ads revenue in exchange for the developers preloading Google as the default search engine for their browsers. Other contracts involve manufacturers of Android mobile devices, such as Motorola and Samsung. These agreements allow manufacturers to preinstall certain proprietary Google apps, like the Google Play Store, on their devices. In exchange for that access, manufacturers must also preload other Google apps, including Google Search and the Chrome browser, which defaults to Google Search. Other agreements involve revenue-sharing arrangements with device manufacturers and wireless carriers. Under these contracts, Google pays manufacturers and carriers a share of its revenue from search ads in exchange for the preinstallation of Google Search at certain access points. Some of these agreements also prohibit Google’s counterparties from preinstalling or promoting alternative general search engines. The Court’s Decision The DOJ’s lawsuit contends that Google’s distribution agreements constitute unlawful monopolization under Section 2 of the Sherman Act because they foreclose substantial shares of the relevant markets and deprive rivals of the scale needed to improve their search engines. The monopolization offense has two elements: (1) the possession of monopoly power, and (2) exclusionary conduct. The following subsections discuss the district court’s analysis of both elements. Monopoly Power The Supreme Court has characterized “monopoly power” as “the power to control prices or exclude competition.” More specifically, monopoly power involves a substantial degree of market power—the ability to raise prices above costs without sacrificing profits. Plaintiffs can establish monopoly power via direct proof that a firm has in fact profitably raised prices substantially above competitive levels or indirect structural evidence that supports an inference of monopoly power. Under the more common indirect approach, plaintiffs can prove monopoly power by showing that the defendant possesses a dominant market share that is protected by entry barriers. To calculate market shares, plaintiffs must define a relevant market in which competition occurs. The scope of the relevant market is determined by the range of reasonable substitutes for the good or service in question. In evaluating substitutability, courts rely on both quantitative evidence and a series of qualitative factors from Brown Shoe Co. v. United States, a 1962 Supreme Court decision. Because of its centrality in establishing market power and monopoly power, market definition is often a dispositive issue in antitrust cases. Applying this legal framework, the district court concluded that Google has monopoly power in two markets: general search services and general search text ads. The court relied on several of the Brown Shoe factors in defining these markets, rejecting Google’s arguments that the relevant markets are broader. Instead of a market for general search, Google had posited a larger market for “query responses” that included vertical search engines (e.g., Expedia, Yelp), social media platforms, and other websites. The court declined to adopt Google’s proposed market, reasoning that vertical search engines do not respond to the range of queries answered by general search engines, even if they can serve as substitutes for discrete purposes. The court concluded that Google has monopoly power in the narrower market for general search based on the firm’s market share of over 89% and significant entry barriers like high capital costs, Google’s control of key distribution channels, brand recognition, and scale. In analyzing the scope of the relevant advertiser-side market, the court recognized markets for both search advertising and general search text ads, rejecting Google’s argument for a broader digital advertising market. Among other things, the court reasoned that search ads (which are displayed in response to specific queries) are not reasonably interchangeable with other types of digital ads because search ads allow advertisers to target customers with greater precision. The court ultimately determined that Google lacks monopoly power in the market for search advertising—which includes search ads on vertical search engines and social media platforms—because of an absence of entry barriers. However, the court found that Google is a monopolist in the narrower market for general search text ads based on the firm’s dominant market share and the entry barriers discussed above. The district court’s decision finds that Google is liable for violating the Sherman Act, but does not impose remedies for those violations. Earlier in the litigation, the court granted the parties’ joint request to bifurcate the liability and remedies phases of the case. The court has ordered the parties to propose a schedule for remedies proceedings by September 4, 2024. Google has said that it plans to appeal the court’s liability decision, but it is unclear whether the appeal will proceed before or after the district court imposes remedies. Congressional Research Service 5 During the remedies phase, the district court will have several options. The narrowest would involve an injunction prohibiting Google’s exclusive contracts. An injunction barring exclusivity was the remedy in United States v. Dentsply, a monopolization case involving exclusive dealing that was resolved in 2006. The most cited antitrust treatise also suggests that, in cases involving a single category of anticompetitive conduct like exclusive dealing, a targeted injunction may be the most appropriate remedy. This type of relief could allow distributors to negotiate default arrangements with other search engines, retain Google as their defaults without receiving payments conditioned on exclusivity, or offer consumers a “choice screen” directing them to select their own default search engine. The court may also consider ordering Google to adopt a choice screen on Android devices, but it likely lacks the authority to require the relevant browser developers to do so because they are not parties to the litigation. Another possibility is a broader injunction requiring Google to share search data with rivals. This type of mandatory pooling could facilitate the emergence of rival search engines, but might also create free-rider problems that disincentivize investments in improving search quality. Such an arrangement might also prove difficult for the court to administer.
|
You must respond to the prompt using information in the context block. Do not use information from other sources. Always format lists using bullet points.
EVIDENCE:
On August 5, 2024, the U.S. District Court for the District of Columbia held that Google unlawfully monopolizes the markets for general search services and general search text ads through a series of exclusive contracts with browser developers, mobile device manufacturers, and wireless carriers. The opinion emerges from a lawsuit filed by the Department of Justice (DOJ) and a group of state attorneys general (AGs) in 2020. The DOJ lawsuit was later consolidated with a separate case filed by another group of state AGs that largely adopted the allegations in the DOJ’s complaint. This Legal Sidebar provides an overview of the court’s decision and issues that may arise during the remedies phase of the case. The Challenged Agreements The DOJ’s lawsuit targets distribution contracts that allegedly allow Google to foreclose (i.e., deny access to) significant shares of the markets for general search and general search text ads. Some of the contracts involve browser developers like Apple (the developer of the Safari browser) and Mozilla (the developer of the Firefox browser). Under these agreements, Google pays developers a share of its search ads revenue in exchange for the developers preloading Google as the default search engine for their browsers. Other contracts involve manufacturers of Android mobile devices, such as Motorola and Samsung. These agreements allow manufacturers to preinstall certain proprietary Google apps, like the Google Play Store, on their devices. In exchange for that access, manufacturers must also preload other Google apps, including Google Search and the Chrome browser, which defaults to Google Search. Other agreements involve revenue-sharing arrangements with device manufacturers and wireless carriers. Under these contracts, Google pays manufacturers and carriers a share of its revenue from search ads in exchange for the preinstallation of Google Search at certain access points. Some of these agreements also prohibit Google’s counterparties from preinstalling or promoting alternative general search engines. The Court’s Decision The DOJ’s lawsuit contends that Google’s distribution agreements constitute unlawful monopolization under Section 2 of the Sherman Act because they foreclose substantial shares of the relevant markets and deprive rivals of the scale needed to improve their search engines. The monopolization offense has two elements: (1) the possession of monopoly power, and (2) exclusionary conduct. The following subsections discuss the district court’s analysis of both elements. Monopoly Power The Supreme Court has characterized “monopoly power” as “the power to control prices or exclude competition.” More specifically, monopoly power involves a substantial degree of market power—the ability to raise prices above costs without sacrificing profits. Plaintiffs can establish monopoly power via direct proof that a firm has in fact profitably raised prices substantially above competitive levels or indirect structural evidence that supports an inference of monopoly power. Under the more common indirect approach, plaintiffs can prove monopoly power by showing that the defendant possesses a dominant market share that is protected by entry barriers. To calculate market shares, plaintiffs must define a relevant market in which competition occurs. The scope of the relevant market is determined by the range of reasonable substitutes for the good or service in question. In evaluating substitutability, courts rely on both quantitative evidence and a series of qualitative factors from Brown Shoe Co. v. United States, a 1962 Supreme Court decision. Because of its centrality in establishing market power and monopoly power, market definition is often a dispositive issue in antitrust cases. Applying this legal framework, the district court concluded that Google has monopoly power in two markets: general search services and general search text ads. The court relied on several of the Brown Shoe factors in defining these markets, rejecting Google’s arguments that the relevant markets are broader. Instead of a market for general search, Google had posited a larger market for “query responses” that included vertical search engines (e.g., Expedia, Yelp), social media platforms, and other websites. The court declined to adopt Google’s proposed market, reasoning that vertical search engines do not respond to the range of queries answered by general search engines, even if they can serve as substitutes for discrete purposes. The court concluded that Google has monopoly power in the narrower market for general search based on the firm’s market share of over 89% and significant entry barriers like high capital costs, Google’s control of key distribution channels, brand recognition, and scale. In analyzing the scope of the relevant advertiser-side market, the court recognized markets for both search advertising and general search text ads, rejecting Google’s argument for a broader digital advertising market. Among other things, the court reasoned that search ads (which are displayed in response to specific queries) are not reasonably interchangeable with other types of digital ads because search ads allow advertisers to target customers with greater precision. The court ultimately determined that Google lacks monopoly power in the market for search advertising—which includes search ads on vertical search engines and social media platforms—because of an absence of entry barriers. However, the court found that Google is a monopolist in the narrower market for general search text ads based on the firm’s dominant market share and the entry barriers discussed above. The district court’s decision finds that Google is liable for violating the Sherman Act, but does not impose remedies for those violations. Earlier in the litigation, the court granted the parties’ joint request to bifurcate the liability and remedies phases of the case. The court has ordered the parties to propose a schedule for remedies proceedings by September 4, 2024. Google has said that it plans to appeal the court’s liability decision, but it is unclear whether the appeal will proceed before or after the district court imposes remedies. Congressional Research Service 5 During the remedies phase, the district court will have several options. The narrowest would involve an injunction prohibiting Google’s exclusive contracts. An injunction barring exclusivity was the remedy in United States v. Dentsply, a monopolization case involving exclusive dealing that was resolved in 2006. The most cited antitrust treatise also suggests that, in cases involving a single category of anticompetitive conduct like exclusive dealing, a targeted injunction may be the most appropriate remedy. This type of relief could allow distributors to negotiate default arrangements with other search engines, retain Google as their defaults without receiving payments conditioned on exclusivity, or offer consumers a “choice screen” directing them to select their own default search engine. The court may also consider ordering Google to adopt a choice screen on Android devices, but it likely lacks the authority to require the relevant browser developers to do so because they are not parties to the litigation. Another possibility is a broader injunction requiring Google to share search data with rivals. This type of mandatory pooling could facilitate the emergence of rival search engines, but might also create free-rider problems that disincentivize investments in improving search quality. Such an arrangement might also prove difficult for the court to administer.
USER:
List the potential challenges that each remedy faces in the monopolization case against Google
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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[question] [user request] ===================== [text] [context document] ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
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In bullet point form, what is Dobbs and what are some effects that America is having because of it based on this statement from Lopez
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Thank you, Chair Sanders, Ranking Member Cassidy, Senator Murray and the members of the Committee for the opportunity to highlight the clear and growing evidence that the Dobbs decision is harming reproductive health and freedom. My name is Destiny Lopez, and I am the acting co-CEO of the Guttmacher Institute, a leading research and policy organization committed to advancing sexual and reproductive health and rights worldwide. For decades following the 1973 Roe v. Wade decision, anti-abortion advocates worked strategically to make abortion harder to get and highly stigmatized. Public support for abortion’s legality has remained high and consistent. But the sheer number of state-level abortion restrictions ensured that abortion became inaccessible for many—even with Roe in place. The Dobbs v. Jackson Women’s Health Organization decision was an inflection point, unleashing chaos and fear across the nation. Our experts are constantly assessing this changing landscape and the increasingly robust body of evidence that illustrates the harms caused and exacerbated by Dobbs. Two years after the decision, here is what we know:i Access to abortion care is severely restricted in many parts of the country. Fourteen states are now enforcing total abortion bans with very limited exceptions, and many more have other new restrictions in place. The total number of brick-and-mortar clinics providing abortion care in the US declined by more than 40 between 2020 and early 2024. Banning abortion does not stop the need for abortion access. Which is why many people seeking abortions post-Dobbs must overcome huge financial and logistical barriers to get care, especially those in states with total or early gestational bans. The number of Americans traveling out of state for abortions doubled from 81,000 in 2020 to more than 170,000 in 2023. States that border states with total abortion bans saw the sharpest increases in out-of-state patients. No one should have to travel to another state to access basic healthcare. And in fact, those who can’t overcome the burdens of travelling for care, which for some might mean crossing multiple state lines, may be forced to stay pregnant against their will. Others may decide to self-manage their abortion. Decades of research have documented that the majority of people obtaining abortions have few financial resources, are people of color, and are already parenting. They are the ones most harshly impacted by bans and restrictions. We also know that providers are resilient and adapting to meet patient needs. While brick-andmortar facilities provide more than three-quarters of all abortions, online clinics are expanding care options by offering medication abortion services via telehealth. Research by the Society for Family Planning shows that virtual-only telehealth abortions accounted for almost one in five abortions from October to December 2023. There are many other important ways Dobbs is interfering with reproductive health care across the nation that I don’t have time to discuss in detail today, from current and future OB-GYNs not wanting to practice in ban states to impacts on maternal health and people facing obstetric emergencies. So what does all this mean? Overturning Roe did not resolve the debates on abortion that have characterized US politics for the past 50 years. Instead, it enabled policies that have significantly worsened the harms faced by individuals who are most marginalized in our health care system. Still, despite these immense hardships and many people being denied care, there were more than one million clinician-provided abortions in 2023—a 10% increase from 2020. This is a testament to the heroic efforts of providers, abortion funds and other support networks, to the resilience and determination of people seeking care, and to the centrality of abortion in peoples’ lives. And it explains why the anti-abortion movement and their political allies are doubling down on even more repressive policies. For instance, this year four states introduced legislation—and one passed a law—criminalizing adults who support adolescents seeking abortion care in another state. Earlier in the year, the Alabama Supreme Court’s decision to classify frozen embryos as “children” wreaked havoc on fertility treatment services while advancing the anti-abortion movement’s long-term goal to enshrine fetal personhood in both law and policy. These attacks on bodily autonomy, coupled with two major abortion cases currently before the Supreme Court, signal that the policy and legal landscape will continue to shift. The full damage caused by Dobbs will not be clear for years to come, but the evidence suggests it will not be easy to repair. That’s why it is imperative that policymakers at all levels of government champion a bold vision of abortion care that goes beyond what Roe promised. Only policies rooted in evidence and human rights will guarantee that all people have meaningful access to high-quality, affordable abortion care where they live and via the method they choose. Thank you.
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[question] In bullet point form, what is Dobbs and what are some effects that America is having because of it based on this statement from Lopez ===================== [text] Thank you, Chair Sanders, Ranking Member Cassidy, Senator Murray and the members of the Committee for the opportunity to highlight the clear and growing evidence that the Dobbs decision is harming reproductive health and freedom. My name is Destiny Lopez, and I am the acting co-CEO of the Guttmacher Institute, a leading research and policy organization committed to advancing sexual and reproductive health and rights worldwide. For decades following the 1973 Roe v. Wade decision, anti-abortion advocates worked strategically to make abortion harder to get and highly stigmatized. Public support for abortion’s legality has remained high and consistent. But the sheer number of state-level abortion restrictions ensured that abortion became inaccessible for many—even with Roe in place. The Dobbs v. Jackson Women’s Health Organization decision was an inflection point, unleashing chaos and fear across the nation. Our experts are constantly assessing this changing landscape and the increasingly robust body of evidence that illustrates the harms caused and exacerbated by Dobbs. Two years after the decision, here is what we know:i Access to abortion care is severely restricted in many parts of the country. Fourteen states are now enforcing total abortion bans with very limited exceptions, and many more have other new restrictions in place. The total number of brick-and-mortar clinics providing abortion care in the US declined by more than 40 between 2020 and early 2024. Banning abortion does not stop the need for abortion access. Which is why many people seeking abortions post-Dobbs must overcome huge financial and logistical barriers to get care, especially those in states with total or early gestational bans. The number of Americans traveling out of state for abortions doubled from 81,000 in 2020 to more than 170,000 in 2023. States that border states with total abortion bans saw the sharpest increases in out-of-state patients. No one should have to travel to another state to access basic healthcare. And in fact, those who can’t overcome the burdens of travelling for care, which for some might mean crossing multiple state lines, may be forced to stay pregnant against their will. Others may decide to self-manage their abortion. Decades of research have documented that the majority of people obtaining abortions have few financial resources, are people of color, and are already parenting. They are the ones most harshly impacted by bans and restrictions. We also know that providers are resilient and adapting to meet patient needs. While brick-andmortar facilities provide more than three-quarters of all abortions, online clinics are expanding care options by offering medication abortion services via telehealth. Research by the Society for Family Planning shows that virtual-only telehealth abortions accounted for almost one in five abortions from October to December 2023. There are many other important ways Dobbs is interfering with reproductive health care across the nation that I don’t have time to discuss in detail today, from current and future OB-GYNs not wanting to practice in ban states to impacts on maternal health and people facing obstetric emergencies. So what does all this mean? Overturning Roe did not resolve the debates on abortion that have characterized US politics for the past 50 years. Instead, it enabled policies that have significantly worsened the harms faced by individuals who are most marginalized in our health care system. Still, despite these immense hardships and many people being denied care, there were more than one million clinician-provided abortions in 2023—a 10% increase from 2020. This is a testament to the heroic efforts of providers, abortion funds and other support networks, to the resilience and determination of people seeking care, and to the centrality of abortion in peoples’ lives. And it explains why the anti-abortion movement and their political allies are doubling down on even more repressive policies. For instance, this year four states introduced legislation—and one passed a law—criminalizing adults who support adolescents seeking abortion care in another state. Earlier in the year, the Alabama Supreme Court’s decision to classify frozen embryos as “children” wreaked havoc on fertility treatment services while advancing the anti-abortion movement’s long-term goal to enshrine fetal personhood in both law and policy. These attacks on bodily autonomy, coupled with two major abortion cases currently before the Supreme Court, signal that the policy and legal landscape will continue to shift. The full damage caused by Dobbs will not be clear for years to come, but the evidence suggests it will not be easy to repair. That’s why it is imperative that policymakers at all levels of government champion a bold vision of abortion care that goes beyond what Roe promised. Only policies rooted in evidence and human rights will guarantee that all people have meaningful access to high-quality, affordable abortion care where they live and via the method they choose. Thank you. https://www.help.senate.gov/imo/media/doc/80626e6a-a9e9-50e7-072a-95e7c2a059e3/Lopez%20-%20Testimony.pdf ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
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[question] [user request] ===================== [text] [context document] ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
EVIDENCE:
Thank you, Chair Sanders, Ranking Member Cassidy, Senator Murray and the members of the Committee for the opportunity to highlight the clear and growing evidence that the Dobbs decision is harming reproductive health and freedom. My name is Destiny Lopez, and I am the acting co-CEO of the Guttmacher Institute, a leading research and policy organization committed to advancing sexual and reproductive health and rights worldwide. For decades following the 1973 Roe v. Wade decision, anti-abortion advocates worked strategically to make abortion harder to get and highly stigmatized. Public support for abortion’s legality has remained high and consistent. But the sheer number of state-level abortion restrictions ensured that abortion became inaccessible for many—even with Roe in place. The Dobbs v. Jackson Women’s Health Organization decision was an inflection point, unleashing chaos and fear across the nation. Our experts are constantly assessing this changing landscape and the increasingly robust body of evidence that illustrates the harms caused and exacerbated by Dobbs. Two years after the decision, here is what we know:i Access to abortion care is severely restricted in many parts of the country. Fourteen states are now enforcing total abortion bans with very limited exceptions, and many more have other new restrictions in place. The total number of brick-and-mortar clinics providing abortion care in the US declined by more than 40 between 2020 and early 2024. Banning abortion does not stop the need for abortion access. Which is why many people seeking abortions post-Dobbs must overcome huge financial and logistical barriers to get care, especially those in states with total or early gestational bans. The number of Americans traveling out of state for abortions doubled from 81,000 in 2020 to more than 170,000 in 2023. States that border states with total abortion bans saw the sharpest increases in out-of-state patients. No one should have to travel to another state to access basic healthcare. And in fact, those who can’t overcome the burdens of travelling for care, which for some might mean crossing multiple state lines, may be forced to stay pregnant against their will. Others may decide to self-manage their abortion. Decades of research have documented that the majority of people obtaining abortions have few financial resources, are people of color, and are already parenting. They are the ones most harshly impacted by bans and restrictions. We also know that providers are resilient and adapting to meet patient needs. While brick-andmortar facilities provide more than three-quarters of all abortions, online clinics are expanding care options by offering medication abortion services via telehealth. Research by the Society for Family Planning shows that virtual-only telehealth abortions accounted for almost one in five abortions from October to December 2023. There are many other important ways Dobbs is interfering with reproductive health care across the nation that I don’t have time to discuss in detail today, from current and future OB-GYNs not wanting to practice in ban states to impacts on maternal health and people facing obstetric emergencies. So what does all this mean? Overturning Roe did not resolve the debates on abortion that have characterized US politics for the past 50 years. Instead, it enabled policies that have significantly worsened the harms faced by individuals who are most marginalized in our health care system. Still, despite these immense hardships and many people being denied care, there were more than one million clinician-provided abortions in 2023—a 10% increase from 2020. This is a testament to the heroic efforts of providers, abortion funds and other support networks, to the resilience and determination of people seeking care, and to the centrality of abortion in peoples’ lives. And it explains why the anti-abortion movement and their political allies are doubling down on even more repressive policies. For instance, this year four states introduced legislation—and one passed a law—criminalizing adults who support adolescents seeking abortion care in another state. Earlier in the year, the Alabama Supreme Court’s decision to classify frozen embryos as “children” wreaked havoc on fertility treatment services while advancing the anti-abortion movement’s long-term goal to enshrine fetal personhood in both law and policy. These attacks on bodily autonomy, coupled with two major abortion cases currently before the Supreme Court, signal that the policy and legal landscape will continue to shift. The full damage caused by Dobbs will not be clear for years to come, but the evidence suggests it will not be easy to repair. That’s why it is imperative that policymakers at all levels of government champion a bold vision of abortion care that goes beyond what Roe promised. Only policies rooted in evidence and human rights will guarantee that all people have meaningful access to high-quality, affordable abortion care where they live and via the method they choose. Thank you.
USER:
In bullet point form, what is Dobbs and what are some effects that America is having because of it based on this statement from Lopez
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Pull your answer from the text below only.
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How dangerous is meningitis?
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Bacterial meningitis is a rare but potentially fatal disease. Several types of bacteria can first cause an upper respiratory tract infection and then travel through the bloodstream to the brain. The disease also can occur when certain bacteria invade the meninges directly. Bacterial meningitis can cause stroke, hearing loss, and permanent brain damage. Pneumococcal meningitis is the most common form of meningitis and is the most serious form of bacterial meningitis. Some 6,000 cases of pneumococcal meningitis are reported in the United States each year. The disease is caused by the bacterium Streptococcus pneumoniae, which also causes pneumonia, blood poisoning (septicemia), and ear and sinus infections. At particular risk are children under age 12 and adults with a weakened immune system. People who have had pneumococcal meningitis often suffer neurological damage ranging from deafness to severe brain damage. Meningococcal meningitis is caused by the bacterium Neisseria meningitudes. Each year in the United States about 2,600 people get this highly contagious disease. High-risk groups include infants under the age of 1 year, people with suppressed immune systems, travelers to foreign countries where the disease is endemic, and military recruits and others who reside in dormitories. Between 10-15 percent of cases are fatal, with another 10-15 percent causing brain damage and other serious side effects. 5 Haemophilus influenzae meningitis was at one time the most common form of bacterial meningitis. Fortunately, the Haemophilus influenzae b vaccine has greatly reduced the number of cases in the United States (see Treatment section). Those most at risk of getting this disease are children in child-care settings and children who do not have access to this vaccine. Other forms of bacterial meningitis include Listeria monocytogenes meningitis (in which certain foods such as unpasteurized dairy or deli meats are sometimes implicated); Escherichia coli meningitis, which is most common in elderly adults and newborns and may be transmitted to a baby through the birth canal; and Mycobacterium tuberculosis meningitis, a rare disease that occurs when the bacterium that causes tuberculosis attacks the meninges. Viral, or aseptic, meningitis is usually caused by enteroviruses—common viruses that enter the body through the mouth and travel to the brain and surrounding tissues where they multiply. Enteroviruses are present in mucus, saliva, and feces, and can be transmitted through direct contact with an infected person or an infected object or surface. Other viruses that cause meningitis include Varicella zoster (the virus that causes chicken pox and can appear decades later as shingles), influenza, mumps, HIV, and Herpes simplex type 2 (genital herpes). Fungal infections can affect the brain. The most common form of fungal meningitis is caused by the fungus Cryptococcus neoformans (found mainly in dirt and bird droppings). 6 It can be slow to develop and smolder for weeks. Although treatable, fungal meningitis often recurs in nearly half of affected persons. Parasitic causes include cysticercosis (a tapeworm infection in the brain), which is common in other parts of the world, as well as cerebral malaria. There are rare cases of amoebic meningitis, sometimes related to fresh water swimming, which can be rapidly fatal. People who are suspected of having meningitis or encephalitis should receive immediate, aggressive medical treatment. Both diseases can progress quickly and have the potential to cause severe, irreversible neurological damage. Effective vaccines are available to prevent Haemophilus influenzae, pneumococcal and meningococcal meningitis. Two types of vaccines are available in the United States to help prevent meningococcal meningitis. The Centers for Disease Control and Prevention recommends vaccination with a meningococcal conjugate vaccine for all preteens and teens ages 11 to 12 years, with a booster dose at 16 years old. Teens and young adults (ages 16 through 23) also may be vaccinated with a serogroup B meningococcal vaccine. If meningococcal meningitis is diagnosed, people in close contact with an infected individual should be given preventative antibiotics. Early treatment of bacterial meningitis involves antibiotics that can cross the bloodbrain barrier (a lining of cells that keeps harmful micro-organisms and chemicals from entering the brain). Appropriate antibiotic treatment for most types of meningitis can greatly reduce the risk of dying from the disease. Anticonvulsants to prevent seizures and corticosteroids to reduce brain inflammation may be prescribed. Infected sinuses may need to be drained. Corticosteroids such as prednisone may be ordered to relieve brain pressure and swelling and to prevent hearing loss that is common in some forms of meningitis. Lyme disease, a bacterial infection, is treated with antibiotics. meningitis is rarely life threatening and no specific treatment is needed. Fungal meningitis is treated with intravenous antifungal medications. Antiviral drugs used to treat viral encephalitis include acyclovir and ganciclovir. For most encephalitis-causing viruses, no specific treatment is available. Autoimmune causes of encephalitis are treated with additional immunosuppressant drugs and screening for underlying tumors when appropriate. Acute disseminated encephalomyelitis, a non-infectious inflammatory brain disease mostly seen in children, is treated with steroids. Anticonvulsants may be prescribed to stop or prevent seizures. Corticosteroids can reduce brain swelling. Affected individuals with breathing difficulties may require artificial respiration. Once the acute illness is under control, comprehensive rehabilitation should include cognitive rehabilitation and physical, speech, and occupational therapy. Can meningitis and encephalitis be prevented? Effective vaccines are available to prevent some forms of meningitis. People should avoid sharing food, utensils, glasses, and other objects with someone who may be exposed to or have the infection. People should wash their hands often with soap and rinse under running water. People who live, work, or go to school with someone who has been diagnosed with bacterial meningitis may be asked to take antibiotics for a few days as a preventive measure. Also, people should limit outdoor activities at night, wear long-sleeved clothing when outdoors, use insect repellents that are most effective for that particular region of the country, and rid lawn and outdoor areas of free-standing pools of water, in which mosquitoes breed. What is the prognosis for these infections? Outcome generally depends on the particular infectious agent involved, the severity of the illness, and how quickly treatment is given. In most cases, people with very mild encephalitis or meningitis can make a full recovery, although the process may be slow. Individuals who experience only headache, fever, and stiff neck may recover in 2-4 weeks. Individuals with bacterial meningitis typically show some relief 48-72 hours following initial treatment but are more likely to experience complications caused by the disease. In more serious cases, these diseases can cause hearing and/or speech loss, blindness, permanent brain and nerve damage, behavioral changes, cognitive disabilities, lack of muscle control, seizures, and memory loss. These individuals may need long-term therapy, medication, and supportive care. The recovery from encephalitis is variable depending on the cause of the disease and extent of brain inflammation.
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How dangerous is meningitis? Pull your answer from the text below only. Bacterial meningitis is a rare but potentially fatal disease. Several types of bacteria can first cause an upper respiratory tract infection and then travel through the bloodstream to the brain. The disease also can occur when certain bacteria invade the meninges directly. Bacterial meningitis can cause stroke, hearing loss, and permanent brain damage. Pneumococcal meningitis is the most common form of meningitis and is the most serious form of bacterial meningitis. Some 6,000 cases of pneumococcal meningitis are reported in the United States each year. The disease is caused by the bacterium Streptococcus pneumoniae, which also causes pneumonia, blood poisoning (septicemia), and ear and sinus infections. At particular risk are children under age 12 and adults with a weakened immune system. People who have had pneumococcal meningitis often suffer neurological damage ranging from deafness to severe brain damage. Meningococcal meningitis is caused by the bacterium Neisseria meningitudes. Each year in the United States about 2,600 people get this highly contagious disease. High-risk groups include infants under the age of 1 year, people with suppressed immune systems, travelers to foreign countries where the disease is endemic, and military recruits and others who reside in dormitories. Between 10-15 percent of cases are fatal, with another 10-15 percent causing brain damage and other serious side effects. 5 Haemophilus influenzae meningitis was at one time the most common form of bacterial meningitis. Fortunately, the Haemophilus influenzae b vaccine has greatly reduced the number of cases in the United States (see Treatment section). Those most at risk of getting this disease are children in child-care settings and children who do not have access to this vaccine. Other forms of bacterial meningitis include Listeria monocytogenes meningitis (in which certain foods such as unpasteurized dairy or deli meats are sometimes implicated); Escherichia coli meningitis, which is most common in elderly adults and newborns and may be transmitted to a baby through the birth canal; and Mycobacterium tuberculosis meningitis, a rare disease that occurs when the bacterium that causes tuberculosis attacks the meninges. Viral, or aseptic, meningitis is usually caused by enteroviruses—common viruses that enter the body through the mouth and travel to the brain and surrounding tissues where they multiply. Enteroviruses are present in mucus, saliva, and feces, and can be transmitted through direct contact with an infected person or an infected object or surface. Other viruses that cause meningitis include Varicella zoster (the virus that causes chicken pox and can appear decades later as shingles), influenza, mumps, HIV, and Herpes simplex type 2 (genital herpes). Fungal infections can affect the brain. The most common form of fungal meningitis is caused by the fungus Cryptococcus neoformans (found mainly in dirt and bird droppings). 6 It can be slow to develop and smolder for weeks. Although treatable, fungal meningitis often recurs in nearly half of affected persons. Parasitic causes include cysticercosis (a tapeworm infection in the brain), which is common in other parts of the world, as well as cerebral malaria. There are rare cases of amoebic meningitis, sometimes related to fresh water swimming, which can be rapidly fatal. People who are suspected of having meningitis or encephalitis should receive immediate, aggressive medical treatment. Both diseases can progress quickly and have the potential to cause severe, irreversible neurological damage. Effective vaccines are available to prevent Haemophilus influenzae, pneumococcal and meningococcal meningitis. Two types of vaccines are available in the United States to help prevent meningococcal meningitis. The Centers for Disease Control and Prevention recommends vaccination with a meningococcal conjugate vaccine for all preteens and teens ages 11 to 12 years, with a booster dose at 16 years old. Teens and young adults (ages 16 through 23) also may be vaccinated with a serogroup B meningococcal vaccine. If meningococcal meningitis is diagnosed, people in close contact with an infected individual should be given preventative antibiotics. Early treatment of bacterial meningitis involves antibiotics that can cross the bloodbrain barrier (a lining of cells that keeps harmful micro-organisms and chemicals from entering the brain). Appropriate antibiotic treatment for most types of meningitis can greatly reduce the risk of dying from the disease. Anticonvulsants to prevent seizures and corticosteroids to reduce brain inflammation may be prescribed. Infected sinuses may need to be drained. Corticosteroids such as prednisone may be ordered to relieve brain pressure and swelling and to prevent hearing loss that is common in some forms of meningitis. Lyme disease, a bacterial infection, is treated with antibiotics. meningitis is rarely life threatening and no specific treatment is needed. Fungal meningitis is treated with intravenous antifungal medications. Antiviral drugs used to treat viral encephalitis include acyclovir and ganciclovir. For most encephalitis-causing viruses, no specific treatment is available. Autoimmune causes of encephalitis are treated with additional immunosuppressant drugs and screening for underlying tumors when appropriate. Acute disseminated encephalomyelitis, a non-infectious inflammatory brain disease mostly seen in children, is treated with steroids. Anticonvulsants may be prescribed to stop or prevent seizures. Corticosteroids can reduce brain swelling. Affected individuals with breathing difficulties may require artificial respiration. Once the acute illness is under control, comprehensive rehabilitation should include cognitive rehabilitation and physical, speech, and occupational therapy. Can meningitis and encephalitis be prevented? Effective vaccines are available to prevent some forms of meningitis. People should avoid sharing food, utensils, glasses, and other objects with someone who may be exposed to or have the infection. People should wash their hands often with soap and rinse under running water. People who live, work, or go to school with someone who has been diagnosed with bacterial meningitis may be asked to take antibiotics for a few days as a preventive measure. Also, people should limit outdoor activities at night, wear long-sleeved clothing when outdoors, use insect repellents that are most effective for that particular region of the country, and rid lawn and outdoor areas of free-standing pools of water, in which mosquitoes breed. What is the prognosis for these infections? Outcome generally depends on the particular infectious agent involved, the severity of the illness, and how quickly treatment is given. In most cases, people with very mild encephalitis or meningitis can make a full recovery, although the process may be slow. Individuals who experience only headache, fever, and stiff neck may recover in 2-4 weeks. Individuals with bacterial meningitis typically show some relief 48-72 hours following initial treatment but are more likely to experience complications caused by the disease. In more serious cases, these diseases can cause hearing and/or speech loss, blindness, permanent brain and nerve damage, behavioral changes, cognitive disabilities, lack of muscle control, seizures, and memory loss. These individuals may need long-term therapy, medication, and supportive care. The recovery from encephalitis is variable depending on the cause of the disease and extent of brain inflammation.
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Pull your answer from the text below only.
EVIDENCE:
Bacterial meningitis is a rare but potentially fatal disease. Several types of bacteria can first cause an upper respiratory tract infection and then travel through the bloodstream to the brain. The disease also can occur when certain bacteria invade the meninges directly. Bacterial meningitis can cause stroke, hearing loss, and permanent brain damage. Pneumococcal meningitis is the most common form of meningitis and is the most serious form of bacterial meningitis. Some 6,000 cases of pneumococcal meningitis are reported in the United States each year. The disease is caused by the bacterium Streptococcus pneumoniae, which also causes pneumonia, blood poisoning (septicemia), and ear and sinus infections. At particular risk are children under age 12 and adults with a weakened immune system. People who have had pneumococcal meningitis often suffer neurological damage ranging from deafness to severe brain damage. Meningococcal meningitis is caused by the bacterium Neisseria meningitudes. Each year in the United States about 2,600 people get this highly contagious disease. High-risk groups include infants under the age of 1 year, people with suppressed immune systems, travelers to foreign countries where the disease is endemic, and military recruits and others who reside in dormitories. Between 10-15 percent of cases are fatal, with another 10-15 percent causing brain damage and other serious side effects. 5 Haemophilus influenzae meningitis was at one time the most common form of bacterial meningitis. Fortunately, the Haemophilus influenzae b vaccine has greatly reduced the number of cases in the United States (see Treatment section). Those most at risk of getting this disease are children in child-care settings and children who do not have access to this vaccine. Other forms of bacterial meningitis include Listeria monocytogenes meningitis (in which certain foods such as unpasteurized dairy or deli meats are sometimes implicated); Escherichia coli meningitis, which is most common in elderly adults and newborns and may be transmitted to a baby through the birth canal; and Mycobacterium tuberculosis meningitis, a rare disease that occurs when the bacterium that causes tuberculosis attacks the meninges. Viral, or aseptic, meningitis is usually caused by enteroviruses—common viruses that enter the body through the mouth and travel to the brain and surrounding tissues where they multiply. Enteroviruses are present in mucus, saliva, and feces, and can be transmitted through direct contact with an infected person or an infected object or surface. Other viruses that cause meningitis include Varicella zoster (the virus that causes chicken pox and can appear decades later as shingles), influenza, mumps, HIV, and Herpes simplex type 2 (genital herpes). Fungal infections can affect the brain. The most common form of fungal meningitis is caused by the fungus Cryptococcus neoformans (found mainly in dirt and bird droppings). 6 It can be slow to develop and smolder for weeks. Although treatable, fungal meningitis often recurs in nearly half of affected persons. Parasitic causes include cysticercosis (a tapeworm infection in the brain), which is common in other parts of the world, as well as cerebral malaria. There are rare cases of amoebic meningitis, sometimes related to fresh water swimming, which can be rapidly fatal. People who are suspected of having meningitis or encephalitis should receive immediate, aggressive medical treatment. Both diseases can progress quickly and have the potential to cause severe, irreversible neurological damage. Effective vaccines are available to prevent Haemophilus influenzae, pneumococcal and meningococcal meningitis. Two types of vaccines are available in the United States to help prevent meningococcal meningitis. The Centers for Disease Control and Prevention recommends vaccination with a meningococcal conjugate vaccine for all preteens and teens ages 11 to 12 years, with a booster dose at 16 years old. Teens and young adults (ages 16 through 23) also may be vaccinated with a serogroup B meningococcal vaccine. If meningococcal meningitis is diagnosed, people in close contact with an infected individual should be given preventative antibiotics. Early treatment of bacterial meningitis involves antibiotics that can cross the bloodbrain barrier (a lining of cells that keeps harmful micro-organisms and chemicals from entering the brain). Appropriate antibiotic treatment for most types of meningitis can greatly reduce the risk of dying from the disease. Anticonvulsants to prevent seizures and corticosteroids to reduce brain inflammation may be prescribed. Infected sinuses may need to be drained. Corticosteroids such as prednisone may be ordered to relieve brain pressure and swelling and to prevent hearing loss that is common in some forms of meningitis. Lyme disease, a bacterial infection, is treated with antibiotics. meningitis is rarely life threatening and no specific treatment is needed. Fungal meningitis is treated with intravenous antifungal medications. Antiviral drugs used to treat viral encephalitis include acyclovir and ganciclovir. For most encephalitis-causing viruses, no specific treatment is available. Autoimmune causes of encephalitis are treated with additional immunosuppressant drugs and screening for underlying tumors when appropriate. Acute disseminated encephalomyelitis, a non-infectious inflammatory brain disease mostly seen in children, is treated with steroids. Anticonvulsants may be prescribed to stop or prevent seizures. Corticosteroids can reduce brain swelling. Affected individuals with breathing difficulties may require artificial respiration. Once the acute illness is under control, comprehensive rehabilitation should include cognitive rehabilitation and physical, speech, and occupational therapy. Can meningitis and encephalitis be prevented? Effective vaccines are available to prevent some forms of meningitis. People should avoid sharing food, utensils, glasses, and other objects with someone who may be exposed to or have the infection. People should wash their hands often with soap and rinse under running water. People who live, work, or go to school with someone who has been diagnosed with bacterial meningitis may be asked to take antibiotics for a few days as a preventive measure. Also, people should limit outdoor activities at night, wear long-sleeved clothing when outdoors, use insect repellents that are most effective for that particular region of the country, and rid lawn and outdoor areas of free-standing pools of water, in which mosquitoes breed. What is the prognosis for these infections? Outcome generally depends on the particular infectious agent involved, the severity of the illness, and how quickly treatment is given. In most cases, people with very mild encephalitis or meningitis can make a full recovery, although the process may be slow. Individuals who experience only headache, fever, and stiff neck may recover in 2-4 weeks. Individuals with bacterial meningitis typically show some relief 48-72 hours following initial treatment but are more likely to experience complications caused by the disease. In more serious cases, these diseases can cause hearing and/or speech loss, blindness, permanent brain and nerve damage, behavioral changes, cognitive disabilities, lack of muscle control, seizures, and memory loss. These individuals may need long-term therapy, medication, and supportive care. The recovery from encephalitis is variable depending on the cause of the disease and extent of brain inflammation.
USER:
How dangerous is meningitis?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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[question] [user request] ===================== [text] [context document] ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
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The state is trying to introduce some study about how sex offenders keep reoffending, but it has ot been properly peer reviewed., According tho this article, will it be admissible or what should i do to get it thrown out of evidence? I need to know the reasoning behind why eividence gets thrown out.
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2. The Frye ruling refers only to the character of the “scientific principle” proffered as evidence. Frye makes no mention of subject-matter expertise (27), except in the sense implied by the “general acceptance” clause, which refers to the consensual expertise held by the scientific community. This concept of consensual expertise as the basis for establishing trustworthiness became eroded through establishment of the Federal Rules of Evidence, which turned the focus toward opinions of individual experts. Rule 702: Testimony by Experts By the 1970s, a sense had emerged that the inflexible Frye requirement for general acceptance was difficult to establish and perhaps insufficient, in that it was mainly relevant to criminal cases in which an invented instrument was proposed to establish fact.# Partly in response to this concern, standards for admissibility of scientific evidence began to change. They did so initially, at least in a formal sense, following recommendations of a federal advisory committee of the United States Judicial Conference, which was established for the broader purpose of normalizing and codifying rules for the use of evidence in US Courts. The Federal Rules of Evidence became law in 1975 by act of Congress. The particular rule that bears on admissibility of expert testimony is known as Rule 702 (28). While Frye selectively targets the use of scientific evidence, Rule 702 applies more generally to expert testimony on “scientific, technical, or other specialized knowledge,” meaning that the same standards apply to evidence drawn from the well of scientific knowledge and to subject-matter experts in nonscience knowledge domains, such as tugboat captaining. In its original form, Rule 702–1975 merely formalized and made into law standards for “helpfulness” and “expert” qualifications, both of which had been less formally applied since the 19th century: “If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise.” As a notably limp standard for judging the evidentiary nuances of modern science, Rule 702-1975 was subsequently interpreted and clarified by the Supreme Court’s transformative 1993 ruling on scientific evidence in Daubert v. Merrell Dow Pharmaceuticals, Inc. (8). The Daubert Standard Unlike the forensic instrument that motivated the Frye standard, in which the question before the court concerned the scientific validity of measured quantities, the Daubert ruling emerged from a toxic tort case, in which scientific evidence attempted to establish cause and effect. Daubert’s civil action was filed against the drug company Merrell Dow Pharmaceuticals in 1984, on behalf of two children born with serious birth defects. The mothers had taken the drug Bendectin [doxylamine succinate and pyridoxine hydrochloride (vitamin B6)], which was manufactured by Merrell Dow and widely used for decades to quell nausea and vomiting during first-trimester pregnancy. The plaintiff alleged that Bendectin had caused deformities during gestation. Merrell Dow maintained that there was no scientific evidence of a link between their drug and birth defects, but Daubert recruited an expert in the form of obstetrician William McBride, who was prepared to testify on the teratogenic effects of Bendectin. Noting that McBride’s assertions failed to meet the Frye standard of general acceptance by the scientific community, the District Court for the Southern District of California issued summary judgement in favor of Merrell Dow (29). Daubert appealed to the Ninth Circuit, which upheld the lower court’s ruling (30). In response, Daubert went on to argue before the Supreme Court that the common law Frye standard for admissibility of scientific evidence was inapplicable in their case, because it had been replaced in 1975 by the legislatively enacted Rule 702. The Court agreed and upheld Rule 702–1975 as the modern legal standard for admissibility in federal court, superseding the Frye standard.‖ In its ruling (8), the Court provided an interpretation of Rule 702–1975, which is known today as the Daubert standard. This standard consists of a set of clear and useful criteria for assessing the trustworthiness of scientific evidence: • whether the theory or technique in question can be (and has been) tested, • whether it has been subjected to peer review and publication, • its known or potential error rate, and • the existence and maintenance of standards controlling its operation, and • whether it has attracted widespread acceptance within a relevant scientific community Unlike the uncompromising Frye standard, these criteria are intended to be flexibly applied at the discretion of the trial judge. With these brief considerations, Daubert strengthened the application of evidence law in several ways that conform to the nature of scientific investigation. Perhaps most importantly, Daubert returned the focus to the body of scientific knowledge (27), highlighting the importance of empirically demonstrating [“can be (and has been) tested”] that a scientific instrument or principle is a valid predictor of the probability that a courtroom hypothesis is correct (“known or potential error rate”). To that end, the focus on widespread or general acceptance of scientific evidence – consistent with Frye but absent from Rule 702 – is notable here, as the scientific consensus at any moment is the rational basis for decision under the unyielding demands of courtroom litigation. Also consistent with Frye and contrary to the letter of Rule 702, Daubert emphasizes the need for evidence to reflect the consensus of the “relevant scientific community.” As highlighted below, the definition of relevance has become a battleground in efforts to reform the use of forensic evidence. Rule 702 Evolves Rule 702 was substantially amended in 2000 to conform with Daubert and to promote a “more rigorous and structured approach” (31), in which the gatekeeping role was formally handed to judges. The Rule’s emphasis on the expert remained, but three “reliability” requirements were included in Rule 702–2000 (provisions b-d), which place constraints on the data, methods, principles, and their application by the expert: A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case. Rule 702 was revised again in 2022 (to take effect December 2023) through amendments proposed by the Advisory Committee on Evidence Rules and subsequently approved by the US Judicial Conference and the Supreme Court (32). For these efforts, Rule 702–2022 differs from the previous by two small text additions. One defines a preponderance of evidence (“more likely than not”) standard for demonstrating that the four provisions [702(a-d)] have been satisfied, which offers the gatekeeping judge a quantitative criterion for decisions about admissibility. The other clarifies that it is not the expert’s reliable application that matters, but rather that “the expert’s opinion reflects a reliable application,” which grants the trial judge the ability to bar opinions that exceed what can be reasonably concluded from the methods and principles applied.
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[question] The state is trying to introduce some study about how sex offenders keep reoffending, but it has ot been properly peer reviewed., According tho this article, will it be admissible or what should i do to get it thrown out of evidence? I need to know the reasoning behind why eividence gets thrown out. ===================== [text] 2. The Frye ruling refers only to the character of the “scientific principle” proffered as evidence. Frye makes no mention of subject-matter expertise (27), except in the sense implied by the “general acceptance” clause, which refers to the consensual expertise held by the scientific community. This concept of consensual expertise as the basis for establishing trustworthiness became eroded through establishment of the Federal Rules of Evidence, which turned the focus toward opinions of individual experts. Rule 702: Testimony by Experts By the 1970s, a sense had emerged that the inflexible Frye requirement for general acceptance was difficult to establish and perhaps insufficient, in that it was mainly relevant to criminal cases in which an invented instrument was proposed to establish fact.# Partly in response to this concern, standards for admissibility of scientific evidence began to change. They did so initially, at least in a formal sense, following recommendations of a federal advisory committee of the United States Judicial Conference, which was established for the broader purpose of normalizing and codifying rules for the use of evidence in US Courts. The Federal Rules of Evidence became law in 1975 by act of Congress. The particular rule that bears on admissibility of expert testimony is known as Rule 702 (28). While Frye selectively targets the use of scientific evidence, Rule 702 applies more generally to expert testimony on “scientific, technical, or other specialized knowledge,” meaning that the same standards apply to evidence drawn from the well of scientific knowledge and to subject-matter experts in nonscience knowledge domains, such as tugboat captaining. In its original form, Rule 702–1975 merely formalized and made into law standards for “helpfulness” and “expert” qualifications, both of which had been less formally applied since the 19th century: “If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise.” As a notably limp standard for judging the evidentiary nuances of modern science, Rule 702-1975 was subsequently interpreted and clarified by the Supreme Court’s transformative 1993 ruling on scientific evidence in Daubert v. Merrell Dow Pharmaceuticals, Inc. (8). The Daubert Standard Unlike the forensic instrument that motivated the Frye standard, in which the question before the court concerned the scientific validity of measured quantities, the Daubert ruling emerged from a toxic tort case, in which scientific evidence attempted to establish cause and effect. Daubert’s civil action was filed against the drug company Merrell Dow Pharmaceuticals in 1984, on behalf of two children born with serious birth defects. The mothers had taken the drug Bendectin [doxylamine succinate and pyridoxine hydrochloride (vitamin B6)], which was manufactured by Merrell Dow and widely used for decades to quell nausea and vomiting during first-trimester pregnancy. The plaintiff alleged that Bendectin had caused deformities during gestation. Merrell Dow maintained that there was no scientific evidence of a link between their drug and birth defects, but Daubert recruited an expert in the form of obstetrician William McBride, who was prepared to testify on the teratogenic effects of Bendectin. Noting that McBride’s assertions failed to meet the Frye standard of general acceptance by the scientific community, the District Court for the Southern District of California issued summary judgement in favor of Merrell Dow (29). Daubert appealed to the Ninth Circuit, which upheld the lower court’s ruling (30). In response, Daubert went on to argue before the Supreme Court that the common law Frye standard for admissibility of scientific evidence was inapplicable in their case, because it had been replaced in 1975 by the legislatively enacted Rule 702. The Court agreed and upheld Rule 702–1975 as the modern legal standard for admissibility in federal court, superseding the Frye standard.‖ In its ruling (8), the Court provided an interpretation of Rule 702–1975, which is known today as the Daubert standard. This standard consists of a set of clear and useful criteria for assessing the trustworthiness of scientific evidence: • whether the theory or technique in question can be (and has been) tested, • whether it has been subjected to peer review and publication, • its known or potential error rate, and • the existence and maintenance of standards controlling its operation, and • whether it has attracted widespread acceptance within a relevant scientific community Unlike the uncompromising Frye standard, these criteria are intended to be flexibly applied at the discretion of the trial judge. With these brief considerations, Daubert strengthened the application of evidence law in several ways that conform to the nature of scientific investigation. Perhaps most importantly, Daubert returned the focus to the body of scientific knowledge (27), highlighting the importance of empirically demonstrating [“can be (and has been) tested”] that a scientific instrument or principle is a valid predictor of the probability that a courtroom hypothesis is correct (“known or potential error rate”). To that end, the focus on widespread or general acceptance of scientific evidence – consistent with Frye but absent from Rule 702 – is notable here, as the scientific consensus at any moment is the rational basis for decision under the unyielding demands of courtroom litigation. Also consistent with Frye and contrary to the letter of Rule 702, Daubert emphasizes the need for evidence to reflect the consensus of the “relevant scientific community.” As highlighted below, the definition of relevance has become a battleground in efforts to reform the use of forensic evidence. Rule 702 Evolves Rule 702 was substantially amended in 2000 to conform with Daubert and to promote a “more rigorous and structured approach” (31), in which the gatekeeping role was formally handed to judges. The Rule’s emphasis on the expert remained, but three “reliability” requirements were included in Rule 702–2000 (provisions b-d), which place constraints on the data, methods, principles, and their application by the expert: A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case. Rule 702 was revised again in 2022 (to take effect December 2023) through amendments proposed by the Advisory Committee on Evidence Rules and subsequently approved by the US Judicial Conference and the Supreme Court (32). For these efforts, Rule 702–2022 differs from the previous by two small text additions. One defines a preponderance of evidence (“more likely than not”) standard for demonstrating that the four provisions [702(a-d)] have been satisfied, which offers the gatekeeping judge a quantitative criterion for decisions about admissibility. The other clarifies that it is not the expert’s reliable application that matters, but rather that “the expert’s opinion reflects a reliable application,” which grants the trial judge the ability to bar opinions that exceed what can be reasonably concluded from the methods and principles applied. https://www.pnas.org/doi/full/10.1073/pnas.2301839120 ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
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[question] [user request] ===================== [text] [context document] ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
EVIDENCE:
2. The Frye ruling refers only to the character of the “scientific principle” proffered as evidence. Frye makes no mention of subject-matter expertise (27), except in the sense implied by the “general acceptance” clause, which refers to the consensual expertise held by the scientific community. This concept of consensual expertise as the basis for establishing trustworthiness became eroded through establishment of the Federal Rules of Evidence, which turned the focus toward opinions of individual experts. Rule 702: Testimony by Experts By the 1970s, a sense had emerged that the inflexible Frye requirement for general acceptance was difficult to establish and perhaps insufficient, in that it was mainly relevant to criminal cases in which an invented instrument was proposed to establish fact.# Partly in response to this concern, standards for admissibility of scientific evidence began to change. They did so initially, at least in a formal sense, following recommendations of a federal advisory committee of the United States Judicial Conference, which was established for the broader purpose of normalizing and codifying rules for the use of evidence in US Courts. The Federal Rules of Evidence became law in 1975 by act of Congress. The particular rule that bears on admissibility of expert testimony is known as Rule 702 (28). While Frye selectively targets the use of scientific evidence, Rule 702 applies more generally to expert testimony on “scientific, technical, or other specialized knowledge,” meaning that the same standards apply to evidence drawn from the well of scientific knowledge and to subject-matter experts in nonscience knowledge domains, such as tugboat captaining. In its original form, Rule 702–1975 merely formalized and made into law standards for “helpfulness” and “expert” qualifications, both of which had been less formally applied since the 19th century: “If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise.” As a notably limp standard for judging the evidentiary nuances of modern science, Rule 702-1975 was subsequently interpreted and clarified by the Supreme Court’s transformative 1993 ruling on scientific evidence in Daubert v. Merrell Dow Pharmaceuticals, Inc. (8). The Daubert Standard Unlike the forensic instrument that motivated the Frye standard, in which the question before the court concerned the scientific validity of measured quantities, the Daubert ruling emerged from a toxic tort case, in which scientific evidence attempted to establish cause and effect. Daubert’s civil action was filed against the drug company Merrell Dow Pharmaceuticals in 1984, on behalf of two children born with serious birth defects. The mothers had taken the drug Bendectin [doxylamine succinate and pyridoxine hydrochloride (vitamin B6)], which was manufactured by Merrell Dow and widely used for decades to quell nausea and vomiting during first-trimester pregnancy. The plaintiff alleged that Bendectin had caused deformities during gestation. Merrell Dow maintained that there was no scientific evidence of a link between their drug and birth defects, but Daubert recruited an expert in the form of obstetrician William McBride, who was prepared to testify on the teratogenic effects of Bendectin. Noting that McBride’s assertions failed to meet the Frye standard of general acceptance by the scientific community, the District Court for the Southern District of California issued summary judgement in favor of Merrell Dow (29). Daubert appealed to the Ninth Circuit, which upheld the lower court’s ruling (30). In response, Daubert went on to argue before the Supreme Court that the common law Frye standard for admissibility of scientific evidence was inapplicable in their case, because it had been replaced in 1975 by the legislatively enacted Rule 702. The Court agreed and upheld Rule 702–1975 as the modern legal standard for admissibility in federal court, superseding the Frye standard.‖ In its ruling (8), the Court provided an interpretation of Rule 702–1975, which is known today as the Daubert standard. This standard consists of a set of clear and useful criteria for assessing the trustworthiness of scientific evidence: • whether the theory or technique in question can be (and has been) tested, • whether it has been subjected to peer review and publication, • its known or potential error rate, and • the existence and maintenance of standards controlling its operation, and • whether it has attracted widespread acceptance within a relevant scientific community Unlike the uncompromising Frye standard, these criteria are intended to be flexibly applied at the discretion of the trial judge. With these brief considerations, Daubert strengthened the application of evidence law in several ways that conform to the nature of scientific investigation. Perhaps most importantly, Daubert returned the focus to the body of scientific knowledge (27), highlighting the importance of empirically demonstrating [“can be (and has been) tested”] that a scientific instrument or principle is a valid predictor of the probability that a courtroom hypothesis is correct (“known or potential error rate”). To that end, the focus on widespread or general acceptance of scientific evidence – consistent with Frye but absent from Rule 702 – is notable here, as the scientific consensus at any moment is the rational basis for decision under the unyielding demands of courtroom litigation. Also consistent with Frye and contrary to the letter of Rule 702, Daubert emphasizes the need for evidence to reflect the consensus of the “relevant scientific community.” As highlighted below, the definition of relevance has become a battleground in efforts to reform the use of forensic evidence. Rule 702 Evolves Rule 702 was substantially amended in 2000 to conform with Daubert and to promote a “more rigorous and structured approach” (31), in which the gatekeeping role was formally handed to judges. The Rule’s emphasis on the expert remained, but three “reliability” requirements were included in Rule 702–2000 (provisions b-d), which place constraints on the data, methods, principles, and their application by the expert: A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case. Rule 702 was revised again in 2022 (to take effect December 2023) through amendments proposed by the Advisory Committee on Evidence Rules and subsequently approved by the US Judicial Conference and the Supreme Court (32). For these efforts, Rule 702–2022 differs from the previous by two small text additions. One defines a preponderance of evidence (“more likely than not”) standard for demonstrating that the four provisions [702(a-d)] have been satisfied, which offers the gatekeeping judge a quantitative criterion for decisions about admissibility. The other clarifies that it is not the expert’s reliable application that matters, but rather that “the expert’s opinion reflects a reliable application,” which grants the trial judge the ability to bar opinions that exceed what can be reasonably concluded from the methods and principles applied.
USER:
The state is trying to introduce some study about how sex offenders keep reoffending, but it has ot been properly peer reviewed., According tho this article, will it be admissible or what should i do to get it thrown out of evidence? I need to know the reasoning behind why eividence gets thrown out.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. [user request] [context document]
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Farmer Old MacDonald operates a large and very efficient farm in Iowa. Is it likely that Old MacDonald's farm is also very profitable if he owns his land? Use the relevant financial measures in answering the question.
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Financial Performance Measures for Iowa Farms Farmers who have a large investment in land, machinery, livestock, and equipment need to keep informed about the financial condition of their operations. Some useful measures of financial performance can be calculated from information found in most farm record books and accounting programs. These measures can help farmers assess the profitability, debt capacity, and financial risk currently faced by their businesses. The measures presented in this publication are based on guidelines of the Farm Financial Standards Council, ffsc.org/, and are used by most agricultural lenders and farm accountants. Types of Measures Five different areas of financial condition are measured. Liquidity refers to the degree to which debt obligations coming due can be paid from cash or assets that soon will be turned into cash. This is measured by the current ratio, the amount of working capital, and the amount of working capital per dollar of gross revenue. A more thorough analysis of liquidity can be made with a cash flow budget. FM1792, AgDM File C3-15: Twelve Steps to Cash Flow Budgeting, store. extension.iastate.edu/Product/1815.pdf, explains this tool in detail. Solvency refers to the degree to which all debts are secured and the relative mix of equity and debt capital used by the farm. The total debt-to-asset ratio is one of several ratios used to measure solvency, all of which are based on the same relationship of assets, liabilities, and net worth. Profitability refers to the difference between income and expenses. One important measure of profitability is net farm income. Annual rates of return on both equity capital and total assets also can be calculated and compared to interest rates for loans or rates of return from alternative investments. Financial efficiency ratios show what percent of gross farm revenue went to pay interest, operating expenses, and depreciation, and how much was left for net farm income. The asset turnover ratio measures how much gross income was generated for each dollar invested in land, livestock, equipment, and other assets. Repayment capacity measures show the degree to which cash generated from the farm and other sources will be sufficient to pay principal and interest payments as they come due. Using Performance Measures Values for the farm financial measures should be calculated for several years to observe trends and to avoid making judgments based on an unusual year. Typical historical values for most of these measures can be found in the tables at the end of this publication. They are based on data obtained from the Iowa Farm Business Association (IFBA). Values will vary according to the major enterprises carried out, farm size, location, and the type of land tenure. Other comparable data can be found in the annual publication FM1789, AgDM File C1-10: Iowa Farm Costs and Returns, store.extension.iastate.edu/ Product/1812.pdf. Liquidity Farms with good liquidity typically have current ratios of at least 3.0 or higher. Dairy farms or other farms that have continuous sales throughout the year can safely operate with a current ratio as low as 2.0, however. Conversely, operations that concentrate sales during several periods each year, such as cash grain farms, need to strive for a current ratio higher than 3.0, especially near the beginning of the year. The amount of working capital needed depends on the size of the operation. Records show that working capital measured at the beginning of the year is typically equal to about 50-70% of the farm’s annual gross revenue. For dairy farms, working capital can be as low as 30% of gross revenue, but cash grain farms may need as much as 50%. Solvency Total debt-to-asset ratios tend to be higher for larger farms and for farms that specialize in livestock feeding. Ratios of 10-30% are common among Iowa farms, although many operate with little or no debt. A high debt load does not make farms less efficient, but principal and interest payments eat into cash flow. High-efficiency farms are able to service a higher debt load safely. Two other ratios are commonly used to measure solvency. The equity-to-asset ratio shows how many dollars of net worth a farm has for every dollar of assets. It is equal to 100% minus the debt-to-asset ratio. Higher equity-to-asset ratios indicate a less risky financial situation. Some lenders prefer to use the debt-to-equity ratio to measure solvency. Higher ratios indicate more risk. Another useful measure is how much net worth the farm has for each crop acre farmed, especially for cash grain farms. The IFBA average is nearly $2,500. Profitability Net farm income from operations is what is left from all income received from the farm business in the past year, minus all the operating expenses used to generate this income. Note that operating expenses do not include the cost of financing the business, which is interest expense. Net farm income, or what is left after subtracting interest, is highly variable from year to year and is closely tied to the size and efficiency of the operation. It also depends on the amount of debt the farm is carrying. The rate of return on farm assets is quite variable, too, but average long-term rates of 6-10% have been common in Iowa. High-profit farms may average more than 12%, while low-profit farms often realize a return of only 2% or less. The average rate of return on farm equity measures how fast farm net worth is growing. Highly leveraged farms may earn little or no return on equity when interest rates are high. On the other hand, if the farm’s overall return on assets is higher than the cost of borrowed money, the return on equity may be quite high and net worth will grow rapidly. Operating profit margin is equal to the dollar return to capital divided by the value of farm production each year. Ratios have averaged about 6-10% in recent years, and 25-30% in the 2000s. High-profit farms have had ratios of 30% or more, while low-profit farms have had ratios of less than 10%. Farms that hire or rent assets such as labor, land, or machinery usually will have a lower operating profit margin because operating costs are higher. However, they will also generate a larger gross and net income. Farms with owned or crop share rented land will have a higher operating profit margin because they have lower operating expenses. Another common measure of profitability is Earnings Before Interest, Taxes, Depreciation, and Amortization, abbreviated as EBITDA. It shows how many dollars are available for debt repayment. Financial Efficiency Asset turnover ratios for typical farms are about 20-30%, but they can range from 10-20% for lowprofit farms and up to 30-50% for high-profit farms. The asset turnover ratio measures the efficient use of investment capital to generate revenue while the operating profit margin ratio measures the efficient use of operating capital. Because they are substitutes for each other (owned and rented land, for example), farms that are high in one measure may be low in the other. Farms with mostly rented land should have higher asset turnover ratios than farms with mostly owned land, generally around 50%. Rented farms also will have higher operating expense ratios because rent paid is included in operating expenses. Likewise, rented farms will tend to have lower depreciation and interest expense ratios than owned farms. Typically, about 60-70% of gross revenue goes for operating expenses, 5-10% goes for depreciation, and under 5% goes for interest. The average net farm income ratio for Iowa farms has been in the 5-15% range in recent years but used to be in the 20-30% range in the 2000s. High-profit farms have averaged 20% over the past decade, while lowprofit farms averaged less than 5%.
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. Farmer Old MacDonald operates a large and very efficient farm in Iowa. Is it likely that Old MacDonald's farm is also very profitable if he owns his land? Use the relevant financial measures in answering the question. Financial Performance Measures for Iowa Farms Farmers who have a large investment in land, machinery, livestock, and equipment need to keep informed about the financial condition of their operations. Some useful measures of financial performance can be calculated from information found in most farm record books and accounting programs. These measures can help farmers assess the profitability, debt capacity, and financial risk currently faced by their businesses. The measures presented in this publication are based on guidelines of the Farm Financial Standards Council, ffsc.org/, and are used by most agricultural lenders and farm accountants. Types of Measures Five different areas of financial condition are measured. Liquidity refers to the degree to which debt obligations coming due can be paid from cash or assets that soon will be turned into cash. This is measured by the current ratio, the amount of working capital, and the amount of working capital per dollar of gross revenue. A more thorough analysis of liquidity can be made with a cash flow budget. FM1792, AgDM File C3-15: Twelve Steps to Cash Flow Budgeting, store. extension.iastate.edu/Product/1815.pdf, explains this tool in detail. Solvency refers to the degree to which all debts are secured and the relative mix of equity and debt capital used by the farm. The total debt-to-asset ratio is one of several ratios used to measure solvency, all of which are based on the same relationship of assets, liabilities, and net worth. Profitability refers to the difference between income and expenses. One important measure of profitability is net farm income. Annual rates of return on both equity capital and total assets also can be calculated and compared to interest rates for loans or rates of return from alternative investments. Financial efficiency ratios show what percent of gross farm revenue went to pay interest, operating expenses, and depreciation, and how much was left for net farm income. The asset turnover ratio measures how much gross income was generated for each dollar invested in land, livestock, equipment, and other assets. Repayment capacity measures show the degree to which cash generated from the farm and other sources will be sufficient to pay principal and interest payments as they come due. Using Performance Measures Values for the farm financial measures should be calculated for several years to observe trends and to avoid making judgments based on an unusual year. Typical historical values for most of these measures can be found in the tables at the end of this publication. They are based on data obtained from the Iowa Farm Business Association (IFBA). Values will vary according to the major enterprises carried out, farm size, location, and the type of land tenure. Other comparable data can be found in the annual publication FM1789, AgDM File C1-10: Iowa Farm Costs and Returns, store.extension.iastate.edu/ Product/1812.pdf. Liquidity Farms with good liquidity typically have current ratios of at least 3.0 or higher. Dairy farms or other farms that have continuous sales throughout the year can safely operate with a current ratio as low as 2.0, however. Conversely, operations that concentrate sales during several periods each year, such as cash grain farms, need to strive for a current ratio higher than 3.0, especially near the beginning of the year. The amount of working capital needed depends on the size of the operation. Records show that working capital measured at the beginning of the year is typically equal to about 50-70% of the farm’s annual gross revenue. For dairy farms, working capital can be as low as 30% of gross revenue, but cash grain farms may need as much as 50%. Solvency Total debt-to-asset ratios tend to be higher for larger farms and for farms that specialize in livestock feeding. Ratios of 10-30% are common among Iowa farms, although many operate with little or no debt. A high debt load does not make farms less efficient, but principal and interest payments eat into cash flow. High-efficiency farms are able to service a higher debt load safely. Two other ratios are commonly used to measure solvency. The equity-to-asset ratio shows how many dollars of net worth a farm has for every dollar of assets. It is equal to 100% minus the debt-to-asset ratio. Higher equity-to-asset ratios indicate a less risky financial situation. Some lenders prefer to use the debt-to-equity ratio to measure solvency. Higher ratios indicate more risk. Another useful measure is how much net worth the farm has for each crop acre farmed, especially for cash grain farms. The IFBA average is nearly $2,500. Profitability Net farm income from operations is what is left from all income received from the farm business in the past year, minus all the operating expenses used to generate this income. Note that operating expenses do not include the cost of financing the business, which is interest expense. Net farm income, or what is left after subtracting interest, is highly variable from year to year and is closely tied to the size and efficiency of the operation. It also depends on the amount of debt the farm is carrying. The rate of return on farm assets is quite variable, too, but average long-term rates of 6-10% have been common in Iowa. High-profit farms may average more than 12%, while low-profit farms often realize a return of only 2% or less. The average rate of return on farm equity measures how fast farm net worth is growing. Highly leveraged farms may earn little or no return on equity when interest rates are high. On the other hand, if the farm’s overall return on assets is higher than the cost of borrowed money, the return on equity may be quite high and net worth will grow rapidly. Operating profit margin is equal to the dollar return to capital divided by the value of farm production each year. Ratios have averaged about 6-10% in recent years, and 25-30% in the 2000s. High-profit farms have had ratios of 30% or more, while low-profit farms have had ratios of less than 10%. Farms that hire or rent assets such as labor, land, or machinery usually will have a lower operating profit margin because operating costs are higher. However, they will also generate a larger gross and net income. Farms with owned or crop share rented land will have a higher operating profit margin because they have lower operating expenses. Another common measure of profitability is Earnings Before Interest, Taxes, Depreciation, and Amortization, abbreviated as EBITDA. It shows how many dollars are available for debt repayment. Financial Efficiency Asset turnover ratios for typical farms are about 20-30%, but they can range from 10-20% for lowprofit farms and up to 30-50% for high-profit farms. The asset turnover ratio measures the efficient use of investment capital to generate revenue while the operating profit margin ratio measures the efficient use of operating capital. Because they are substitutes for each other (owned and rented land, for example), farms that are high in one measure may be low in the other. Farms with mostly rented land should have higher asset turnover ratios than farms with mostly owned land, generally around 50%. Rented farms also will have higher operating expense ratios because rent paid is included in operating expenses. Likewise, rented farms will tend to have lower depreciation and interest expense ratios than owned farms. Typically, about 60-70% of gross revenue goes for operating expenses, 5-10% goes for depreciation, and under 5% goes for interest. The average net farm income ratio for Iowa farms has been in the 5-15% range in recent years but used to be in the 20-30% range in the 2000s. High-profit farms have averaged 20% over the past decade, while lowprofit farms averaged less than 5%. https://www.extension.iastate.edu/agdm/wholefarm/pdf/c3-55.pdf
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. [user request] [context document]
EVIDENCE:
Financial Performance Measures for Iowa Farms Farmers who have a large investment in land, machinery, livestock, and equipment need to keep informed about the financial condition of their operations. Some useful measures of financial performance can be calculated from information found in most farm record books and accounting programs. These measures can help farmers assess the profitability, debt capacity, and financial risk currently faced by their businesses. The measures presented in this publication are based on guidelines of the Farm Financial Standards Council, ffsc.org/, and are used by most agricultural lenders and farm accountants. Types of Measures Five different areas of financial condition are measured. Liquidity refers to the degree to which debt obligations coming due can be paid from cash or assets that soon will be turned into cash. This is measured by the current ratio, the amount of working capital, and the amount of working capital per dollar of gross revenue. A more thorough analysis of liquidity can be made with a cash flow budget. FM1792, AgDM File C3-15: Twelve Steps to Cash Flow Budgeting, store. extension.iastate.edu/Product/1815.pdf, explains this tool in detail. Solvency refers to the degree to which all debts are secured and the relative mix of equity and debt capital used by the farm. The total debt-to-asset ratio is one of several ratios used to measure solvency, all of which are based on the same relationship of assets, liabilities, and net worth. Profitability refers to the difference between income and expenses. One important measure of profitability is net farm income. Annual rates of return on both equity capital and total assets also can be calculated and compared to interest rates for loans or rates of return from alternative investments. Financial efficiency ratios show what percent of gross farm revenue went to pay interest, operating expenses, and depreciation, and how much was left for net farm income. The asset turnover ratio measures how much gross income was generated for each dollar invested in land, livestock, equipment, and other assets. Repayment capacity measures show the degree to which cash generated from the farm and other sources will be sufficient to pay principal and interest payments as they come due. Using Performance Measures Values for the farm financial measures should be calculated for several years to observe trends and to avoid making judgments based on an unusual year. Typical historical values for most of these measures can be found in the tables at the end of this publication. They are based on data obtained from the Iowa Farm Business Association (IFBA). Values will vary according to the major enterprises carried out, farm size, location, and the type of land tenure. Other comparable data can be found in the annual publication FM1789, AgDM File C1-10: Iowa Farm Costs and Returns, store.extension.iastate.edu/ Product/1812.pdf. Liquidity Farms with good liquidity typically have current ratios of at least 3.0 or higher. Dairy farms or other farms that have continuous sales throughout the year can safely operate with a current ratio as low as 2.0, however. Conversely, operations that concentrate sales during several periods each year, such as cash grain farms, need to strive for a current ratio higher than 3.0, especially near the beginning of the year. The amount of working capital needed depends on the size of the operation. Records show that working capital measured at the beginning of the year is typically equal to about 50-70% of the farm’s annual gross revenue. For dairy farms, working capital can be as low as 30% of gross revenue, but cash grain farms may need as much as 50%. Solvency Total debt-to-asset ratios tend to be higher for larger farms and for farms that specialize in livestock feeding. Ratios of 10-30% are common among Iowa farms, although many operate with little or no debt. A high debt load does not make farms less efficient, but principal and interest payments eat into cash flow. High-efficiency farms are able to service a higher debt load safely. Two other ratios are commonly used to measure solvency. The equity-to-asset ratio shows how many dollars of net worth a farm has for every dollar of assets. It is equal to 100% minus the debt-to-asset ratio. Higher equity-to-asset ratios indicate a less risky financial situation. Some lenders prefer to use the debt-to-equity ratio to measure solvency. Higher ratios indicate more risk. Another useful measure is how much net worth the farm has for each crop acre farmed, especially for cash grain farms. The IFBA average is nearly $2,500. Profitability Net farm income from operations is what is left from all income received from the farm business in the past year, minus all the operating expenses used to generate this income. Note that operating expenses do not include the cost of financing the business, which is interest expense. Net farm income, or what is left after subtracting interest, is highly variable from year to year and is closely tied to the size and efficiency of the operation. It also depends on the amount of debt the farm is carrying. The rate of return on farm assets is quite variable, too, but average long-term rates of 6-10% have been common in Iowa. High-profit farms may average more than 12%, while low-profit farms often realize a return of only 2% or less. The average rate of return on farm equity measures how fast farm net worth is growing. Highly leveraged farms may earn little or no return on equity when interest rates are high. On the other hand, if the farm’s overall return on assets is higher than the cost of borrowed money, the return on equity may be quite high and net worth will grow rapidly. Operating profit margin is equal to the dollar return to capital divided by the value of farm production each year. Ratios have averaged about 6-10% in recent years, and 25-30% in the 2000s. High-profit farms have had ratios of 30% or more, while low-profit farms have had ratios of less than 10%. Farms that hire or rent assets such as labor, land, or machinery usually will have a lower operating profit margin because operating costs are higher. However, they will also generate a larger gross and net income. Farms with owned or crop share rented land will have a higher operating profit margin because they have lower operating expenses. Another common measure of profitability is Earnings Before Interest, Taxes, Depreciation, and Amortization, abbreviated as EBITDA. It shows how many dollars are available for debt repayment. Financial Efficiency Asset turnover ratios for typical farms are about 20-30%, but they can range from 10-20% for lowprofit farms and up to 30-50% for high-profit farms. The asset turnover ratio measures the efficient use of investment capital to generate revenue while the operating profit margin ratio measures the efficient use of operating capital. Because they are substitutes for each other (owned and rented land, for example), farms that are high in one measure may be low in the other. Farms with mostly rented land should have higher asset turnover ratios than farms with mostly owned land, generally around 50%. Rented farms also will have higher operating expense ratios because rent paid is included in operating expenses. Likewise, rented farms will tend to have lower depreciation and interest expense ratios than owned farms. Typically, about 60-70% of gross revenue goes for operating expenses, 5-10% goes for depreciation, and under 5% goes for interest. The average net farm income ratio for Iowa farms has been in the 5-15% range in recent years but used to be in the 20-30% range in the 2000s. High-profit farms have averaged 20% over the past decade, while lowprofit farms averaged less than 5%.
USER:
Farmer Old MacDonald operates a large and very efficient farm in Iowa. Is it likely that Old MacDonald's farm is also very profitable if he owns his land? Use the relevant financial measures in answering the question.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Please answer the question using only the provided context.
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Please summarize the major differences between cash- and tax-basis account as explained in the context provided.
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Practice Aid Accounting and Financial Reporting Guidelines for Cash- and Tax-Basis Financial Statements © 2018 Association of International Certified Professional Accountants. All rights reserved. For other uses of this work, please email [email protected] with your request or write to us at 220 Leigh Farm Road, Durham, NC 27707-8110 USA. This document was created by the Association of International Certified Professional Accountants as a free member benefit which may be freely used and shared by members for personal use. All copyright statements should be maintained. © 2018 Association of International Certified Professional Accountants. All rights reserved. 1 Preface Because of the complexities of accounting principles generally accepted in the United States of America (GAAP), many smaller entities have determined that financial statements prepared by applying the cash‐ or tax‐basis of accounting more appropriately suit their needs. Unlike GAAP, little authoritative guidance is available with re‐ spect to the preparation of financial statements when applying the cash‐ or tax‐basis of accounting. Financial statements prepared when applying the cash‐ or tax‐basis of accounting need to have a level of consistency so that they are useful and not misleading to users of the financial statements. Additionally, because financial statements prepared when applying the cash‐ or tax‐basis of accounting are not considered appropriate in form unless the financial statements include informative disclosures similar to those required by GAAP if the financial statements contain items that are the same as, or similar to, those in financial statements prepared in accord‐ ance with GAAP, preparers of full disclosure financial statements prepared when applying the cash‐ or tax‐basis of accounting are often faced with difficult questions. This practice aid is intended to provide preparers of cash‐ and tax‐basis financial statements with guidelines and best practices to promote consistency and for resolving the often difficult questions regarding the preparation of such financial statements. Although this practice aid is the best source for such guidance, it is nonauthorita‐ tive and should not be used as a substitute for the preparer’s professional judgment. This practice aid has not been approved, disapproved, or otherwise acted upon by any senior committee of the AICPA. This practice aid does not contain guidance with respect to performing an audit, review, or compilation of finan‐ cial statements prepared when applying the cash‐ or tax‐basis of accounting. Practitioners engaged to audit such financial statements should refer to Statements on Auditing Standards, including AU‐C section 800, Special Con‐ siderations—Audits of Financial Statements Prepared in Accordance With Special Purpose Frameworks (AICPA, Professional Standards). Practitioners engaged to perform a review or compilation should refer to Statements on Standards for Accounting and Review Services (SSARSs). Likewise, CPAs in public practice who prepare finan‐ cial statements for clients but are not engaged to perform an audit, review, or compilation of such financial statements should refer to SSARSs. Prepared by Michael P. Glynn Senior Technical Manager Audit and Attest Standards Team Edited by Kelly G. McAuliffe Technical Manager Member Learning and Competency 2 © 2018 Association of International Certified Professional Accountants. All rights reserved. Acknowledgments In 1998, the AICPA published the Practice Aid Preparing and Reporting on Cash‐ and Tax‐Basis Financial State‐ ments. That publication was written by Michael J. Ramos, CPA, and edited by the AICPA Accounting and Publica‐ tions Team. That publication served as a basis for the preparation of the original edition of this practice aid. In addition to this practice aid, the AICPA has also published a separate practice aid, Applying OCBOA in State and Local Government Financial Statements, authored by Michael A. (Mike) Crawford, CPA. Mike served as an invaluable resource in the preparation of the original edition of this practice aid. The AICPA also greatly appreciates the invaluable input provided by the late Dr. Thomas A. Ratcliffe in the de‐ velopment of the previous edition of this practice aid. Finally, the AICPA would like to thank the 2011/12 members of the Accounting and Review Services Committee and the 2011/12 members of the AICPA PCPS Technical Issues Committee, who provided invaluable input re‐ garding the content of the original edition of this practice aid. © 2018 Association of International Certified Professional Accountants. All rights reserved. 3 4 © 2018 Association of International Certified Professional Accountants. All rights reserved. Chapter 1 Overview of Cash‐ and Tax‐Basis Financial Statements Introduction Financial statements, including related notes, are a structured representation of historical financial information intended to communicate an entity’s economic resources and obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework. fn 1 All financial statements are prepared in accordance with a financial reporting framework. The term financial reporting framework is defined as “a set of criteria used to determine measurement, recognition, presentation, and disclosure of all material items appearing in the financial statements.” fn 2 Examples of financial reporting frameworks are accounting principles generally accepted in the United States of America (GAAP), International Financial Reporting Stand‐ ards promulgated by the International Accounting Standards Board, and special purpose frameworks such as the cash‐, tax, regulatory‐, contractual‐, and other bases that use a definitive set of logical, reasonable criteria that is applied to all material items appearing in the financial statements. The cash‐, tax‐, regulatory‐, and other‐basis of accounting are commonly referred to as other comprehensive bases of accounting. As GAAP becomes increasingly complex and less cost beneficial for private companies, such companies consider issuing cash‐ and tax‐basis financial statements as cost‐effective and useful alternatives. Many of these private companies are small and medium‐sized entities that report to a narrow range of financial statement users. Those users, unlike users of public company financial statements, typically have access to company management and additional financial information beyond that provided in the financial statements. Cash‐ or tax‐basis financial statements may be appropriate whenever the entity is not contractually or otherwise required to issue GAAP financial statements. The following conditions may indicate that financial statements prepared when applying the cash‐ or tax‐basis of accounting is appropriate: • The users of the financial statements—both internal and external to the entity—understand a cash‐ or tax‐basis presentation and find it relevant for their needs. • It is cost‐effective to prepare cash‐ or tax‐basis financial statements. • The operations of the entity are conducive to a cash‐ or tax‐basis presentation. Preparing cash‐ or tax‐basis financial statements has many benefits. A significant benefit is due to the fact that many smaller entities maintain their accounting records on a cash‐ or tax‐basis. Often, accounting and finance personnel responsible for maintaining the books and records can more easily understand the concepts of cash in fn 1 Paragraph .05 of AR‐C section 90, Review of Financial Statements (AICPA, Professional Standards), and paragraph .13 of AU‐C section 200, Overall Objectives of the Independent Auditor and Conduct of an Audit in Accordance With Generally Accepted Auditing Standards (AICPA, Professional Standards). fn 2 See footnote 1. © 2018 Association of International Certified Professional Accountants. All rights reserved. 5 and out as well as tax reporting compared to GAAP. Because the internal records are often maintained on the cash‐ or tax‐basis of accounting, it is easier to prepare the financial statements when applying that same basis. If the financial statements are prepared in accordance with GAAP, the accounting and finance personnel would “true‐up” the financial information through a series of journal entries. Additionally, many users of smaller entity financial statements find cash‐ or tax‐basis financial statements to be more understandable than financial statements prepared in accordance with GAAP because those users are often accustomed to preparing and con‐ sidering budgets on a cash‐basis and understand tax issues. Because many smaller entities are appropriately concerned with minimizing costs and maximizing the resources that are available to fund the operations of the business, resources allocated to accounting and financial report‐ ing are often not sufficient to maintain GAAP basis accounting records and to prepare financial statements in ac‐ cordance with GAAP. Preparing financial statements when applying the cash‐ or tax‐basis of accounting general‐ ly is less costly than preparing GAAP financial statements because of the following: • Less complex measurement requirements. Financial statements prepared when applying the cash‐basis of accounting reflect transactions resulting from cash receipt and disbursement transactions or events. Financial statements prepared when applying the tax‐basis of accounting reflect transactions in the same manner as those transactions are reflected in the entity’s tax return. • Less extensive disclosure requirements. Financial statements prepared when applying the cash‐ or tax‐ basis of accounting do not require all of the extensive disclosures required of GAAP statements because the statements do not include some of the items, events, and transactions that are typically included in GAAP basis financial statements. Observations and Suggestions Often, preparers of cash‐ and tax‐basis financial statements elect to omit substantially all disclosures required by the cash‐ or tax‐basis of accounting. The omission of disclosures is a departure from the cash‐ or tax‐basis of ac‐ counting and, if such disclosures were included in the financial statements, they might influence the user’s con‐ clusions about the entity’s financial position, results of operations, and cash flows. However, the omission may not necessarily result in misleading financial statements provided that the intended users are informed about such matters. • Ability to prepare tax returns and financial statements from the same information. When tax‐basis finan‐ cial statements are issued, a significant portion of the cost can be absorbed by the preparation of the tax return. Additionally, the entity is not required to maintain two sets of accounting records to account for items such as depreciation, bad debts, and consolidation matters. However, in addition to the benefits of financial statements prepared when applying a cash‐ or tax‐basis of ac‐ counting, financial statement preparers should also be aware of the limitations of such financial statements. For example, financial statements prepared when applying the cash‐ or tax‐basis of accounting may not meet the needs of certain users such as regulators and certain lenders. In addition, the cash‐basis of accounting can be easily manipulated by accelerating or delaying the timing of the receipt or disbursement of cash and therefore may not be a comprehensive measure of the entity’s complete economic condition. In practice, the most typical industries in which cash‐ or tax‐basis financial statements are issued include the fol‐ lowing: • Professional services 6 © 2018 Association of International Certified Professional Accountants. All rights reserved. • Medical • Retail • Real estate • Farming/agricultural • Construction • Not‐for‐profit Cash‐Basis of Accounting The cash‐basis of accounting is a basis of accounting that the entity uses to record cash receipts and disburse‐ ments. When applying the cash‐basis of accounting, transactions are recognized based on the timing of cash re‐ ceipts and disbursements. As a result, • revenues are recognized only when cash is received rather than when earned, and • expenses are recognized only when cash is paid rather than when the obligation is incurred. When applying the cash‐basis, cash outflows to purchase an “asset” are not capitalized but instead are recorded as a disbursement as of the date of purchase, so there is no depreciation or amortization. Accruals are not made and prepaid assets are not recorded. The cash‐basis of accounting in its purest form is rarely used but may be appropriate whenever the entity • is interested primarily in sources and uses of cash. • has a limited number of financial statement users. • has relatively simple operations engaged in one primary activity. • does not have significant amounts of debt, capital assets, or other items that would be recognized in ac‐ cordance with the accrual basis. Examples of some entities that may use the cash‐basis of accounting include the following: • Estates • Trusts • Civic ventures • Student activity funds • Political campaigns and committees © 2018 Association of International Certified Professional Accountants. All rights reserved. 7 When applying the cash‐basis of accounting, because the only assets of the entity would be cash and cash equivalents and there would be no liabilities, a balance sheet equivalent is often not presented. The income statement equivalent would report cash receipts and disbursements and other changes in cash and cash equiva‐ lents and disclose any restrictions on ending cash and cash equivalents. Any departure from the presentation of cash and cash equivalent balances and changes in such balances, such as the reporting of long‐term debt arising from cash transactions, the capitalization and depreciation of capital assets acquired with cash, or the reporting of investments or receivables and payables resulting from cash transactions, should be considered a modification to the cash‐basis of accounting. Such deviations require eval‐ uation regarding whether they are appropriate modifications of the cash‐basis of accounting. Appropriate modi‐ fications of the cash‐basis of accounting are discussed in the subsequent section. In‐Substance Two‐Step Transactions or Events in the Cash‐Basis of Accounting The preparer of cash‐basis financial statements may encounter single‐step transactions or events that may not directly involve a cash inflow or outflow but may nevertheless be recorded as an in‐substance two‐step cash transaction or event when applying the cash‐basis of accounting. For example, management of an entity may sign a note from a bank in order to purchase equipment. The bank may then directly pay the vendor for the pur‐ chase of the equipment. Because there was no cash transaction, the entity may not record the single‐step trans‐ action in the financial statements. However, so as not to be misleading to users of the financial statements, the preparer may choose to record the transaction as an in‐substance two‐step transaction. In accordance with that treatment, the journal entries may look as follows: Cash XX,XXX Note Proceeds (Revenue) XX,XXX (To record note proceeds that were paid directly to the vendor) Capital expenditure XX,XXX Cash XX,XXX (To record purchase of equipment) Then, subsequent payments on the note would be recorded as follows: Debt service expenditure XXX Cash XXX (To record principal and interest payment on note payable) Modified Cash‐Basis of Accounting The modified cash‐basis of accounting involves logical and consistent modifications to transactions or events that are derived from cash receipts or cash disbursements. For example, a modification to the cash‐basis of ac‐ counting to report capital assets should involve recording and depreciating only those capital assets that result from cash transactions or events. The modification should not involve the recording and depreciating of donated capital assets because these transactions or events do not involve an inflow or outflow of cash. Once deprecia‐ ble capital assets arising from cash transactions or events are recorded when applying a modified cash‐basis of accounting, such assets should also be depreciated over their estimated useful lives. Depreciating capital assets that were acquired with cash is a logical allocation of the cash‐basis assets’ costs over the assets’ useful lives. 8 © 2018 Association of International Certified Professional Accountants. All rights reserved. An easy way to look at whether a modification is appropriate is to consider whether the transaction or event would have been recorded if the entity was preparing the cash‐basis financial statements. For example, if an en‐ tity purchased a capital asset and was preparing cash‐basis financial statements, the journal entry would look like this: Capital expenditure XXXX Cash XXXX (To record purchase of capital asset) Because cash is part of the journal entry, it would be an appropriate modification to capitalize the asset and de‐ preciate the cost over the estimated useful life of the asset. On the other hand, the recording of trade accounts receivable arising from services provided or goods sold would not be an appropriate modification of the cash‐basis of accounting assuming cash was not received at the time the services were provided or goods were sold. Modifications to the cash‐basis of accounting generally result when cash receipts or cash disbursements provide a benefit or an obligation that covers multiple reporting periods. For example, a preparer may conclude that fi‐ nancial statement users would be misled if cash purchases of capital assets are recorded as disbursements or expenditures in the period in which the assets are purchased. Instead, the preparer may elect to modify the cash‐basis of accounting to record the asset on the balance sheet equivalent and depreciate it over the estimat‐ ed useful life of the asset, thereby, in effect, spreading the benefit of the cash outflow over multiple reporting periods in a manner that has substantial support and is logical and consistent. Questions often arise in the application of a modified cash‐basis of accounting regarding whether reported as‐ sets and liabilities derived from cash transactions or events should ever be written down or written off once they are recorded at their original cash value. Temporary changes in the fair value of an asset or liability should not be recognized in applying a modified cash‐basis of accounting and all recognized assets and liabilities should be measured and reported at their original cash value (net of any accumulated depreciation or amortization, if applicable). If an asset or liability has been permanently impaired and has no future cash value or represents no future obligation against cash, it would be appropriate to write‐down or write‐off such amounts in modified cash‐basis financial statements. A significant challenge to preparing financial statements when applying a modified cash‐basis of accounting is developing the appropriate accounting policy that results in financial statements that meet the needs of the primary users of the statements and consistently applying that policy to cash transactions and events in order to keep the financial statements from being misleading for the purposes for which they are intended. The preparer may find benefit in spelling out the logic behind the cash‐basis modifications and documenting the accounting policy prior to preparation of the basic financial statements. Although there is no single accepted method of applying a modified cash‐basis of accounting, modified cash‐ basis financial statements can be more meaningful if they are comparable with similar financial statements. Some preparers have inappropriately considered the modified cash‐basis of accounting as a “free‐for‐all” propo‐ sition in which they can unilaterally and arbitrarily choose the modifications that they will apply. For example, a preparer may inappropriately decide to prepare financial statements applying a modified cash‐basis of account‐ ing that records assets arising from cash transactions or events, including investments, inventories, and capital assets but does not record short‐term and long‐term liabilities and other obligations arising from cash transac‐ tions. Inconsistent uses of a modified cash‐basis framework should be avoided in general use financial state‐ ments because such inconsistencies will normally result in financial statements that are misleading for general © 2018 Association of International Certified Professional Accountants. All rights reserved. 9 use. Financial statements that are prepared using inconsistent modifications may be appropriate for special pur‐ poses involving limited users but should be labeled as such with clear disclosure and use of descriptive headings. With the needs of the primary financial statement users in mind, when preparing financial statements applying a modified cash‐basis of accounting, the preparer should consider modifying the following cash transactions or events, among others, by the recording of the following: • Receivables resulting from an outflow of cash, such as a cash advance to an employee • Investments in marketable securities acquired with cash • Inventories acquired with cash • Capital assets arising from cash transactions and depreciating the assets where appropriate • Deferred revenue resulting from cash receipts • Liabilities resulting from short‐term cash borrowings • Long‐term notes and other debt arising from cash transactions or events • Any other material assets, liabilities, revenues, and expenses resulting from cash transactions or events If the financial statements are prepared when applying a modified cash‐basis accounting policy in which one or more of the preceding—but not all—are recorded, the preparer should be prepared to defend how the decision to modify or not modify is a logical and consistent application of the accounting policy and does not result in misleading financial statements for the purposes for which they are intended. A number of transactions or events are not appropriate modifications to the cash‐basis of accounting. Generally, these transactions or events should not be recorded when applying a modified cash‐basis of accounting because they do not involve cash inflows or outflows, are illogical, or are not substantially supported in the accounting literature. Common transactions or events that should not be reported in financial statements prepared when applying a modified cash‐basis of accounting include the recording or adjusting of the following: • Capital assets arising from cash transactions or events, but not recording depreciation where appropri‐ ate • Donated capital assets where cash outflows were not involved • Accounts receivable from services provided or goods sold and other accrued receivables • Pledges receivable or other receivables where cash outflows were not involved • Investments for which cash outflows were not involved • Accounts payable for goods or services received where no cash outflow was involved • Accrued income taxes, accrued interest expense, other accrued liabilities where no cash outflow was in‐ volved 10 © 2018 Association of International Certified Professional Accountants. All rights reserved. • Subsequent write ups or write downs to fair value to recognize unrealized gains and losses on marketa‐ ble investments • Derivative instruments where cash inflows or outflows were not involved as well as the mark to market for fair value changes Because modified cash‐basis frameworks do not involve financial statement elements resulting from accruals and noncash transactions or events, it is unlikely that an acceptable modified cash‐basis framework would ever be materially equivalent to GAAP. However, it is important for financial statement preparers to avoid attempting to make certain modifications to GAAP financial statements and then referring to those financial statements as modified cash‐basis financial statements. For example, financial statements that are presented in conformity with GAAP, except that material leases are not capitalized, are not considered modified cash‐basis financial statements. Such financial statements are considered GAAP financial statements with a material departure due to the failure to capitalize material leases. The preparer will need to use judgment in determining if modified “cash‐basis” statements are tantamount to financial statements purported to be prepared in accordance with GAAP with material departures therefrom. Tax‐Basis of Accounting The tax‐basis is a basis of accounting that the entity uses to file its federal income tax or federal information re‐ turn for the period covered by the financial statements. The tax‐basis of accounting is based on the principles and rules for accounting for transactions under the federal income tax laws and regulations. Few new measurement guidelines need to be established because the method is based on tax laws. The tax‐basis of accounting covers a range of alternative bases, from cash to full accrual, depending on the nature of the taxpayer, and in some circumstances, the taxpayer’s elections. An entity need not be a taxable entity to prepare tax‐basis financial statements. Any entity that files a return with the IRS, either an income tax return or an information return, may prepare tax‐basis financial statements. Therefore, not‐for‐profit organizations, C corporations, S corporations, partnerships, limited liability partner‐ ships, limited liability companies, and sole proprietors may all use the tax‐basis of accounting. The tax‐basis of accounting is most useful for small, nonpublic entities whose financial statement users are in‐ terested primarily in the tax aspects of their relationship with the entity. For example, investors in tax‐driven partnerships, such as those commonly employed in the real estate industry, may be primarily interested in the tax consequences of transactions. However, they may want more information than would be provided by a tax return. Determining Whether to Prepare and Issue Cash‐ or Tax‐Basis Financial Statements As long as the entity is not contractually or otherwise required to issue financial statements prepared in accord‐ ance with GAAP or a regulatory or contractual basis of accounting, the entity may prepare and issue cash‐ or tax‐ basis financial statements. Understanding the needs of the financial statement users is an important step in de‐ termining whether to prepare and issue cash‐ or tax‐basis financial statements. If the users of the financial statements understand the presentation, and if the information presented when applying that basis of account‐ ing is relevant to their needs, then the preparer may determine that it is useful and appropriate to prepare and issue cash‐ or tax‐basis financial statements. The following are characteristics of entities that generally are good candidates to prepare cash‐ or tax‐basis financial statements: © 2018 Association of International Certified Professional Accountants. All rights reserved. 11 a. The entity’s creditors do not need or require financial statements prepared in accordance with GAAP. b. The cost of complying with GAAP would exceed the benefits (for example, a small construction contrac‐ tor who would be required to account for long term contracts using the percentage of completion method and would be required to compute deferred taxes). c. The owners are closely involved in the day‐to‐day operations of the business and have a fairly accurate picture of the entity’s financial position. d. The owners are primarily interested in cash flows (for example, a professional corporation of physicians that distributes its cash‐basis earnings through salaries, bonuses, and retirement plan contributions). e. The owners are primarily interested in the tax implications of transactions (for example, partners in a partnership who are concerned about the effects of transactions on their personal tax returns). f. It may not be appropriate to prepare and issue cash‐ or tax‐basis financial statements if the entity is or soon will be required to issue GAAP‐basis financial statements. For example, management of a company that is anticipating selling its business may be required to issue financial statements prepared in accord‐ ance with GAAP. Additionally, financial statements prepared when applying the cash‐ or tax‐basis of accounting should not be is‐ sued if the results are misleading. Cash‐ and tax‐basis financial statements are intended to be a cost‐effective al‐ ternative to GAAP, not a way to deliberately mislead financial statement users. Example Situation In Which it May Not Be Prudent to Issue Tax‐Basis Financial Statements • Long Street Partners has typically issued tax‐basis financial statements because the partners are more interested in the tax treatment of partnership transactions. Outside creditors have also accepted the tax‐basis financial statements as suitable for their needs. During the current year, two events occur that significantly affect the partnership: Several large customers experience financial difficulty and the part‐ nership’s receivables from the customers are in danger of not being collected. If the financial statements were prepared in accordance with GAAP, the partnership would be required to record a valuation al‐ lowance and recognize a bad debt expense. Under the tax rules, the partnership uses the direct write‐off method, so a tax deduction may not be allowed in the current year. • The partnership has acknowledged that it is obligated to perform an environmental remediation at one of its sites. If the financial statements were prepared in accordance with GAAP, the partnership would be required to recognize the liability and a loss. Although the entity may disclose the information in a risks and uncertainties note, under the tax rules, the deduction is not allowed until the amount is paid and therefore would not be included in the income statement equivalent. • Prior to preparing and issuing tax‐basis financial statements, in determining whether the proposed fi‐ nancial reporting framework is appropriate, the preparer may consider the following: — Whether the tax‐basis financial statements continue to be suitable for the users’ needs. In the example, the entity had a long history of issuing tax‐basis financial statements, which were suit‐ 12 © 2018 Association of International Certified Professional Accountants. All rights reserved. able for the needs of the users. The events in the current year merely illustrate the limitations of tax‐basis financial statements. — Appropriateness of disclosure. The preparer may determine to expand on the information in‐ cluded in the notes to the financial statements about these two events. For example, the part‐ nership might disclose the nature of the environmental remediation liability and the amounts involved. — Recognition may be appropriate. Depending on the nature and magnitude of the item, it may be appropriate to recognize it in the financial statements. In this example, the partnership might decide to account for bad debts using the allowance method and to recognize a contingent lia‐ bility for the remediation obligation. This would be a departure from the tax‐basis of accounting and the management of the entity may determine that, in the circumstances, it may be more appropriate to prepare its financial statements in accordance with GAAP. — Consider GAAP financials. As a result of the changed circumstances, financial statements pre‐ pared when applying the cash‐ or tax‐basis of accounting may no longer be appropriate, and the management of the entity may decide to prepare its financial statements in accordance with GAAP. Deciding Between Modified Cash‐ or Accrual Tax‐Basis Financial Statements In some situations it may be difficult to determine whether to issue modified cash‐ or accrual tax‐basis financial statements. Each basis has its own distinct advantages and disadvantages. Modified Cash‐ or Accrual Tax‐Basis Advantages and Disadvantages of Each Advantages Disadvantages Modified Cash‐Basis • Can be simpler to prepare than tax‐ basis • Not affected by changes in tax laws • Interim financial statements are easy to prepare • Recognition and measurement prin‐ ciples are not well‐defined • Not well‐suited for entities that have inventory or complex operations Accrual Tax‐Basis • Better‐suited for entities with inven‐ tory or complex operations • Well‐defined recognition and meas‐ urement criteria • Decisions made for tax reporting purposes may have unintended fi‐ nancial reporting effects • Accounting treatments are affected © 2018 Association of International Certified Professional Accountants. All rights reserved. 13 Advantages Disadvantages by changes in tax laws 14 © 2018 Association of International Certified Professional Accountants. All rights reserved. Chapter 2 Recognition and Measurement Issues in Financial Statements Prepared When Applying the Cash‐ or Tax‐Basis of Accounting The determination of what information should be reported in the financial statements and when to recognize transactions or events (recognition), and how to record transactions or events and at what amounts (measure‐ ment) varies depending on the type of framework used to prepare the financial statements. This chapter in‐ cludes a discussion of recognition and measurement issues for cash‐, modified cash‐, and tax‐basis financial statements. Cash‐Basis and Modified Cash‐Basis Observations and Suggestions In accordance with the master glossary included in the FASB Accounting Standards Codification® , cash equiva‐ lents are short‐term, highly liquid investments that have both of the following characteristics: a. Readily convertible to known amounts of cash b. So near their maturity that they present insignificant risks of changes in value because of changes in in‐ terest rates Generally, only investments with original maturities of three months or less qualify under that definition. Origi‐ nal maturity means original maturity to the entity holding the investment. For example, both a three‐month U.S. Treasury bill and a three‐year U.S. Treasury note purchased three months from maturity qualify as cash equiva‐ lents. However, a Treasury note purchased three years ago does not become a cash equivalent when its remain‐ ing maturity is three months. Examples of items commonly considered to be cash equivalents are Treasury bills, commercial paper, money market funds, and federal funds sold (for an entity with banking operations). The following represents certain significant measurement and recognition issues with respect to the cash‐ and modified‐cash bases of accounting. Investments In accordance with the cash‐basis of accounting, entities would reflect purchases of investments as cash dis‐ bursements and sales of investments as cash receipts in the period that the cash is disbursed or received. In‐ vestments acquired via noncash transactions should not be recorded and unrealized gains and losses should not be recognized. A common modification to the cash‐basis of accounting is to record investments in marketable securities as as‐ sets. If the entity prepared its financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP), the investments would be reflected in the balance sheet. As such, the investments would be initially recorded at cost and subsequent unrealized changes in value would be recorded to reflect the fair value of the investments. Because unrealized gains and losses are not the result of a cash © 2018 Association of International Certified Professional Accountants. All rights reserved. 15 transaction or event, such unrealized gains and losses should not be recorded in financial statements when ap‐ plying a modified cash‐basis of accounting. Instead, the investments would remain on the balance sheet equiva‐ lent at cost unless and until they become worthless or are sold. Receivables Receivables should not be recognized in financial statements prepared when applying the cash basis of account‐ ing unless the receivables result from an outflow of cash. Other receivables such as those arising from sales transactions made on credit should not be recorded. Property and Equipment Under the cash‐basis of accounting, purchases of property and equipment would be reflected in the financial statements as cash disbursements in the period the transaction occurred. The assets would not be capitalized and depreciation would not be recorded. A common modification to the cash‐basis of accounting is to record property and equipment arising from cash transactions as assets. Once the modification is made, the entity should adopt and consistently apply an alloca‐ tion policy (depreciation or amortization) that has substantial support in the accounting literature and is logical. Such policy should also include recording any financing arrangements that are part of a cash transaction. As part of this policy, management of the entity should consider how it would address single‐step transactions or events that may not directly involve a cash inflow or outflow but may nevertheless be recorded as an in‐substance two‐ step cash transaction or event. See chapter 1, “Overview of Cash‐ and Tax‐Basis Financial Statements,” for dis‐ cussion of in‐substance two‐step transactions. Donated assets should not be recognized as “assets” because they are not derived from the use of cash or cash equivalents. It would be appropriate to write off any remaining carrying value of property and equipment once the assets are no longer in use or have been permanently impaired. Bank Overdrafts Bank overdrafts may be netted with other cash balances from the same bank. Bank overdrafts should not be netted against funds held at another financial institution. If the entity has an overall negative cash balance from a financial institution, when applying the cash‐basis of accounting, the negative cash balance would be shown as a liability on the balance sheet equivalent, if one is presented. For example, if the net balance in Bank A is $(1,000) and the net balance in Bank B is $5,000, the balance sheet equivalent would show a cash asset of $5,000 and the $(1,000) overdraft as a liability. If the entity has an overall global negative cash balance, the neg‐ ative cash balance would be shown as negative cash on hand at the end of the period on the statement of cash receipts and disbursements. Borrowings When applying the cash‐basis of accounting, the entity should record all proceeds from borrowings as cash re‐ ceipts when received and then reflect the principal repaid and associated interest as cash disbursements when paid. If a loan provides direct financing of an asset, neither the loan nor the asset should be recorded. However, 16 © 2018 Association of International Certified Professional Accountants. All rights reserved. the principal and interest payments would be reflected as cash disbursements when paid. See chapter 1 for dis‐ cussion of in‐substance two‐step transactions. Tax‐Basis In tax‐basis financial statements, transactions are recognized and measured in the same manner as they are in the entity’s federal tax return. Therefore, the preparer of financial statements when applying the tax‐basis of ac‐ counting is required to understand the federal tax laws applicable to the particular entity. Although this chapter highlights certain common measurement and recognition issues with respect to the tax‐basis of accounting, it is not a substitute for understanding the federal tax laws applicable to the particular entity. Additionally, although the IRS permits all entities to use the accrual method of accounting for tax purposes, many smaller entities can instead elect to use the cash method of accounting for tax purposes. Entities with in‐ ventories are required to use the accrual method for sales and purchases of inventory. Nontaxable Revenues and Nondeductible Expenses Under federal income tax laws, certain revenue is not taxable and certain expenses are not deductible. For ex‐ ample, receipts such as interest on obligations of state and local governments and proceeds from life insurance policies are not taxable. Costs such as premiums paid on officers’ life insurance policies are not deductible. When presenting tax‐basis financial statements, in order to be transparent, preparers of tax‐basis financial statements may recognize nontaxable revenues and nondeductible expenses outside of taxable income. Nontaxable revenues should be recognized when received (cash‐basis) or when earned (accrual basis). Nonde‐ ductible expenses should be reported and charged to expense in the period paid (cash‐basis) or when incurred (accrual basis). Additional Income Taxes for Prior Years An IRS exam may result in additional income taxes being assessed for prior years. Two alternative methods may be used to account for additional taxes for prior years. • The amount may be charged to expense in the current period if there are no corresponding adjustments to the balance sheet equivalent for expenses capitalized or revenue recognized. • The amount may be treated as a prior period adjustment and charged to retained earnings in a manner that is logical and consistent with the equivalent of a presentation in accordance with GAAP. The IRS may disallow amounts charged to expense in prior years and require those amounts to be capitalized and amortized or may require recognition of previously unreported revenue. Such amounts, net of income tax adjustments, should be treated as prior period adjustments. Otherwise, either of the preceding methods is con‐ sidered acceptable. The method used and the amount of additional taxes should be disclosed in the notes to the financial statements. Accounting Changes for Tax Purposes For tax purposes, the effects of an accounting change may be recognized prospectively over a specified number of years. Accounting changes should be treated in the same manner as they are treated in the tax return. © 2018 Association of International Certified Professional Accountants. All rights reserved. 17 S Corporations Income of an S corporation is taxable to its shareholders. Consequently, such a corporation may be required to maintain information on distinct classes of retained earnings. However, in tax‐basis financial statements, S cor‐ porations usually report retained earnings as a single amount and should report distributions to stockholders. Significant Differences Between GAAP and Tax‐Basis There are many differences between the way items are accounted for in accordance with GAAP and the way they are treated under the tax rules. Some of the more common include the following: • Bad debt losses on uncollectible receivables • Inventory capitalization and valuation • Unrealized gains on investment securities • Depreciation and impairment of capital assets • Fair value measurements • Consolidation 18 © 2018 Association of International Certified Professional Accountants. All rights reserved. Chapter 3 Presentation and Disclosure Issues in Financial Statements Prepared When Ap‐ plying the Cash‐ or Tax‐Basis of Accounting The determination of the form and content of the financial statements or which financial statements to present and what to include (presentation and disclosure) varies depending on the financial reporting framework ap‐ plied. Financial statements prepared when applying the cash‐ or tax‐basis of accounting may provide less complex and more understandable alternatives to financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). However, preparers must be knowledgeable of GAAP disclosure requirements because cash‐ and tax‐basis financial statements should include informative disclosures similar to those required by GAAP if the financial statements contain items that are the same as, or similar to, those in financial statements prepared in accordance with GAAP. Observations and Suggestions Often, preparers of cash‐ and tax‐basis financial statements elect to omit substantially all disclosures required by the cash‐ or tax‐basis of accounting. The omission of disclosures is a departure from the cash‐ or tax‐basis of ac‐ counting and, if such disclosures were included in the financial statements, they might influence the user’s con‐ clusions about the entity’s financial position, results of operations, and cash flows. However, the omission may not necessarily result in misleading financial statements provided that the intended users are informed about such matters. If cash‐ or tax‐basis financial statements contain items for which GAAP would require disclosure, the financial statements may either provide the relevant disclosure that would be required for those items in a GAAP presen‐ tation or provide information that communicates the substance of that disclosure. This may result in substitut‐ ing qualitative information for some of the quantitative information required for GAAP presentations. For exam‐ ple, • disclosure of the repayment terms of significant long‐term borrowings may sufficiently communicate in‐ formation about future principal reduction without providing the summary of principal reduction during each of the next five years. • information about the effects of accounting changes, discontinued operations, and extraordinary items could be disclosed in a note to the financial statements without following the GAAP presentation re‐ quirements in the income statement equivalent or disclosing net‐of‐tax effects. • instead of showing expenses by their functional classifications with respect to the financial statements of a not‐for‐profit organization, a statement of activities could present expenses according to their natu‐ ral classifications, and a note to the financial statements could use estimated percentages to communi‐ cate information about expenses incurred by the major program and supporting services. • instead of showing the amounts of, and changes in, the unrestricted and temporarily and permanently restricted classes of net assets with respect to the financial statements of a not‐for‐profit organization, a © 2018 Association of International Certified Professional Accountants. All rights reserved. 19 statement of assets, liabilities, and net assets could report total net assets or fund balances, a related statement of activities could report changes in those totals, and a note to the financial statements could provide information, using estimated or actual amounts or percentages, about the restrictions on those amounts and on any deferred restricted amounts, describe the major restrictions, and provide infor‐ mation about significant changes in restricted amounts. For financial statements prepared when applying the cash‐ or tax‐basis of accounting, GAAP disclosure require‐ ments that are not relevant to the measurement of the item need not be considered. To illustrate, • fair value disclosures for investments in debt and equity securities would not be relevant when the basis of presentation does not adjust the cost of such securities to their fair value. • disclosures related to actuarial calculations for contributions to defined benefit plans would not be rele‐ vant in financial statements prepared when applying the cash‐ or tax‐basis of accounting. • disclosures related to the use of estimates would not be relevant in a presentation that has no esti‐ mates, such as the cash‐ or modified cash‐basis of accounting. Financial statements prepared when applying the cash‐basis of accounting generally do not include a statement of cash flows. However, depending on the user’s requirements, financial statements prepared when applying a modified cash‐ or the tax‐basis of accounting may include a statement of cash flows. For example, it may be challenging for users to obtain accurate information on operating, investing, and financing activities in single‐ year financial statements prepared when applying the tax‐basis of accounting unless a statement of cash flows is presented. Similar to financial statements prepared in accordance with GAAP, in order to achieve fair presentation, financial statements prepared when applying the cash‐ or tax‐basis of accounting should include all informative disclo‐ sures that are appropriate for the applicable financial reporting framework, including all significant matters that materially affect the financial statements’ use, understanding, and interpretation. Additionally, because financial statements prepared when applying the cash‐ or tax‐basis of accounting have certain inherent presentation and disclosure limitations, in order to enhance the value and usefulness of such fi‐ nancial statements, the preparer may disclose additional information in the notes to the financial statements. For example, donated capital assets would not be included in the balance sheet equivalent in financial state‐ ments prepared when applying a modified cash‐basis of accounting—even if the modification to the cash‐basis of accounting is to record capital expenditures as assets and depreciate them over their estimated useful lives. The preparer may elect to disclose the value of such donated capital assets in the notes to the financial state‐ ments. Presentation—Cash‐Basis Financial Statements Because a balance sheet equivalent would simply show the cash balance and a corresponding equity account, and a statement of cash flows would be repetitive of the statement of cash receipts and disbursements, finan‐ cial statements prepared when applying the cash‐basis of accounting may consist only of a statement of cash re‐ ceipts and disbursements. Although a single statement may be presented, informative disclosures are still nec‐ essary. Additionally, restrictions on cash balances should either be presented on the face of the statement of cash receipts and disbursements or should be disclosed in the notes to the financial statements. 20 © 2018 Association of International Certified Professional Accountants. All rights reserved. Basis of Accounting A required disclosure for all cash‐ and tax‐basis financial statements is the description of the basis of accounting (financial reporting framework), including how that basis of accounting differs from GAAP. Although these dif‐ ferences from GAAP should be qualitatively described, they need not be quantified. This description is important in financial statements prepared when applying a modified cash‐basis of accounting because such financial statements may vary depending on the modifications to the cash‐basis that were made. The description there‐ fore becomes essential to the user’s understanding of the financial statements. The description of the basis of accounting is usually presented in the summary of significant accounting policies section of the notes to the financial statements with a heading such as “Basis of Accounting.” The following ex‐ amples represent how the basis of accounting may be disclosed in the notes to financial statements prepared when applying the cash‐, a modified cash‐, and the tax‐basis of accounting. Example: Basis of Accounting Note—Cash‐Basis of Accounting Basis of Accounting The financial statements of Company X have been prepared on the cash‐basis of accounting, which is a compre‐ hensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP). The cash‐basis of accounting differs from GAAP primarily because revenues are recognized when re‐ ceived rather than when earned and expenses are recorded when paid rather than when incurred. The financial statements therefore present only cash and cash equivalents and changes therein in the form of cash receipts and disbursements. Example: Basis of Accounting Note—Modified Cash‐Basis of Accounting Basis of Accounting The financial statements of Company X have been prepared on the cash‐basis of accounting, modified to record assets or liabilities with respect to cash transactions and events that provide a benefit or result in an obligation that covers a period greater than the period in which the cash transaction or event occurred. The modifications result in the recording of investments, inventories, capital assets, and related short‐term and long‐term obliga‐ tions on the statement of financial position. This method of accounting represents a comprehensive basis of ac‐ counting other than accounting principles generally accepted in the United States of America (GAAP). This basis of accounting differs from GAAP primarily because certain revenue and related assets (such as accounts receiva‐ ble and revenue for billed or provided services not yet collected, and other accrued revenue and receivables) have been recognized when received rather than when earned and certain expenses and related liabilities (such as accounts payable and expenses for goods or services received but not yet paid, and other accrued liabilities and expenses) have been recognized when paid rather than when the obligations were incurred. Example: Basis of Accounting Note—Tax‐Basis of Accounting Basis of Accounting The financial statements of Company X have been prepared on the accrual basis of accounting that the Company uses for filing its federal income tax return, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP). This basis differs from GAAP primarily be‐ © 2018 Association of International Certified Professional Accountants. All rights reserved. 21 cause the Company expenses the cost of certain types of assets in accordance with IRC Section 179. GAAP re‐ quires that such assets be capitalized and expensed over their estimated useful lives. Summary of Significant Accounting Policies FASB Accounting Standards Codification (ASC) 235, Notes to Financial Statements, requires that financial state‐ ments prepared in accordance with GAAP include a summary of significant accounting policies in the notes to the financial statements. Accordingly, cash‐ and tax‐basis financial statements should include a summary of sig‐ nificant accounting policies in the notes to the financial statements. In addition to the basis of accounting discussed previously, the note should include disclosure of the significant accounting policies used to prepare the financial statements, including policies that involve the following: • A selection from existing acceptable alternatives • Industry specific applications • Unusual or innovative applications of accounting principles Because the cash‐basis of accounting does not include the recognition of noncash assets, liabilities, and noncash transactions, elaborate accounting policy disclosures are usually unnecessary. In financial statements prepared when applying a modified cash‐basis of accounting, such disclosures may include information about the follow‐ ing: • Investments • Inventory • Property and equipment • Income taxes • Consolidation • Related parties and related party transactions • Commitments and contingencies • Uncertainties • Subsequent events • Asset impairments The significant accounting policies note for tax‐basis financial statements should include disclosure of the follow‐ ing: • Whether the basic method of accounting is cash or accrual 22 © 2018 Association of International Certified Professional Accountants. All rights reserved. • The tax filing status of the entity, if other than a taxable corporation (that is, a C corporation) • That revenues and related assets and expenses and related obligations are recognized only when they are reported or deducted for federal income tax purposes • That nontaxable income and nondeductible expenses are included in the determination of the equiva‐ lent of operating results or “net income” • The nature of any optional tax methods of accounting followed • The nature of any important judgments or policies necessary for an understanding of the methods of recognizing revenue and allocating costs to current and future periods • Tax uncertainties including open tax years Also, tax uncertainties should be addressed in financial statements prepared when applying the cash‐ or tax‐ basis of accounting. FASB ASC 740‐10‐50‐15 requires that open tax years be disclosed—even if the reporting en‐ tity is a pass‐through entity or a not‐for‐profit organization. In addition, in financial statements prepared when applying the tax‐basis of accounting, disclosures regarding significant accounting policies may include information about receivables. The following represents guidance on certain other common presentation and disclosure issues with respect to cash‐ and tax‐basis financial statements. Subsequent Events FASB ASC 855, Subsequent Events, sets forth general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. The preparer should disclose the date through which subsequent events have been evaluated, which is the date the financial statements are available to be issued. When financial statements prepared when applying the cash‐ or tax‐basis of accounting contain items that are the same as, or similar to, those in financial statements pre‐ pared in accordance with GAAP, such financial statements should contain the disclosures required by FASB ASC 855. Related Party Transactions The existence of related party transactions that are material individually or in the aggregate and the nature and amounts of the transactions and balances should be disclosed. Note that the tax rules may define “related par‐ ty” differently than how it is defined in accordance with GAAP. To avoid confusion on the part of users of the tax‐basis financial statements, the GAAP definition of related party should be considered for all financial report‐ ing purposes. Commitments and Contingencies The existence and nature of material commitments and contingencies should be disclosed in the notes to finan‐ cial statements prepared when applying the cash‐ or tax‐basis of accounting. © 2018 Association of International Certified Professional Accountants. All rights reserved. 23 Pension Plans The existence and nature of a pension plan should be disclosed in the notes to financial statements when apply‐ ing the cash‐ or tax‐basis of accounting. Assets and Liabilities Information disclosed for assets and liabilities commonly includes the following items: • Restricted cash, segregated from cash available for current operations, with a description of the nature of the restriction • The aggregate fair value of investments in marketable securities • Accounts and notes receivable from officers, employees, and affiliates, presented separately with disclo‐ sure of the effective interest rate on notes receivable, and interest income for the period • The major classes of property, plant, and equipment; depreciation expense for the period; the meth‐ od(s) used in computing depreciation; and the aggregate, accumulated depreciation • The method of determining inventory cost (for example, last in, first out and first in, first out) Owners’ Equity The financial statements often include disclosures regarding information on owners’ equity as follows: • For each class of stock, the number of shares authorized, issued, and outstanding; the par or stated val‐ ue; and, in summary form, the pertinent rights and privileges of each outstanding class (if more than one class is outstanding) • The existence of stock option and stock purchase plans • Restrictions on the payment of dividends • Changes for the period in the separate components of owners’ equity A note to the financial statements of a voluntary health and welfare organization that prepares tax‐basis finan‐ cial statements could provide information, using estimated or actual amounts or percentages, about the re‐ strictions on total net assets or fund balances and on any deferred restricted amounts, describe the major re‐ strictions, and provide information about significant changes in restricted amounts. Risks and Uncertainties Financial statements prepared in accordance with GAAP are required to include a number of disclosures with re‐ spect to risks and uncertainties. The following table summarizes these disclosures and how GAAP requirements for disclosing risks and uncer‐ tainties should be addressed in cash‐ and tax‐basis financial statements. The table is not meant to be all‐ inclusive. 24 © 2018 Association of International Certified Professional Accountants. All rights reserved. Observations and Suggestions Often, preparers of cash‐ and tax‐basis financial statements elect to omit substantially all disclosures required by the cash‐ or tax‐basis of accounting. The omission of disclosures is a departure from the cash‐ or tax‐basis of ac‐ counting and, if such disclosures were included in the financial statements, they might influence the user’s con‐ clusions about the entity’s financial position, results of operations, and cash flows. However, the omission may not necessarily result in misleading financial statements provided that the intended users are informed about such matters. GAAP Requirement Summary of Required Disclosures Applicability to Cash‐ or Tax‐ Basis of Accounting Nature of Operations Entities should disclose a de‐ scription of the major products or services the reporting entity sells or provides and its principal markets. This information is use‐ ful because it helps financial statement users understand the nature of the entity’s business and the risks common to that business. This disclosure is relevant to all financial statements prepared in accordance with the cash‐ or tax‐ basis of accounting and should be made. Use of Estimates Financial statements should in‐ clude an explanation that the preparation of financial state‐ ments in accordance with GAAP requires the use of manage‐ ment’s estimates. This disclosure may not be rele‐ vant to some financial state‐ ments prepared in accordance with the cash‐ or tax‐basis of accounting; for example, finan‐ cial statements prepared on the cash‐basis that do not include estimated amounts. Certain Significant Estimates If certain criteria are met, the entity is required to disclose the nature of an uncertainty if it is at least reasonably possible that a change in an estimate will occur in the near term. The purpose of the disclosure is to communicate to financial statement users that there is a reasonable possibility that certain estimated amounts in the current year financial statements will change signifi‐ cantly and affect the subsequent years’ financial statements. If the GAAP disclosure criteria are met, the financial statements should include disclosure of the information required by GAAP. Vulnerability Due to Concentra‐ If certain criteria are met, the If the GAAP disclosure criteria © 2018 Association of International Certified Professional Accountants. All rights reserved. 25 GAAP Requirement Summary of Required Disclosures Applicability to Cash‐ or Tax‐ Basis of Accounting tions financial statements are re‐ quired to include disclosure in‐ formation about its vulnerability due to concentrations; for ex‐ ample, significant volume of business conducted with one customer. are met, the preparer should disclose the information re‐ quired by GAAP. Going Concern A basic premise underlying fi‐ nancial reporting is that a user of the financial statements can as‐ sume that the entity will contin‐ ue as a going concern for a rea‐ sonable period of time. If the preparer concludes that material uncertainties exist such that the entity may not continue as a go‐ ing concern for a reasonable pe‐ riod of time, the financial state‐ ments should include disclosure of such uncertainty. If the preparer concludes that there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time (generally one year from the date of the bal‐ ance sheet equivalent), the pre‐ parer should disclose the going concern considerations in a note to the financial statements. Terminology for Cash‐ and Tax‐Basis Financial Statements There is no requirement to modify financial statement titles in cash‐ or tax‐basis financial statements. However, users of such financial statements should be able to readily identify the basis of accounting used to prepare the financial statements. A common and convenient way of identifying the basis of accounting is through the finan‐ cial statement titles by adding “cash‐basis,” “modified cash‐basis,” or “tax‐basis” after the financial statement ti‐ tle. Cash‐basis financial statements might be titled, for example, • Statement of Assets and Liabilities Arising from Cash Transactions; • Statement of Revenue Collected and Expenses Paid; • Statement of Revenue and Expenses—Cash‐Basis; or • Statement of Cash Receipts and Disbursements. Modified cash‐basis financial statements might be titled, for example, • Statement of Assets and Net Assets—Modified Cash‐Basis; or • Statement of Revenue, Expenses and Changes in Net Assets—Modified Cash‐Basis. Tax‐basis financial statements might be titled, for example, 26 © 2018 Association of International Certified Professional Accountants. All rights reserved. • Statement of Assets, Liabilities, and Capital—Tax‐Basis; • Statement of Operations—Tax‐Basis; or • Statement of Revenue and Expenses—Tax‐Basis. The preceding examples are not meant to be all‐inclusive and are not the only acceptable titles. With respect to the captions to be used with the cash‐, modified cash‐, or tax‐basis financial statements, there is no requirement to modify the standard GAAP financial statement captions. Therefore, captions such as “net in‐ come,” “net loss,” and “retained earnings” are acceptable. However, if modifications are desired (which many preparers prefer as a means of additional emphasis that the financial statements are not prepared in accordance with GAAP), common examples for cash‐basis financial statements are excess of revenue collected over expenses paid and excess of expenses paid over revenue collected. For financial statements prepared when applying a modified cash‐basis of accounting, common modifications are excess of revenue over expenses and excess of ex‐ penses over revenue. With respect to tax‐basis financial statements, modifications with respect to financial statement captions are rarely made. However, modifications, if made, may include retained earnings—tax‐basis and net income—tax‐basis. Consolidation Accounting Professional judgment should be applied to determine which presentation—consolidated, unconsolidated, or combined—provides the most meaningful and relevant information. A preparer should not consolidate entities unless all entities to be consolidated use the same basis of accounting. For example, it would not be appropriate to consolidate an entity that prepares its financial statements using a modified cash‐basis of accounting with its parent who maintains its books and records in accordance with the tax‐basis of accounting. If the modified cash‐ basis of accounting is used, then all consolidated entities should utilize the same modifications to the cash‐basis of accounting. With respect to financial statements prepared when applying the tax‐basis of accounting, consolidation is based on the IRC. Therefore, the consolidation requirements of FASB ASC 810, Consolidation, do not apply. However, if the entity files a consolidated tax return, it should report consolidated results on its tax‐basis financial state‐ ments. In the case of brother‐sister corporations in which each entity maintains its books and records on the tax‐basis of accounting, but a consolidated tax return is not filed, the preparer may prepare combined financial statements because such financial statements may be more useful to users than individual uncombined financial statements. Although the tax consolidation rules are followed, additional disclosures may be necessary to lessen the chance that the financial statements are not misleading. Consider, for example, a 60 percent owned subsidiary that would be consolidated in financial statements prepared in accordance with GAAP but is not consolidated in fi‐ nancial statements prepared when applying the tax‐basis of accounting because the threshold for consolidation under the IRC is 80 percent ownership. Even though the subsidiary is not consolidated, the preparer should con‐ sider which disclosures are appropriate relative to the 60 percent owned subsidiary. Examples of matters that might require disclosure are the ownership and relationship with the subsidiary, related party transactions, guarantees, and commitments. © 2018 Association of International Certified Professional Accountants. All rights reserved. 27 Change From GAAP to Cash‐ or Tax‐Basis A change from GAAP to cash‐ or tax‐basis statements (or vice versa) does not represent a change in accounting principles as described in FASB ASC 250, Accounting Changes and Error Corrections. Therefore, no justification for the change is required, and a cumulative effect adjustment is unnecessary. When only the current year’s cash‐ or tax‐basis statements are presented, there are three ways of presenting opening equity: • Show opening equity as previously reported in accordance with GAAP, with an adjustment to convert to the cash‐ or tax‐basis. • Show opening equity on the as‐adjusted cash‐ or tax‐basis. • Show the effects of the adjustment to convert as a cumulative‐effect adjustment in the income state‐ ment equivalent. If comparative financial statements are presented, the prior periods should be restated and presented on the basis to which the company has changed. Restatement is necessary to ensure comparability between all periods presented. In all cases, the change in accounting basis should be disclosed in the notes to the financial statements. The fol‐ lowing is an example of how such a change in accounting basis could be disclosed in the notes to the financial statements: In 20X1, management adopted a policy of preparing its financial statements on the basis of accounting that it uses to file its federal income tax return. Prior to 20X1, the Company’s financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. Management believes that this change results in more relevant financial reporting that is easier and less costly to understand, apply, and use in the Company’s circumstances and considering the needs of the users of the financial statements. The 20X1 financial statements have been restated to be on the tax‐ basis of accounting. 28 © 2018 Association of International Certified Professional Accountants. All rights reserved. Appendix Illustrative Cash‐ and Tax‐Basis Financial Statements This appendix contains illustrative examples of financial statements prepared when applying the cash‐, modified cash‐, or tax‐basis of accounting for different types of entities. These financial statements are intended to illus‐ trate the significant discussion points in chapters 1–3 of this practice aid. Each financial statement has been an‐ notated to highlight these key points. Name of Entity Type of Entity Basis of Preparation Ceolainn Club Not‐for‐profit Cash Mickey’s Center Not‐for‐profit Modified Cash Donnelly & Oates Limited Liability Partnership Tax (Accrual Basis) Charlton Contractors, Inc. Construction Contractor Tax (Accrual Basis) Margaret Rose 1964 Irrevocable Trust Trust Tax (Accrual Basis) CEOLAINN CLUB FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 20X2 AND 20X1 Circumstances include the following: • The financial statements are for a not‐for‐profit membership club. • The financial statements are prepared on the cash‐basis of accounting. • The financial statements are comparative for the years ended June 30, 20X2, and 20X1. The financial statements illustrate the following: • The financial statements include a statement of functional expenses, which is required by accounting principles generally accepted in the United States of America (GAAP). Financial statements prepared when applying the cash‐basis of accounting are not required to include such a statement, but may in‐ stead communicate the substance of that requirement. • GAAP requires not‐for‐profit organizations to report the amount of unrestricted, temporarily restricted, and permanently restricted net assets on the face of the statement of financial position. Because a statement of financial position equivalent is not presented, the illustrative financial statements com‐ municate the substance of the GAAP requirement in the notes to the financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 29 Ceoliann Club Statements of Cash Receipts and Disbursements For the Years Ended June 30, 20X2 and 20X1 June 30, 20X2 June 30, 20X1 Cash received from support activities: Membership dues $ 49,899 $ 46,759 Donations 996 1,125 Programs 7,495 10,645 Total cash received from support activities 58,390 58,529 Cash received from other sources: Interest income 19 30 Other 300 3,720 Total cash received from other sources 319 3,750 TOTAL CASH RECEIVED $ 58,709 $ 62,279 Cash disbursed: Program services $ 29,110 $ 29,484 Supporting services 19,783 19,113 Fundraising 6,288 8,803 TOTAL CASH DISBURSED $ 55,181 $ 57,400 Excess of revenue collected over expenses paid 3,528 4,879 Cash and cash equivalents, beginning of year 39,046 34,167 Cash and cash equivalents, end of year $ 42,574 $ 39,046 See accompanying notes to financial statements. 30 © 2018 Association of International Certified Professional Accountants. All rights reserved. The Ceoliann Club Statements of Functional Expenses Cash‐Basis For the Years Ended June 30, 20X2 and 20X1 Program Services Supporting Services Fundraising Total June 30, 20X2 Program Services Supporting Services Fundraising Total June 30, 20X1 Salaries and benefits $ 23,333 $ 16,440 $ 4,241 $ 44,014 $ 23,633 $15,876 $ 5,937 $ 45,446 Events—special 1,795 1,795 2,513 2,513 Legal and ac‐ counting 2,320 2,320 2,500 2,500 Insurance 313 51 45 409 317 49 63 429 Postage/printing 3,477 3,477 3,398 3,398 Licenses/fees 114 114 464 464 Office expense 612 232 207 1.051 620 224 290 1,134 Miscellaneous 1,375 626 2,001 1,516 1,516 $ 29,110 $19,783 $6,288 $55,181 $29,484 $19,113 $8,803 $57,400 53% 36% 11% 52% 33% 15% See accompanying notes to financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 31 Ceolainn Club Notes to Financial Statements Cash‐Basis For the Years Ended June 30, 20X2 and 20X1 Note 1—Summary of Significant Accounting Policies Nature of Activities The Ceolainn Club (the Club) is a New York not‐for‐profit organization. The Club’s mission is to promote safe so‐ cial programs for young adults. Basis of Accounting The Club’s financial statements have been prepared on the cash‐basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP). The cash‐basis of accounting differs from GAAP primarily because revenues are recognized when received rather than when earned and expenses are recorded when paid rather than when incurred. The financial statements therefore present only cash and cash equivalents and changes therein in the form of cash receipts and dis‐ bursements. Cash and Cash Equivalents The Club considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. As of June 30, 20X2, and 20X1, cash and cash equivalents consisted entirely of the adjusted book balance in the Club’s checking account. Net Assets As of June 30, 20X2, and 20X1, all of the Club’s net assets were unrestricted. Income Taxes The Club is exempt from federal and state income taxes under Internal Revenue Code Section 501(c)(7). Accord‐ ingly, no provision for income taxes has been made in the financial statements. Uncertain Tax Positions Federal and state income tax returns for the years 20X0 to date are subject to examination by taxing authorities. Subsequent Events Management has evaluated subsequent events through August 28, 20X2, which is the date the financial state‐ ments were available to be issued. 32 © 2018 Association of International Certified Professional Accountants. All rights reserved. MICKEY’S CENTER FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED AUGUST 31, 20X2 Circumstances include the following: • The financial statements are for a not‐for‐profit charity. • The financial statements are prepared on a modified cash‐basis of accounting. The cash‐basis of ac‐ counting was modified to accrue cash transactions and events that provide a benefit or result in an obli‐ gation that covers a period greater than the period in which the cash transactions or events occurred. Such accruals resulted in the recording of property and equipment as assets on the statement of assets and net assets and subsequent depreciation of those assets over their estimated useful lives. • The financial statements are as of August 31, 20X2, and for the year then ended. The financial statements illustrate the following: • The financial statements include a statement of functional expenses, which is required by accounting principles generally accepted in the United States of America (GAAP). Financial statements prepared when applying a modified cash‐basis of accounting are not required to include such a statement, but may instead communicate the substance of that requirement. • GAAP requires not‐for‐profit organizations to report the amount of unrestricted, temporarily restricted, and permanently restricted net assets on the face of the balance sheet (in the case of the illustrative fi‐ nancial statements prepared on a modified cash‐basis of accounting, such point in time statement is re‐ ferred to as the statement of assets and net assets). The illustrative financial statements do not follow those presentation requirements but instead, communicate their substance by providing relevant in‐ formation in the notes to the financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 33 Mickey’s Center Statement of Assets and Net Assets Modified Cash‐Basis August 31, 20X2 Assets Cash and cash equivalents $ 316,258 Restricted cash (Note 2) 108,084 Property and equipment (net of accumulated de‐ preciation of $35,565) 9,018 $ 433,360 Net Assets Unrestricted net assets (Note 5) 433,360 Net assets $ 433,360 See accompanying notes to financial statements. 34 © 2018 Association of International Certified Professional Accountants. All rights reserved. Mickey’s Center Statement of Revenue, Expenses and Changes in Net Assets Modified Cash‐Basis For the Year Ended August 31, 20X2 Revenue Corporate and foundation contributions $ 536,134 Other contributions 235,920 Exchange club projects 105,302 Unsolicited and other donations 69,754 Total revenue 947,110 Expenses Program services 769,426 Management and general 100,718 Fundraising 55,264 155,982 Total expenses 925,408 Increase in net assets 21,702 Net assets, beginning of year 411,658 Net assets, end of year $ 433,360 See accompanying notes to financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 35 Mickey’s Center Statement of Functional Expenses Modified Cash‐Basis For the Year Ended August 31, 20X2 Program Services Management and General Fundraising Total Salaries and bene‐ fits $ 451,675 $ 76,781 $ 38,041 $ 566,497 Grant expense 41,291 41,291 Special events 77,790 13,233 91,023 Training 16,029 16,029 Professional ser‐ vices 16,810 16,810 Telephone 14,782 720 428 15,930 Postage/printing 6,176 301 178 6,655 Office supplies 16,597 809 481 17,887 Program materials 16,279 16,279 Depreciation 8,917 435 259 9,611 Rent 58,084 2,831 1,683 62,598 Miscellaneous 61,806 2,031 961 64,798 $ 769,426 $ 100,718 $ 55,264 $ 925,408 83% 11% 6% See accompanying notes to financial statements. 36 © 2018 Association of International Certified Professional Accountants. All rights reserved. Mickey’s Center Notes to Financial Statements Modified Cash‐Basis August 31, 20X2 Note 1—Summary of Significant Accounting Policies Nature of Activities Mickey’s Center (the Center) is a nonprofit corporation incorporated under the Texas Non‐Profit Corporation Act. The purpose of the Center is to use its funds exclusively for charitable, scientific, and educational purposes, especially the prevention of child abuse. Basis of Accounting The financial statements of the Center have been prepared on the cash‐basis of accounting, modified to record assets or liabilities with respect to cash transactions and events that provide a benefit or result in an obligation that covers a period greater than the period in which the cash transactions or events occurred. The modifica‐ tions result in the recording of capital assets on the statement of assets and net assets. Except for depreciation, all transactions are recognized as either revenue or expenses when received or paid in cash. Except for deprecia‐ tion, noncash transactions are not recognized. This basis of accounting represents a comprehensive basis of ac‐ counting other than accounting principles generally accepted in the United States of America (GAAP). This basis of accounting differs from GAAP primarily because certain revenue and related assets have been recognized when received rather than when earned and certain expenses and related liabilities have been recognized when paid rather than when the obligations were incurred. Property and Equipment Property and equipment are recorded at cost and consist of the office building and equipment. Depreciation is computed on the straight‐line method based on estimated useful lives of 30 years and 5 years for the office building and equipment, respectively. Cash Equivalents The Center considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. Contributions The Center records contributions when received in cash. Contributed Services Many individuals volunteer their time to help the Center with its educational activities. During the year ended August 31, 20X2, the Center received approximately 200 volunteer hours that have not been recorded in the statement of revenue, expenses, and changes in net assets. Functional Expenses © 2018 Association of International Certified Professional Accountants. All rights reserved. 37 The costs of providing the various programs, fundraising, and other activities have been summarized on a func‐ tional basis in the statement of functional expenses. Accordingly, certain costs have been allocated among the programs and fundraising activities benefited. Functional expenses are allocated to programs and supporting services based on specific identification. Expenses that relate to more than one program or support activity are allocated based on salary expenditure. Income Taxes The Center is exempt from federal and state income taxes under Internal Revenue Code Section 501(c)(3), ex‐ cept to the extent that it has taxable income from businesses that are not related to its tax exempt purpose. Un‐ related business income, if there was any, would be taxed at the applicable corporate income tax rate. The Cen‐ ter did not have any unrelated business income during the year ended August 31, 20X2, and accordingly, no pro‐ vision for income taxes has been made in the financial statements. The Center is not currently under examination by any taxing jurisdiction. Federal and state taxing authorities no longer have the right to examine tax years prior to 20Y9. For the year ended August 31, 20X2, there were no in‐ terest or penalties associated with tax positions recorded in the accompanying financial statements. Use of Estimates The preparation of financial statements on a modified cash‐basis of accounting requires management to make estimates and assumptions that affect financial statement amounts and disclosures. Actual results could differ from those estimates and assumptions. Subsequent Events In preparing these financial statements, management of the Center has evaluated events and transactions for potential recognition or disclosure through January 20, 20X3, the date the financial statements were available to be issued. Note 2—Restricted Cash The balance represents funds restricted by the board of directors in an amount equal to the balance in the School Initiatives Fund. Note 3—Commitments and Contingencies The land on which the Center’s office is located is being leased on an annual basis at a rate of $1,400 per annum. See Note 4. Note 4—Subsequent Events In September 20X2, the Center entered into a “purchase and sale agreement,” which provided for the purchase of a building in the amount of $230,000 and the assumption of a lease of the land on which the building is locat‐ ed. The building purchase was executed on September 28, 20X2, and was financed in part by a $220,000 note payable to a bank. The terms of the note provide for quarterly interest payments at the bank’s prime rate through the note maturity date. A $100,000 principal payment was due and made in December 20X2, and the remaining balance is due September 20X8. The note is secured by a leasehold deed of trust and security agree‐ ment and an assignment of rents and leases. 38 © 2018 Association of International Certified Professional Accountants. All rights reserved. The assumed lease previously referred to is an operating lease that requires annual payments of $19,600 through September 20X6. The Center has the option to terminate the lease in March 20X9. If the lease is not terminated, the annual payment will be revised to reflect 6 percent of the value of the land, which will be de‐ termined as set forth in the lease agreement. In December 20X2, the Center entered into a construction contract for $138,000 to design and construct certain building and leasehold improvements. Note 5—Internally Restricted Net Assets Net assets internally restricted for the School Initiatives Fund consist of amounts allocated from unrestricted net assets as approved by the board of directors. The internally restricted amounts are to be used for purchasing equipment and establishing programs for educational programs in schools and are not available for other pur‐ poses without approval by the board of directors. Note 6—Allocation of Joint Costs During the year ended August 31, 20X2, the Center conducted activities that included appeals for contributions and incurred joint costs of approximately $46,000. These activities included direct mail campaigns and special events. Approximately 65 percent of these joint costs were allocated to fundraising activities and 35 percent to program services. © 2018 Association of International Certified Professional Accountants. All rights reserved. 39 DONNELLY & OATES LIMITED LIABILITY PARTNERSHIP FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 20X2 Circumstances include the following: • The financial statements are for a limited liability partnership (LLP) that owns and operates a racquet and swim club. • The financial statements are prepared on basis of accounting that the LLP uses for federal income tax purposes. • The financial statements are as of and for the year ended December 31, 20X2. The financial statements illustrate the following: • The Statement of Revenues and Expenses uses the caption “Revenues in excess of expenses” to portray what a financial statement prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) would describe as “Net income.” There is no prohibition on the use of “Net income” or other GAAP captions within the financial statements. In this situation, the entity has chosen the term because management believes it to be more descriptive. • The financial statements include a Statement of Cash Flows, which is not required for financial state‐ ments prepared when applying the tax‐basis of accounting. However, in this case, the financial state‐ ments include a single year only, thus it would be difficult for financial statement users to obtain accu‐ rately the information on operating, investing and financing activities presented in a statement of cash flows. 40 © 2018 Association of International Certified Professional Accountants. All rights reserved. Donnelly & Oates Limited Liability Partnership Statements of Assets, Liabilities and Partners’ Capital Tax‐Basis December 31, 20X2 Assets Cash 450,944 Accounts receivable 451,194 Inventory 311,214 Prepaid expenses and other assets 24,046 Financing fees, less accumulated amortization of $57,096 259,124 Syndication costs 312,166 Property and equipment, net of accumulated depreci‐ ation of $2,810,112 9,054,554 $ 10,863,242 Liabilities and Partners’ Capital Accounts payable $ 276,502 Accrued payroll and related costs 117,792 Other accrued expenses 23,998 Unearned dues 369,586 Mortgage payable $ 7,566,966 Total liabilities 8,354,844 Partners’ capital 2,508,398 $ 10,863,242 See accompanying notes. © 2018 Association of International Certified Professional Accountants. All rights reserved. 41 Donnelly & Oates Limited Liability Partnership Statement of Revenues and Expenses Tax‐Basis For the Year Ended December 31, 20X2 Revenues Membership dues $ 3,970,334 Initiation fees 389,638 Tennis court fees and lessons 1,103,224 Other income 726,936 Sports shop and café 1,219,740 Total revenues 7,409,872 Expenses Management fee 50,700 Maintenance and operating 504,448 Utilities 391,460 Advertising and promotions 191,088 Payroll and related costs 2,774,706 Insurance 136,984 Administrative 246,906 Real estate taxes 351,246 Cost of sales—sports shop and café 701,800 Total expenses 5,349,338 Net operating income 2,060,534 Partnership expenses (9,572) Interest expense (765,476) Depreciation and amortization (610,094) Loss on sale of equipment (4,240) Revenues in excess of expenses $ 671,152 See accompanying notes. 42 © 2018 Association of International Certified Professional Accountants. All rights reserved. Donnelly & Oates Limited Liability Partnership Statement of Partners’ Capital Tax‐Basis For the Year Ended December 31, 20X2 Limited Part‐ ners Special Limited Partner General Part‐ ner Partners’ Capi‐ tal Balance, December 31, 20X1 $ 1,017,392 $ 1,256,710 $ (69,276) $ 2,204,826 Cash distributions (238,924) (55,138) (73,518) (367,580) Revenues in excess of ex‐ penses 436,254 100,674 134,224 671,152 Balance, December 31, 20X2 $ 1,214,722 $ 1,302,246 $ (8,570) $ 2,508,398 See accompanying notes. © 2018 Association of International Certified Professional Accountants. All rights reserved. 43 Donnelly & Oates Limited Liability Partnership Statement of Cash Flows Tax‐Basis For the Year Ended December 31, 20X2 Cash flows from operating activities Revenues in excess of expenses $ 671,152 Adjustments to reconcile revenues in excess of ex‐ penses to cash flows from operating activities Depreciation and amortization 610,094 Loss on sale of equipment 4,240 (Increase) decrease in: Accounts receivable (23,494) Inventory (102,916) Prepaid expenses 1,472 Accounts payable and accrued expenses 74,992 Unearned dues 32,874 Net cash flows provided by operating activities 1,268,414 Cash flows from investing activities Acquisition of equipment (277,138) Proceeds from sale of equipment 620 Net cash flows used by investing activities (276,518) Cash flows from financing activities Repayment of debt (473,574) Cash distributions to partners (367,580) Net cash flows used by financing activities (841,154) Increase in cash 150,742 Cash at beginning of year 300,202 Cash at end of year $ 450,944 Supplemental disclosures of cash flow information: Cash paid during the year for interest $ 774,170 See accompanying notes. 44 © 2018 Association of International Certified Professional Accountants. All rights reserved. Donnelly & Oates Limited Liability Partnership Notes to Financial Statements Tax‐Basis For the Year Ended December 31, 20X2 Note 1—Summary of Significant Accounting Policies Nature of Operations The Partnership owns and operates a racquet and swim club (the Club) located in Minnesota. The Club has approximately 3,000 members at December 31, 20X2. The Club extends credit to members for the payment of dues and other charges. The Partnership, formed in 19W5, is a limited liability partnership in accordance with the provisions of the Uni‐ form Partnership Act as in effect in the State of Minnesota. The general partner of the Partnership is Tony Donnelly. Basis of Accounting The Partnership’s financial statements are prepared on the accounting basis the Partnership used for federal in‐ come tax purposes, which is a comprehensive basis of accounting other than accounting principles generally ac‐ cepted in the United States of America (GAAP). The Partnership uses the Accelerated Cost Recovery System (ACRS) and Modified Accelerated Cost Recovery System (MACRS) in depreciating its property. Under ACRS and MACRS, depreciation is determined over periods of time that are shorter than those used in accordance with GAAP. Additionally, the income tax methods used to capitalize and amortize amortizable assets differ from those used under GAAP. Syndication costs are carried as an asset of the Partnership and are not amortized. Under GAAP these costs would be deducted from partners’ capital. Cash Equivalents The Partnership considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Concentration of Credit Risk The Partnership places its cash with one banking institution. At times the amount on deposit exceeds the in‐ sured limit of the institution and exposes the Partnership to a collection risk. Inventories Inventories, which consist of merchandise for sale in the sports shop, food, and beverages, are stated at the lower of cost (first in, first out method) or market. Membership Dues and Initiation Fees © 2018 Association of International Certified Professional Accountants. All rights reserved. 45 Membership dues are billed in advance and recorded in accounts receivable and unearned dues. The dues are recognized as revenue in the month earned. Initiation fees are recorded as revenue in the period when the fee is collected. Property and Equipment Property and equipment are carried at depreciated cost. Depreciation is computed using income tax methods. The cost of maintenance and repairs is charged to income as incurred; significant renewals or betterments are capitalized. Financing Fees Financing fees are amortized over the term of the related debt using the straight‐line method. During 20XX, fi‐ nancing fees related to retired debt were written off. The financing fees related to new debt were capitalized. Amortization expense was $12,149 during 20X2. Start‐Up Costs Start‐up costs are amortized over 60 months using the straight‐line method. Income Taxes Income taxes on Partnership income are levied on the partners at the partner level. Accordingly, all profits and losses of the Partnership are recognized by each partner on his respective tax return. Management believes that the Partnership has adequately addressed all relevant tax positions and that there are no unrecorded tax liabilities. Tax returns filed for the tax years ending from December 31, 20Y9, through cur‐ rent are still subject to examination by federal and state tax authorities. Any interest or penalties assessed to the Partnership are recorded in operating expenses. No interest or penalties from federal or state tax authorities were recorded in the accompanying financial statements. Advertising and Promotions Advertising costs are expensed as incurred. For the year ended December 31, 20X2, the Partnership incurred $191,088 in advertising costs. Estimates The preparation of financial statements on the tax‐basis of accounting requires management to make estimates and assumptions that affect the amounts reported on the financial statements and accompanying notes. Actual results could differ from those estimates. Subsequent Events Subsequent events have been evaluated through February 24, 20X3, which is the date the financial statements were available to be issued, and there are no subsequent events requiring disclosure. Note 2—Partnership Organization Profit and Loss Allocations 46 © 2018 Association of International Certified Professional Accountants. All rights reserved. Prior to December 1, 20XX, profits and losses from annual operations were allocated 99 percent to the limited partners and 1 percent to the general partner. Subsequent to November 30, 20XX, and until the Class A limited partners have received distributions of net cash flow equal to their preferred return, profits and losses from annual operations are allocated 65 percent to the Class A limited partners; 15 percent to the special limited partner; and 20 percent to the general partner. After the Class A limited partners have received cumulative distributions of net cash flow equal to their pre‐ ferred return, profits and losses from annual operations will be allocated 45 percent to the Class A limited part‐ ners; 15 percent to the special limited partner; and 40 percent to the general partner. Net Cash Flow Allocation From Operations Subsequent to November 30, 20XX, net cash flow is allocated 65 percent to the Class A limited partners; 15 per‐ cent to the special limited partner; and 20 percent to the general partner until such time as the Class A limited partners have received cumulative distributions equal to their preferred return. The balance of any net cash flow will be distributed 45 percent to the Class A limited partners; 15 percent to the special limited partner; and 40 percent to the general partner. Preferred Return The preferred return means a 9 percent per annum cumulative noncompounded return on the adjusted capital contribution of the Class A limited partners. The adjusted capital contribution means the original capital contri‐ butions are reduced only by distribution from the net proceeds of sale or refinancing. Note 3—Property and Equipment Property and equipment at December 31, 20X2, consisted of the following: Recovery Peri‐ od—Years Land $ 975,720 — Building 9,320,050 7–40 Tenant improvements 1,568,896 5–7 Total cost of property and equip‐ ment being depreciated $ 11,864,666 Less: Accumulated depreciation 2,810,112 Total property and equipment, net $ 9,054,554 Depreciation expense was $597,945 during 20X2. © 2018 Association of International Certified Professional Accountants. All rights reserved. 47 Note 4—Mortgage Payable At December 31, 20X2, debt consisted of the following: Mortgage loan payable in monthly payments of $73,124, including interest at 9.375%, through January 20XY when the interest rate changes to 3.5% above the 3‐ year Treasury base rate. Beginning February 1, 20XY, monthly payments will be ad‐ justed to reflect the new interest rate; the payments will be based upon a 15‐year term. The remaining principal is due January 1, 20XZ. The mortgage is secured by property, equipment, and a personal guaranty. $ 6,778,186 10% unsecured note payable to the special limited partners due in monthly install‐ ments of $16,546, including principal and interest, through February 1, 20XZ, when the unpaid balance is due. 788,780 $ 7,566,966 Scheduled principal payments under these loans are approximately $380,000 per year until February 1, 20XY, when payment terms will be adjusted as described previously. Note 5—Amendment of the Partnership Agreement The Partnership agreement was amended effective November 30, 20XX. The primary purpose of the amend‐ ment was to create a new class of limited partner (the special limited partner) and to change the allocations of profits, losses, and cash distributions. Effective November 30, 20XX, Michael Oates surrendered his 67 limited partnership units in exchange for $1,450,000 and a 15 percent special limited partnership interest. Additionally, as part of this exchange, $200,000 was paid down on the note payable to the special limited partner, the interest rate on this note was reduced to 10 percent from 12 percent, and the term of the note was shortened. Note 6—Transactions With Affiliates At December 31, 20X2, the Partnership owed partners or affiliated entities $788,780. During 20X2 a management fee of $50,700 was paid to a partner. 48 © 2018 Association of International Certified Professional Accountants. All rights reserved. CHARLTON CONTRACTORS, INC. FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 20X2, AND 20X1 Circumstances include the following: • The financial statements are for a general contractor. The general contractor has elected to be treated as a small business corporation (S corporation) under Internal Revenue Code Section 1362. • The financial statements are prepared on the accrual method of accounting used for federal income tax purposes. • The financial statements are comparative statements as of and for the years ended December 31, 20X2, and 20X1. The financial statements illustrate the following: • The financial statements include a statement of cash flows, which is not required for financial state‐ ments prepared when applying the tax‐basis of accounting. • Information about contract receivables (Note 2), billings in excess of costs on uncompleted contracts (Note 5), and backlog (Note 7) are disclosures typically made in the financial statements of construction contractors. However, the aging summary of contract receivables is not usually disclosed. In this situa‐ tion, the preparer concluded that the information is relevant to the financial statement users. • The information on accounts payable and accruals is not required but has been included because the preparer concluded that users of the financial statements find it meaningful. • Accounting principles generally accepted in the United States of America (GAAP) requires a summary of future minimum lease payments, which usually is presented in a schedule. Because the entity’s lease commitments are not complex, this information has been summarized in narrative form, which is ac‐ ceptable for financial statements prepared on the tax‐basis of accounting. © 2018 Association of International Certified Professional Accountants. All rights reserved. 49 Charlton Contractors, Inc. Statements of Assets, Liabilities and Equity Tax‐Basis December 31, 20X2 and 20X1 20X2 20X1 Assets Current Assets Cash and cash equivalents $ 3,078,966 $ 3,608,930 Accounts receivable—contract (Note 2) 2,409,554 1,422,268 Advances to officers 7,812 — Inventory 287,714 196,200 Total current assets 5,784,046 5,227,398 Property and Equipment Machinery and equipment 1,694,980 1,710,828 Transportation equipment 384,790 395,042 Office furniture and equipment 162,454 163,034 Leasehold improvements 363,798 363,798 Total cost 2,606,022 2,632,702 Accumulated depreciation and amortization (Note 3) (2,362,850) (2,343,812) Net property and equipment 243,172 288,890 Other Assets Cash surrender value of officers’ life insurance 24,454 23,610 Miscellaneous 1,460 20,766 Total other assets 25,914 44,376 Total assets $ 6,053,132 $ 5,560,664 See accompanying notes to financial statements. 50 © 2018 Association of International Certified Professional Accountants. All rights reserved. Charlton Contractors, Inc. Statements of Assets, Liabilities and Equity Tax‐Basis Years Ended December 31, 20X2 and 20X1 20X2 20X1 Liabilities and Stockholders’ Equity Current Liabilities Accounts payable and accruals (Note 4) $ 548,646 $ 288,904 Billings in excess of costs on uncompleted con‐ tracts (Note 5) 976,754 445,108 Total current liabilities 1,525,400 734,012 Contributed Capital Common stock, $1,000 par value; 100 shares authorized; 60 shares issued and outstanding 60,000 60,000 Retained Earnings 4,467,732 4,766,652 Total stockholders’ equity 4,527,732 4,826,652 Total liabilities and stockholders’ equity $ 6,053,132 $ 5,560,664 See accompanying notes to financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 51 Charlton Contractors, Inc. Statements of Operations and Retained Earnings Tax‐Basis Years Ended December 31, 20X2 and 20X1 20X2 20X1 Contract revenue $ 7,009,498 $ 8,116,380 Cost of contract revenue Direct costs Materials and supplies 1,710,330 1,729,310 Salaries and wages 1,184,132 1,264,664 Subcontracts 1,670,596 1,838,942 Other 99,486 92,560 4,664,544 4,925,476 Indirect costs 813,520 967,278 5,478,064 5,892,754 Gross profit 1,531,434 2,223,626 General and administrative expenses Salaries and wages 1,298,552 2,139,444 Profit‐sharing plan contribution — 6,138 Other 596,938 539,786 1,895,490 2,685,368 Operating loss (364,056) (461,742) Financing income 88,148 132,590 Net loss (275,908) (329,152) Retained earnings, beginning of year 4,766,652 5,255,804 Distributions to stockholders (23,012) (160,000) Retained earnings, end of year $ 4,467,732 $ 4,766,652 See accompanying notes to financial statements. 52 © 2018 Association of International Certified Professional Accountants. All rights reserved. Charlton Contractors, Inc. Statements of Cash Flows Tax‐Basis Years Ended December 31, 20X2 and 20X1 20X2 20X1 Cash flows from operating activities Net loss $ (275,908) $ (329,152) Noncash items included in net loss: Depreciation 45,718 60,204 (Increase) decrease in: Contract receivables (987,286) 2,103,570 Inventory (91,514) (3,260) Cash surrender of officers’ life insurance (844) (1,200) Other assets — (408) Increase (decrease) in: Accounts payable and accruals 259,742 (100,832) Billings in excess of costs on uncompleted contracts 531,646 (895,508) Net cash (used) provided by operat‐ ing activities (518,446) 833,414 Cash flows from investing activities Property and equipment purchases — (60,000) Advances to officers (7,812) — Redemption of certificates of deposit — 2,132,038 Decrease in miscellaneous assets 19,306 — Net cash provided by investing ac‐ tivities 11,494 2,072,038 Cash flows from financing activities Distributions to stockholders (23,012) (160,000) Net (decrease) increase in cash and cash equiva‐ lents (529,964) 2,745,452 Cash and cash equivalents, beginning of year 3,608,930 863,478 Cash and cash equivalents, end of year $ 3,078,966 $ 3,608,930 See accompanying notes to financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 53 Charlton Contractors, Inc. Notes to Financial Statements Tax‐Basis December 31, 20X2 and 20X1 Note 1—Summary of Significant Accounting Policies Nature of Operations Charlton Contractors is a general contractor primarily engaged in the construction of commercial and multifami‐ ly residential projects in the San Diego metropolitan area. Basis of Accounting The accompanying financial statements have been prepared on the accrual method of accounting used for fed‐ eral income tax purposes, which is a comprehensive basis of accounting other than accounting principles gener‐ ally accepted in the United States of America (GAAP). If the accompanying financial statements were prepared in conformity with GAAP, contract revenue and costs would be recognized under the percentage‐of‐completion method of accounting, an allowance for uncollectible accounts receivable would be established, property and equipment would be depreciated over their estimated useful lives, and the related party lease would be capitalized as an asset and liability. The Corporation has elected to be treated as a small business corporation (S corporation) under Internal Reve‐ nue Code Section 1362. This election provides that, in lieu of corporate income taxes, the taxable items and credits pass directly to the stockholders. Therefore, these financial statements do not include federal or state in‐ come taxes that would otherwise be applicable. The Corporation uses the accrual completed contract method to recognize construction revenue. That method of accounting recognizes contract revenue and costs when a contract is completed or substantially completed. A contract is considered substantially completed when all costs except insignificant items have been incurred and the installation has been accepted by the customer. Contract costs include all direct material and labor costs and those indirect costs related to contract perfor‐ mance, such as rent, depreciation, maintenance, and insurance. Indirect costs are allocated based on contract revenue. General and administrative costs are charged to expenses as incurred. Amounts billed in excess of costs are classified as current liabilities under billings in excess of cost on uncom‐ pleted contracts. Contract retentions are included in contract receivables. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with a maturity of three months or less when pur‐ chased. 54 © 2018 Association of International Certified Professional Accountants. All rights reserved. At December 31, 20X2, and 20X1, the Corporation had on deposit with several banks amounts in excess of Fed‐ eral Deposit Insurance Corporation insurance limits. The Corporation has not experienced any losses in such ac‐ counts. The Corporation believes it is not exposed to any significant credit risk on cash and cash equivalents. Contract Receivables Contract receivables, including retentions, are recorded as progress billings and rendered in accordance with the provisions of the contracts. The Corporation uses the direct write‐off method to record uncollectible accounts in compliance with the Internal Revenue Code. Inventory Inventory is valued at the lower of cost, based on the first in, first out method, or market. Property and Equipment Property and equipment are recorded at cost and depreciated using principally accelerated methods. Leasehold improvements are amortized over the life of the related leases or their estimated useful lives, whichever is shorter. Property and equipment are depreciated over the following recovery periods: Machinery and equipment 5 years Transportation equipment 5 years Office furniture and equipment 5–7 years Leasehold improvements 10–31.5 years Expenditures for maintenance and repairs that do not materially extend the lives of the assets are charged to earnings. When property or equipment is sold or otherwise disposed of, the cost and related accumulated de‐ preciation are removed from the respective accounts, and the resulting gain or loss is reflected in earnings. Profit‐Sharing Plan The Corporation adopted a profit‐sharing plan effective November 22, 19V4. Substantially all full‐time employ‐ ees are eligible to participate. The Corporation’s contributions on behalf of its employees are determined annu‐ ally by the board of directors. The Corporation did not make a contribution for 20X2. Profit‐sharing contributions were $6,138 for the year ended December 31, 20X1. Statement of Cash Flows For purposes of the statement of cash flows, cash and cash equivalents include money market accounts and op‐ erating bank accounts. The Corporation did not pay any interest expense for 20X2 and 20X1. Income Taxes © 2018 Association of International Certified Professional Accountants. All rights reserved. 55 The Corporation, with the consent of its shareholders, has elected, in accordance with the Internal Revenue Code, to be treated as an S corporation. In lieu of federal income taxes, the shareholders of an S corporation are taxed on their proportionate share of the corporation’s taxable income. Therefore, no provision for federal in‐ come taxes has been included in these financial statements. California law generally conforms to federal law ex‐ cept for a 1.5 percent tax imposed on S corporation’s earnings. The Corporation is subject to tax in other states. Deferred income taxes have not been recognized in these financial statements because the amount of deferred taxes is not considered material. The Corporation does not recognize a liability for uncertain tax positions until agreement and settlement is reached with the taxing authority. Tax returns filed for the tax years ending from December 31, 20Y9, through current are still subject to examination by federal and state tax authorities. Subsequent Events The Corporation has evaluated subsequent events from the date of the statement of assets, liabilities, and equi‐ ty—tax‐basis through March 12, 20X3, the date on which the financial statements were available to be issued, and determined that there are no items to disclose. Note 2—Contract Receivables An aging summary of contract receivables at December 31, is as follows: 20X2 20X1 Billed Current $ 1,131,718 $ 364,284 30 days 486,854 306,318 60 days 189,138 79,914 90 days and over 129,326 133,272 1,937,036 883,788 Unbilled retentions 456,512 444,252 Unbilled amounts on complet‐ ed contracts 16,006 94,228 Totals $ 2,409,554 $ 1,422,268 56 © 2018 Association of International Certified Professional Accountants. All rights reserved. Completed and uncompleted contract receivables at December 31, are as follows: 20X2 20X1 Completed contracts Billed, including retentions $ 906,052 $ 581,760 Unbilled retentions 116,772 125,206 Unbilled amounts on completed con‐ tracts 16,006 94,228 Uncompleted contracts Uncompleted contracts billed 1,030,984 302,028 Unbilled retentions 339,740 319,046 Totals $ 2,409,554 $ 1,422,268 Receivables written off as uncollectible totaled $30,158 for the year ended December 31, 20X2, and $2,000 for the year ended December 31, 20X1. Recoveries of receivables written off an uncollectible totaled $17,000 for the year ended December 31, 20X1. Note 3—Depreciation and Amortization The accumulated depreciation and amortization balances at December 31, are as follows: 20X2 20X1 Machinery and equipment $ 1,689,162 $ 1,701,064 Transportation equipment 308,130 296,002 Office furniture and equipment 161,612 160,440 Leasehold improvements 203,946 186,306 Totals $ 2,362,850 $ 2,343,812 © 2018 Association of International Certified Professional Accountants. All rights reserved. 57 Note 4—Accounts Payable and Accruals Accounts payable and accruals consist of the following at December 31: 20X2 20X1 Trade accounts payable $ 343,222 $ 157,726 Subcontract payables 156,130 86,104 Accrued payroll 40,626 39,814 Accrued and withheld payroll taxes 3,124 860 Sales tax payable 5,544 4,400 Totals $ 548,646 $ 288,904 Note 5—Billings in Excess of Costs on Uncompleted Contracts Billings in excess of costs on uncompleted contracts at December 31 are as follows: 20X2 20X1 Billings on uncompleted contracts $ 4,320,008 $ 2,258,286 Costs incurred on uncompleted contracts (3,343,254) (1,813,178) Billings in excess of costs on un‐ completed contracts $ 976,754 $ 445,108 Note 6—Commitment Under Lease Agreement On December 15, 20V6, the Corporation signed a lease with its stockholders for an office and production facility located in Mira Mesa, California. The facility lease is for 25 years, terminating December 15, 20YY. The base an‐ nual rent was $343,000 for 20X2 and 20X1. Increases in the base annual rent are to be based on the consumer price index, not to exceed 6 percent. The stockholders pay the real estate taxes and the Corporation pays all maintenance charges and operating costs for the facility. The rental payments include an escalation for increas‐ es in real estate taxes. At December 31, 20X2, the aggregate minimum lease payments under this lease were approximately $2,800,000. Future minimum lease payments are scheduled to be approximately $350,000 for each of the next 5 years. Rent expense for each of the years ended December 31, 20X2, and 20X1 was $353,000. Note 7—Backlog The estimated gross revenue on work to be performed on signed contracts was $3,467,894 at December 31, 20X2, and $4,183,624 at December 31, 20X1. In addition to the backlog of work to be performed, there was gross revenue to be reported in future periods under the accrual completed contract method used by the com‐ pany of $1,548,173 at December 31, 20X2, and $1,668,961 at December 31, 20X1. 58 © 2018 Association of International Certified Professional Accountants. All rights reserved. MARGARET ROSE 1964 IRREVOCABLE TRUST FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 20X2 AND 20X1 Circumstances include the following: • The financial statements are for an irrevocable trust. • The financial statements are prepared on the cash method of accounting used for federal income tax purposes. • The financial statements are comparative as of and for the years ended December 31, 20X2, and 20X1. The financial statements illustrate the following: • The financial statements do not include a statement of cash flows, which is acceptable for a presenta‐ tion when applying the tax‐basis of accounting. The preparer concluded that a statement of cash flows is not necessary because (1) the users of the financial statements are more interested in asset balances ra‐ ther than cash flows, and (2) if cash flow information is needed, it could easily be derived from the in‐ formation presented. © 2018 Association of International Certified Professional Accountants. All rights reserved. 59 Margaret Rose 1964 Irrevocable Trust Statements of Assets, Liabilities and Corpus Tax‐Basis December 31, 20X2 and 20X1 20X2 20X1 Assets Marketable securities—at cost $ 1,830,087 $ 1,560,681 (market value $2,746,922 and $2,353,519 in 20X2 and 20X1, respectively) Purchased interest 340 — Total assets $ 1,830,427 $ 1,560,681 Liabilities and Corpus Due to beneficiary 157,946 75,302 Total liabilities 157,946 75,302 Corpus 1,672,481 1,485,379 Total liabilities and corpus $ 1,830,427 $ 1,560,681 See accompanying notes. 60 © 2018 Association of International Certified Professional Accountants. All rights reserved. Margaret Rose 1964 Irrevocable Trust Statements of Revenues, Expenses and Corpus Tax‐Basis Years Ended December 31, 20X2 and 20X1 20X2 20X1 Revenues Dividends $ 76,139 $ 69,044 Interest 4,729 4,457 Gain (loss) on sale of securities, net 201,370 46,094 Total revenues 282,238 119,595 Expenses Accounting fee 7,500 7,000 Bank custodian fee 3,018 2,588 Investment counsel fee 9,474 7,588 Total expenses 19,992 17,176 Income before provision for income taxes 262,246 102,419 Provision for income taxes 75,144 22,207 Net income 187,102 80,212 Corpus, beginning of year 1,485,379 1,405,167 Corpus, end of year $ 1,672,481 $ 1,485,379 See notes to financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 61 Margaret Rose 1964 Irrevocable Trust Notes to Financial Statements Tax‐Basis For the Years Ended December 31, 20X2 and 20X1 Note 1—Nature of Trust and Significant Accounting Policies Nature of Trust The Margaret Rose 1964 Irrevocable Trust (the Trust) was created on May 5, 1964, by Michael Thomas. Distribu‐ tion of 25 percent of principal is to be made at age 30, and 33 1/3 percent at age 35. After January 1, 19X2, the beneficiary may request annually a noncumulative distribution of the larger of $5,000 or 5 percent of the princi‐ pal as of the end of the year. Upon death of the beneficiary, the Trust is to be distributed according to the terms of her will. The trustee has discretionary power to distribute principal or income, or both. Basis of Accounting The accompanying financial statements have been prepared on the cash method of accounting used for federal income tax purposes, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP). Consequently, certain revenues and expenses are recognized in the determination of income in different reporting periods than they would be if the financial statements were prepared in conformity with GAAP. Although income tax rules are used to determine the timing of the re‐ porting of revenues and expenses, nontaxable revenues and nondeductible expenses are included in the deter‐ mination of net income. Use of Estimates The preparation of financial statements in conformity with the cash method of accounting used for federal in‐ come tax purposes requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Marketable Securities Marketable securities are carried at cost. The cost of marketable securities sold is based on cost as determined under the specific identification method. Income Taxes The Trust does not recognize a liability for uncertain tax positions. Tax returns filed for the tax years ending from December 31, 20Y9, through current are still subject to examination by federal and state tax authorities. Subsequent Events In preparing these financial statements, the Trust has evaluated events and transactions for potential recogni‐ tion or disclosure through April 1, 20X3, the date the financial statements were available to be issued, and de‐ termined that there are no items to disclose. 62 © 2018 Association of International Certified Professional Accountants. All rights reserved. Note 2—Marketable Securities At December 31, 20X2, and 20X1, gross unrealized gains and losses pertaining to marketable securities in the portfolio were as follows: Cost Market Value Unrealized Gains Losses 20X2 Equities $ 948,766 $ 1,790,955 $ 854,565 $ 12,376 Fixed income and money market 881,321 955,967 119,362 44,716 Total $ 1,830,087 $ 2,746,922 $ 973,927 $ 57,092 Market Unrealized Cost Value Gains Losses 20X1 Equities $ 891,685 $ 1,611,732 $ 757,910 $ 37,863 Fixed income and money market 668,996 741,787 72,791 — Total $ 1,560,681 $ 2,353,519 $ 830,701 $ 37,863 Note 3—Income Taxes The income tax expense shown in the accompanying financial statements differs from the expense that would result from applying statutory tax rates to income before income taxes primarily because of capital gains. Distributions to beneficiaries are allowed as a deduction from taxable income for the trust in the year in which such distributions are made. The provision for income taxes for the years ended December 31 consists of: 20X2 20X1 Federal $ 63,200 $ 17,874 State 11,944 4,333 Provision for income taxes $ 75,144 $ 22,207
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Please answer the question using only the provided context. Please summarize the major differences between cash- and tax-basis account as explained in the context provided. Practice Aid Accounting and Financial Reporting Guidelines for Cash- and Tax-Basis Financial Statements © 2018 Association of International Certified Professional Accountants. All rights reserved. For other uses of this work, please email [email protected] with your request or write to us at 220 Leigh Farm Road, Durham, NC 27707-8110 USA. This document was created by the Association of International Certified Professional Accountants as a free member benefit which may be freely used and shared by members for personal use. All copyright statements should be maintained. © 2018 Association of International Certified Professional Accountants. All rights reserved. 1 Preface Because of the complexities of accounting principles generally accepted in the United States of America (GAAP), many smaller entities have determined that financial statements prepared by applying the cash‐ or tax‐basis of accounting more appropriately suit their needs. Unlike GAAP, little authoritative guidance is available with re‐ spect to the preparation of financial statements when applying the cash‐ or tax‐basis of accounting. Financial statements prepared when applying the cash‐ or tax‐basis of accounting need to have a level of consistency so that they are useful and not misleading to users of the financial statements. Additionally, because financial statements prepared when applying the cash‐ or tax‐basis of accounting are not considered appropriate in form unless the financial statements include informative disclosures similar to those required by GAAP if the financial statements contain items that are the same as, or similar to, those in financial statements prepared in accord‐ ance with GAAP, preparers of full disclosure financial statements prepared when applying the cash‐ or tax‐basis of accounting are often faced with difficult questions. This practice aid is intended to provide preparers of cash‐ and tax‐basis financial statements with guidelines and best practices to promote consistency and for resolving the often difficult questions regarding the preparation of such financial statements. Although this practice aid is the best source for such guidance, it is nonauthorita‐ tive and should not be used as a substitute for the preparer’s professional judgment. This practice aid has not been approved, disapproved, or otherwise acted upon by any senior committee of the AICPA. This practice aid does not contain guidance with respect to performing an audit, review, or compilation of finan‐ cial statements prepared when applying the cash‐ or tax‐basis of accounting. Practitioners engaged to audit such financial statements should refer to Statements on Auditing Standards, including AU‐C section 800, Special Con‐ siderations—Audits of Financial Statements Prepared in Accordance With Special Purpose Frameworks (AICPA, Professional Standards). Practitioners engaged to perform a review or compilation should refer to Statements on Standards for Accounting and Review Services (SSARSs). Likewise, CPAs in public practice who prepare finan‐ cial statements for clients but are not engaged to perform an audit, review, or compilation of such financial statements should refer to SSARSs. Prepared by Michael P. Glynn Senior Technical Manager Audit and Attest Standards Team Edited by Kelly G. McAuliffe Technical Manager Member Learning and Competency 2 © 2018 Association of International Certified Professional Accountants. All rights reserved. Acknowledgments In 1998, the AICPA published the Practice Aid Preparing and Reporting on Cash‐ and Tax‐Basis Financial State‐ ments. That publication was written by Michael J. Ramos, CPA, and edited by the AICPA Accounting and Publica‐ tions Team. That publication served as a basis for the preparation of the original edition of this practice aid. In addition to this practice aid, the AICPA has also published a separate practice aid, Applying OCBOA in State and Local Government Financial Statements, authored by Michael A. (Mike) Crawford, CPA. Mike served as an invaluable resource in the preparation of the original edition of this practice aid. The AICPA also greatly appreciates the invaluable input provided by the late Dr. Thomas A. Ratcliffe in the de‐ velopment of the previous edition of this practice aid. Finally, the AICPA would like to thank the 2011/12 members of the Accounting and Review Services Committee and the 2011/12 members of the AICPA PCPS Technical Issues Committee, who provided invaluable input re‐ garding the content of the original edition of this practice aid. © 2018 Association of International Certified Professional Accountants. All rights reserved. 3 4 © 2018 Association of International Certified Professional Accountants. All rights reserved. Chapter 1 Overview of Cash‐ and Tax‐Basis Financial Statements Introduction Financial statements, including related notes, are a structured representation of historical financial information intended to communicate an entity’s economic resources and obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework. fn 1 All financial statements are prepared in accordance with a financial reporting framework. The term financial reporting framework is defined as “a set of criteria used to determine measurement, recognition, presentation, and disclosure of all material items appearing in the financial statements.” fn 2 Examples of financial reporting frameworks are accounting principles generally accepted in the United States of America (GAAP), International Financial Reporting Stand‐ ards promulgated by the International Accounting Standards Board, and special purpose frameworks such as the cash‐, tax, regulatory‐, contractual‐, and other bases that use a definitive set of logical, reasonable criteria that is applied to all material items appearing in the financial statements. The cash‐, tax‐, regulatory‐, and other‐basis of accounting are commonly referred to as other comprehensive bases of accounting. As GAAP becomes increasingly complex and less cost beneficial for private companies, such companies consider issuing cash‐ and tax‐basis financial statements as cost‐effective and useful alternatives. Many of these private companies are small and medium‐sized entities that report to a narrow range of financial statement users. Those users, unlike users of public company financial statements, typically have access to company management and additional financial information beyond that provided in the financial statements. Cash‐ or tax‐basis financial statements may be appropriate whenever the entity is not contractually or otherwise required to issue GAAP financial statements. The following conditions may indicate that financial statements prepared when applying the cash‐ or tax‐basis of accounting is appropriate: • The users of the financial statements—both internal and external to the entity—understand a cash‐ or tax‐basis presentation and find it relevant for their needs. • It is cost‐effective to prepare cash‐ or tax‐basis financial statements. • The operations of the entity are conducive to a cash‐ or tax‐basis presentation. Preparing cash‐ or tax‐basis financial statements has many benefits. A significant benefit is due to the fact that many smaller entities maintain their accounting records on a cash‐ or tax‐basis. Often, accounting and finance personnel responsible for maintaining the books and records can more easily understand the concepts of cash in fn 1 Paragraph .05 of AR‐C section 90, Review of Financial Statements (AICPA, Professional Standards), and paragraph .13 of AU‐C section 200, Overall Objectives of the Independent Auditor and Conduct of an Audit in Accordance With Generally Accepted Auditing Standards (AICPA, Professional Standards). fn 2 See footnote 1. © 2018 Association of International Certified Professional Accountants. All rights reserved. 5 and out as well as tax reporting compared to GAAP. Because the internal records are often maintained on the cash‐ or tax‐basis of accounting, it is easier to prepare the financial statements when applying that same basis. If the financial statements are prepared in accordance with GAAP, the accounting and finance personnel would “true‐up” the financial information through a series of journal entries. Additionally, many users of smaller entity financial statements find cash‐ or tax‐basis financial statements to be more understandable than financial statements prepared in accordance with GAAP because those users are often accustomed to preparing and con‐ sidering budgets on a cash‐basis and understand tax issues. Because many smaller entities are appropriately concerned with minimizing costs and maximizing the resources that are available to fund the operations of the business, resources allocated to accounting and financial report‐ ing are often not sufficient to maintain GAAP basis accounting records and to prepare financial statements in ac‐ cordance with GAAP. Preparing financial statements when applying the cash‐ or tax‐basis of accounting general‐ ly is less costly than preparing GAAP financial statements because of the following: • Less complex measurement requirements. Financial statements prepared when applying the cash‐basis of accounting reflect transactions resulting from cash receipt and disbursement transactions or events. Financial statements prepared when applying the tax‐basis of accounting reflect transactions in the same manner as those transactions are reflected in the entity’s tax return. • Less extensive disclosure requirements. Financial statements prepared when applying the cash‐ or tax‐ basis of accounting do not require all of the extensive disclosures required of GAAP statements because the statements do not include some of the items, events, and transactions that are typically included in GAAP basis financial statements. Observations and Suggestions Often, preparers of cash‐ and tax‐basis financial statements elect to omit substantially all disclosures required by the cash‐ or tax‐basis of accounting. The omission of disclosures is a departure from the cash‐ or tax‐basis of ac‐ counting and, if such disclosures were included in the financial statements, they might influence the user’s con‐ clusions about the entity’s financial position, results of operations, and cash flows. However, the omission may not necessarily result in misleading financial statements provided that the intended users are informed about such matters. • Ability to prepare tax returns and financial statements from the same information. When tax‐basis finan‐ cial statements are issued, a significant portion of the cost can be absorbed by the preparation of the tax return. Additionally, the entity is not required to maintain two sets of accounting records to account for items such as depreciation, bad debts, and consolidation matters. However, in addition to the benefits of financial statements prepared when applying a cash‐ or tax‐basis of ac‐ counting, financial statement preparers should also be aware of the limitations of such financial statements. For example, financial statements prepared when applying the cash‐ or tax‐basis of accounting may not meet the needs of certain users such as regulators and certain lenders. In addition, the cash‐basis of accounting can be easily manipulated by accelerating or delaying the timing of the receipt or disbursement of cash and therefore may not be a comprehensive measure of the entity’s complete economic condition. In practice, the most typical industries in which cash‐ or tax‐basis financial statements are issued include the fol‐ lowing: • Professional services 6 © 2018 Association of International Certified Professional Accountants. All rights reserved. • Medical • Retail • Real estate • Farming/agricultural • Construction • Not‐for‐profit Cash‐Basis of Accounting The cash‐basis of accounting is a basis of accounting that the entity uses to record cash receipts and disburse‐ ments. When applying the cash‐basis of accounting, transactions are recognized based on the timing of cash re‐ ceipts and disbursements. As a result, • revenues are recognized only when cash is received rather than when earned, and • expenses are recognized only when cash is paid rather than when the obligation is incurred. When applying the cash‐basis, cash outflows to purchase an “asset” are not capitalized but instead are recorded as a disbursement as of the date of purchase, so there is no depreciation or amortization. Accruals are not made and prepaid assets are not recorded. The cash‐basis of accounting in its purest form is rarely used but may be appropriate whenever the entity • is interested primarily in sources and uses of cash. • has a limited number of financial statement users. • has relatively simple operations engaged in one primary activity. • does not have significant amounts of debt, capital assets, or other items that would be recognized in ac‐ cordance with the accrual basis. Examples of some entities that may use the cash‐basis of accounting include the following: • Estates • Trusts • Civic ventures • Student activity funds • Political campaigns and committees © 2018 Association of International Certified Professional Accountants. All rights reserved. 7 When applying the cash‐basis of accounting, because the only assets of the entity would be cash and cash equivalents and there would be no liabilities, a balance sheet equivalent is often not presented. The income statement equivalent would report cash receipts and disbursements and other changes in cash and cash equiva‐ lents and disclose any restrictions on ending cash and cash equivalents. Any departure from the presentation of cash and cash equivalent balances and changes in such balances, such as the reporting of long‐term debt arising from cash transactions, the capitalization and depreciation of capital assets acquired with cash, or the reporting of investments or receivables and payables resulting from cash transactions, should be considered a modification to the cash‐basis of accounting. Such deviations require eval‐ uation regarding whether they are appropriate modifications of the cash‐basis of accounting. Appropriate modi‐ fications of the cash‐basis of accounting are discussed in the subsequent section. In‐Substance Two‐Step Transactions or Events in the Cash‐Basis of Accounting The preparer of cash‐basis financial statements may encounter single‐step transactions or events that may not directly involve a cash inflow or outflow but may nevertheless be recorded as an in‐substance two‐step cash transaction or event when applying the cash‐basis of accounting. For example, management of an entity may sign a note from a bank in order to purchase equipment. The bank may then directly pay the vendor for the pur‐ chase of the equipment. Because there was no cash transaction, the entity may not record the single‐step trans‐ action in the financial statements. However, so as not to be misleading to users of the financial statements, the preparer may choose to record the transaction as an in‐substance two‐step transaction. In accordance with that treatment, the journal entries may look as follows: Cash XX,XXX Note Proceeds (Revenue) XX,XXX (To record note proceeds that were paid directly to the vendor) Capital expenditure XX,XXX Cash XX,XXX (To record purchase of equipment) Then, subsequent payments on the note would be recorded as follows: Debt service expenditure XXX Cash XXX (To record principal and interest payment on note payable) Modified Cash‐Basis of Accounting The modified cash‐basis of accounting involves logical and consistent modifications to transactions or events that are derived from cash receipts or cash disbursements. For example, a modification to the cash‐basis of ac‐ counting to report capital assets should involve recording and depreciating only those capital assets that result from cash transactions or events. The modification should not involve the recording and depreciating of donated capital assets because these transactions or events do not involve an inflow or outflow of cash. Once deprecia‐ ble capital assets arising from cash transactions or events are recorded when applying a modified cash‐basis of accounting, such assets should also be depreciated over their estimated useful lives. Depreciating capital assets that were acquired with cash is a logical allocation of the cash‐basis assets’ costs over the assets’ useful lives. 8 © 2018 Association of International Certified Professional Accountants. All rights reserved. An easy way to look at whether a modification is appropriate is to consider whether the transaction or event would have been recorded if the entity was preparing the cash‐basis financial statements. For example, if an en‐ tity purchased a capital asset and was preparing cash‐basis financial statements, the journal entry would look like this: Capital expenditure XXXX Cash XXXX (To record purchase of capital asset) Because cash is part of the journal entry, it would be an appropriate modification to capitalize the asset and de‐ preciate the cost over the estimated useful life of the asset. On the other hand, the recording of trade accounts receivable arising from services provided or goods sold would not be an appropriate modification of the cash‐basis of accounting assuming cash was not received at the time the services were provided or goods were sold. Modifications to the cash‐basis of accounting generally result when cash receipts or cash disbursements provide a benefit or an obligation that covers multiple reporting periods. For example, a preparer may conclude that fi‐ nancial statement users would be misled if cash purchases of capital assets are recorded as disbursements or expenditures in the period in which the assets are purchased. Instead, the preparer may elect to modify the cash‐basis of accounting to record the asset on the balance sheet equivalent and depreciate it over the estimat‐ ed useful life of the asset, thereby, in effect, spreading the benefit of the cash outflow over multiple reporting periods in a manner that has substantial support and is logical and consistent. Questions often arise in the application of a modified cash‐basis of accounting regarding whether reported as‐ sets and liabilities derived from cash transactions or events should ever be written down or written off once they are recorded at their original cash value. Temporary changes in the fair value of an asset or liability should not be recognized in applying a modified cash‐basis of accounting and all recognized assets and liabilities should be measured and reported at their original cash value (net of any accumulated depreciation or amortization, if applicable). If an asset or liability has been permanently impaired and has no future cash value or represents no future obligation against cash, it would be appropriate to write‐down or write‐off such amounts in modified cash‐basis financial statements. A significant challenge to preparing financial statements when applying a modified cash‐basis of accounting is developing the appropriate accounting policy that results in financial statements that meet the needs of the primary users of the statements and consistently applying that policy to cash transactions and events in order to keep the financial statements from being misleading for the purposes for which they are intended. The preparer may find benefit in spelling out the logic behind the cash‐basis modifications and documenting the accounting policy prior to preparation of the basic financial statements. Although there is no single accepted method of applying a modified cash‐basis of accounting, modified cash‐ basis financial statements can be more meaningful if they are comparable with similar financial statements. Some preparers have inappropriately considered the modified cash‐basis of accounting as a “free‐for‐all” propo‐ sition in which they can unilaterally and arbitrarily choose the modifications that they will apply. For example, a preparer may inappropriately decide to prepare financial statements applying a modified cash‐basis of account‐ ing that records assets arising from cash transactions or events, including investments, inventories, and capital assets but does not record short‐term and long‐term liabilities and other obligations arising from cash transac‐ tions. Inconsistent uses of a modified cash‐basis framework should be avoided in general use financial state‐ ments because such inconsistencies will normally result in financial statements that are misleading for general © 2018 Association of International Certified Professional Accountants. All rights reserved. 9 use. Financial statements that are prepared using inconsistent modifications may be appropriate for special pur‐ poses involving limited users but should be labeled as such with clear disclosure and use of descriptive headings. With the needs of the primary financial statement users in mind, when preparing financial statements applying a modified cash‐basis of accounting, the preparer should consider modifying the following cash transactions or events, among others, by the recording of the following: • Receivables resulting from an outflow of cash, such as a cash advance to an employee • Investments in marketable securities acquired with cash • Inventories acquired with cash • Capital assets arising from cash transactions and depreciating the assets where appropriate • Deferred revenue resulting from cash receipts • Liabilities resulting from short‐term cash borrowings • Long‐term notes and other debt arising from cash transactions or events • Any other material assets, liabilities, revenues, and expenses resulting from cash transactions or events If the financial statements are prepared when applying a modified cash‐basis accounting policy in which one or more of the preceding—but not all—are recorded, the preparer should be prepared to defend how the decision to modify or not modify is a logical and consistent application of the accounting policy and does not result in misleading financial statements for the purposes for which they are intended. A number of transactions or events are not appropriate modifications to the cash‐basis of accounting. Generally, these transactions or events should not be recorded when applying a modified cash‐basis of accounting because they do not involve cash inflows or outflows, are illogical, or are not substantially supported in the accounting literature. Common transactions or events that should not be reported in financial statements prepared when applying a modified cash‐basis of accounting include the recording or adjusting of the following: • Capital assets arising from cash transactions or events, but not recording depreciation where appropri‐ ate • Donated capital assets where cash outflows were not involved • Accounts receivable from services provided or goods sold and other accrued receivables • Pledges receivable or other receivables where cash outflows were not involved • Investments for which cash outflows were not involved • Accounts payable for goods or services received where no cash outflow was involved • Accrued income taxes, accrued interest expense, other accrued liabilities where no cash outflow was in‐ volved 10 © 2018 Association of International Certified Professional Accountants. All rights reserved. • Subsequent write ups or write downs to fair value to recognize unrealized gains and losses on marketa‐ ble investments • Derivative instruments where cash inflows or outflows were not involved as well as the mark to market for fair value changes Because modified cash‐basis frameworks do not involve financial statement elements resulting from accruals and noncash transactions or events, it is unlikely that an acceptable modified cash‐basis framework would ever be materially equivalent to GAAP. However, it is important for financial statement preparers to avoid attempting to make certain modifications to GAAP financial statements and then referring to those financial statements as modified cash‐basis financial statements. For example, financial statements that are presented in conformity with GAAP, except that material leases are not capitalized, are not considered modified cash‐basis financial statements. Such financial statements are considered GAAP financial statements with a material departure due to the failure to capitalize material leases. The preparer will need to use judgment in determining if modified “cash‐basis” statements are tantamount to financial statements purported to be prepared in accordance with GAAP with material departures therefrom. Tax‐Basis of Accounting The tax‐basis is a basis of accounting that the entity uses to file its federal income tax or federal information re‐ turn for the period covered by the financial statements. The tax‐basis of accounting is based on the principles and rules for accounting for transactions under the federal income tax laws and regulations. Few new measurement guidelines need to be established because the method is based on tax laws. The tax‐basis of accounting covers a range of alternative bases, from cash to full accrual, depending on the nature of the taxpayer, and in some circumstances, the taxpayer’s elections. An entity need not be a taxable entity to prepare tax‐basis financial statements. Any entity that files a return with the IRS, either an income tax return or an information return, may prepare tax‐basis financial statements. Therefore, not‐for‐profit organizations, C corporations, S corporations, partnerships, limited liability partner‐ ships, limited liability companies, and sole proprietors may all use the tax‐basis of accounting. The tax‐basis of accounting is most useful for small, nonpublic entities whose financial statement users are in‐ terested primarily in the tax aspects of their relationship with the entity. For example, investors in tax‐driven partnerships, such as those commonly employed in the real estate industry, may be primarily interested in the tax consequences of transactions. However, they may want more information than would be provided by a tax return. Determining Whether to Prepare and Issue Cash‐ or Tax‐Basis Financial Statements As long as the entity is not contractually or otherwise required to issue financial statements prepared in accord‐ ance with GAAP or a regulatory or contractual basis of accounting, the entity may prepare and issue cash‐ or tax‐ basis financial statements. Understanding the needs of the financial statement users is an important step in de‐ termining whether to prepare and issue cash‐ or tax‐basis financial statements. If the users of the financial statements understand the presentation, and if the information presented when applying that basis of account‐ ing is relevant to their needs, then the preparer may determine that it is useful and appropriate to prepare and issue cash‐ or tax‐basis financial statements. The following are characteristics of entities that generally are good candidates to prepare cash‐ or tax‐basis financial statements: © 2018 Association of International Certified Professional Accountants. All rights reserved. 11 a. The entity’s creditors do not need or require financial statements prepared in accordance with GAAP. b. The cost of complying with GAAP would exceed the benefits (for example, a small construction contrac‐ tor who would be required to account for long term contracts using the percentage of completion method and would be required to compute deferred taxes). c. The owners are closely involved in the day‐to‐day operations of the business and have a fairly accurate picture of the entity’s financial position. d. The owners are primarily interested in cash flows (for example, a professional corporation of physicians that distributes its cash‐basis earnings through salaries, bonuses, and retirement plan contributions). e. The owners are primarily interested in the tax implications of transactions (for example, partners in a partnership who are concerned about the effects of transactions on their personal tax returns). f. It may not be appropriate to prepare and issue cash‐ or tax‐basis financial statements if the entity is or soon will be required to issue GAAP‐basis financial statements. For example, management of a company that is anticipating selling its business may be required to issue financial statements prepared in accord‐ ance with GAAP. Additionally, financial statements prepared when applying the cash‐ or tax‐basis of accounting should not be is‐ sued if the results are misleading. Cash‐ and tax‐basis financial statements are intended to be a cost‐effective al‐ ternative to GAAP, not a way to deliberately mislead financial statement users. Example Situation In Which it May Not Be Prudent to Issue Tax‐Basis Financial Statements • Long Street Partners has typically issued tax‐basis financial statements because the partners are more interested in the tax treatment of partnership transactions. Outside creditors have also accepted the tax‐basis financial statements as suitable for their needs. During the current year, two events occur that significantly affect the partnership: Several large customers experience financial difficulty and the part‐ nership’s receivables from the customers are in danger of not being collected. If the financial statements were prepared in accordance with GAAP, the partnership would be required to record a valuation al‐ lowance and recognize a bad debt expense. Under the tax rules, the partnership uses the direct write‐off method, so a tax deduction may not be allowed in the current year. • The partnership has acknowledged that it is obligated to perform an environmental remediation at one of its sites. If the financial statements were prepared in accordance with GAAP, the partnership would be required to recognize the liability and a loss. Although the entity may disclose the information in a risks and uncertainties note, under the tax rules, the deduction is not allowed until the amount is paid and therefore would not be included in the income statement equivalent. • Prior to preparing and issuing tax‐basis financial statements, in determining whether the proposed fi‐ nancial reporting framework is appropriate, the preparer may consider the following: — Whether the tax‐basis financial statements continue to be suitable for the users’ needs. In the example, the entity had a long history of issuing tax‐basis financial statements, which were suit‐ 12 © 2018 Association of International Certified Professional Accountants. All rights reserved. able for the needs of the users. The events in the current year merely illustrate the limitations of tax‐basis financial statements. — Appropriateness of disclosure. The preparer may determine to expand on the information in‐ cluded in the notes to the financial statements about these two events. For example, the part‐ nership might disclose the nature of the environmental remediation liability and the amounts involved. — Recognition may be appropriate. Depending on the nature and magnitude of the item, it may be appropriate to recognize it in the financial statements. In this example, the partnership might decide to account for bad debts using the allowance method and to recognize a contingent lia‐ bility for the remediation obligation. This would be a departure from the tax‐basis of accounting and the management of the entity may determine that, in the circumstances, it may be more appropriate to prepare its financial statements in accordance with GAAP. — Consider GAAP financials. As a result of the changed circumstances, financial statements pre‐ pared when applying the cash‐ or tax‐basis of accounting may no longer be appropriate, and the management of the entity may decide to prepare its financial statements in accordance with GAAP. Deciding Between Modified Cash‐ or Accrual Tax‐Basis Financial Statements In some situations it may be difficult to determine whether to issue modified cash‐ or accrual tax‐basis financial statements. Each basis has its own distinct advantages and disadvantages. Modified Cash‐ or Accrual Tax‐Basis Advantages and Disadvantages of Each Advantages Disadvantages Modified Cash‐Basis • Can be simpler to prepare than tax‐ basis • Not affected by changes in tax laws • Interim financial statements are easy to prepare • Recognition and measurement prin‐ ciples are not well‐defined • Not well‐suited for entities that have inventory or complex operations Accrual Tax‐Basis • Better‐suited for entities with inven‐ tory or complex operations • Well‐defined recognition and meas‐ urement criteria • Decisions made for tax reporting purposes may have unintended fi‐ nancial reporting effects • Accounting treatments are affected © 2018 Association of International Certified Professional Accountants. All rights reserved. 13 Advantages Disadvantages by changes in tax laws 14 © 2018 Association of International Certified Professional Accountants. All rights reserved. Chapter 2 Recognition and Measurement Issues in Financial Statements Prepared When Applying the Cash‐ or Tax‐Basis of Accounting The determination of what information should be reported in the financial statements and when to recognize transactions or events (recognition), and how to record transactions or events and at what amounts (measure‐ ment) varies depending on the type of framework used to prepare the financial statements. This chapter in‐ cludes a discussion of recognition and measurement issues for cash‐, modified cash‐, and tax‐basis financial statements. Cash‐Basis and Modified Cash‐Basis Observations and Suggestions In accordance with the master glossary included in the FASB Accounting Standards Codification® , cash equiva‐ lents are short‐term, highly liquid investments that have both of the following characteristics: a. Readily convertible to known amounts of cash b. So near their maturity that they present insignificant risks of changes in value because of changes in in‐ terest rates Generally, only investments with original maturities of three months or less qualify under that definition. Origi‐ nal maturity means original maturity to the entity holding the investment. For example, both a three‐month U.S. Treasury bill and a three‐year U.S. Treasury note purchased three months from maturity qualify as cash equiva‐ lents. However, a Treasury note purchased three years ago does not become a cash equivalent when its remain‐ ing maturity is three months. Examples of items commonly considered to be cash equivalents are Treasury bills, commercial paper, money market funds, and federal funds sold (for an entity with banking operations). The following represents certain significant measurement and recognition issues with respect to the cash‐ and modified‐cash bases of accounting. Investments In accordance with the cash‐basis of accounting, entities would reflect purchases of investments as cash dis‐ bursements and sales of investments as cash receipts in the period that the cash is disbursed or received. In‐ vestments acquired via noncash transactions should not be recorded and unrealized gains and losses should not be recognized. A common modification to the cash‐basis of accounting is to record investments in marketable securities as as‐ sets. If the entity prepared its financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP), the investments would be reflected in the balance sheet. As such, the investments would be initially recorded at cost and subsequent unrealized changes in value would be recorded to reflect the fair value of the investments. Because unrealized gains and losses are not the result of a cash © 2018 Association of International Certified Professional Accountants. All rights reserved. 15 transaction or event, such unrealized gains and losses should not be recorded in financial statements when ap‐ plying a modified cash‐basis of accounting. Instead, the investments would remain on the balance sheet equiva‐ lent at cost unless and until they become worthless or are sold. Receivables Receivables should not be recognized in financial statements prepared when applying the cash basis of account‐ ing unless the receivables result from an outflow of cash. Other receivables such as those arising from sales transactions made on credit should not be recorded. Property and Equipment Under the cash‐basis of accounting, purchases of property and equipment would be reflected in the financial statements as cash disbursements in the period the transaction occurred. The assets would not be capitalized and depreciation would not be recorded. A common modification to the cash‐basis of accounting is to record property and equipment arising from cash transactions as assets. Once the modification is made, the entity should adopt and consistently apply an alloca‐ tion policy (depreciation or amortization) that has substantial support in the accounting literature and is logical. Such policy should also include recording any financing arrangements that are part of a cash transaction. As part of this policy, management of the entity should consider how it would address single‐step transactions or events that may not directly involve a cash inflow or outflow but may nevertheless be recorded as an in‐substance two‐ step cash transaction or event. See chapter 1, “Overview of Cash‐ and Tax‐Basis Financial Statements,” for dis‐ cussion of in‐substance two‐step transactions. Donated assets should not be recognized as “assets” because they are not derived from the use of cash or cash equivalents. It would be appropriate to write off any remaining carrying value of property and equipment once the assets are no longer in use or have been permanently impaired. Bank Overdrafts Bank overdrafts may be netted with other cash balances from the same bank. Bank overdrafts should not be netted against funds held at another financial institution. If the entity has an overall negative cash balance from a financial institution, when applying the cash‐basis of accounting, the negative cash balance would be shown as a liability on the balance sheet equivalent, if one is presented. For example, if the net balance in Bank A is $(1,000) and the net balance in Bank B is $5,000, the balance sheet equivalent would show a cash asset of $5,000 and the $(1,000) overdraft as a liability. If the entity has an overall global negative cash balance, the neg‐ ative cash balance would be shown as negative cash on hand at the end of the period on the statement of cash receipts and disbursements. Borrowings When applying the cash‐basis of accounting, the entity should record all proceeds from borrowings as cash re‐ ceipts when received and then reflect the principal repaid and associated interest as cash disbursements when paid. If a loan provides direct financing of an asset, neither the loan nor the asset should be recorded. However, 16 © 2018 Association of International Certified Professional Accountants. All rights reserved. the principal and interest payments would be reflected as cash disbursements when paid. See chapter 1 for dis‐ cussion of in‐substance two‐step transactions. Tax‐Basis In tax‐basis financial statements, transactions are recognized and measured in the same manner as they are in the entity’s federal tax return. Therefore, the preparer of financial statements when applying the tax‐basis of ac‐ counting is required to understand the federal tax laws applicable to the particular entity. Although this chapter highlights certain common measurement and recognition issues with respect to the tax‐basis of accounting, it is not a substitute for understanding the federal tax laws applicable to the particular entity. Additionally, although the IRS permits all entities to use the accrual method of accounting for tax purposes, many smaller entities can instead elect to use the cash method of accounting for tax purposes. Entities with in‐ ventories are required to use the accrual method for sales and purchases of inventory. Nontaxable Revenues and Nondeductible Expenses Under federal income tax laws, certain revenue is not taxable and certain expenses are not deductible. For ex‐ ample, receipts such as interest on obligations of state and local governments and proceeds from life insurance policies are not taxable. Costs such as premiums paid on officers’ life insurance policies are not deductible. When presenting tax‐basis financial statements, in order to be transparent, preparers of tax‐basis financial statements may recognize nontaxable revenues and nondeductible expenses outside of taxable income. Nontaxable revenues should be recognized when received (cash‐basis) or when earned (accrual basis). Nonde‐ ductible expenses should be reported and charged to expense in the period paid (cash‐basis) or when incurred (accrual basis). Additional Income Taxes for Prior Years An IRS exam may result in additional income taxes being assessed for prior years. Two alternative methods may be used to account for additional taxes for prior years. • The amount may be charged to expense in the current period if there are no corresponding adjustments to the balance sheet equivalent for expenses capitalized or revenue recognized. • The amount may be treated as a prior period adjustment and charged to retained earnings in a manner that is logical and consistent with the equivalent of a presentation in accordance with GAAP. The IRS may disallow amounts charged to expense in prior years and require those amounts to be capitalized and amortized or may require recognition of previously unreported revenue. Such amounts, net of income tax adjustments, should be treated as prior period adjustments. Otherwise, either of the preceding methods is con‐ sidered acceptable. The method used and the amount of additional taxes should be disclosed in the notes to the financial statements. Accounting Changes for Tax Purposes For tax purposes, the effects of an accounting change may be recognized prospectively over a specified number of years. Accounting changes should be treated in the same manner as they are treated in the tax return. © 2018 Association of International Certified Professional Accountants. All rights reserved. 17 S Corporations Income of an S corporation is taxable to its shareholders. Consequently, such a corporation may be required to maintain information on distinct classes of retained earnings. However, in tax‐basis financial statements, S cor‐ porations usually report retained earnings as a single amount and should report distributions to stockholders. Significant Differences Between GAAP and Tax‐Basis There are many differences between the way items are accounted for in accordance with GAAP and the way they are treated under the tax rules. Some of the more common include the following: • Bad debt losses on uncollectible receivables • Inventory capitalization and valuation • Unrealized gains on investment securities • Depreciation and impairment of capital assets • Fair value measurements • Consolidation 18 © 2018 Association of International Certified Professional Accountants. All rights reserved. Chapter 3 Presentation and Disclosure Issues in Financial Statements Prepared When Ap‐ plying the Cash‐ or Tax‐Basis of Accounting The determination of the form and content of the financial statements or which financial statements to present and what to include (presentation and disclosure) varies depending on the financial reporting framework ap‐ plied. Financial statements prepared when applying the cash‐ or tax‐basis of accounting may provide less complex and more understandable alternatives to financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). However, preparers must be knowledgeable of GAAP disclosure requirements because cash‐ and tax‐basis financial statements should include informative disclosures similar to those required by GAAP if the financial statements contain items that are the same as, or similar to, those in financial statements prepared in accordance with GAAP. Observations and Suggestions Often, preparers of cash‐ and tax‐basis financial statements elect to omit substantially all disclosures required by the cash‐ or tax‐basis of accounting. The omission of disclosures is a departure from the cash‐ or tax‐basis of ac‐ counting and, if such disclosures were included in the financial statements, they might influence the user’s con‐ clusions about the entity’s financial position, results of operations, and cash flows. However, the omission may not necessarily result in misleading financial statements provided that the intended users are informed about such matters. If cash‐ or tax‐basis financial statements contain items for which GAAP would require disclosure, the financial statements may either provide the relevant disclosure that would be required for those items in a GAAP presen‐ tation or provide information that communicates the substance of that disclosure. This may result in substitut‐ ing qualitative information for some of the quantitative information required for GAAP presentations. For exam‐ ple, • disclosure of the repayment terms of significant long‐term borrowings may sufficiently communicate in‐ formation about future principal reduction without providing the summary of principal reduction during each of the next five years. • information about the effects of accounting changes, discontinued operations, and extraordinary items could be disclosed in a note to the financial statements without following the GAAP presentation re‐ quirements in the income statement equivalent or disclosing net‐of‐tax effects. • instead of showing expenses by their functional classifications with respect to the financial statements of a not‐for‐profit organization, a statement of activities could present expenses according to their natu‐ ral classifications, and a note to the financial statements could use estimated percentages to communi‐ cate information about expenses incurred by the major program and supporting services. • instead of showing the amounts of, and changes in, the unrestricted and temporarily and permanently restricted classes of net assets with respect to the financial statements of a not‐for‐profit organization, a © 2018 Association of International Certified Professional Accountants. All rights reserved. 19 statement of assets, liabilities, and net assets could report total net assets or fund balances, a related statement of activities could report changes in those totals, and a note to the financial statements could provide information, using estimated or actual amounts or percentages, about the restrictions on those amounts and on any deferred restricted amounts, describe the major restrictions, and provide infor‐ mation about significant changes in restricted amounts. For financial statements prepared when applying the cash‐ or tax‐basis of accounting, GAAP disclosure require‐ ments that are not relevant to the measurement of the item need not be considered. To illustrate, • fair value disclosures for investments in debt and equity securities would not be relevant when the basis of presentation does not adjust the cost of such securities to their fair value. • disclosures related to actuarial calculations for contributions to defined benefit plans would not be rele‐ vant in financial statements prepared when applying the cash‐ or tax‐basis of accounting. • disclosures related to the use of estimates would not be relevant in a presentation that has no esti‐ mates, such as the cash‐ or modified cash‐basis of accounting. Financial statements prepared when applying the cash‐basis of accounting generally do not include a statement of cash flows. However, depending on the user’s requirements, financial statements prepared when applying a modified cash‐ or the tax‐basis of accounting may include a statement of cash flows. For example, it may be challenging for users to obtain accurate information on operating, investing, and financing activities in single‐ year financial statements prepared when applying the tax‐basis of accounting unless a statement of cash flows is presented. Similar to financial statements prepared in accordance with GAAP, in order to achieve fair presentation, financial statements prepared when applying the cash‐ or tax‐basis of accounting should include all informative disclo‐ sures that are appropriate for the applicable financial reporting framework, including all significant matters that materially affect the financial statements’ use, understanding, and interpretation. Additionally, because financial statements prepared when applying the cash‐ or tax‐basis of accounting have certain inherent presentation and disclosure limitations, in order to enhance the value and usefulness of such fi‐ nancial statements, the preparer may disclose additional information in the notes to the financial statements. For example, donated capital assets would not be included in the balance sheet equivalent in financial state‐ ments prepared when applying a modified cash‐basis of accounting—even if the modification to the cash‐basis of accounting is to record capital expenditures as assets and depreciate them over their estimated useful lives. The preparer may elect to disclose the value of such donated capital assets in the notes to the financial state‐ ments. Presentation—Cash‐Basis Financial Statements Because a balance sheet equivalent would simply show the cash balance and a corresponding equity account, and a statement of cash flows would be repetitive of the statement of cash receipts and disbursements, finan‐ cial statements prepared when applying the cash‐basis of accounting may consist only of a statement of cash re‐ ceipts and disbursements. Although a single statement may be presented, informative disclosures are still nec‐ essary. Additionally, restrictions on cash balances should either be presented on the face of the statement of cash receipts and disbursements or should be disclosed in the notes to the financial statements. 20 © 2018 Association of International Certified Professional Accountants. All rights reserved. Basis of Accounting A required disclosure for all cash‐ and tax‐basis financial statements is the description of the basis of accounting (financial reporting framework), including how that basis of accounting differs from GAAP. Although these dif‐ ferences from GAAP should be qualitatively described, they need not be quantified. This description is important in financial statements prepared when applying a modified cash‐basis of accounting because such financial statements may vary depending on the modifications to the cash‐basis that were made. The description there‐ fore becomes essential to the user’s understanding of the financial statements. The description of the basis of accounting is usually presented in the summary of significant accounting policies section of the notes to the financial statements with a heading such as “Basis of Accounting.” The following ex‐ amples represent how the basis of accounting may be disclosed in the notes to financial statements prepared when applying the cash‐, a modified cash‐, and the tax‐basis of accounting. Example: Basis of Accounting Note—Cash‐Basis of Accounting Basis of Accounting The financial statements of Company X have been prepared on the cash‐basis of accounting, which is a compre‐ hensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP). The cash‐basis of accounting differs from GAAP primarily because revenues are recognized when re‐ ceived rather than when earned and expenses are recorded when paid rather than when incurred. The financial statements therefore present only cash and cash equivalents and changes therein in the form of cash receipts and disbursements. Example: Basis of Accounting Note—Modified Cash‐Basis of Accounting Basis of Accounting The financial statements of Company X have been prepared on the cash‐basis of accounting, modified to record assets or liabilities with respect to cash transactions and events that provide a benefit or result in an obligation that covers a period greater than the period in which the cash transaction or event occurred. The modifications result in the recording of investments, inventories, capital assets, and related short‐term and long‐term obliga‐ tions on the statement of financial position. This method of accounting represents a comprehensive basis of ac‐ counting other than accounting principles generally accepted in the United States of America (GAAP). This basis of accounting differs from GAAP primarily because certain revenue and related assets (such as accounts receiva‐ ble and revenue for billed or provided services not yet collected, and other accrued revenue and receivables) have been recognized when received rather than when earned and certain expenses and related liabilities (such as accounts payable and expenses for goods or services received but not yet paid, and other accrued liabilities and expenses) have been recognized when paid rather than when the obligations were incurred. Example: Basis of Accounting Note—Tax‐Basis of Accounting Basis of Accounting The financial statements of Company X have been prepared on the accrual basis of accounting that the Company uses for filing its federal income tax return, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP). This basis differs from GAAP primarily be‐ © 2018 Association of International Certified Professional Accountants. All rights reserved. 21 cause the Company expenses the cost of certain types of assets in accordance with IRC Section 179. GAAP re‐ quires that such assets be capitalized and expensed over their estimated useful lives. Summary of Significant Accounting Policies FASB Accounting Standards Codification (ASC) 235, Notes to Financial Statements, requires that financial state‐ ments prepared in accordance with GAAP include a summary of significant accounting policies in the notes to the financial statements. Accordingly, cash‐ and tax‐basis financial statements should include a summary of sig‐ nificant accounting policies in the notes to the financial statements. In addition to the basis of accounting discussed previously, the note should include disclosure of the significant accounting policies used to prepare the financial statements, including policies that involve the following: • A selection from existing acceptable alternatives • Industry specific applications • Unusual or innovative applications of accounting principles Because the cash‐basis of accounting does not include the recognition of noncash assets, liabilities, and noncash transactions, elaborate accounting policy disclosures are usually unnecessary. In financial statements prepared when applying a modified cash‐basis of accounting, such disclosures may include information about the follow‐ ing: • Investments • Inventory • Property and equipment • Income taxes • Consolidation • Related parties and related party transactions • Commitments and contingencies • Uncertainties • Subsequent events • Asset impairments The significant accounting policies note for tax‐basis financial statements should include disclosure of the follow‐ ing: • Whether the basic method of accounting is cash or accrual 22 © 2018 Association of International Certified Professional Accountants. All rights reserved. • The tax filing status of the entity, if other than a taxable corporation (that is, a C corporation) • That revenues and related assets and expenses and related obligations are recognized only when they are reported or deducted for federal income tax purposes • That nontaxable income and nondeductible expenses are included in the determination of the equiva‐ lent of operating results or “net income” • The nature of any optional tax methods of accounting followed • The nature of any important judgments or policies necessary for an understanding of the methods of recognizing revenue and allocating costs to current and future periods • Tax uncertainties including open tax years Also, tax uncertainties should be addressed in financial statements prepared when applying the cash‐ or tax‐ basis of accounting. FASB ASC 740‐10‐50‐15 requires that open tax years be disclosed—even if the reporting en‐ tity is a pass‐through entity or a not‐for‐profit organization. In addition, in financial statements prepared when applying the tax‐basis of accounting, disclosures regarding significant accounting policies may include information about receivables. The following represents guidance on certain other common presentation and disclosure issues with respect to cash‐ and tax‐basis financial statements. Subsequent Events FASB ASC 855, Subsequent Events, sets forth general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. The preparer should disclose the date through which subsequent events have been evaluated, which is the date the financial statements are available to be issued. When financial statements prepared when applying the cash‐ or tax‐basis of accounting contain items that are the same as, or similar to, those in financial statements pre‐ pared in accordance with GAAP, such financial statements should contain the disclosures required by FASB ASC 855. Related Party Transactions The existence of related party transactions that are material individually or in the aggregate and the nature and amounts of the transactions and balances should be disclosed. Note that the tax rules may define “related par‐ ty” differently than how it is defined in accordance with GAAP. To avoid confusion on the part of users of the tax‐basis financial statements, the GAAP definition of related party should be considered for all financial report‐ ing purposes. Commitments and Contingencies The existence and nature of material commitments and contingencies should be disclosed in the notes to finan‐ cial statements prepared when applying the cash‐ or tax‐basis of accounting. © 2018 Association of International Certified Professional Accountants. All rights reserved. 23 Pension Plans The existence and nature of a pension plan should be disclosed in the notes to financial statements when apply‐ ing the cash‐ or tax‐basis of accounting. Assets and Liabilities Information disclosed for assets and liabilities commonly includes the following items: • Restricted cash, segregated from cash available for current operations, with a description of the nature of the restriction • The aggregate fair value of investments in marketable securities • Accounts and notes receivable from officers, employees, and affiliates, presented separately with disclo‐ sure of the effective interest rate on notes receivable, and interest income for the period • The major classes of property, plant, and equipment; depreciation expense for the period; the meth‐ od(s) used in computing depreciation; and the aggregate, accumulated depreciation • The method of determining inventory cost (for example, last in, first out and first in, first out) Owners’ Equity The financial statements often include disclosures regarding information on owners’ equity as follows: • For each class of stock, the number of shares authorized, issued, and outstanding; the par or stated val‐ ue; and, in summary form, the pertinent rights and privileges of each outstanding class (if more than one class is outstanding) • The existence of stock option and stock purchase plans • Restrictions on the payment of dividends • Changes for the period in the separate components of owners’ equity A note to the financial statements of a voluntary health and welfare organization that prepares tax‐basis finan‐ cial statements could provide information, using estimated or actual amounts or percentages, about the re‐ strictions on total net assets or fund balances and on any deferred restricted amounts, describe the major re‐ strictions, and provide information about significant changes in restricted amounts. Risks and Uncertainties Financial statements prepared in accordance with GAAP are required to include a number of disclosures with re‐ spect to risks and uncertainties. The following table summarizes these disclosures and how GAAP requirements for disclosing risks and uncer‐ tainties should be addressed in cash‐ and tax‐basis financial statements. The table is not meant to be all‐ inclusive. 24 © 2018 Association of International Certified Professional Accountants. All rights reserved. Observations and Suggestions Often, preparers of cash‐ and tax‐basis financial statements elect to omit substantially all disclosures required by the cash‐ or tax‐basis of accounting. The omission of disclosures is a departure from the cash‐ or tax‐basis of ac‐ counting and, if such disclosures were included in the financial statements, they might influence the user’s con‐ clusions about the entity’s financial position, results of operations, and cash flows. However, the omission may not necessarily result in misleading financial statements provided that the intended users are informed about such matters. GAAP Requirement Summary of Required Disclosures Applicability to Cash‐ or Tax‐ Basis of Accounting Nature of Operations Entities should disclose a de‐ scription of the major products or services the reporting entity sells or provides and its principal markets. This information is use‐ ful because it helps financial statement users understand the nature of the entity’s business and the risks common to that business. This disclosure is relevant to all financial statements prepared in accordance with the cash‐ or tax‐ basis of accounting and should be made. Use of Estimates Financial statements should in‐ clude an explanation that the preparation of financial state‐ ments in accordance with GAAP requires the use of manage‐ ment’s estimates. This disclosure may not be rele‐ vant to some financial state‐ ments prepared in accordance with the cash‐ or tax‐basis of accounting; for example, finan‐ cial statements prepared on the cash‐basis that do not include estimated amounts. Certain Significant Estimates If certain criteria are met, the entity is required to disclose the nature of an uncertainty if it is at least reasonably possible that a change in an estimate will occur in the near term. The purpose of the disclosure is to communicate to financial statement users that there is a reasonable possibility that certain estimated amounts in the current year financial statements will change signifi‐ cantly and affect the subsequent years’ financial statements. If the GAAP disclosure criteria are met, the financial statements should include disclosure of the information required by GAAP. Vulnerability Due to Concentra‐ If certain criteria are met, the If the GAAP disclosure criteria © 2018 Association of International Certified Professional Accountants. All rights reserved. 25 GAAP Requirement Summary of Required Disclosures Applicability to Cash‐ or Tax‐ Basis of Accounting tions financial statements are re‐ quired to include disclosure in‐ formation about its vulnerability due to concentrations; for ex‐ ample, significant volume of business conducted with one customer. are met, the preparer should disclose the information re‐ quired by GAAP. Going Concern A basic premise underlying fi‐ nancial reporting is that a user of the financial statements can as‐ sume that the entity will contin‐ ue as a going concern for a rea‐ sonable period of time. If the preparer concludes that material uncertainties exist such that the entity may not continue as a go‐ ing concern for a reasonable pe‐ riod of time, the financial state‐ ments should include disclosure of such uncertainty. If the preparer concludes that there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time (generally one year from the date of the bal‐ ance sheet equivalent), the pre‐ parer should disclose the going concern considerations in a note to the financial statements. Terminology for Cash‐ and Tax‐Basis Financial Statements There is no requirement to modify financial statement titles in cash‐ or tax‐basis financial statements. However, users of such financial statements should be able to readily identify the basis of accounting used to prepare the financial statements. A common and convenient way of identifying the basis of accounting is through the finan‐ cial statement titles by adding “cash‐basis,” “modified cash‐basis,” or “tax‐basis” after the financial statement ti‐ tle. Cash‐basis financial statements might be titled, for example, • Statement of Assets and Liabilities Arising from Cash Transactions; • Statement of Revenue Collected and Expenses Paid; • Statement of Revenue and Expenses—Cash‐Basis; or • Statement of Cash Receipts and Disbursements. Modified cash‐basis financial statements might be titled, for example, • Statement of Assets and Net Assets—Modified Cash‐Basis; or • Statement of Revenue, Expenses and Changes in Net Assets—Modified Cash‐Basis. Tax‐basis financial statements might be titled, for example, 26 © 2018 Association of International Certified Professional Accountants. All rights reserved. • Statement of Assets, Liabilities, and Capital—Tax‐Basis; • Statement of Operations—Tax‐Basis; or • Statement of Revenue and Expenses—Tax‐Basis. The preceding examples are not meant to be all‐inclusive and are not the only acceptable titles. With respect to the captions to be used with the cash‐, modified cash‐, or tax‐basis financial statements, there is no requirement to modify the standard GAAP financial statement captions. Therefore, captions such as “net in‐ come,” “net loss,” and “retained earnings” are acceptable. However, if modifications are desired (which many preparers prefer as a means of additional emphasis that the financial statements are not prepared in accordance with GAAP), common examples for cash‐basis financial statements are excess of revenue collected over expenses paid and excess of expenses paid over revenue collected. For financial statements prepared when applying a modified cash‐basis of accounting, common modifications are excess of revenue over expenses and excess of ex‐ penses over revenue. With respect to tax‐basis financial statements, modifications with respect to financial statement captions are rarely made. However, modifications, if made, may include retained earnings—tax‐basis and net income—tax‐basis. Consolidation Accounting Professional judgment should be applied to determine which presentation—consolidated, unconsolidated, or combined—provides the most meaningful and relevant information. A preparer should not consolidate entities unless all entities to be consolidated use the same basis of accounting. For example, it would not be appropriate to consolidate an entity that prepares its financial statements using a modified cash‐basis of accounting with its parent who maintains its books and records in accordance with the tax‐basis of accounting. If the modified cash‐ basis of accounting is used, then all consolidated entities should utilize the same modifications to the cash‐basis of accounting. With respect to financial statements prepared when applying the tax‐basis of accounting, consolidation is based on the IRC. Therefore, the consolidation requirements of FASB ASC 810, Consolidation, do not apply. However, if the entity files a consolidated tax return, it should report consolidated results on its tax‐basis financial state‐ ments. In the case of brother‐sister corporations in which each entity maintains its books and records on the tax‐basis of accounting, but a consolidated tax return is not filed, the preparer may prepare combined financial statements because such financial statements may be more useful to users than individual uncombined financial statements. Although the tax consolidation rules are followed, additional disclosures may be necessary to lessen the chance that the financial statements are not misleading. Consider, for example, a 60 percent owned subsidiary that would be consolidated in financial statements prepared in accordance with GAAP but is not consolidated in fi‐ nancial statements prepared when applying the tax‐basis of accounting because the threshold for consolidation under the IRC is 80 percent ownership. Even though the subsidiary is not consolidated, the preparer should con‐ sider which disclosures are appropriate relative to the 60 percent owned subsidiary. Examples of matters that might require disclosure are the ownership and relationship with the subsidiary, related party transactions, guarantees, and commitments. © 2018 Association of International Certified Professional Accountants. All rights reserved. 27 Change From GAAP to Cash‐ or Tax‐Basis A change from GAAP to cash‐ or tax‐basis statements (or vice versa) does not represent a change in accounting principles as described in FASB ASC 250, Accounting Changes and Error Corrections. Therefore, no justification for the change is required, and a cumulative effect adjustment is unnecessary. When only the current year’s cash‐ or tax‐basis statements are presented, there are three ways of presenting opening equity: • Show opening equity as previously reported in accordance with GAAP, with an adjustment to convert to the cash‐ or tax‐basis. • Show opening equity on the as‐adjusted cash‐ or tax‐basis. • Show the effects of the adjustment to convert as a cumulative‐effect adjustment in the income state‐ ment equivalent. If comparative financial statements are presented, the prior periods should be restated and presented on the basis to which the company has changed. Restatement is necessary to ensure comparability between all periods presented. In all cases, the change in accounting basis should be disclosed in the notes to the financial statements. The fol‐ lowing is an example of how such a change in accounting basis could be disclosed in the notes to the financial statements: In 20X1, management adopted a policy of preparing its financial statements on the basis of accounting that it uses to file its federal income tax return. Prior to 20X1, the Company’s financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. Management believes that this change results in more relevant financial reporting that is easier and less costly to understand, apply, and use in the Company’s circumstances and considering the needs of the users of the financial statements. The 20X1 financial statements have been restated to be on the tax‐ basis of accounting. 28 © 2018 Association of International Certified Professional Accountants. All rights reserved. Appendix Illustrative Cash‐ and Tax‐Basis Financial Statements This appendix contains illustrative examples of financial statements prepared when applying the cash‐, modified cash‐, or tax‐basis of accounting for different types of entities. These financial statements are intended to illus‐ trate the significant discussion points in chapters 1–3 of this practice aid. Each financial statement has been an‐ notated to highlight these key points. Name of Entity Type of Entity Basis of Preparation Ceolainn Club Not‐for‐profit Cash Mickey’s Center Not‐for‐profit Modified Cash Donnelly & Oates Limited Liability Partnership Tax (Accrual Basis) Charlton Contractors, Inc. Construction Contractor Tax (Accrual Basis) Margaret Rose 1964 Irrevocable Trust Trust Tax (Accrual Basis) CEOLAINN CLUB FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 20X2 AND 20X1 Circumstances include the following: • The financial statements are for a not‐for‐profit membership club. • The financial statements are prepared on the cash‐basis of accounting. • The financial statements are comparative for the years ended June 30, 20X2, and 20X1. The financial statements illustrate the following: • The financial statements include a statement of functional expenses, which is required by accounting principles generally accepted in the United States of America (GAAP). Financial statements prepared when applying the cash‐basis of accounting are not required to include such a statement, but may in‐ stead communicate the substance of that requirement. • GAAP requires not‐for‐profit organizations to report the amount of unrestricted, temporarily restricted, and permanently restricted net assets on the face of the statement of financial position. Because a statement of financial position equivalent is not presented, the illustrative financial statements com‐ municate the substance of the GAAP requirement in the notes to the financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 29 Ceoliann Club Statements of Cash Receipts and Disbursements For the Years Ended June 30, 20X2 and 20X1 June 30, 20X2 June 30, 20X1 Cash received from support activities: Membership dues $ 49,899 $ 46,759 Donations 996 1,125 Programs 7,495 10,645 Total cash received from support activities 58,390 58,529 Cash received from other sources: Interest income 19 30 Other 300 3,720 Total cash received from other sources 319 3,750 TOTAL CASH RECEIVED $ 58,709 $ 62,279 Cash disbursed: Program services $ 29,110 $ 29,484 Supporting services 19,783 19,113 Fundraising 6,288 8,803 TOTAL CASH DISBURSED $ 55,181 $ 57,400 Excess of revenue collected over expenses paid 3,528 4,879 Cash and cash equivalents, beginning of year 39,046 34,167 Cash and cash equivalents, end of year $ 42,574 $ 39,046 See accompanying notes to financial statements. 30 © 2018 Association of International Certified Professional Accountants. All rights reserved. The Ceoliann Club Statements of Functional Expenses Cash‐Basis For the Years Ended June 30, 20X2 and 20X1 Program Services Supporting Services Fundraising Total June 30, 20X2 Program Services Supporting Services Fundraising Total June 30, 20X1 Salaries and benefits $ 23,333 $ 16,440 $ 4,241 $ 44,014 $ 23,633 $15,876 $ 5,937 $ 45,446 Events—special 1,795 1,795 2,513 2,513 Legal and ac‐ counting 2,320 2,320 2,500 2,500 Insurance 313 51 45 409 317 49 63 429 Postage/printing 3,477 3,477 3,398 3,398 Licenses/fees 114 114 464 464 Office expense 612 232 207 1.051 620 224 290 1,134 Miscellaneous 1,375 626 2,001 1,516 1,516 $ 29,110 $19,783 $6,288 $55,181 $29,484 $19,113 $8,803 $57,400 53% 36% 11% 52% 33% 15% See accompanying notes to financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 31 Ceolainn Club Notes to Financial Statements Cash‐Basis For the Years Ended June 30, 20X2 and 20X1 Note 1—Summary of Significant Accounting Policies Nature of Activities The Ceolainn Club (the Club) is a New York not‐for‐profit organization. The Club’s mission is to promote safe so‐ cial programs for young adults. Basis of Accounting The Club’s financial statements have been prepared on the cash‐basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP). The cash‐basis of accounting differs from GAAP primarily because revenues are recognized when received rather than when earned and expenses are recorded when paid rather than when incurred. The financial statements therefore present only cash and cash equivalents and changes therein in the form of cash receipts and dis‐ bursements. Cash and Cash Equivalents The Club considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. As of June 30, 20X2, and 20X1, cash and cash equivalents consisted entirely of the adjusted book balance in the Club’s checking account. Net Assets As of June 30, 20X2, and 20X1, all of the Club’s net assets were unrestricted. Income Taxes The Club is exempt from federal and state income taxes under Internal Revenue Code Section 501(c)(7). Accord‐ ingly, no provision for income taxes has been made in the financial statements. Uncertain Tax Positions Federal and state income tax returns for the years 20X0 to date are subject to examination by taxing authorities. Subsequent Events Management has evaluated subsequent events through August 28, 20X2, which is the date the financial state‐ ments were available to be issued. 32 © 2018 Association of International Certified Professional Accountants. All rights reserved. MICKEY’S CENTER FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED AUGUST 31, 20X2 Circumstances include the following: • The financial statements are for a not‐for‐profit charity. • The financial statements are prepared on a modified cash‐basis of accounting. The cash‐basis of ac‐ counting was modified to accrue cash transactions and events that provide a benefit or result in an obli‐ gation that covers a period greater than the period in which the cash transactions or events occurred. Such accruals resulted in the recording of property and equipment as assets on the statement of assets and net assets and subsequent depreciation of those assets over their estimated useful lives. • The financial statements are as of August 31, 20X2, and for the year then ended. The financial statements illustrate the following: • The financial statements include a statement of functional expenses, which is required by accounting principles generally accepted in the United States of America (GAAP). Financial statements prepared when applying a modified cash‐basis of accounting are not required to include such a statement, but may instead communicate the substance of that requirement. • GAAP requires not‐for‐profit organizations to report the amount of unrestricted, temporarily restricted, and permanently restricted net assets on the face of the balance sheet (in the case of the illustrative fi‐ nancial statements prepared on a modified cash‐basis of accounting, such point in time statement is re‐ ferred to as the statement of assets and net assets). The illustrative financial statements do not follow those presentation requirements but instead, communicate their substance by providing relevant in‐ formation in the notes to the financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 33 Mickey’s Center Statement of Assets and Net Assets Modified Cash‐Basis August 31, 20X2 Assets Cash and cash equivalents $ 316,258 Restricted cash (Note 2) 108,084 Property and equipment (net of accumulated de‐ preciation of $35,565) 9,018 $ 433,360 Net Assets Unrestricted net assets (Note 5) 433,360 Net assets $ 433,360 See accompanying notes to financial statements. 34 © 2018 Association of International Certified Professional Accountants. All rights reserved. Mickey’s Center Statement of Revenue, Expenses and Changes in Net Assets Modified Cash‐Basis For the Year Ended August 31, 20X2 Revenue Corporate and foundation contributions $ 536,134 Other contributions 235,920 Exchange club projects 105,302 Unsolicited and other donations 69,754 Total revenue 947,110 Expenses Program services 769,426 Management and general 100,718 Fundraising 55,264 155,982 Total expenses 925,408 Increase in net assets 21,702 Net assets, beginning of year 411,658 Net assets, end of year $ 433,360 See accompanying notes to financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 35 Mickey’s Center Statement of Functional Expenses Modified Cash‐Basis For the Year Ended August 31, 20X2 Program Services Management and General Fundraising Total Salaries and bene‐ fits $ 451,675 $ 76,781 $ 38,041 $ 566,497 Grant expense 41,291 41,291 Special events 77,790 13,233 91,023 Training 16,029 16,029 Professional ser‐ vices 16,810 16,810 Telephone 14,782 720 428 15,930 Postage/printing 6,176 301 178 6,655 Office supplies 16,597 809 481 17,887 Program materials 16,279 16,279 Depreciation 8,917 435 259 9,611 Rent 58,084 2,831 1,683 62,598 Miscellaneous 61,806 2,031 961 64,798 $ 769,426 $ 100,718 $ 55,264 $ 925,408 83% 11% 6% See accompanying notes to financial statements. 36 © 2018 Association of International Certified Professional Accountants. All rights reserved. Mickey’s Center Notes to Financial Statements Modified Cash‐Basis August 31, 20X2 Note 1—Summary of Significant Accounting Policies Nature of Activities Mickey’s Center (the Center) is a nonprofit corporation incorporated under the Texas Non‐Profit Corporation Act. The purpose of the Center is to use its funds exclusively for charitable, scientific, and educational purposes, especially the prevention of child abuse. Basis of Accounting The financial statements of the Center have been prepared on the cash‐basis of accounting, modified to record assets or liabilities with respect to cash transactions and events that provide a benefit or result in an obligation that covers a period greater than the period in which the cash transactions or events occurred. The modifica‐ tions result in the recording of capital assets on the statement of assets and net assets. Except for depreciation, all transactions are recognized as either revenue or expenses when received or paid in cash. Except for deprecia‐ tion, noncash transactions are not recognized. This basis of accounting represents a comprehensive basis of ac‐ counting other than accounting principles generally accepted in the United States of America (GAAP). This basis of accounting differs from GAAP primarily because certain revenue and related assets have been recognized when received rather than when earned and certain expenses and related liabilities have been recognized when paid rather than when the obligations were incurred. Property and Equipment Property and equipment are recorded at cost and consist of the office building and equipment. Depreciation is computed on the straight‐line method based on estimated useful lives of 30 years and 5 years for the office building and equipment, respectively. Cash Equivalents The Center considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. Contributions The Center records contributions when received in cash. Contributed Services Many individuals volunteer their time to help the Center with its educational activities. During the year ended August 31, 20X2, the Center received approximately 200 volunteer hours that have not been recorded in the statement of revenue, expenses, and changes in net assets. Functional Expenses © 2018 Association of International Certified Professional Accountants. All rights reserved. 37 The costs of providing the various programs, fundraising, and other activities have been summarized on a func‐ tional basis in the statement of functional expenses. Accordingly, certain costs have been allocated among the programs and fundraising activities benefited. Functional expenses are allocated to programs and supporting services based on specific identification. Expenses that relate to more than one program or support activity are allocated based on salary expenditure. Income Taxes The Center is exempt from federal and state income taxes under Internal Revenue Code Section 501(c)(3), ex‐ cept to the extent that it has taxable income from businesses that are not related to its tax exempt purpose. Un‐ related business income, if there was any, would be taxed at the applicable corporate income tax rate. The Cen‐ ter did not have any unrelated business income during the year ended August 31, 20X2, and accordingly, no pro‐ vision for income taxes has been made in the financial statements. The Center is not currently under examination by any taxing jurisdiction. Federal and state taxing authorities no longer have the right to examine tax years prior to 20Y9. For the year ended August 31, 20X2, there were no in‐ terest or penalties associated with tax positions recorded in the accompanying financial statements. Use of Estimates The preparation of financial statements on a modified cash‐basis of accounting requires management to make estimates and assumptions that affect financial statement amounts and disclosures. Actual results could differ from those estimates and assumptions. Subsequent Events In preparing these financial statements, management of the Center has evaluated events and transactions for potential recognition or disclosure through January 20, 20X3, the date the financial statements were available to be issued. Note 2—Restricted Cash The balance represents funds restricted by the board of directors in an amount equal to the balance in the School Initiatives Fund. Note 3—Commitments and Contingencies The land on which the Center’s office is located is being leased on an annual basis at a rate of $1,400 per annum. See Note 4. Note 4—Subsequent Events In September 20X2, the Center entered into a “purchase and sale agreement,” which provided for the purchase of a building in the amount of $230,000 and the assumption of a lease of the land on which the building is locat‐ ed. The building purchase was executed on September 28, 20X2, and was financed in part by a $220,000 note payable to a bank. The terms of the note provide for quarterly interest payments at the bank’s prime rate through the note maturity date. A $100,000 principal payment was due and made in December 20X2, and the remaining balance is due September 20X8. The note is secured by a leasehold deed of trust and security agree‐ ment and an assignment of rents and leases. 38 © 2018 Association of International Certified Professional Accountants. All rights reserved. The assumed lease previously referred to is an operating lease that requires annual payments of $19,600 through September 20X6. The Center has the option to terminate the lease in March 20X9. If the lease is not terminated, the annual payment will be revised to reflect 6 percent of the value of the land, which will be de‐ termined as set forth in the lease agreement. In December 20X2, the Center entered into a construction contract for $138,000 to design and construct certain building and leasehold improvements. Note 5—Internally Restricted Net Assets Net assets internally restricted for the School Initiatives Fund consist of amounts allocated from unrestricted net assets as approved by the board of directors. The internally restricted amounts are to be used for purchasing equipment and establishing programs for educational programs in schools and are not available for other pur‐ poses without approval by the board of directors. Note 6—Allocation of Joint Costs During the year ended August 31, 20X2, the Center conducted activities that included appeals for contributions and incurred joint costs of approximately $46,000. These activities included direct mail campaigns and special events. Approximately 65 percent of these joint costs were allocated to fundraising activities and 35 percent to program services. © 2018 Association of International Certified Professional Accountants. All rights reserved. 39 DONNELLY & OATES LIMITED LIABILITY PARTNERSHIP FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 20X2 Circumstances include the following: • The financial statements are for a limited liability partnership (LLP) that owns and operates a racquet and swim club. • The financial statements are prepared on basis of accounting that the LLP uses for federal income tax purposes. • The financial statements are as of and for the year ended December 31, 20X2. The financial statements illustrate the following: • The Statement of Revenues and Expenses uses the caption “Revenues in excess of expenses” to portray what a financial statement prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) would describe as “Net income.” There is no prohibition on the use of “Net income” or other GAAP captions within the financial statements. In this situation, the entity has chosen the term because management believes it to be more descriptive. • The financial statements include a Statement of Cash Flows, which is not required for financial state‐ ments prepared when applying the tax‐basis of accounting. However, in this case, the financial state‐ ments include a single year only, thus it would be difficult for financial statement users to obtain accu‐ rately the information on operating, investing and financing activities presented in a statement of cash flows. 40 © 2018 Association of International Certified Professional Accountants. All rights reserved. Donnelly & Oates Limited Liability Partnership Statements of Assets, Liabilities and Partners’ Capital Tax‐Basis December 31, 20X2 Assets Cash 450,944 Accounts receivable 451,194 Inventory 311,214 Prepaid expenses and other assets 24,046 Financing fees, less accumulated amortization of $57,096 259,124 Syndication costs 312,166 Property and equipment, net of accumulated depreci‐ ation of $2,810,112 9,054,554 $ 10,863,242 Liabilities and Partners’ Capital Accounts payable $ 276,502 Accrued payroll and related costs 117,792 Other accrued expenses 23,998 Unearned dues 369,586 Mortgage payable $ 7,566,966 Total liabilities 8,354,844 Partners’ capital 2,508,398 $ 10,863,242 See accompanying notes. © 2018 Association of International Certified Professional Accountants. All rights reserved. 41 Donnelly & Oates Limited Liability Partnership Statement of Revenues and Expenses Tax‐Basis For the Year Ended December 31, 20X2 Revenues Membership dues $ 3,970,334 Initiation fees 389,638 Tennis court fees and lessons 1,103,224 Other income 726,936 Sports shop and café 1,219,740 Total revenues 7,409,872 Expenses Management fee 50,700 Maintenance and operating 504,448 Utilities 391,460 Advertising and promotions 191,088 Payroll and related costs 2,774,706 Insurance 136,984 Administrative 246,906 Real estate taxes 351,246 Cost of sales—sports shop and café 701,800 Total expenses 5,349,338 Net operating income 2,060,534 Partnership expenses (9,572) Interest expense (765,476) Depreciation and amortization (610,094) Loss on sale of equipment (4,240) Revenues in excess of expenses $ 671,152 See accompanying notes. 42 © 2018 Association of International Certified Professional Accountants. All rights reserved. Donnelly & Oates Limited Liability Partnership Statement of Partners’ Capital Tax‐Basis For the Year Ended December 31, 20X2 Limited Part‐ ners Special Limited Partner General Part‐ ner Partners’ Capi‐ tal Balance, December 31, 20X1 $ 1,017,392 $ 1,256,710 $ (69,276) $ 2,204,826 Cash distributions (238,924) (55,138) (73,518) (367,580) Revenues in excess of ex‐ penses 436,254 100,674 134,224 671,152 Balance, December 31, 20X2 $ 1,214,722 $ 1,302,246 $ (8,570) $ 2,508,398 See accompanying notes. © 2018 Association of International Certified Professional Accountants. All rights reserved. 43 Donnelly & Oates Limited Liability Partnership Statement of Cash Flows Tax‐Basis For the Year Ended December 31, 20X2 Cash flows from operating activities Revenues in excess of expenses $ 671,152 Adjustments to reconcile revenues in excess of ex‐ penses to cash flows from operating activities Depreciation and amortization 610,094 Loss on sale of equipment 4,240 (Increase) decrease in: Accounts receivable (23,494) Inventory (102,916) Prepaid expenses 1,472 Accounts payable and accrued expenses 74,992 Unearned dues 32,874 Net cash flows provided by operating activities 1,268,414 Cash flows from investing activities Acquisition of equipment (277,138) Proceeds from sale of equipment 620 Net cash flows used by investing activities (276,518) Cash flows from financing activities Repayment of debt (473,574) Cash distributions to partners (367,580) Net cash flows used by financing activities (841,154) Increase in cash 150,742 Cash at beginning of year 300,202 Cash at end of year $ 450,944 Supplemental disclosures of cash flow information: Cash paid during the year for interest $ 774,170 See accompanying notes. 44 © 2018 Association of International Certified Professional Accountants. All rights reserved. Donnelly & Oates Limited Liability Partnership Notes to Financial Statements Tax‐Basis For the Year Ended December 31, 20X2 Note 1—Summary of Significant Accounting Policies Nature of Operations The Partnership owns and operates a racquet and swim club (the Club) located in Minnesota. The Club has approximately 3,000 members at December 31, 20X2. The Club extends credit to members for the payment of dues and other charges. The Partnership, formed in 19W5, is a limited liability partnership in accordance with the provisions of the Uni‐ form Partnership Act as in effect in the State of Minnesota. The general partner of the Partnership is Tony Donnelly. Basis of Accounting The Partnership’s financial statements are prepared on the accounting basis the Partnership used for federal in‐ come tax purposes, which is a comprehensive basis of accounting other than accounting principles generally ac‐ cepted in the United States of America (GAAP). The Partnership uses the Accelerated Cost Recovery System (ACRS) and Modified Accelerated Cost Recovery System (MACRS) in depreciating its property. Under ACRS and MACRS, depreciation is determined over periods of time that are shorter than those used in accordance with GAAP. Additionally, the income tax methods used to capitalize and amortize amortizable assets differ from those used under GAAP. Syndication costs are carried as an asset of the Partnership and are not amortized. Under GAAP these costs would be deducted from partners’ capital. Cash Equivalents The Partnership considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Concentration of Credit Risk The Partnership places its cash with one banking institution. At times the amount on deposit exceeds the in‐ sured limit of the institution and exposes the Partnership to a collection risk. Inventories Inventories, which consist of merchandise for sale in the sports shop, food, and beverages, are stated at the lower of cost (first in, first out method) or market. Membership Dues and Initiation Fees © 2018 Association of International Certified Professional Accountants. All rights reserved. 45 Membership dues are billed in advance and recorded in accounts receivable and unearned dues. The dues are recognized as revenue in the month earned. Initiation fees are recorded as revenue in the period when the fee is collected. Property and Equipment Property and equipment are carried at depreciated cost. Depreciation is computed using income tax methods. The cost of maintenance and repairs is charged to income as incurred; significant renewals or betterments are capitalized. Financing Fees Financing fees are amortized over the term of the related debt using the straight‐line method. During 20XX, fi‐ nancing fees related to retired debt were written off. The financing fees related to new debt were capitalized. Amortization expense was $12,149 during 20X2. Start‐Up Costs Start‐up costs are amortized over 60 months using the straight‐line method. Income Taxes Income taxes on Partnership income are levied on the partners at the partner level. Accordingly, all profits and losses of the Partnership are recognized by each partner on his respective tax return. Management believes that the Partnership has adequately addressed all relevant tax positions and that there are no unrecorded tax liabilities. Tax returns filed for the tax years ending from December 31, 20Y9, through cur‐ rent are still subject to examination by federal and state tax authorities. Any interest or penalties assessed to the Partnership are recorded in operating expenses. No interest or penalties from federal or state tax authorities were recorded in the accompanying financial statements. Advertising and Promotions Advertising costs are expensed as incurred. For the year ended December 31, 20X2, the Partnership incurred $191,088 in advertising costs. Estimates The preparation of financial statements on the tax‐basis of accounting requires management to make estimates and assumptions that affect the amounts reported on the financial statements and accompanying notes. Actual results could differ from those estimates. Subsequent Events Subsequent events have been evaluated through February 24, 20X3, which is the date the financial statements were available to be issued, and there are no subsequent events requiring disclosure. Note 2—Partnership Organization Profit and Loss Allocations 46 © 2018 Association of International Certified Professional Accountants. All rights reserved. Prior to December 1, 20XX, profits and losses from annual operations were allocated 99 percent to the limited partners and 1 percent to the general partner. Subsequent to November 30, 20XX, and until the Class A limited partners have received distributions of net cash flow equal to their preferred return, profits and losses from annual operations are allocated 65 percent to the Class A limited partners; 15 percent to the special limited partner; and 20 percent to the general partner. After the Class A limited partners have received cumulative distributions of net cash flow equal to their pre‐ ferred return, profits and losses from annual operations will be allocated 45 percent to the Class A limited part‐ ners; 15 percent to the special limited partner; and 40 percent to the general partner. Net Cash Flow Allocation From Operations Subsequent to November 30, 20XX, net cash flow is allocated 65 percent to the Class A limited partners; 15 per‐ cent to the special limited partner; and 20 percent to the general partner until such time as the Class A limited partners have received cumulative distributions equal to their preferred return. The balance of any net cash flow will be distributed 45 percent to the Class A limited partners; 15 percent to the special limited partner; and 40 percent to the general partner. Preferred Return The preferred return means a 9 percent per annum cumulative noncompounded return on the adjusted capital contribution of the Class A limited partners. The adjusted capital contribution means the original capital contri‐ butions are reduced only by distribution from the net proceeds of sale or refinancing. Note 3—Property and Equipment Property and equipment at December 31, 20X2, consisted of the following: Recovery Peri‐ od—Years Land $ 975,720 — Building 9,320,050 7–40 Tenant improvements 1,568,896 5–7 Total cost of property and equip‐ ment being depreciated $ 11,864,666 Less: Accumulated depreciation 2,810,112 Total property and equipment, net $ 9,054,554 Depreciation expense was $597,945 during 20X2. © 2018 Association of International Certified Professional Accountants. All rights reserved. 47 Note 4—Mortgage Payable At December 31, 20X2, debt consisted of the following: Mortgage loan payable in monthly payments of $73,124, including interest at 9.375%, through January 20XY when the interest rate changes to 3.5% above the 3‐ year Treasury base rate. Beginning February 1, 20XY, monthly payments will be ad‐ justed to reflect the new interest rate; the payments will be based upon a 15‐year term. The remaining principal is due January 1, 20XZ. The mortgage is secured by property, equipment, and a personal guaranty. $ 6,778,186 10% unsecured note payable to the special limited partners due in monthly install‐ ments of $16,546, including principal and interest, through February 1, 20XZ, when the unpaid balance is due. 788,780 $ 7,566,966 Scheduled principal payments under these loans are approximately $380,000 per year until February 1, 20XY, when payment terms will be adjusted as described previously. Note 5—Amendment of the Partnership Agreement The Partnership agreement was amended effective November 30, 20XX. The primary purpose of the amend‐ ment was to create a new class of limited partner (the special limited partner) and to change the allocations of profits, losses, and cash distributions. Effective November 30, 20XX, Michael Oates surrendered his 67 limited partnership units in exchange for $1,450,000 and a 15 percent special limited partnership interest. Additionally, as part of this exchange, $200,000 was paid down on the note payable to the special limited partner, the interest rate on this note was reduced to 10 percent from 12 percent, and the term of the note was shortened. Note 6—Transactions With Affiliates At December 31, 20X2, the Partnership owed partners or affiliated entities $788,780. During 20X2 a management fee of $50,700 was paid to a partner. 48 © 2018 Association of International Certified Professional Accountants. All rights reserved. CHARLTON CONTRACTORS, INC. FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 20X2, AND 20X1 Circumstances include the following: • The financial statements are for a general contractor. The general contractor has elected to be treated as a small business corporation (S corporation) under Internal Revenue Code Section 1362. • The financial statements are prepared on the accrual method of accounting used for federal income tax purposes. • The financial statements are comparative statements as of and for the years ended December 31, 20X2, and 20X1. The financial statements illustrate the following: • The financial statements include a statement of cash flows, which is not required for financial state‐ ments prepared when applying the tax‐basis of accounting. • Information about contract receivables (Note 2), billings in excess of costs on uncompleted contracts (Note 5), and backlog (Note 7) are disclosures typically made in the financial statements of construction contractors. However, the aging summary of contract receivables is not usually disclosed. In this situa‐ tion, the preparer concluded that the information is relevant to the financial statement users. • The information on accounts payable and accruals is not required but has been included because the preparer concluded that users of the financial statements find it meaningful. • Accounting principles generally accepted in the United States of America (GAAP) requires a summary of future minimum lease payments, which usually is presented in a schedule. Because the entity’s lease commitments are not complex, this information has been summarized in narrative form, which is ac‐ ceptable for financial statements prepared on the tax‐basis of accounting. © 2018 Association of International Certified Professional Accountants. All rights reserved. 49 Charlton Contractors, Inc. Statements of Assets, Liabilities and Equity Tax‐Basis December 31, 20X2 and 20X1 20X2 20X1 Assets Current Assets Cash and cash equivalents $ 3,078,966 $ 3,608,930 Accounts receivable—contract (Note 2) 2,409,554 1,422,268 Advances to officers 7,812 — Inventory 287,714 196,200 Total current assets 5,784,046 5,227,398 Property and Equipment Machinery and equipment 1,694,980 1,710,828 Transportation equipment 384,790 395,042 Office furniture and equipment 162,454 163,034 Leasehold improvements 363,798 363,798 Total cost 2,606,022 2,632,702 Accumulated depreciation and amortization (Note 3) (2,362,850) (2,343,812) Net property and equipment 243,172 288,890 Other Assets Cash surrender value of officers’ life insurance 24,454 23,610 Miscellaneous 1,460 20,766 Total other assets 25,914 44,376 Total assets $ 6,053,132 $ 5,560,664 See accompanying notes to financial statements. 50 © 2018 Association of International Certified Professional Accountants. All rights reserved. Charlton Contractors, Inc. Statements of Assets, Liabilities and Equity Tax‐Basis Years Ended December 31, 20X2 and 20X1 20X2 20X1 Liabilities and Stockholders’ Equity Current Liabilities Accounts payable and accruals (Note 4) $ 548,646 $ 288,904 Billings in excess of costs on uncompleted con‐ tracts (Note 5) 976,754 445,108 Total current liabilities 1,525,400 734,012 Contributed Capital Common stock, $1,000 par value; 100 shares authorized; 60 shares issued and outstanding 60,000 60,000 Retained Earnings 4,467,732 4,766,652 Total stockholders’ equity 4,527,732 4,826,652 Total liabilities and stockholders’ equity $ 6,053,132 $ 5,560,664 See accompanying notes to financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 51 Charlton Contractors, Inc. Statements of Operations and Retained Earnings Tax‐Basis Years Ended December 31, 20X2 and 20X1 20X2 20X1 Contract revenue $ 7,009,498 $ 8,116,380 Cost of contract revenue Direct costs Materials and supplies 1,710,330 1,729,310 Salaries and wages 1,184,132 1,264,664 Subcontracts 1,670,596 1,838,942 Other 99,486 92,560 4,664,544 4,925,476 Indirect costs 813,520 967,278 5,478,064 5,892,754 Gross profit 1,531,434 2,223,626 General and administrative expenses Salaries and wages 1,298,552 2,139,444 Profit‐sharing plan contribution — 6,138 Other 596,938 539,786 1,895,490 2,685,368 Operating loss (364,056) (461,742) Financing income 88,148 132,590 Net loss (275,908) (329,152) Retained earnings, beginning of year 4,766,652 5,255,804 Distributions to stockholders (23,012) (160,000) Retained earnings, end of year $ 4,467,732 $ 4,766,652 See accompanying notes to financial statements. 52 © 2018 Association of International Certified Professional Accountants. All rights reserved. Charlton Contractors, Inc. Statements of Cash Flows Tax‐Basis Years Ended December 31, 20X2 and 20X1 20X2 20X1 Cash flows from operating activities Net loss $ (275,908) $ (329,152) Noncash items included in net loss: Depreciation 45,718 60,204 (Increase) decrease in: Contract receivables (987,286) 2,103,570 Inventory (91,514) (3,260) Cash surrender of officers’ life insurance (844) (1,200) Other assets — (408) Increase (decrease) in: Accounts payable and accruals 259,742 (100,832) Billings in excess of costs on uncompleted contracts 531,646 (895,508) Net cash (used) provided by operat‐ ing activities (518,446) 833,414 Cash flows from investing activities Property and equipment purchases — (60,000) Advances to officers (7,812) — Redemption of certificates of deposit — 2,132,038 Decrease in miscellaneous assets 19,306 — Net cash provided by investing ac‐ tivities 11,494 2,072,038 Cash flows from financing activities Distributions to stockholders (23,012) (160,000) Net (decrease) increase in cash and cash equiva‐ lents (529,964) 2,745,452 Cash and cash equivalents, beginning of year 3,608,930 863,478 Cash and cash equivalents, end of year $ 3,078,966 $ 3,608,930 See accompanying notes to financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 53 Charlton Contractors, Inc. Notes to Financial Statements Tax‐Basis December 31, 20X2 and 20X1 Note 1—Summary of Significant Accounting Policies Nature of Operations Charlton Contractors is a general contractor primarily engaged in the construction of commercial and multifami‐ ly residential projects in the San Diego metropolitan area. Basis of Accounting The accompanying financial statements have been prepared on the accrual method of accounting used for fed‐ eral income tax purposes, which is a comprehensive basis of accounting other than accounting principles gener‐ ally accepted in the United States of America (GAAP). If the accompanying financial statements were prepared in conformity with GAAP, contract revenue and costs would be recognized under the percentage‐of‐completion method of accounting, an allowance for uncollectible accounts receivable would be established, property and equipment would be depreciated over their estimated useful lives, and the related party lease would be capitalized as an asset and liability. The Corporation has elected to be treated as a small business corporation (S corporation) under Internal Reve‐ nue Code Section 1362. This election provides that, in lieu of corporate income taxes, the taxable items and credits pass directly to the stockholders. Therefore, these financial statements do not include federal or state in‐ come taxes that would otherwise be applicable. The Corporation uses the accrual completed contract method to recognize construction revenue. That method of accounting recognizes contract revenue and costs when a contract is completed or substantially completed. A contract is considered substantially completed when all costs except insignificant items have been incurred and the installation has been accepted by the customer. Contract costs include all direct material and labor costs and those indirect costs related to contract perfor‐ mance, such as rent, depreciation, maintenance, and insurance. Indirect costs are allocated based on contract revenue. General and administrative costs are charged to expenses as incurred. Amounts billed in excess of costs are classified as current liabilities under billings in excess of cost on uncom‐ pleted contracts. Contract retentions are included in contract receivables. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with a maturity of three months or less when pur‐ chased. 54 © 2018 Association of International Certified Professional Accountants. All rights reserved. At December 31, 20X2, and 20X1, the Corporation had on deposit with several banks amounts in excess of Fed‐ eral Deposit Insurance Corporation insurance limits. The Corporation has not experienced any losses in such ac‐ counts. The Corporation believes it is not exposed to any significant credit risk on cash and cash equivalents. Contract Receivables Contract receivables, including retentions, are recorded as progress billings and rendered in accordance with the provisions of the contracts. The Corporation uses the direct write‐off method to record uncollectible accounts in compliance with the Internal Revenue Code. Inventory Inventory is valued at the lower of cost, based on the first in, first out method, or market. Property and Equipment Property and equipment are recorded at cost and depreciated using principally accelerated methods. Leasehold improvements are amortized over the life of the related leases or their estimated useful lives, whichever is shorter. Property and equipment are depreciated over the following recovery periods: Machinery and equipment 5 years Transportation equipment 5 years Office furniture and equipment 5–7 years Leasehold improvements 10–31.5 years Expenditures for maintenance and repairs that do not materially extend the lives of the assets are charged to earnings. When property or equipment is sold or otherwise disposed of, the cost and related accumulated de‐ preciation are removed from the respective accounts, and the resulting gain or loss is reflected in earnings. Profit‐Sharing Plan The Corporation adopted a profit‐sharing plan effective November 22, 19V4. Substantially all full‐time employ‐ ees are eligible to participate. The Corporation’s contributions on behalf of its employees are determined annu‐ ally by the board of directors. The Corporation did not make a contribution for 20X2. Profit‐sharing contributions were $6,138 for the year ended December 31, 20X1. Statement of Cash Flows For purposes of the statement of cash flows, cash and cash equivalents include money market accounts and op‐ erating bank accounts. The Corporation did not pay any interest expense for 20X2 and 20X1. Income Taxes © 2018 Association of International Certified Professional Accountants. All rights reserved. 55 The Corporation, with the consent of its shareholders, has elected, in accordance with the Internal Revenue Code, to be treated as an S corporation. In lieu of federal income taxes, the shareholders of an S corporation are taxed on their proportionate share of the corporation’s taxable income. Therefore, no provision for federal in‐ come taxes has been included in these financial statements. California law generally conforms to federal law ex‐ cept for a 1.5 percent tax imposed on S corporation’s earnings. The Corporation is subject to tax in other states. Deferred income taxes have not been recognized in these financial statements because the amount of deferred taxes is not considered material. The Corporation does not recognize a liability for uncertain tax positions until agreement and settlement is reached with the taxing authority. Tax returns filed for the tax years ending from December 31, 20Y9, through current are still subject to examination by federal and state tax authorities. Subsequent Events The Corporation has evaluated subsequent events from the date of the statement of assets, liabilities, and equi‐ ty—tax‐basis through March 12, 20X3, the date on which the financial statements were available to be issued, and determined that there are no items to disclose. Note 2—Contract Receivables An aging summary of contract receivables at December 31, is as follows: 20X2 20X1 Billed Current $ 1,131,718 $ 364,284 30 days 486,854 306,318 60 days 189,138 79,914 90 days and over 129,326 133,272 1,937,036 883,788 Unbilled retentions 456,512 444,252 Unbilled amounts on complet‐ ed contracts 16,006 94,228 Totals $ 2,409,554 $ 1,422,268 56 © 2018 Association of International Certified Professional Accountants. All rights reserved. Completed and uncompleted contract receivables at December 31, are as follows: 20X2 20X1 Completed contracts Billed, including retentions $ 906,052 $ 581,760 Unbilled retentions 116,772 125,206 Unbilled amounts on completed con‐ tracts 16,006 94,228 Uncompleted contracts Uncompleted contracts billed 1,030,984 302,028 Unbilled retentions 339,740 319,046 Totals $ 2,409,554 $ 1,422,268 Receivables written off as uncollectible totaled $30,158 for the year ended December 31, 20X2, and $2,000 for the year ended December 31, 20X1. Recoveries of receivables written off an uncollectible totaled $17,000 for the year ended December 31, 20X1. Note 3—Depreciation and Amortization The accumulated depreciation and amortization balances at December 31, are as follows: 20X2 20X1 Machinery and equipment $ 1,689,162 $ 1,701,064 Transportation equipment 308,130 296,002 Office furniture and equipment 161,612 160,440 Leasehold improvements 203,946 186,306 Totals $ 2,362,850 $ 2,343,812 © 2018 Association of International Certified Professional Accountants. All rights reserved. 57 Note 4—Accounts Payable and Accruals Accounts payable and accruals consist of the following at December 31: 20X2 20X1 Trade accounts payable $ 343,222 $ 157,726 Subcontract payables 156,130 86,104 Accrued payroll 40,626 39,814 Accrued and withheld payroll taxes 3,124 860 Sales tax payable 5,544 4,400 Totals $ 548,646 $ 288,904 Note 5—Billings in Excess of Costs on Uncompleted Contracts Billings in excess of costs on uncompleted contracts at December 31 are as follows: 20X2 20X1 Billings on uncompleted contracts $ 4,320,008 $ 2,258,286 Costs incurred on uncompleted contracts (3,343,254) (1,813,178) Billings in excess of costs on un‐ completed contracts $ 976,754 $ 445,108 Note 6—Commitment Under Lease Agreement On December 15, 20V6, the Corporation signed a lease with its stockholders for an office and production facility located in Mira Mesa, California. The facility lease is for 25 years, terminating December 15, 20YY. The base an‐ nual rent was $343,000 for 20X2 and 20X1. Increases in the base annual rent are to be based on the consumer price index, not to exceed 6 percent. The stockholders pay the real estate taxes and the Corporation pays all maintenance charges and operating costs for the facility. The rental payments include an escalation for increas‐ es in real estate taxes. At December 31, 20X2, the aggregate minimum lease payments under this lease were approximately $2,800,000. Future minimum lease payments are scheduled to be approximately $350,000 for each of the next 5 years. Rent expense for each of the years ended December 31, 20X2, and 20X1 was $353,000. Note 7—Backlog The estimated gross revenue on work to be performed on signed contracts was $3,467,894 at December 31, 20X2, and $4,183,624 at December 31, 20X1. In addition to the backlog of work to be performed, there was gross revenue to be reported in future periods under the accrual completed contract method used by the com‐ pany of $1,548,173 at December 31, 20X2, and $1,668,961 at December 31, 20X1. 58 © 2018 Association of International Certified Professional Accountants. All rights reserved. MARGARET ROSE 1964 IRREVOCABLE TRUST FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 20X2 AND 20X1 Circumstances include the following: • The financial statements are for an irrevocable trust. • The financial statements are prepared on the cash method of accounting used for federal income tax purposes. • The financial statements are comparative as of and for the years ended December 31, 20X2, and 20X1. The financial statements illustrate the following: • The financial statements do not include a statement of cash flows, which is acceptable for a presenta‐ tion when applying the tax‐basis of accounting. The preparer concluded that a statement of cash flows is not necessary because (1) the users of the financial statements are more interested in asset balances ra‐ ther than cash flows, and (2) if cash flow information is needed, it could easily be derived from the in‐ formation presented. © 2018 Association of International Certified Professional Accountants. All rights reserved. 59 Margaret Rose 1964 Irrevocable Trust Statements of Assets, Liabilities and Corpus Tax‐Basis December 31, 20X2 and 20X1 20X2 20X1 Assets Marketable securities—at cost $ 1,830,087 $ 1,560,681 (market value $2,746,922 and $2,353,519 in 20X2 and 20X1, respectively) Purchased interest 340 — Total assets $ 1,830,427 $ 1,560,681 Liabilities and Corpus Due to beneficiary 157,946 75,302 Total liabilities 157,946 75,302 Corpus 1,672,481 1,485,379 Total liabilities and corpus $ 1,830,427 $ 1,560,681 See accompanying notes. 60 © 2018 Association of International Certified Professional Accountants. All rights reserved. Margaret Rose 1964 Irrevocable Trust Statements of Revenues, Expenses and Corpus Tax‐Basis Years Ended December 31, 20X2 and 20X1 20X2 20X1 Revenues Dividends $ 76,139 $ 69,044 Interest 4,729 4,457 Gain (loss) on sale of securities, net 201,370 46,094 Total revenues 282,238 119,595 Expenses Accounting fee 7,500 7,000 Bank custodian fee 3,018 2,588 Investment counsel fee 9,474 7,588 Total expenses 19,992 17,176 Income before provision for income taxes 262,246 102,419 Provision for income taxes 75,144 22,207 Net income 187,102 80,212 Corpus, beginning of year 1,485,379 1,405,167 Corpus, end of year $ 1,672,481 $ 1,485,379 See notes to financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 61 Margaret Rose 1964 Irrevocable Trust Notes to Financial Statements Tax‐Basis For the Years Ended December 31, 20X2 and 20X1 Note 1—Nature of Trust and Significant Accounting Policies Nature of Trust The Margaret Rose 1964 Irrevocable Trust (the Trust) was created on May 5, 1964, by Michael Thomas. Distribu‐ tion of 25 percent of principal is to be made at age 30, and 33 1/3 percent at age 35. After January 1, 19X2, the beneficiary may request annually a noncumulative distribution of the larger of $5,000 or 5 percent of the princi‐ pal as of the end of the year. Upon death of the beneficiary, the Trust is to be distributed according to the terms of her will. The trustee has discretionary power to distribute principal or income, or both. Basis of Accounting The accompanying financial statements have been prepared on the cash method of accounting used for federal income tax purposes, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP). Consequently, certain revenues and expenses are recognized in the determination of income in different reporting periods than they would be if the financial statements were prepared in conformity with GAAP. Although income tax rules are used to determine the timing of the re‐ porting of revenues and expenses, nontaxable revenues and nondeductible expenses are included in the deter‐ mination of net income. Use of Estimates The preparation of financial statements in conformity with the cash method of accounting used for federal in‐ come tax purposes requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Marketable Securities Marketable securities are carried at cost. The cost of marketable securities sold is based on cost as determined under the specific identification method. Income Taxes The Trust does not recognize a liability for uncertain tax positions. Tax returns filed for the tax years ending from December 31, 20Y9, through current are still subject to examination by federal and state tax authorities. Subsequent Events In preparing these financial statements, the Trust has evaluated events and transactions for potential recogni‐ tion or disclosure through April 1, 20X3, the date the financial statements were available to be issued, and de‐ termined that there are no items to disclose. 62 © 2018 Association of International Certified Professional Accountants. All rights reserved. Note 2—Marketable Securities At December 31, 20X2, and 20X1, gross unrealized gains and losses pertaining to marketable securities in the portfolio were as follows: Cost Market Value Unrealized Gains Losses 20X2 Equities $ 948,766 $ 1,790,955 $ 854,565 $ 12,376 Fixed income and money market 881,321 955,967 119,362 44,716 Total $ 1,830,087 $ 2,746,922 $ 973,927 $ 57,092 Market Unrealized Cost Value Gains Losses 20X1 Equities $ 891,685 $ 1,611,732 $ 757,910 $ 37,863 Fixed income and money market 668,996 741,787 72,791 — Total $ 1,560,681 $ 2,353,519 $ 830,701 $ 37,863 Note 3—Income Taxes The income tax expense shown in the accompanying financial statements differs from the expense that would result from applying statutory tax rates to income before income taxes primarily because of capital gains. Distributions to beneficiaries are allowed as a deduction from taxable income for the trust in the year in which such distributions are made. The provision for income taxes for the years ended December 31 consists of: 20X2 20X1 Federal $ 63,200 $ 17,874 State 11,944 4,333 Provision for income taxes $ 75,144 $ 22,207
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EVIDENCE:
Practice Aid Accounting and Financial Reporting Guidelines for Cash- and Tax-Basis Financial Statements © 2018 Association of International Certified Professional Accountants. All rights reserved. For other uses of this work, please email [email protected] with your request or write to us at 220 Leigh Farm Road, Durham, NC 27707-8110 USA. This document was created by the Association of International Certified Professional Accountants as a free member benefit which may be freely used and shared by members for personal use. All copyright statements should be maintained. © 2018 Association of International Certified Professional Accountants. All rights reserved. 1 Preface Because of the complexities of accounting principles generally accepted in the United States of America (GAAP), many smaller entities have determined that financial statements prepared by applying the cash‐ or tax‐basis of accounting more appropriately suit their needs. Unlike GAAP, little authoritative guidance is available with re‐ spect to the preparation of financial statements when applying the cash‐ or tax‐basis of accounting. Financial statements prepared when applying the cash‐ or tax‐basis of accounting need to have a level of consistency so that they are useful and not misleading to users of the financial statements. Additionally, because financial statements prepared when applying the cash‐ or tax‐basis of accounting are not considered appropriate in form unless the financial statements include informative disclosures similar to those required by GAAP if the financial statements contain items that are the same as, or similar to, those in financial statements prepared in accord‐ ance with GAAP, preparers of full disclosure financial statements prepared when applying the cash‐ or tax‐basis of accounting are often faced with difficult questions. This practice aid is intended to provide preparers of cash‐ and tax‐basis financial statements with guidelines and best practices to promote consistency and for resolving the often difficult questions regarding the preparation of such financial statements. Although this practice aid is the best source for such guidance, it is nonauthorita‐ tive and should not be used as a substitute for the preparer’s professional judgment. This practice aid has not been approved, disapproved, or otherwise acted upon by any senior committee of the AICPA. This practice aid does not contain guidance with respect to performing an audit, review, or compilation of finan‐ cial statements prepared when applying the cash‐ or tax‐basis of accounting. Practitioners engaged to audit such financial statements should refer to Statements on Auditing Standards, including AU‐C section 800, Special Con‐ siderations—Audits of Financial Statements Prepared in Accordance With Special Purpose Frameworks (AICPA, Professional Standards). Practitioners engaged to perform a review or compilation should refer to Statements on Standards for Accounting and Review Services (SSARSs). Likewise, CPAs in public practice who prepare finan‐ cial statements for clients but are not engaged to perform an audit, review, or compilation of such financial statements should refer to SSARSs. Prepared by Michael P. Glynn Senior Technical Manager Audit and Attest Standards Team Edited by Kelly G. McAuliffe Technical Manager Member Learning and Competency 2 © 2018 Association of International Certified Professional Accountants. All rights reserved. Acknowledgments In 1998, the AICPA published the Practice Aid Preparing and Reporting on Cash‐ and Tax‐Basis Financial State‐ ments. That publication was written by Michael J. Ramos, CPA, and edited by the AICPA Accounting and Publica‐ tions Team. That publication served as a basis for the preparation of the original edition of this practice aid. In addition to this practice aid, the AICPA has also published a separate practice aid, Applying OCBOA in State and Local Government Financial Statements, authored by Michael A. (Mike) Crawford, CPA. Mike served as an invaluable resource in the preparation of the original edition of this practice aid. The AICPA also greatly appreciates the invaluable input provided by the late Dr. Thomas A. Ratcliffe in the de‐ velopment of the previous edition of this practice aid. Finally, the AICPA would like to thank the 2011/12 members of the Accounting and Review Services Committee and the 2011/12 members of the AICPA PCPS Technical Issues Committee, who provided invaluable input re‐ garding the content of the original edition of this practice aid. © 2018 Association of International Certified Professional Accountants. All rights reserved. 3 4 © 2018 Association of International Certified Professional Accountants. All rights reserved. Chapter 1 Overview of Cash‐ and Tax‐Basis Financial Statements Introduction Financial statements, including related notes, are a structured representation of historical financial information intended to communicate an entity’s economic resources and obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework. fn 1 All financial statements are prepared in accordance with a financial reporting framework. The term financial reporting framework is defined as “a set of criteria used to determine measurement, recognition, presentation, and disclosure of all material items appearing in the financial statements.” fn 2 Examples of financial reporting frameworks are accounting principles generally accepted in the United States of America (GAAP), International Financial Reporting Stand‐ ards promulgated by the International Accounting Standards Board, and special purpose frameworks such as the cash‐, tax, regulatory‐, contractual‐, and other bases that use a definitive set of logical, reasonable criteria that is applied to all material items appearing in the financial statements. The cash‐, tax‐, regulatory‐, and other‐basis of accounting are commonly referred to as other comprehensive bases of accounting. As GAAP becomes increasingly complex and less cost beneficial for private companies, such companies consider issuing cash‐ and tax‐basis financial statements as cost‐effective and useful alternatives. Many of these private companies are small and medium‐sized entities that report to a narrow range of financial statement users. Those users, unlike users of public company financial statements, typically have access to company management and additional financial information beyond that provided in the financial statements. Cash‐ or tax‐basis financial statements may be appropriate whenever the entity is not contractually or otherwise required to issue GAAP financial statements. The following conditions may indicate that financial statements prepared when applying the cash‐ or tax‐basis of accounting is appropriate: • The users of the financial statements—both internal and external to the entity—understand a cash‐ or tax‐basis presentation and find it relevant for their needs. • It is cost‐effective to prepare cash‐ or tax‐basis financial statements. • The operations of the entity are conducive to a cash‐ or tax‐basis presentation. Preparing cash‐ or tax‐basis financial statements has many benefits. A significant benefit is due to the fact that many smaller entities maintain their accounting records on a cash‐ or tax‐basis. Often, accounting and finance personnel responsible for maintaining the books and records can more easily understand the concepts of cash in fn 1 Paragraph .05 of AR‐C section 90, Review of Financial Statements (AICPA, Professional Standards), and paragraph .13 of AU‐C section 200, Overall Objectives of the Independent Auditor and Conduct of an Audit in Accordance With Generally Accepted Auditing Standards (AICPA, Professional Standards). fn 2 See footnote 1. © 2018 Association of International Certified Professional Accountants. All rights reserved. 5 and out as well as tax reporting compared to GAAP. Because the internal records are often maintained on the cash‐ or tax‐basis of accounting, it is easier to prepare the financial statements when applying that same basis. If the financial statements are prepared in accordance with GAAP, the accounting and finance personnel would “true‐up” the financial information through a series of journal entries. Additionally, many users of smaller entity financial statements find cash‐ or tax‐basis financial statements to be more understandable than financial statements prepared in accordance with GAAP because those users are often accustomed to preparing and con‐ sidering budgets on a cash‐basis and understand tax issues. Because many smaller entities are appropriately concerned with minimizing costs and maximizing the resources that are available to fund the operations of the business, resources allocated to accounting and financial report‐ ing are often not sufficient to maintain GAAP basis accounting records and to prepare financial statements in ac‐ cordance with GAAP. Preparing financial statements when applying the cash‐ or tax‐basis of accounting general‐ ly is less costly than preparing GAAP financial statements because of the following: • Less complex measurement requirements. Financial statements prepared when applying the cash‐basis of accounting reflect transactions resulting from cash receipt and disbursement transactions or events. Financial statements prepared when applying the tax‐basis of accounting reflect transactions in the same manner as those transactions are reflected in the entity’s tax return. • Less extensive disclosure requirements. Financial statements prepared when applying the cash‐ or tax‐ basis of accounting do not require all of the extensive disclosures required of GAAP statements because the statements do not include some of the items, events, and transactions that are typically included in GAAP basis financial statements. Observations and Suggestions Often, preparers of cash‐ and tax‐basis financial statements elect to omit substantially all disclosures required by the cash‐ or tax‐basis of accounting. The omission of disclosures is a departure from the cash‐ or tax‐basis of ac‐ counting and, if such disclosures were included in the financial statements, they might influence the user’s con‐ clusions about the entity’s financial position, results of operations, and cash flows. However, the omission may not necessarily result in misleading financial statements provided that the intended users are informed about such matters. • Ability to prepare tax returns and financial statements from the same information. When tax‐basis finan‐ cial statements are issued, a significant portion of the cost can be absorbed by the preparation of the tax return. Additionally, the entity is not required to maintain two sets of accounting records to account for items such as depreciation, bad debts, and consolidation matters. However, in addition to the benefits of financial statements prepared when applying a cash‐ or tax‐basis of ac‐ counting, financial statement preparers should also be aware of the limitations of such financial statements. For example, financial statements prepared when applying the cash‐ or tax‐basis of accounting may not meet the needs of certain users such as regulators and certain lenders. In addition, the cash‐basis of accounting can be easily manipulated by accelerating or delaying the timing of the receipt or disbursement of cash and therefore may not be a comprehensive measure of the entity’s complete economic condition. In practice, the most typical industries in which cash‐ or tax‐basis financial statements are issued include the fol‐ lowing: • Professional services 6 © 2018 Association of International Certified Professional Accountants. All rights reserved. • Medical • Retail • Real estate • Farming/agricultural • Construction • Not‐for‐profit Cash‐Basis of Accounting The cash‐basis of accounting is a basis of accounting that the entity uses to record cash receipts and disburse‐ ments. When applying the cash‐basis of accounting, transactions are recognized based on the timing of cash re‐ ceipts and disbursements. As a result, • revenues are recognized only when cash is received rather than when earned, and • expenses are recognized only when cash is paid rather than when the obligation is incurred. When applying the cash‐basis, cash outflows to purchase an “asset” are not capitalized but instead are recorded as a disbursement as of the date of purchase, so there is no depreciation or amortization. Accruals are not made and prepaid assets are not recorded. The cash‐basis of accounting in its purest form is rarely used but may be appropriate whenever the entity • is interested primarily in sources and uses of cash. • has a limited number of financial statement users. • has relatively simple operations engaged in one primary activity. • does not have significant amounts of debt, capital assets, or other items that would be recognized in ac‐ cordance with the accrual basis. Examples of some entities that may use the cash‐basis of accounting include the following: • Estates • Trusts • Civic ventures • Student activity funds • Political campaigns and committees © 2018 Association of International Certified Professional Accountants. All rights reserved. 7 When applying the cash‐basis of accounting, because the only assets of the entity would be cash and cash equivalents and there would be no liabilities, a balance sheet equivalent is often not presented. The income statement equivalent would report cash receipts and disbursements and other changes in cash and cash equiva‐ lents and disclose any restrictions on ending cash and cash equivalents. Any departure from the presentation of cash and cash equivalent balances and changes in such balances, such as the reporting of long‐term debt arising from cash transactions, the capitalization and depreciation of capital assets acquired with cash, or the reporting of investments or receivables and payables resulting from cash transactions, should be considered a modification to the cash‐basis of accounting. Such deviations require eval‐ uation regarding whether they are appropriate modifications of the cash‐basis of accounting. Appropriate modi‐ fications of the cash‐basis of accounting are discussed in the subsequent section. In‐Substance Two‐Step Transactions or Events in the Cash‐Basis of Accounting The preparer of cash‐basis financial statements may encounter single‐step transactions or events that may not directly involve a cash inflow or outflow but may nevertheless be recorded as an in‐substance two‐step cash transaction or event when applying the cash‐basis of accounting. For example, management of an entity may sign a note from a bank in order to purchase equipment. The bank may then directly pay the vendor for the pur‐ chase of the equipment. Because there was no cash transaction, the entity may not record the single‐step trans‐ action in the financial statements. However, so as not to be misleading to users of the financial statements, the preparer may choose to record the transaction as an in‐substance two‐step transaction. In accordance with that treatment, the journal entries may look as follows: Cash XX,XXX Note Proceeds (Revenue) XX,XXX (To record note proceeds that were paid directly to the vendor) Capital expenditure XX,XXX Cash XX,XXX (To record purchase of equipment) Then, subsequent payments on the note would be recorded as follows: Debt service expenditure XXX Cash XXX (To record principal and interest payment on note payable) Modified Cash‐Basis of Accounting The modified cash‐basis of accounting involves logical and consistent modifications to transactions or events that are derived from cash receipts or cash disbursements. For example, a modification to the cash‐basis of ac‐ counting to report capital assets should involve recording and depreciating only those capital assets that result from cash transactions or events. The modification should not involve the recording and depreciating of donated capital assets because these transactions or events do not involve an inflow or outflow of cash. Once deprecia‐ ble capital assets arising from cash transactions or events are recorded when applying a modified cash‐basis of accounting, such assets should also be depreciated over their estimated useful lives. Depreciating capital assets that were acquired with cash is a logical allocation of the cash‐basis assets’ costs over the assets’ useful lives. 8 © 2018 Association of International Certified Professional Accountants. All rights reserved. An easy way to look at whether a modification is appropriate is to consider whether the transaction or event would have been recorded if the entity was preparing the cash‐basis financial statements. For example, if an en‐ tity purchased a capital asset and was preparing cash‐basis financial statements, the journal entry would look like this: Capital expenditure XXXX Cash XXXX (To record purchase of capital asset) Because cash is part of the journal entry, it would be an appropriate modification to capitalize the asset and de‐ preciate the cost over the estimated useful life of the asset. On the other hand, the recording of trade accounts receivable arising from services provided or goods sold would not be an appropriate modification of the cash‐basis of accounting assuming cash was not received at the time the services were provided or goods were sold. Modifications to the cash‐basis of accounting generally result when cash receipts or cash disbursements provide a benefit or an obligation that covers multiple reporting periods. For example, a preparer may conclude that fi‐ nancial statement users would be misled if cash purchases of capital assets are recorded as disbursements or expenditures in the period in which the assets are purchased. Instead, the preparer may elect to modify the cash‐basis of accounting to record the asset on the balance sheet equivalent and depreciate it over the estimat‐ ed useful life of the asset, thereby, in effect, spreading the benefit of the cash outflow over multiple reporting periods in a manner that has substantial support and is logical and consistent. Questions often arise in the application of a modified cash‐basis of accounting regarding whether reported as‐ sets and liabilities derived from cash transactions or events should ever be written down or written off once they are recorded at their original cash value. Temporary changes in the fair value of an asset or liability should not be recognized in applying a modified cash‐basis of accounting and all recognized assets and liabilities should be measured and reported at their original cash value (net of any accumulated depreciation or amortization, if applicable). If an asset or liability has been permanently impaired and has no future cash value or represents no future obligation against cash, it would be appropriate to write‐down or write‐off such amounts in modified cash‐basis financial statements. A significant challenge to preparing financial statements when applying a modified cash‐basis of accounting is developing the appropriate accounting policy that results in financial statements that meet the needs of the primary users of the statements and consistently applying that policy to cash transactions and events in order to keep the financial statements from being misleading for the purposes for which they are intended. The preparer may find benefit in spelling out the logic behind the cash‐basis modifications and documenting the accounting policy prior to preparation of the basic financial statements. Although there is no single accepted method of applying a modified cash‐basis of accounting, modified cash‐ basis financial statements can be more meaningful if they are comparable with similar financial statements. Some preparers have inappropriately considered the modified cash‐basis of accounting as a “free‐for‐all” propo‐ sition in which they can unilaterally and arbitrarily choose the modifications that they will apply. For example, a preparer may inappropriately decide to prepare financial statements applying a modified cash‐basis of account‐ ing that records assets arising from cash transactions or events, including investments, inventories, and capital assets but does not record short‐term and long‐term liabilities and other obligations arising from cash transac‐ tions. Inconsistent uses of a modified cash‐basis framework should be avoided in general use financial state‐ ments because such inconsistencies will normally result in financial statements that are misleading for general © 2018 Association of International Certified Professional Accountants. All rights reserved. 9 use. Financial statements that are prepared using inconsistent modifications may be appropriate for special pur‐ poses involving limited users but should be labeled as such with clear disclosure and use of descriptive headings. With the needs of the primary financial statement users in mind, when preparing financial statements applying a modified cash‐basis of accounting, the preparer should consider modifying the following cash transactions or events, among others, by the recording of the following: • Receivables resulting from an outflow of cash, such as a cash advance to an employee • Investments in marketable securities acquired with cash • Inventories acquired with cash • Capital assets arising from cash transactions and depreciating the assets where appropriate • Deferred revenue resulting from cash receipts • Liabilities resulting from short‐term cash borrowings • Long‐term notes and other debt arising from cash transactions or events • Any other material assets, liabilities, revenues, and expenses resulting from cash transactions or events If the financial statements are prepared when applying a modified cash‐basis accounting policy in which one or more of the preceding—but not all—are recorded, the preparer should be prepared to defend how the decision to modify or not modify is a logical and consistent application of the accounting policy and does not result in misleading financial statements for the purposes for which they are intended. A number of transactions or events are not appropriate modifications to the cash‐basis of accounting. Generally, these transactions or events should not be recorded when applying a modified cash‐basis of accounting because they do not involve cash inflows or outflows, are illogical, or are not substantially supported in the accounting literature. Common transactions or events that should not be reported in financial statements prepared when applying a modified cash‐basis of accounting include the recording or adjusting of the following: • Capital assets arising from cash transactions or events, but not recording depreciation where appropri‐ ate • Donated capital assets where cash outflows were not involved • Accounts receivable from services provided or goods sold and other accrued receivables • Pledges receivable or other receivables where cash outflows were not involved • Investments for which cash outflows were not involved • Accounts payable for goods or services received where no cash outflow was involved • Accrued income taxes, accrued interest expense, other accrued liabilities where no cash outflow was in‐ volved 10 © 2018 Association of International Certified Professional Accountants. All rights reserved. • Subsequent write ups or write downs to fair value to recognize unrealized gains and losses on marketa‐ ble investments • Derivative instruments where cash inflows or outflows were not involved as well as the mark to market for fair value changes Because modified cash‐basis frameworks do not involve financial statement elements resulting from accruals and noncash transactions or events, it is unlikely that an acceptable modified cash‐basis framework would ever be materially equivalent to GAAP. However, it is important for financial statement preparers to avoid attempting to make certain modifications to GAAP financial statements and then referring to those financial statements as modified cash‐basis financial statements. For example, financial statements that are presented in conformity with GAAP, except that material leases are not capitalized, are not considered modified cash‐basis financial statements. Such financial statements are considered GAAP financial statements with a material departure due to the failure to capitalize material leases. The preparer will need to use judgment in determining if modified “cash‐basis” statements are tantamount to financial statements purported to be prepared in accordance with GAAP with material departures therefrom. Tax‐Basis of Accounting The tax‐basis is a basis of accounting that the entity uses to file its federal income tax or federal information re‐ turn for the period covered by the financial statements. The tax‐basis of accounting is based on the principles and rules for accounting for transactions under the federal income tax laws and regulations. Few new measurement guidelines need to be established because the method is based on tax laws. The tax‐basis of accounting covers a range of alternative bases, from cash to full accrual, depending on the nature of the taxpayer, and in some circumstances, the taxpayer’s elections. An entity need not be a taxable entity to prepare tax‐basis financial statements. Any entity that files a return with the IRS, either an income tax return or an information return, may prepare tax‐basis financial statements. Therefore, not‐for‐profit organizations, C corporations, S corporations, partnerships, limited liability partner‐ ships, limited liability companies, and sole proprietors may all use the tax‐basis of accounting. The tax‐basis of accounting is most useful for small, nonpublic entities whose financial statement users are in‐ terested primarily in the tax aspects of their relationship with the entity. For example, investors in tax‐driven partnerships, such as those commonly employed in the real estate industry, may be primarily interested in the tax consequences of transactions. However, they may want more information than would be provided by a tax return. Determining Whether to Prepare and Issue Cash‐ or Tax‐Basis Financial Statements As long as the entity is not contractually or otherwise required to issue financial statements prepared in accord‐ ance with GAAP or a regulatory or contractual basis of accounting, the entity may prepare and issue cash‐ or tax‐ basis financial statements. Understanding the needs of the financial statement users is an important step in de‐ termining whether to prepare and issue cash‐ or tax‐basis financial statements. If the users of the financial statements understand the presentation, and if the information presented when applying that basis of account‐ ing is relevant to their needs, then the preparer may determine that it is useful and appropriate to prepare and issue cash‐ or tax‐basis financial statements. The following are characteristics of entities that generally are good candidates to prepare cash‐ or tax‐basis financial statements: © 2018 Association of International Certified Professional Accountants. All rights reserved. 11 a. The entity’s creditors do not need or require financial statements prepared in accordance with GAAP. b. The cost of complying with GAAP would exceed the benefits (for example, a small construction contrac‐ tor who would be required to account for long term contracts using the percentage of completion method and would be required to compute deferred taxes). c. The owners are closely involved in the day‐to‐day operations of the business and have a fairly accurate picture of the entity’s financial position. d. The owners are primarily interested in cash flows (for example, a professional corporation of physicians that distributes its cash‐basis earnings through salaries, bonuses, and retirement plan contributions). e. The owners are primarily interested in the tax implications of transactions (for example, partners in a partnership who are concerned about the effects of transactions on their personal tax returns). f. It may not be appropriate to prepare and issue cash‐ or tax‐basis financial statements if the entity is or soon will be required to issue GAAP‐basis financial statements. For example, management of a company that is anticipating selling its business may be required to issue financial statements prepared in accord‐ ance with GAAP. Additionally, financial statements prepared when applying the cash‐ or tax‐basis of accounting should not be is‐ sued if the results are misleading. Cash‐ and tax‐basis financial statements are intended to be a cost‐effective al‐ ternative to GAAP, not a way to deliberately mislead financial statement users. Example Situation In Which it May Not Be Prudent to Issue Tax‐Basis Financial Statements • Long Street Partners has typically issued tax‐basis financial statements because the partners are more interested in the tax treatment of partnership transactions. Outside creditors have also accepted the tax‐basis financial statements as suitable for their needs. During the current year, two events occur that significantly affect the partnership: Several large customers experience financial difficulty and the part‐ nership’s receivables from the customers are in danger of not being collected. If the financial statements were prepared in accordance with GAAP, the partnership would be required to record a valuation al‐ lowance and recognize a bad debt expense. Under the tax rules, the partnership uses the direct write‐off method, so a tax deduction may not be allowed in the current year. • The partnership has acknowledged that it is obligated to perform an environmental remediation at one of its sites. If the financial statements were prepared in accordance with GAAP, the partnership would be required to recognize the liability and a loss. Although the entity may disclose the information in a risks and uncertainties note, under the tax rules, the deduction is not allowed until the amount is paid and therefore would not be included in the income statement equivalent. • Prior to preparing and issuing tax‐basis financial statements, in determining whether the proposed fi‐ nancial reporting framework is appropriate, the preparer may consider the following: — Whether the tax‐basis financial statements continue to be suitable for the users’ needs. In the example, the entity had a long history of issuing tax‐basis financial statements, which were suit‐ 12 © 2018 Association of International Certified Professional Accountants. All rights reserved. able for the needs of the users. The events in the current year merely illustrate the limitations of tax‐basis financial statements. — Appropriateness of disclosure. The preparer may determine to expand on the information in‐ cluded in the notes to the financial statements about these two events. For example, the part‐ nership might disclose the nature of the environmental remediation liability and the amounts involved. — Recognition may be appropriate. Depending on the nature and magnitude of the item, it may be appropriate to recognize it in the financial statements. In this example, the partnership might decide to account for bad debts using the allowance method and to recognize a contingent lia‐ bility for the remediation obligation. This would be a departure from the tax‐basis of accounting and the management of the entity may determine that, in the circumstances, it may be more appropriate to prepare its financial statements in accordance with GAAP. — Consider GAAP financials. As a result of the changed circumstances, financial statements pre‐ pared when applying the cash‐ or tax‐basis of accounting may no longer be appropriate, and the management of the entity may decide to prepare its financial statements in accordance with GAAP. Deciding Between Modified Cash‐ or Accrual Tax‐Basis Financial Statements In some situations it may be difficult to determine whether to issue modified cash‐ or accrual tax‐basis financial statements. Each basis has its own distinct advantages and disadvantages. Modified Cash‐ or Accrual Tax‐Basis Advantages and Disadvantages of Each Advantages Disadvantages Modified Cash‐Basis • Can be simpler to prepare than tax‐ basis • Not affected by changes in tax laws • Interim financial statements are easy to prepare • Recognition and measurement prin‐ ciples are not well‐defined • Not well‐suited for entities that have inventory or complex operations Accrual Tax‐Basis • Better‐suited for entities with inven‐ tory or complex operations • Well‐defined recognition and meas‐ urement criteria • Decisions made for tax reporting purposes may have unintended fi‐ nancial reporting effects • Accounting treatments are affected © 2018 Association of International Certified Professional Accountants. All rights reserved. 13 Advantages Disadvantages by changes in tax laws 14 © 2018 Association of International Certified Professional Accountants. All rights reserved. Chapter 2 Recognition and Measurement Issues in Financial Statements Prepared When Applying the Cash‐ or Tax‐Basis of Accounting The determination of what information should be reported in the financial statements and when to recognize transactions or events (recognition), and how to record transactions or events and at what amounts (measure‐ ment) varies depending on the type of framework used to prepare the financial statements. This chapter in‐ cludes a discussion of recognition and measurement issues for cash‐, modified cash‐, and tax‐basis financial statements. Cash‐Basis and Modified Cash‐Basis Observations and Suggestions In accordance with the master glossary included in the FASB Accounting Standards Codification® , cash equiva‐ lents are short‐term, highly liquid investments that have both of the following characteristics: a. Readily convertible to known amounts of cash b. So near their maturity that they present insignificant risks of changes in value because of changes in in‐ terest rates Generally, only investments with original maturities of three months or less qualify under that definition. Origi‐ nal maturity means original maturity to the entity holding the investment. For example, both a three‐month U.S. Treasury bill and a three‐year U.S. Treasury note purchased three months from maturity qualify as cash equiva‐ lents. However, a Treasury note purchased three years ago does not become a cash equivalent when its remain‐ ing maturity is three months. Examples of items commonly considered to be cash equivalents are Treasury bills, commercial paper, money market funds, and federal funds sold (for an entity with banking operations). The following represents certain significant measurement and recognition issues with respect to the cash‐ and modified‐cash bases of accounting. Investments In accordance with the cash‐basis of accounting, entities would reflect purchases of investments as cash dis‐ bursements and sales of investments as cash receipts in the period that the cash is disbursed or received. In‐ vestments acquired via noncash transactions should not be recorded and unrealized gains and losses should not be recognized. A common modification to the cash‐basis of accounting is to record investments in marketable securities as as‐ sets. If the entity prepared its financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP), the investments would be reflected in the balance sheet. As such, the investments would be initially recorded at cost and subsequent unrealized changes in value would be recorded to reflect the fair value of the investments. Because unrealized gains and losses are not the result of a cash © 2018 Association of International Certified Professional Accountants. All rights reserved. 15 transaction or event, such unrealized gains and losses should not be recorded in financial statements when ap‐ plying a modified cash‐basis of accounting. Instead, the investments would remain on the balance sheet equiva‐ lent at cost unless and until they become worthless or are sold. Receivables Receivables should not be recognized in financial statements prepared when applying the cash basis of account‐ ing unless the receivables result from an outflow of cash. Other receivables such as those arising from sales transactions made on credit should not be recorded. Property and Equipment Under the cash‐basis of accounting, purchases of property and equipment would be reflected in the financial statements as cash disbursements in the period the transaction occurred. The assets would not be capitalized and depreciation would not be recorded. A common modification to the cash‐basis of accounting is to record property and equipment arising from cash transactions as assets. Once the modification is made, the entity should adopt and consistently apply an alloca‐ tion policy (depreciation or amortization) that has substantial support in the accounting literature and is logical. Such policy should also include recording any financing arrangements that are part of a cash transaction. As part of this policy, management of the entity should consider how it would address single‐step transactions or events that may not directly involve a cash inflow or outflow but may nevertheless be recorded as an in‐substance two‐ step cash transaction or event. See chapter 1, “Overview of Cash‐ and Tax‐Basis Financial Statements,” for dis‐ cussion of in‐substance two‐step transactions. Donated assets should not be recognized as “assets” because they are not derived from the use of cash or cash equivalents. It would be appropriate to write off any remaining carrying value of property and equipment once the assets are no longer in use or have been permanently impaired. Bank Overdrafts Bank overdrafts may be netted with other cash balances from the same bank. Bank overdrafts should not be netted against funds held at another financial institution. If the entity has an overall negative cash balance from a financial institution, when applying the cash‐basis of accounting, the negative cash balance would be shown as a liability on the balance sheet equivalent, if one is presented. For example, if the net balance in Bank A is $(1,000) and the net balance in Bank B is $5,000, the balance sheet equivalent would show a cash asset of $5,000 and the $(1,000) overdraft as a liability. If the entity has an overall global negative cash balance, the neg‐ ative cash balance would be shown as negative cash on hand at the end of the period on the statement of cash receipts and disbursements. Borrowings When applying the cash‐basis of accounting, the entity should record all proceeds from borrowings as cash re‐ ceipts when received and then reflect the principal repaid and associated interest as cash disbursements when paid. If a loan provides direct financing of an asset, neither the loan nor the asset should be recorded. However, 16 © 2018 Association of International Certified Professional Accountants. All rights reserved. the principal and interest payments would be reflected as cash disbursements when paid. See chapter 1 for dis‐ cussion of in‐substance two‐step transactions. Tax‐Basis In tax‐basis financial statements, transactions are recognized and measured in the same manner as they are in the entity’s federal tax return. Therefore, the preparer of financial statements when applying the tax‐basis of ac‐ counting is required to understand the federal tax laws applicable to the particular entity. Although this chapter highlights certain common measurement and recognition issues with respect to the tax‐basis of accounting, it is not a substitute for understanding the federal tax laws applicable to the particular entity. Additionally, although the IRS permits all entities to use the accrual method of accounting for tax purposes, many smaller entities can instead elect to use the cash method of accounting for tax purposes. Entities with in‐ ventories are required to use the accrual method for sales and purchases of inventory. Nontaxable Revenues and Nondeductible Expenses Under federal income tax laws, certain revenue is not taxable and certain expenses are not deductible. For ex‐ ample, receipts such as interest on obligations of state and local governments and proceeds from life insurance policies are not taxable. Costs such as premiums paid on officers’ life insurance policies are not deductible. When presenting tax‐basis financial statements, in order to be transparent, preparers of tax‐basis financial statements may recognize nontaxable revenues and nondeductible expenses outside of taxable income. Nontaxable revenues should be recognized when received (cash‐basis) or when earned (accrual basis). Nonde‐ ductible expenses should be reported and charged to expense in the period paid (cash‐basis) or when incurred (accrual basis). Additional Income Taxes for Prior Years An IRS exam may result in additional income taxes being assessed for prior years. Two alternative methods may be used to account for additional taxes for prior years. • The amount may be charged to expense in the current period if there are no corresponding adjustments to the balance sheet equivalent for expenses capitalized or revenue recognized. • The amount may be treated as a prior period adjustment and charged to retained earnings in a manner that is logical and consistent with the equivalent of a presentation in accordance with GAAP. The IRS may disallow amounts charged to expense in prior years and require those amounts to be capitalized and amortized or may require recognition of previously unreported revenue. Such amounts, net of income tax adjustments, should be treated as prior period adjustments. Otherwise, either of the preceding methods is con‐ sidered acceptable. The method used and the amount of additional taxes should be disclosed in the notes to the financial statements. Accounting Changes for Tax Purposes For tax purposes, the effects of an accounting change may be recognized prospectively over a specified number of years. Accounting changes should be treated in the same manner as they are treated in the tax return. © 2018 Association of International Certified Professional Accountants. All rights reserved. 17 S Corporations Income of an S corporation is taxable to its shareholders. Consequently, such a corporation may be required to maintain information on distinct classes of retained earnings. However, in tax‐basis financial statements, S cor‐ porations usually report retained earnings as a single amount and should report distributions to stockholders. Significant Differences Between GAAP and Tax‐Basis There are many differences between the way items are accounted for in accordance with GAAP and the way they are treated under the tax rules. Some of the more common include the following: • Bad debt losses on uncollectible receivables • Inventory capitalization and valuation • Unrealized gains on investment securities • Depreciation and impairment of capital assets • Fair value measurements • Consolidation 18 © 2018 Association of International Certified Professional Accountants. All rights reserved. Chapter 3 Presentation and Disclosure Issues in Financial Statements Prepared When Ap‐ plying the Cash‐ or Tax‐Basis of Accounting The determination of the form and content of the financial statements or which financial statements to present and what to include (presentation and disclosure) varies depending on the financial reporting framework ap‐ plied. Financial statements prepared when applying the cash‐ or tax‐basis of accounting may provide less complex and more understandable alternatives to financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). However, preparers must be knowledgeable of GAAP disclosure requirements because cash‐ and tax‐basis financial statements should include informative disclosures similar to those required by GAAP if the financial statements contain items that are the same as, or similar to, those in financial statements prepared in accordance with GAAP. Observations and Suggestions Often, preparers of cash‐ and tax‐basis financial statements elect to omit substantially all disclosures required by the cash‐ or tax‐basis of accounting. The omission of disclosures is a departure from the cash‐ or tax‐basis of ac‐ counting and, if such disclosures were included in the financial statements, they might influence the user’s con‐ clusions about the entity’s financial position, results of operations, and cash flows. However, the omission may not necessarily result in misleading financial statements provided that the intended users are informed about such matters. If cash‐ or tax‐basis financial statements contain items for which GAAP would require disclosure, the financial statements may either provide the relevant disclosure that would be required for those items in a GAAP presen‐ tation or provide information that communicates the substance of that disclosure. This may result in substitut‐ ing qualitative information for some of the quantitative information required for GAAP presentations. For exam‐ ple, • disclosure of the repayment terms of significant long‐term borrowings may sufficiently communicate in‐ formation about future principal reduction without providing the summary of principal reduction during each of the next five years. • information about the effects of accounting changes, discontinued operations, and extraordinary items could be disclosed in a note to the financial statements without following the GAAP presentation re‐ quirements in the income statement equivalent or disclosing net‐of‐tax effects. • instead of showing expenses by their functional classifications with respect to the financial statements of a not‐for‐profit organization, a statement of activities could present expenses according to their natu‐ ral classifications, and a note to the financial statements could use estimated percentages to communi‐ cate information about expenses incurred by the major program and supporting services. • instead of showing the amounts of, and changes in, the unrestricted and temporarily and permanently restricted classes of net assets with respect to the financial statements of a not‐for‐profit organization, a © 2018 Association of International Certified Professional Accountants. All rights reserved. 19 statement of assets, liabilities, and net assets could report total net assets or fund balances, a related statement of activities could report changes in those totals, and a note to the financial statements could provide information, using estimated or actual amounts or percentages, about the restrictions on those amounts and on any deferred restricted amounts, describe the major restrictions, and provide infor‐ mation about significant changes in restricted amounts. For financial statements prepared when applying the cash‐ or tax‐basis of accounting, GAAP disclosure require‐ ments that are not relevant to the measurement of the item need not be considered. To illustrate, • fair value disclosures for investments in debt and equity securities would not be relevant when the basis of presentation does not adjust the cost of such securities to their fair value. • disclosures related to actuarial calculations for contributions to defined benefit plans would not be rele‐ vant in financial statements prepared when applying the cash‐ or tax‐basis of accounting. • disclosures related to the use of estimates would not be relevant in a presentation that has no esti‐ mates, such as the cash‐ or modified cash‐basis of accounting. Financial statements prepared when applying the cash‐basis of accounting generally do not include a statement of cash flows. However, depending on the user’s requirements, financial statements prepared when applying a modified cash‐ or the tax‐basis of accounting may include a statement of cash flows. For example, it may be challenging for users to obtain accurate information on operating, investing, and financing activities in single‐ year financial statements prepared when applying the tax‐basis of accounting unless a statement of cash flows is presented. Similar to financial statements prepared in accordance with GAAP, in order to achieve fair presentation, financial statements prepared when applying the cash‐ or tax‐basis of accounting should include all informative disclo‐ sures that are appropriate for the applicable financial reporting framework, including all significant matters that materially affect the financial statements’ use, understanding, and interpretation. Additionally, because financial statements prepared when applying the cash‐ or tax‐basis of accounting have certain inherent presentation and disclosure limitations, in order to enhance the value and usefulness of such fi‐ nancial statements, the preparer may disclose additional information in the notes to the financial statements. For example, donated capital assets would not be included in the balance sheet equivalent in financial state‐ ments prepared when applying a modified cash‐basis of accounting—even if the modification to the cash‐basis of accounting is to record capital expenditures as assets and depreciate them over their estimated useful lives. The preparer may elect to disclose the value of such donated capital assets in the notes to the financial state‐ ments. Presentation—Cash‐Basis Financial Statements Because a balance sheet equivalent would simply show the cash balance and a corresponding equity account, and a statement of cash flows would be repetitive of the statement of cash receipts and disbursements, finan‐ cial statements prepared when applying the cash‐basis of accounting may consist only of a statement of cash re‐ ceipts and disbursements. Although a single statement may be presented, informative disclosures are still nec‐ essary. Additionally, restrictions on cash balances should either be presented on the face of the statement of cash receipts and disbursements or should be disclosed in the notes to the financial statements. 20 © 2018 Association of International Certified Professional Accountants. All rights reserved. Basis of Accounting A required disclosure for all cash‐ and tax‐basis financial statements is the description of the basis of accounting (financial reporting framework), including how that basis of accounting differs from GAAP. Although these dif‐ ferences from GAAP should be qualitatively described, they need not be quantified. This description is important in financial statements prepared when applying a modified cash‐basis of accounting because such financial statements may vary depending on the modifications to the cash‐basis that were made. The description there‐ fore becomes essential to the user’s understanding of the financial statements. The description of the basis of accounting is usually presented in the summary of significant accounting policies section of the notes to the financial statements with a heading such as “Basis of Accounting.” The following ex‐ amples represent how the basis of accounting may be disclosed in the notes to financial statements prepared when applying the cash‐, a modified cash‐, and the tax‐basis of accounting. Example: Basis of Accounting Note—Cash‐Basis of Accounting Basis of Accounting The financial statements of Company X have been prepared on the cash‐basis of accounting, which is a compre‐ hensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP). The cash‐basis of accounting differs from GAAP primarily because revenues are recognized when re‐ ceived rather than when earned and expenses are recorded when paid rather than when incurred. The financial statements therefore present only cash and cash equivalents and changes therein in the form of cash receipts and disbursements. Example: Basis of Accounting Note—Modified Cash‐Basis of Accounting Basis of Accounting The financial statements of Company X have been prepared on the cash‐basis of accounting, modified to record assets or liabilities with respect to cash transactions and events that provide a benefit or result in an obligation that covers a period greater than the period in which the cash transaction or event occurred. The modifications result in the recording of investments, inventories, capital assets, and related short‐term and long‐term obliga‐ tions on the statement of financial position. This method of accounting represents a comprehensive basis of ac‐ counting other than accounting principles generally accepted in the United States of America (GAAP). This basis of accounting differs from GAAP primarily because certain revenue and related assets (such as accounts receiva‐ ble and revenue for billed or provided services not yet collected, and other accrued revenue and receivables) have been recognized when received rather than when earned and certain expenses and related liabilities (such as accounts payable and expenses for goods or services received but not yet paid, and other accrued liabilities and expenses) have been recognized when paid rather than when the obligations were incurred. Example: Basis of Accounting Note—Tax‐Basis of Accounting Basis of Accounting The financial statements of Company X have been prepared on the accrual basis of accounting that the Company uses for filing its federal income tax return, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP). This basis differs from GAAP primarily be‐ © 2018 Association of International Certified Professional Accountants. All rights reserved. 21 cause the Company expenses the cost of certain types of assets in accordance with IRC Section 179. GAAP re‐ quires that such assets be capitalized and expensed over their estimated useful lives. Summary of Significant Accounting Policies FASB Accounting Standards Codification (ASC) 235, Notes to Financial Statements, requires that financial state‐ ments prepared in accordance with GAAP include a summary of significant accounting policies in the notes to the financial statements. Accordingly, cash‐ and tax‐basis financial statements should include a summary of sig‐ nificant accounting policies in the notes to the financial statements. In addition to the basis of accounting discussed previously, the note should include disclosure of the significant accounting policies used to prepare the financial statements, including policies that involve the following: • A selection from existing acceptable alternatives • Industry specific applications • Unusual or innovative applications of accounting principles Because the cash‐basis of accounting does not include the recognition of noncash assets, liabilities, and noncash transactions, elaborate accounting policy disclosures are usually unnecessary. In financial statements prepared when applying a modified cash‐basis of accounting, such disclosures may include information about the follow‐ ing: • Investments • Inventory • Property and equipment • Income taxes • Consolidation • Related parties and related party transactions • Commitments and contingencies • Uncertainties • Subsequent events • Asset impairments The significant accounting policies note for tax‐basis financial statements should include disclosure of the follow‐ ing: • Whether the basic method of accounting is cash or accrual 22 © 2018 Association of International Certified Professional Accountants. All rights reserved. • The tax filing status of the entity, if other than a taxable corporation (that is, a C corporation) • That revenues and related assets and expenses and related obligations are recognized only when they are reported or deducted for federal income tax purposes • That nontaxable income and nondeductible expenses are included in the determination of the equiva‐ lent of operating results or “net income” • The nature of any optional tax methods of accounting followed • The nature of any important judgments or policies necessary for an understanding of the methods of recognizing revenue and allocating costs to current and future periods • Tax uncertainties including open tax years Also, tax uncertainties should be addressed in financial statements prepared when applying the cash‐ or tax‐ basis of accounting. FASB ASC 740‐10‐50‐15 requires that open tax years be disclosed—even if the reporting en‐ tity is a pass‐through entity or a not‐for‐profit organization. In addition, in financial statements prepared when applying the tax‐basis of accounting, disclosures regarding significant accounting policies may include information about receivables. The following represents guidance on certain other common presentation and disclosure issues with respect to cash‐ and tax‐basis financial statements. Subsequent Events FASB ASC 855, Subsequent Events, sets forth general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. The preparer should disclose the date through which subsequent events have been evaluated, which is the date the financial statements are available to be issued. When financial statements prepared when applying the cash‐ or tax‐basis of accounting contain items that are the same as, or similar to, those in financial statements pre‐ pared in accordance with GAAP, such financial statements should contain the disclosures required by FASB ASC 855. Related Party Transactions The existence of related party transactions that are material individually or in the aggregate and the nature and amounts of the transactions and balances should be disclosed. Note that the tax rules may define “related par‐ ty” differently than how it is defined in accordance with GAAP. To avoid confusion on the part of users of the tax‐basis financial statements, the GAAP definition of related party should be considered for all financial report‐ ing purposes. Commitments and Contingencies The existence and nature of material commitments and contingencies should be disclosed in the notes to finan‐ cial statements prepared when applying the cash‐ or tax‐basis of accounting. © 2018 Association of International Certified Professional Accountants. All rights reserved. 23 Pension Plans The existence and nature of a pension plan should be disclosed in the notes to financial statements when apply‐ ing the cash‐ or tax‐basis of accounting. Assets and Liabilities Information disclosed for assets and liabilities commonly includes the following items: • Restricted cash, segregated from cash available for current operations, with a description of the nature of the restriction • The aggregate fair value of investments in marketable securities • Accounts and notes receivable from officers, employees, and affiliates, presented separately with disclo‐ sure of the effective interest rate on notes receivable, and interest income for the period • The major classes of property, plant, and equipment; depreciation expense for the period; the meth‐ od(s) used in computing depreciation; and the aggregate, accumulated depreciation • The method of determining inventory cost (for example, last in, first out and first in, first out) Owners’ Equity The financial statements often include disclosures regarding information on owners’ equity as follows: • For each class of stock, the number of shares authorized, issued, and outstanding; the par or stated val‐ ue; and, in summary form, the pertinent rights and privileges of each outstanding class (if more than one class is outstanding) • The existence of stock option and stock purchase plans • Restrictions on the payment of dividends • Changes for the period in the separate components of owners’ equity A note to the financial statements of a voluntary health and welfare organization that prepares tax‐basis finan‐ cial statements could provide information, using estimated or actual amounts or percentages, about the re‐ strictions on total net assets or fund balances and on any deferred restricted amounts, describe the major re‐ strictions, and provide information about significant changes in restricted amounts. Risks and Uncertainties Financial statements prepared in accordance with GAAP are required to include a number of disclosures with re‐ spect to risks and uncertainties. The following table summarizes these disclosures and how GAAP requirements for disclosing risks and uncer‐ tainties should be addressed in cash‐ and tax‐basis financial statements. The table is not meant to be all‐ inclusive. 24 © 2018 Association of International Certified Professional Accountants. All rights reserved. Observations and Suggestions Often, preparers of cash‐ and tax‐basis financial statements elect to omit substantially all disclosures required by the cash‐ or tax‐basis of accounting. The omission of disclosures is a departure from the cash‐ or tax‐basis of ac‐ counting and, if such disclosures were included in the financial statements, they might influence the user’s con‐ clusions about the entity’s financial position, results of operations, and cash flows. However, the omission may not necessarily result in misleading financial statements provided that the intended users are informed about such matters. GAAP Requirement Summary of Required Disclosures Applicability to Cash‐ or Tax‐ Basis of Accounting Nature of Operations Entities should disclose a de‐ scription of the major products or services the reporting entity sells or provides and its principal markets. This information is use‐ ful because it helps financial statement users understand the nature of the entity’s business and the risks common to that business. This disclosure is relevant to all financial statements prepared in accordance with the cash‐ or tax‐ basis of accounting and should be made. Use of Estimates Financial statements should in‐ clude an explanation that the preparation of financial state‐ ments in accordance with GAAP requires the use of manage‐ ment’s estimates. This disclosure may not be rele‐ vant to some financial state‐ ments prepared in accordance with the cash‐ or tax‐basis of accounting; for example, finan‐ cial statements prepared on the cash‐basis that do not include estimated amounts. Certain Significant Estimates If certain criteria are met, the entity is required to disclose the nature of an uncertainty if it is at least reasonably possible that a change in an estimate will occur in the near term. The purpose of the disclosure is to communicate to financial statement users that there is a reasonable possibility that certain estimated amounts in the current year financial statements will change signifi‐ cantly and affect the subsequent years’ financial statements. If the GAAP disclosure criteria are met, the financial statements should include disclosure of the information required by GAAP. Vulnerability Due to Concentra‐ If certain criteria are met, the If the GAAP disclosure criteria © 2018 Association of International Certified Professional Accountants. All rights reserved. 25 GAAP Requirement Summary of Required Disclosures Applicability to Cash‐ or Tax‐ Basis of Accounting tions financial statements are re‐ quired to include disclosure in‐ formation about its vulnerability due to concentrations; for ex‐ ample, significant volume of business conducted with one customer. are met, the preparer should disclose the information re‐ quired by GAAP. Going Concern A basic premise underlying fi‐ nancial reporting is that a user of the financial statements can as‐ sume that the entity will contin‐ ue as a going concern for a rea‐ sonable period of time. If the preparer concludes that material uncertainties exist such that the entity may not continue as a go‐ ing concern for a reasonable pe‐ riod of time, the financial state‐ ments should include disclosure of such uncertainty. If the preparer concludes that there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time (generally one year from the date of the bal‐ ance sheet equivalent), the pre‐ parer should disclose the going concern considerations in a note to the financial statements. Terminology for Cash‐ and Tax‐Basis Financial Statements There is no requirement to modify financial statement titles in cash‐ or tax‐basis financial statements. However, users of such financial statements should be able to readily identify the basis of accounting used to prepare the financial statements. A common and convenient way of identifying the basis of accounting is through the finan‐ cial statement titles by adding “cash‐basis,” “modified cash‐basis,” or “tax‐basis” after the financial statement ti‐ tle. Cash‐basis financial statements might be titled, for example, • Statement of Assets and Liabilities Arising from Cash Transactions; • Statement of Revenue Collected and Expenses Paid; • Statement of Revenue and Expenses—Cash‐Basis; or • Statement of Cash Receipts and Disbursements. Modified cash‐basis financial statements might be titled, for example, • Statement of Assets and Net Assets—Modified Cash‐Basis; or • Statement of Revenue, Expenses and Changes in Net Assets—Modified Cash‐Basis. Tax‐basis financial statements might be titled, for example, 26 © 2018 Association of International Certified Professional Accountants. All rights reserved. • Statement of Assets, Liabilities, and Capital—Tax‐Basis; • Statement of Operations—Tax‐Basis; or • Statement of Revenue and Expenses—Tax‐Basis. The preceding examples are not meant to be all‐inclusive and are not the only acceptable titles. With respect to the captions to be used with the cash‐, modified cash‐, or tax‐basis financial statements, there is no requirement to modify the standard GAAP financial statement captions. Therefore, captions such as “net in‐ come,” “net loss,” and “retained earnings” are acceptable. However, if modifications are desired (which many preparers prefer as a means of additional emphasis that the financial statements are not prepared in accordance with GAAP), common examples for cash‐basis financial statements are excess of revenue collected over expenses paid and excess of expenses paid over revenue collected. For financial statements prepared when applying a modified cash‐basis of accounting, common modifications are excess of revenue over expenses and excess of ex‐ penses over revenue. With respect to tax‐basis financial statements, modifications with respect to financial statement captions are rarely made. However, modifications, if made, may include retained earnings—tax‐basis and net income—tax‐basis. Consolidation Accounting Professional judgment should be applied to determine which presentation—consolidated, unconsolidated, or combined—provides the most meaningful and relevant information. A preparer should not consolidate entities unless all entities to be consolidated use the same basis of accounting. For example, it would not be appropriate to consolidate an entity that prepares its financial statements using a modified cash‐basis of accounting with its parent who maintains its books and records in accordance with the tax‐basis of accounting. If the modified cash‐ basis of accounting is used, then all consolidated entities should utilize the same modifications to the cash‐basis of accounting. With respect to financial statements prepared when applying the tax‐basis of accounting, consolidation is based on the IRC. Therefore, the consolidation requirements of FASB ASC 810, Consolidation, do not apply. However, if the entity files a consolidated tax return, it should report consolidated results on its tax‐basis financial state‐ ments. In the case of brother‐sister corporations in which each entity maintains its books and records on the tax‐basis of accounting, but a consolidated tax return is not filed, the preparer may prepare combined financial statements because such financial statements may be more useful to users than individual uncombined financial statements. Although the tax consolidation rules are followed, additional disclosures may be necessary to lessen the chance that the financial statements are not misleading. Consider, for example, a 60 percent owned subsidiary that would be consolidated in financial statements prepared in accordance with GAAP but is not consolidated in fi‐ nancial statements prepared when applying the tax‐basis of accounting because the threshold for consolidation under the IRC is 80 percent ownership. Even though the subsidiary is not consolidated, the preparer should con‐ sider which disclosures are appropriate relative to the 60 percent owned subsidiary. Examples of matters that might require disclosure are the ownership and relationship with the subsidiary, related party transactions, guarantees, and commitments. © 2018 Association of International Certified Professional Accountants. All rights reserved. 27 Change From GAAP to Cash‐ or Tax‐Basis A change from GAAP to cash‐ or tax‐basis statements (or vice versa) does not represent a change in accounting principles as described in FASB ASC 250, Accounting Changes and Error Corrections. Therefore, no justification for the change is required, and a cumulative effect adjustment is unnecessary. When only the current year’s cash‐ or tax‐basis statements are presented, there are three ways of presenting opening equity: • Show opening equity as previously reported in accordance with GAAP, with an adjustment to convert to the cash‐ or tax‐basis. • Show opening equity on the as‐adjusted cash‐ or tax‐basis. • Show the effects of the adjustment to convert as a cumulative‐effect adjustment in the income state‐ ment equivalent. If comparative financial statements are presented, the prior periods should be restated and presented on the basis to which the company has changed. Restatement is necessary to ensure comparability between all periods presented. In all cases, the change in accounting basis should be disclosed in the notes to the financial statements. The fol‐ lowing is an example of how such a change in accounting basis could be disclosed in the notes to the financial statements: In 20X1, management adopted a policy of preparing its financial statements on the basis of accounting that it uses to file its federal income tax return. Prior to 20X1, the Company’s financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. Management believes that this change results in more relevant financial reporting that is easier and less costly to understand, apply, and use in the Company’s circumstances and considering the needs of the users of the financial statements. The 20X1 financial statements have been restated to be on the tax‐ basis of accounting. 28 © 2018 Association of International Certified Professional Accountants. All rights reserved. Appendix Illustrative Cash‐ and Tax‐Basis Financial Statements This appendix contains illustrative examples of financial statements prepared when applying the cash‐, modified cash‐, or tax‐basis of accounting for different types of entities. These financial statements are intended to illus‐ trate the significant discussion points in chapters 1–3 of this practice aid. Each financial statement has been an‐ notated to highlight these key points. Name of Entity Type of Entity Basis of Preparation Ceolainn Club Not‐for‐profit Cash Mickey’s Center Not‐for‐profit Modified Cash Donnelly & Oates Limited Liability Partnership Tax (Accrual Basis) Charlton Contractors, Inc. Construction Contractor Tax (Accrual Basis) Margaret Rose 1964 Irrevocable Trust Trust Tax (Accrual Basis) CEOLAINN CLUB FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 20X2 AND 20X1 Circumstances include the following: • The financial statements are for a not‐for‐profit membership club. • The financial statements are prepared on the cash‐basis of accounting. • The financial statements are comparative for the years ended June 30, 20X2, and 20X1. The financial statements illustrate the following: • The financial statements include a statement of functional expenses, which is required by accounting principles generally accepted in the United States of America (GAAP). Financial statements prepared when applying the cash‐basis of accounting are not required to include such a statement, but may in‐ stead communicate the substance of that requirement. • GAAP requires not‐for‐profit organizations to report the amount of unrestricted, temporarily restricted, and permanently restricted net assets on the face of the statement of financial position. Because a statement of financial position equivalent is not presented, the illustrative financial statements com‐ municate the substance of the GAAP requirement in the notes to the financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 29 Ceoliann Club Statements of Cash Receipts and Disbursements For the Years Ended June 30, 20X2 and 20X1 June 30, 20X2 June 30, 20X1 Cash received from support activities: Membership dues $ 49,899 $ 46,759 Donations 996 1,125 Programs 7,495 10,645 Total cash received from support activities 58,390 58,529 Cash received from other sources: Interest income 19 30 Other 300 3,720 Total cash received from other sources 319 3,750 TOTAL CASH RECEIVED $ 58,709 $ 62,279 Cash disbursed: Program services $ 29,110 $ 29,484 Supporting services 19,783 19,113 Fundraising 6,288 8,803 TOTAL CASH DISBURSED $ 55,181 $ 57,400 Excess of revenue collected over expenses paid 3,528 4,879 Cash and cash equivalents, beginning of year 39,046 34,167 Cash and cash equivalents, end of year $ 42,574 $ 39,046 See accompanying notes to financial statements. 30 © 2018 Association of International Certified Professional Accountants. All rights reserved. The Ceoliann Club Statements of Functional Expenses Cash‐Basis For the Years Ended June 30, 20X2 and 20X1 Program Services Supporting Services Fundraising Total June 30, 20X2 Program Services Supporting Services Fundraising Total June 30, 20X1 Salaries and benefits $ 23,333 $ 16,440 $ 4,241 $ 44,014 $ 23,633 $15,876 $ 5,937 $ 45,446 Events—special 1,795 1,795 2,513 2,513 Legal and ac‐ counting 2,320 2,320 2,500 2,500 Insurance 313 51 45 409 317 49 63 429 Postage/printing 3,477 3,477 3,398 3,398 Licenses/fees 114 114 464 464 Office expense 612 232 207 1.051 620 224 290 1,134 Miscellaneous 1,375 626 2,001 1,516 1,516 $ 29,110 $19,783 $6,288 $55,181 $29,484 $19,113 $8,803 $57,400 53% 36% 11% 52% 33% 15% See accompanying notes to financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 31 Ceolainn Club Notes to Financial Statements Cash‐Basis For the Years Ended June 30, 20X2 and 20X1 Note 1—Summary of Significant Accounting Policies Nature of Activities The Ceolainn Club (the Club) is a New York not‐for‐profit organization. The Club’s mission is to promote safe so‐ cial programs for young adults. Basis of Accounting The Club’s financial statements have been prepared on the cash‐basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP). The cash‐basis of accounting differs from GAAP primarily because revenues are recognized when received rather than when earned and expenses are recorded when paid rather than when incurred. The financial statements therefore present only cash and cash equivalents and changes therein in the form of cash receipts and dis‐ bursements. Cash and Cash Equivalents The Club considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. As of June 30, 20X2, and 20X1, cash and cash equivalents consisted entirely of the adjusted book balance in the Club’s checking account. Net Assets As of June 30, 20X2, and 20X1, all of the Club’s net assets were unrestricted. Income Taxes The Club is exempt from federal and state income taxes under Internal Revenue Code Section 501(c)(7). Accord‐ ingly, no provision for income taxes has been made in the financial statements. Uncertain Tax Positions Federal and state income tax returns for the years 20X0 to date are subject to examination by taxing authorities. Subsequent Events Management has evaluated subsequent events through August 28, 20X2, which is the date the financial state‐ ments were available to be issued. 32 © 2018 Association of International Certified Professional Accountants. All rights reserved. MICKEY’S CENTER FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED AUGUST 31, 20X2 Circumstances include the following: • The financial statements are for a not‐for‐profit charity. • The financial statements are prepared on a modified cash‐basis of accounting. The cash‐basis of ac‐ counting was modified to accrue cash transactions and events that provide a benefit or result in an obli‐ gation that covers a period greater than the period in which the cash transactions or events occurred. Such accruals resulted in the recording of property and equipment as assets on the statement of assets and net assets and subsequent depreciation of those assets over their estimated useful lives. • The financial statements are as of August 31, 20X2, and for the year then ended. The financial statements illustrate the following: • The financial statements include a statement of functional expenses, which is required by accounting principles generally accepted in the United States of America (GAAP). Financial statements prepared when applying a modified cash‐basis of accounting are not required to include such a statement, but may instead communicate the substance of that requirement. • GAAP requires not‐for‐profit organizations to report the amount of unrestricted, temporarily restricted, and permanently restricted net assets on the face of the balance sheet (in the case of the illustrative fi‐ nancial statements prepared on a modified cash‐basis of accounting, such point in time statement is re‐ ferred to as the statement of assets and net assets). The illustrative financial statements do not follow those presentation requirements but instead, communicate their substance by providing relevant in‐ formation in the notes to the financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 33 Mickey’s Center Statement of Assets and Net Assets Modified Cash‐Basis August 31, 20X2 Assets Cash and cash equivalents $ 316,258 Restricted cash (Note 2) 108,084 Property and equipment (net of accumulated de‐ preciation of $35,565) 9,018 $ 433,360 Net Assets Unrestricted net assets (Note 5) 433,360 Net assets $ 433,360 See accompanying notes to financial statements. 34 © 2018 Association of International Certified Professional Accountants. All rights reserved. Mickey’s Center Statement of Revenue, Expenses and Changes in Net Assets Modified Cash‐Basis For the Year Ended August 31, 20X2 Revenue Corporate and foundation contributions $ 536,134 Other contributions 235,920 Exchange club projects 105,302 Unsolicited and other donations 69,754 Total revenue 947,110 Expenses Program services 769,426 Management and general 100,718 Fundraising 55,264 155,982 Total expenses 925,408 Increase in net assets 21,702 Net assets, beginning of year 411,658 Net assets, end of year $ 433,360 See accompanying notes to financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 35 Mickey’s Center Statement of Functional Expenses Modified Cash‐Basis For the Year Ended August 31, 20X2 Program Services Management and General Fundraising Total Salaries and bene‐ fits $ 451,675 $ 76,781 $ 38,041 $ 566,497 Grant expense 41,291 41,291 Special events 77,790 13,233 91,023 Training 16,029 16,029 Professional ser‐ vices 16,810 16,810 Telephone 14,782 720 428 15,930 Postage/printing 6,176 301 178 6,655 Office supplies 16,597 809 481 17,887 Program materials 16,279 16,279 Depreciation 8,917 435 259 9,611 Rent 58,084 2,831 1,683 62,598 Miscellaneous 61,806 2,031 961 64,798 $ 769,426 $ 100,718 $ 55,264 $ 925,408 83% 11% 6% See accompanying notes to financial statements. 36 © 2018 Association of International Certified Professional Accountants. All rights reserved. Mickey’s Center Notes to Financial Statements Modified Cash‐Basis August 31, 20X2 Note 1—Summary of Significant Accounting Policies Nature of Activities Mickey’s Center (the Center) is a nonprofit corporation incorporated under the Texas Non‐Profit Corporation Act. The purpose of the Center is to use its funds exclusively for charitable, scientific, and educational purposes, especially the prevention of child abuse. Basis of Accounting The financial statements of the Center have been prepared on the cash‐basis of accounting, modified to record assets or liabilities with respect to cash transactions and events that provide a benefit or result in an obligation that covers a period greater than the period in which the cash transactions or events occurred. The modifica‐ tions result in the recording of capital assets on the statement of assets and net assets. Except for depreciation, all transactions are recognized as either revenue or expenses when received or paid in cash. Except for deprecia‐ tion, noncash transactions are not recognized. This basis of accounting represents a comprehensive basis of ac‐ counting other than accounting principles generally accepted in the United States of America (GAAP). This basis of accounting differs from GAAP primarily because certain revenue and related assets have been recognized when received rather than when earned and certain expenses and related liabilities have been recognized when paid rather than when the obligations were incurred. Property and Equipment Property and equipment are recorded at cost and consist of the office building and equipment. Depreciation is computed on the straight‐line method based on estimated useful lives of 30 years and 5 years for the office building and equipment, respectively. Cash Equivalents The Center considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. Contributions The Center records contributions when received in cash. Contributed Services Many individuals volunteer their time to help the Center with its educational activities. During the year ended August 31, 20X2, the Center received approximately 200 volunteer hours that have not been recorded in the statement of revenue, expenses, and changes in net assets. Functional Expenses © 2018 Association of International Certified Professional Accountants. All rights reserved. 37 The costs of providing the various programs, fundraising, and other activities have been summarized on a func‐ tional basis in the statement of functional expenses. Accordingly, certain costs have been allocated among the programs and fundraising activities benefited. Functional expenses are allocated to programs and supporting services based on specific identification. Expenses that relate to more than one program or support activity are allocated based on salary expenditure. Income Taxes The Center is exempt from federal and state income taxes under Internal Revenue Code Section 501(c)(3), ex‐ cept to the extent that it has taxable income from businesses that are not related to its tax exempt purpose. Un‐ related business income, if there was any, would be taxed at the applicable corporate income tax rate. The Cen‐ ter did not have any unrelated business income during the year ended August 31, 20X2, and accordingly, no pro‐ vision for income taxes has been made in the financial statements. The Center is not currently under examination by any taxing jurisdiction. Federal and state taxing authorities no longer have the right to examine tax years prior to 20Y9. For the year ended August 31, 20X2, there were no in‐ terest or penalties associated with tax positions recorded in the accompanying financial statements. Use of Estimates The preparation of financial statements on a modified cash‐basis of accounting requires management to make estimates and assumptions that affect financial statement amounts and disclosures. Actual results could differ from those estimates and assumptions. Subsequent Events In preparing these financial statements, management of the Center has evaluated events and transactions for potential recognition or disclosure through January 20, 20X3, the date the financial statements were available to be issued. Note 2—Restricted Cash The balance represents funds restricted by the board of directors in an amount equal to the balance in the School Initiatives Fund. Note 3—Commitments and Contingencies The land on which the Center’s office is located is being leased on an annual basis at a rate of $1,400 per annum. See Note 4. Note 4—Subsequent Events In September 20X2, the Center entered into a “purchase and sale agreement,” which provided for the purchase of a building in the amount of $230,000 and the assumption of a lease of the land on which the building is locat‐ ed. The building purchase was executed on September 28, 20X2, and was financed in part by a $220,000 note payable to a bank. The terms of the note provide for quarterly interest payments at the bank’s prime rate through the note maturity date. A $100,000 principal payment was due and made in December 20X2, and the remaining balance is due September 20X8. The note is secured by a leasehold deed of trust and security agree‐ ment and an assignment of rents and leases. 38 © 2018 Association of International Certified Professional Accountants. All rights reserved. The assumed lease previously referred to is an operating lease that requires annual payments of $19,600 through September 20X6. The Center has the option to terminate the lease in March 20X9. If the lease is not terminated, the annual payment will be revised to reflect 6 percent of the value of the land, which will be de‐ termined as set forth in the lease agreement. In December 20X2, the Center entered into a construction contract for $138,000 to design and construct certain building and leasehold improvements. Note 5—Internally Restricted Net Assets Net assets internally restricted for the School Initiatives Fund consist of amounts allocated from unrestricted net assets as approved by the board of directors. The internally restricted amounts are to be used for purchasing equipment and establishing programs for educational programs in schools and are not available for other pur‐ poses without approval by the board of directors. Note 6—Allocation of Joint Costs During the year ended August 31, 20X2, the Center conducted activities that included appeals for contributions and incurred joint costs of approximately $46,000. These activities included direct mail campaigns and special events. Approximately 65 percent of these joint costs were allocated to fundraising activities and 35 percent to program services. © 2018 Association of International Certified Professional Accountants. All rights reserved. 39 DONNELLY & OATES LIMITED LIABILITY PARTNERSHIP FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 20X2 Circumstances include the following: • The financial statements are for a limited liability partnership (LLP) that owns and operates a racquet and swim club. • The financial statements are prepared on basis of accounting that the LLP uses for federal income tax purposes. • The financial statements are as of and for the year ended December 31, 20X2. The financial statements illustrate the following: • The Statement of Revenues and Expenses uses the caption “Revenues in excess of expenses” to portray what a financial statement prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) would describe as “Net income.” There is no prohibition on the use of “Net income” or other GAAP captions within the financial statements. In this situation, the entity has chosen the term because management believes it to be more descriptive. • The financial statements include a Statement of Cash Flows, which is not required for financial state‐ ments prepared when applying the tax‐basis of accounting. However, in this case, the financial state‐ ments include a single year only, thus it would be difficult for financial statement users to obtain accu‐ rately the information on operating, investing and financing activities presented in a statement of cash flows. 40 © 2018 Association of International Certified Professional Accountants. All rights reserved. Donnelly & Oates Limited Liability Partnership Statements of Assets, Liabilities and Partners’ Capital Tax‐Basis December 31, 20X2 Assets Cash 450,944 Accounts receivable 451,194 Inventory 311,214 Prepaid expenses and other assets 24,046 Financing fees, less accumulated amortization of $57,096 259,124 Syndication costs 312,166 Property and equipment, net of accumulated depreci‐ ation of $2,810,112 9,054,554 $ 10,863,242 Liabilities and Partners’ Capital Accounts payable $ 276,502 Accrued payroll and related costs 117,792 Other accrued expenses 23,998 Unearned dues 369,586 Mortgage payable $ 7,566,966 Total liabilities 8,354,844 Partners’ capital 2,508,398 $ 10,863,242 See accompanying notes. © 2018 Association of International Certified Professional Accountants. All rights reserved. 41 Donnelly & Oates Limited Liability Partnership Statement of Revenues and Expenses Tax‐Basis For the Year Ended December 31, 20X2 Revenues Membership dues $ 3,970,334 Initiation fees 389,638 Tennis court fees and lessons 1,103,224 Other income 726,936 Sports shop and café 1,219,740 Total revenues 7,409,872 Expenses Management fee 50,700 Maintenance and operating 504,448 Utilities 391,460 Advertising and promotions 191,088 Payroll and related costs 2,774,706 Insurance 136,984 Administrative 246,906 Real estate taxes 351,246 Cost of sales—sports shop and café 701,800 Total expenses 5,349,338 Net operating income 2,060,534 Partnership expenses (9,572) Interest expense (765,476) Depreciation and amortization (610,094) Loss on sale of equipment (4,240) Revenues in excess of expenses $ 671,152 See accompanying notes. 42 © 2018 Association of International Certified Professional Accountants. All rights reserved. Donnelly & Oates Limited Liability Partnership Statement of Partners’ Capital Tax‐Basis For the Year Ended December 31, 20X2 Limited Part‐ ners Special Limited Partner General Part‐ ner Partners’ Capi‐ tal Balance, December 31, 20X1 $ 1,017,392 $ 1,256,710 $ (69,276) $ 2,204,826 Cash distributions (238,924) (55,138) (73,518) (367,580) Revenues in excess of ex‐ penses 436,254 100,674 134,224 671,152 Balance, December 31, 20X2 $ 1,214,722 $ 1,302,246 $ (8,570) $ 2,508,398 See accompanying notes. © 2018 Association of International Certified Professional Accountants. All rights reserved. 43 Donnelly & Oates Limited Liability Partnership Statement of Cash Flows Tax‐Basis For the Year Ended December 31, 20X2 Cash flows from operating activities Revenues in excess of expenses $ 671,152 Adjustments to reconcile revenues in excess of ex‐ penses to cash flows from operating activities Depreciation and amortization 610,094 Loss on sale of equipment 4,240 (Increase) decrease in: Accounts receivable (23,494) Inventory (102,916) Prepaid expenses 1,472 Accounts payable and accrued expenses 74,992 Unearned dues 32,874 Net cash flows provided by operating activities 1,268,414 Cash flows from investing activities Acquisition of equipment (277,138) Proceeds from sale of equipment 620 Net cash flows used by investing activities (276,518) Cash flows from financing activities Repayment of debt (473,574) Cash distributions to partners (367,580) Net cash flows used by financing activities (841,154) Increase in cash 150,742 Cash at beginning of year 300,202 Cash at end of year $ 450,944 Supplemental disclosures of cash flow information: Cash paid during the year for interest $ 774,170 See accompanying notes. 44 © 2018 Association of International Certified Professional Accountants. All rights reserved. Donnelly & Oates Limited Liability Partnership Notes to Financial Statements Tax‐Basis For the Year Ended December 31, 20X2 Note 1—Summary of Significant Accounting Policies Nature of Operations The Partnership owns and operates a racquet and swim club (the Club) located in Minnesota. The Club has approximately 3,000 members at December 31, 20X2. The Club extends credit to members for the payment of dues and other charges. The Partnership, formed in 19W5, is a limited liability partnership in accordance with the provisions of the Uni‐ form Partnership Act as in effect in the State of Minnesota. The general partner of the Partnership is Tony Donnelly. Basis of Accounting The Partnership’s financial statements are prepared on the accounting basis the Partnership used for federal in‐ come tax purposes, which is a comprehensive basis of accounting other than accounting principles generally ac‐ cepted in the United States of America (GAAP). The Partnership uses the Accelerated Cost Recovery System (ACRS) and Modified Accelerated Cost Recovery System (MACRS) in depreciating its property. Under ACRS and MACRS, depreciation is determined over periods of time that are shorter than those used in accordance with GAAP. Additionally, the income tax methods used to capitalize and amortize amortizable assets differ from those used under GAAP. Syndication costs are carried as an asset of the Partnership and are not amortized. Under GAAP these costs would be deducted from partners’ capital. Cash Equivalents The Partnership considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Concentration of Credit Risk The Partnership places its cash with one banking institution. At times the amount on deposit exceeds the in‐ sured limit of the institution and exposes the Partnership to a collection risk. Inventories Inventories, which consist of merchandise for sale in the sports shop, food, and beverages, are stated at the lower of cost (first in, first out method) or market. Membership Dues and Initiation Fees © 2018 Association of International Certified Professional Accountants. All rights reserved. 45 Membership dues are billed in advance and recorded in accounts receivable and unearned dues. The dues are recognized as revenue in the month earned. Initiation fees are recorded as revenue in the period when the fee is collected. Property and Equipment Property and equipment are carried at depreciated cost. Depreciation is computed using income tax methods. The cost of maintenance and repairs is charged to income as incurred; significant renewals or betterments are capitalized. Financing Fees Financing fees are amortized over the term of the related debt using the straight‐line method. During 20XX, fi‐ nancing fees related to retired debt were written off. The financing fees related to new debt were capitalized. Amortization expense was $12,149 during 20X2. Start‐Up Costs Start‐up costs are amortized over 60 months using the straight‐line method. Income Taxes Income taxes on Partnership income are levied on the partners at the partner level. Accordingly, all profits and losses of the Partnership are recognized by each partner on his respective tax return. Management believes that the Partnership has adequately addressed all relevant tax positions and that there are no unrecorded tax liabilities. Tax returns filed for the tax years ending from December 31, 20Y9, through cur‐ rent are still subject to examination by federal and state tax authorities. Any interest or penalties assessed to the Partnership are recorded in operating expenses. No interest or penalties from federal or state tax authorities were recorded in the accompanying financial statements. Advertising and Promotions Advertising costs are expensed as incurred. For the year ended December 31, 20X2, the Partnership incurred $191,088 in advertising costs. Estimates The preparation of financial statements on the tax‐basis of accounting requires management to make estimates and assumptions that affect the amounts reported on the financial statements and accompanying notes. Actual results could differ from those estimates. Subsequent Events Subsequent events have been evaluated through February 24, 20X3, which is the date the financial statements were available to be issued, and there are no subsequent events requiring disclosure. Note 2—Partnership Organization Profit and Loss Allocations 46 © 2018 Association of International Certified Professional Accountants. All rights reserved. Prior to December 1, 20XX, profits and losses from annual operations were allocated 99 percent to the limited partners and 1 percent to the general partner. Subsequent to November 30, 20XX, and until the Class A limited partners have received distributions of net cash flow equal to their preferred return, profits and losses from annual operations are allocated 65 percent to the Class A limited partners; 15 percent to the special limited partner; and 20 percent to the general partner. After the Class A limited partners have received cumulative distributions of net cash flow equal to their pre‐ ferred return, profits and losses from annual operations will be allocated 45 percent to the Class A limited part‐ ners; 15 percent to the special limited partner; and 40 percent to the general partner. Net Cash Flow Allocation From Operations Subsequent to November 30, 20XX, net cash flow is allocated 65 percent to the Class A limited partners; 15 per‐ cent to the special limited partner; and 20 percent to the general partner until such time as the Class A limited partners have received cumulative distributions equal to their preferred return. The balance of any net cash flow will be distributed 45 percent to the Class A limited partners; 15 percent to the special limited partner; and 40 percent to the general partner. Preferred Return The preferred return means a 9 percent per annum cumulative noncompounded return on the adjusted capital contribution of the Class A limited partners. The adjusted capital contribution means the original capital contri‐ butions are reduced only by distribution from the net proceeds of sale or refinancing. Note 3—Property and Equipment Property and equipment at December 31, 20X2, consisted of the following: Recovery Peri‐ od—Years Land $ 975,720 — Building 9,320,050 7–40 Tenant improvements 1,568,896 5–7 Total cost of property and equip‐ ment being depreciated $ 11,864,666 Less: Accumulated depreciation 2,810,112 Total property and equipment, net $ 9,054,554 Depreciation expense was $597,945 during 20X2. © 2018 Association of International Certified Professional Accountants. All rights reserved. 47 Note 4—Mortgage Payable At December 31, 20X2, debt consisted of the following: Mortgage loan payable in monthly payments of $73,124, including interest at 9.375%, through January 20XY when the interest rate changes to 3.5% above the 3‐ year Treasury base rate. Beginning February 1, 20XY, monthly payments will be ad‐ justed to reflect the new interest rate; the payments will be based upon a 15‐year term. The remaining principal is due January 1, 20XZ. The mortgage is secured by property, equipment, and a personal guaranty. $ 6,778,186 10% unsecured note payable to the special limited partners due in monthly install‐ ments of $16,546, including principal and interest, through February 1, 20XZ, when the unpaid balance is due. 788,780 $ 7,566,966 Scheduled principal payments under these loans are approximately $380,000 per year until February 1, 20XY, when payment terms will be adjusted as described previously. Note 5—Amendment of the Partnership Agreement The Partnership agreement was amended effective November 30, 20XX. The primary purpose of the amend‐ ment was to create a new class of limited partner (the special limited partner) and to change the allocations of profits, losses, and cash distributions. Effective November 30, 20XX, Michael Oates surrendered his 67 limited partnership units in exchange for $1,450,000 and a 15 percent special limited partnership interest. Additionally, as part of this exchange, $200,000 was paid down on the note payable to the special limited partner, the interest rate on this note was reduced to 10 percent from 12 percent, and the term of the note was shortened. Note 6—Transactions With Affiliates At December 31, 20X2, the Partnership owed partners or affiliated entities $788,780. During 20X2 a management fee of $50,700 was paid to a partner. 48 © 2018 Association of International Certified Professional Accountants. All rights reserved. CHARLTON CONTRACTORS, INC. FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 20X2, AND 20X1 Circumstances include the following: • The financial statements are for a general contractor. The general contractor has elected to be treated as a small business corporation (S corporation) under Internal Revenue Code Section 1362. • The financial statements are prepared on the accrual method of accounting used for federal income tax purposes. • The financial statements are comparative statements as of and for the years ended December 31, 20X2, and 20X1. The financial statements illustrate the following: • The financial statements include a statement of cash flows, which is not required for financial state‐ ments prepared when applying the tax‐basis of accounting. • Information about contract receivables (Note 2), billings in excess of costs on uncompleted contracts (Note 5), and backlog (Note 7) are disclosures typically made in the financial statements of construction contractors. However, the aging summary of contract receivables is not usually disclosed. In this situa‐ tion, the preparer concluded that the information is relevant to the financial statement users. • The information on accounts payable and accruals is not required but has been included because the preparer concluded that users of the financial statements find it meaningful. • Accounting principles generally accepted in the United States of America (GAAP) requires a summary of future minimum lease payments, which usually is presented in a schedule. Because the entity’s lease commitments are not complex, this information has been summarized in narrative form, which is ac‐ ceptable for financial statements prepared on the tax‐basis of accounting. © 2018 Association of International Certified Professional Accountants. All rights reserved. 49 Charlton Contractors, Inc. Statements of Assets, Liabilities and Equity Tax‐Basis December 31, 20X2 and 20X1 20X2 20X1 Assets Current Assets Cash and cash equivalents $ 3,078,966 $ 3,608,930 Accounts receivable—contract (Note 2) 2,409,554 1,422,268 Advances to officers 7,812 — Inventory 287,714 196,200 Total current assets 5,784,046 5,227,398 Property and Equipment Machinery and equipment 1,694,980 1,710,828 Transportation equipment 384,790 395,042 Office furniture and equipment 162,454 163,034 Leasehold improvements 363,798 363,798 Total cost 2,606,022 2,632,702 Accumulated depreciation and amortization (Note 3) (2,362,850) (2,343,812) Net property and equipment 243,172 288,890 Other Assets Cash surrender value of officers’ life insurance 24,454 23,610 Miscellaneous 1,460 20,766 Total other assets 25,914 44,376 Total assets $ 6,053,132 $ 5,560,664 See accompanying notes to financial statements. 50 © 2018 Association of International Certified Professional Accountants. All rights reserved. Charlton Contractors, Inc. Statements of Assets, Liabilities and Equity Tax‐Basis Years Ended December 31, 20X2 and 20X1 20X2 20X1 Liabilities and Stockholders’ Equity Current Liabilities Accounts payable and accruals (Note 4) $ 548,646 $ 288,904 Billings in excess of costs on uncompleted con‐ tracts (Note 5) 976,754 445,108 Total current liabilities 1,525,400 734,012 Contributed Capital Common stock, $1,000 par value; 100 shares authorized; 60 shares issued and outstanding 60,000 60,000 Retained Earnings 4,467,732 4,766,652 Total stockholders’ equity 4,527,732 4,826,652 Total liabilities and stockholders’ equity $ 6,053,132 $ 5,560,664 See accompanying notes to financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 51 Charlton Contractors, Inc. Statements of Operations and Retained Earnings Tax‐Basis Years Ended December 31, 20X2 and 20X1 20X2 20X1 Contract revenue $ 7,009,498 $ 8,116,380 Cost of contract revenue Direct costs Materials and supplies 1,710,330 1,729,310 Salaries and wages 1,184,132 1,264,664 Subcontracts 1,670,596 1,838,942 Other 99,486 92,560 4,664,544 4,925,476 Indirect costs 813,520 967,278 5,478,064 5,892,754 Gross profit 1,531,434 2,223,626 General and administrative expenses Salaries and wages 1,298,552 2,139,444 Profit‐sharing plan contribution — 6,138 Other 596,938 539,786 1,895,490 2,685,368 Operating loss (364,056) (461,742) Financing income 88,148 132,590 Net loss (275,908) (329,152) Retained earnings, beginning of year 4,766,652 5,255,804 Distributions to stockholders (23,012) (160,000) Retained earnings, end of year $ 4,467,732 $ 4,766,652 See accompanying notes to financial statements. 52 © 2018 Association of International Certified Professional Accountants. All rights reserved. Charlton Contractors, Inc. Statements of Cash Flows Tax‐Basis Years Ended December 31, 20X2 and 20X1 20X2 20X1 Cash flows from operating activities Net loss $ (275,908) $ (329,152) Noncash items included in net loss: Depreciation 45,718 60,204 (Increase) decrease in: Contract receivables (987,286) 2,103,570 Inventory (91,514) (3,260) Cash surrender of officers’ life insurance (844) (1,200) Other assets — (408) Increase (decrease) in: Accounts payable and accruals 259,742 (100,832) Billings in excess of costs on uncompleted contracts 531,646 (895,508) Net cash (used) provided by operat‐ ing activities (518,446) 833,414 Cash flows from investing activities Property and equipment purchases — (60,000) Advances to officers (7,812) — Redemption of certificates of deposit — 2,132,038 Decrease in miscellaneous assets 19,306 — Net cash provided by investing ac‐ tivities 11,494 2,072,038 Cash flows from financing activities Distributions to stockholders (23,012) (160,000) Net (decrease) increase in cash and cash equiva‐ lents (529,964) 2,745,452 Cash and cash equivalents, beginning of year 3,608,930 863,478 Cash and cash equivalents, end of year $ 3,078,966 $ 3,608,930 See accompanying notes to financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 53 Charlton Contractors, Inc. Notes to Financial Statements Tax‐Basis December 31, 20X2 and 20X1 Note 1—Summary of Significant Accounting Policies Nature of Operations Charlton Contractors is a general contractor primarily engaged in the construction of commercial and multifami‐ ly residential projects in the San Diego metropolitan area. Basis of Accounting The accompanying financial statements have been prepared on the accrual method of accounting used for fed‐ eral income tax purposes, which is a comprehensive basis of accounting other than accounting principles gener‐ ally accepted in the United States of America (GAAP). If the accompanying financial statements were prepared in conformity with GAAP, contract revenue and costs would be recognized under the percentage‐of‐completion method of accounting, an allowance for uncollectible accounts receivable would be established, property and equipment would be depreciated over their estimated useful lives, and the related party lease would be capitalized as an asset and liability. The Corporation has elected to be treated as a small business corporation (S corporation) under Internal Reve‐ nue Code Section 1362. This election provides that, in lieu of corporate income taxes, the taxable items and credits pass directly to the stockholders. Therefore, these financial statements do not include federal or state in‐ come taxes that would otherwise be applicable. The Corporation uses the accrual completed contract method to recognize construction revenue. That method of accounting recognizes contract revenue and costs when a contract is completed or substantially completed. A contract is considered substantially completed when all costs except insignificant items have been incurred and the installation has been accepted by the customer. Contract costs include all direct material and labor costs and those indirect costs related to contract perfor‐ mance, such as rent, depreciation, maintenance, and insurance. Indirect costs are allocated based on contract revenue. General and administrative costs are charged to expenses as incurred. Amounts billed in excess of costs are classified as current liabilities under billings in excess of cost on uncom‐ pleted contracts. Contract retentions are included in contract receivables. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with a maturity of three months or less when pur‐ chased. 54 © 2018 Association of International Certified Professional Accountants. All rights reserved. At December 31, 20X2, and 20X1, the Corporation had on deposit with several banks amounts in excess of Fed‐ eral Deposit Insurance Corporation insurance limits. The Corporation has not experienced any losses in such ac‐ counts. The Corporation believes it is not exposed to any significant credit risk on cash and cash equivalents. Contract Receivables Contract receivables, including retentions, are recorded as progress billings and rendered in accordance with the provisions of the contracts. The Corporation uses the direct write‐off method to record uncollectible accounts in compliance with the Internal Revenue Code. Inventory Inventory is valued at the lower of cost, based on the first in, first out method, or market. Property and Equipment Property and equipment are recorded at cost and depreciated using principally accelerated methods. Leasehold improvements are amortized over the life of the related leases or their estimated useful lives, whichever is shorter. Property and equipment are depreciated over the following recovery periods: Machinery and equipment 5 years Transportation equipment 5 years Office furniture and equipment 5–7 years Leasehold improvements 10–31.5 years Expenditures for maintenance and repairs that do not materially extend the lives of the assets are charged to earnings. When property or equipment is sold or otherwise disposed of, the cost and related accumulated de‐ preciation are removed from the respective accounts, and the resulting gain or loss is reflected in earnings. Profit‐Sharing Plan The Corporation adopted a profit‐sharing plan effective November 22, 19V4. Substantially all full‐time employ‐ ees are eligible to participate. The Corporation’s contributions on behalf of its employees are determined annu‐ ally by the board of directors. The Corporation did not make a contribution for 20X2. Profit‐sharing contributions were $6,138 for the year ended December 31, 20X1. Statement of Cash Flows For purposes of the statement of cash flows, cash and cash equivalents include money market accounts and op‐ erating bank accounts. The Corporation did not pay any interest expense for 20X2 and 20X1. Income Taxes © 2018 Association of International Certified Professional Accountants. All rights reserved. 55 The Corporation, with the consent of its shareholders, has elected, in accordance with the Internal Revenue Code, to be treated as an S corporation. In lieu of federal income taxes, the shareholders of an S corporation are taxed on their proportionate share of the corporation’s taxable income. Therefore, no provision for federal in‐ come taxes has been included in these financial statements. California law generally conforms to federal law ex‐ cept for a 1.5 percent tax imposed on S corporation’s earnings. The Corporation is subject to tax in other states. Deferred income taxes have not been recognized in these financial statements because the amount of deferred taxes is not considered material. The Corporation does not recognize a liability for uncertain tax positions until agreement and settlement is reached with the taxing authority. Tax returns filed for the tax years ending from December 31, 20Y9, through current are still subject to examination by federal and state tax authorities. Subsequent Events The Corporation has evaluated subsequent events from the date of the statement of assets, liabilities, and equi‐ ty—tax‐basis through March 12, 20X3, the date on which the financial statements were available to be issued, and determined that there are no items to disclose. Note 2—Contract Receivables An aging summary of contract receivables at December 31, is as follows: 20X2 20X1 Billed Current $ 1,131,718 $ 364,284 30 days 486,854 306,318 60 days 189,138 79,914 90 days and over 129,326 133,272 1,937,036 883,788 Unbilled retentions 456,512 444,252 Unbilled amounts on complet‐ ed contracts 16,006 94,228 Totals $ 2,409,554 $ 1,422,268 56 © 2018 Association of International Certified Professional Accountants. All rights reserved. Completed and uncompleted contract receivables at December 31, are as follows: 20X2 20X1 Completed contracts Billed, including retentions $ 906,052 $ 581,760 Unbilled retentions 116,772 125,206 Unbilled amounts on completed con‐ tracts 16,006 94,228 Uncompleted contracts Uncompleted contracts billed 1,030,984 302,028 Unbilled retentions 339,740 319,046 Totals $ 2,409,554 $ 1,422,268 Receivables written off as uncollectible totaled $30,158 for the year ended December 31, 20X2, and $2,000 for the year ended December 31, 20X1. Recoveries of receivables written off an uncollectible totaled $17,000 for the year ended December 31, 20X1. Note 3—Depreciation and Amortization The accumulated depreciation and amortization balances at December 31, are as follows: 20X2 20X1 Machinery and equipment $ 1,689,162 $ 1,701,064 Transportation equipment 308,130 296,002 Office furniture and equipment 161,612 160,440 Leasehold improvements 203,946 186,306 Totals $ 2,362,850 $ 2,343,812 © 2018 Association of International Certified Professional Accountants. All rights reserved. 57 Note 4—Accounts Payable and Accruals Accounts payable and accruals consist of the following at December 31: 20X2 20X1 Trade accounts payable $ 343,222 $ 157,726 Subcontract payables 156,130 86,104 Accrued payroll 40,626 39,814 Accrued and withheld payroll taxes 3,124 860 Sales tax payable 5,544 4,400 Totals $ 548,646 $ 288,904 Note 5—Billings in Excess of Costs on Uncompleted Contracts Billings in excess of costs on uncompleted contracts at December 31 are as follows: 20X2 20X1 Billings on uncompleted contracts $ 4,320,008 $ 2,258,286 Costs incurred on uncompleted contracts (3,343,254) (1,813,178) Billings in excess of costs on un‐ completed contracts $ 976,754 $ 445,108 Note 6—Commitment Under Lease Agreement On December 15, 20V6, the Corporation signed a lease with its stockholders for an office and production facility located in Mira Mesa, California. The facility lease is for 25 years, terminating December 15, 20YY. The base an‐ nual rent was $343,000 for 20X2 and 20X1. Increases in the base annual rent are to be based on the consumer price index, not to exceed 6 percent. The stockholders pay the real estate taxes and the Corporation pays all maintenance charges and operating costs for the facility. The rental payments include an escalation for increas‐ es in real estate taxes. At December 31, 20X2, the aggregate minimum lease payments under this lease were approximately $2,800,000. Future minimum lease payments are scheduled to be approximately $350,000 for each of the next 5 years. Rent expense for each of the years ended December 31, 20X2, and 20X1 was $353,000. Note 7—Backlog The estimated gross revenue on work to be performed on signed contracts was $3,467,894 at December 31, 20X2, and $4,183,624 at December 31, 20X1. In addition to the backlog of work to be performed, there was gross revenue to be reported in future periods under the accrual completed contract method used by the com‐ pany of $1,548,173 at December 31, 20X2, and $1,668,961 at December 31, 20X1. 58 © 2018 Association of International Certified Professional Accountants. All rights reserved. MARGARET ROSE 1964 IRREVOCABLE TRUST FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 20X2 AND 20X1 Circumstances include the following: • The financial statements are for an irrevocable trust. • The financial statements are prepared on the cash method of accounting used for federal income tax purposes. • The financial statements are comparative as of and for the years ended December 31, 20X2, and 20X1. The financial statements illustrate the following: • The financial statements do not include a statement of cash flows, which is acceptable for a presenta‐ tion when applying the tax‐basis of accounting. The preparer concluded that a statement of cash flows is not necessary because (1) the users of the financial statements are more interested in asset balances ra‐ ther than cash flows, and (2) if cash flow information is needed, it could easily be derived from the in‐ formation presented. © 2018 Association of International Certified Professional Accountants. All rights reserved. 59 Margaret Rose 1964 Irrevocable Trust Statements of Assets, Liabilities and Corpus Tax‐Basis December 31, 20X2 and 20X1 20X2 20X1 Assets Marketable securities—at cost $ 1,830,087 $ 1,560,681 (market value $2,746,922 and $2,353,519 in 20X2 and 20X1, respectively) Purchased interest 340 — Total assets $ 1,830,427 $ 1,560,681 Liabilities and Corpus Due to beneficiary 157,946 75,302 Total liabilities 157,946 75,302 Corpus 1,672,481 1,485,379 Total liabilities and corpus $ 1,830,427 $ 1,560,681 See accompanying notes. 60 © 2018 Association of International Certified Professional Accountants. All rights reserved. Margaret Rose 1964 Irrevocable Trust Statements of Revenues, Expenses and Corpus Tax‐Basis Years Ended December 31, 20X2 and 20X1 20X2 20X1 Revenues Dividends $ 76,139 $ 69,044 Interest 4,729 4,457 Gain (loss) on sale of securities, net 201,370 46,094 Total revenues 282,238 119,595 Expenses Accounting fee 7,500 7,000 Bank custodian fee 3,018 2,588 Investment counsel fee 9,474 7,588 Total expenses 19,992 17,176 Income before provision for income taxes 262,246 102,419 Provision for income taxes 75,144 22,207 Net income 187,102 80,212 Corpus, beginning of year 1,485,379 1,405,167 Corpus, end of year $ 1,672,481 $ 1,485,379 See notes to financial statements. © 2018 Association of International Certified Professional Accountants. All rights reserved. 61 Margaret Rose 1964 Irrevocable Trust Notes to Financial Statements Tax‐Basis For the Years Ended December 31, 20X2 and 20X1 Note 1—Nature of Trust and Significant Accounting Policies Nature of Trust The Margaret Rose 1964 Irrevocable Trust (the Trust) was created on May 5, 1964, by Michael Thomas. Distribu‐ tion of 25 percent of principal is to be made at age 30, and 33 1/3 percent at age 35. After January 1, 19X2, the beneficiary may request annually a noncumulative distribution of the larger of $5,000 or 5 percent of the princi‐ pal as of the end of the year. Upon death of the beneficiary, the Trust is to be distributed according to the terms of her will. The trustee has discretionary power to distribute principal or income, or both. Basis of Accounting The accompanying financial statements have been prepared on the cash method of accounting used for federal income tax purposes, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP). Consequently, certain revenues and expenses are recognized in the determination of income in different reporting periods than they would be if the financial statements were prepared in conformity with GAAP. Although income tax rules are used to determine the timing of the re‐ porting of revenues and expenses, nontaxable revenues and nondeductible expenses are included in the deter‐ mination of net income. Use of Estimates The preparation of financial statements in conformity with the cash method of accounting used for federal in‐ come tax purposes requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Marketable Securities Marketable securities are carried at cost. The cost of marketable securities sold is based on cost as determined under the specific identification method. Income Taxes The Trust does not recognize a liability for uncertain tax positions. Tax returns filed for the tax years ending from December 31, 20Y9, through current are still subject to examination by federal and state tax authorities. Subsequent Events In preparing these financial statements, the Trust has evaluated events and transactions for potential recogni‐ tion or disclosure through April 1, 20X3, the date the financial statements were available to be issued, and de‐ termined that there are no items to disclose. 62 © 2018 Association of International Certified Professional Accountants. All rights reserved. Note 2—Marketable Securities At December 31, 20X2, and 20X1, gross unrealized gains and losses pertaining to marketable securities in the portfolio were as follows: Cost Market Value Unrealized Gains Losses 20X2 Equities $ 948,766 $ 1,790,955 $ 854,565 $ 12,376 Fixed income and money market 881,321 955,967 119,362 44,716 Total $ 1,830,087 $ 2,746,922 $ 973,927 $ 57,092 Market Unrealized Cost Value Gains Losses 20X1 Equities $ 891,685 $ 1,611,732 $ 757,910 $ 37,863 Fixed income and money market 668,996 741,787 72,791 — Total $ 1,560,681 $ 2,353,519 $ 830,701 $ 37,863 Note 3—Income Taxes The income tax expense shown in the accompanying financial statements differs from the expense that would result from applying statutory tax rates to income before income taxes primarily because of capital gains. Distributions to beneficiaries are allowed as a deduction from taxable income for the trust in the year in which such distributions are made. The provision for income taxes for the years ended December 31 consists of: 20X2 20X1 Federal $ 63,200 $ 17,874 State 11,944 4,333 Provision for income taxes $ 75,144 $ 22,207
USER:
Please summarize the major differences between cash- and tax-basis account as explained in the context provided.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 9
| 16
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Answer all user questions using only information from the prompt provided by the user. Do not use any outside sources, or any information stored in your databases.
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Which wars have been financed with estate taxes?
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History Early History of U.S. Taxes on Transfers Taxes on the transfer of assets have existed throughout history, dating back to ancient Egypt. In the United States, they were used prior to the modern estate and gift tax in 1916 to finance wars and similar emergencies.8 The first was enacted in 1797 to expand the Navy, given strained relationships with France. At that time, a documentary stamp tax on the inventories of deceased persons, the receipt of inheritances from an estate (except those to a wife, children, or grandchildren), and the probates and letters of administration of estates was imposed. These taxes were fixed amounts, although they were larger for larger inheritances and small inheritances were exempt. These taxes were repealed in 1802. In 1862, during the Civil War, an inheritance tax was imposed. Unlike the current estate tax, the tax was imposed on the beneficiaries, but unlike the stamp tax, it was a percentage of the inheritance. The tax was also imposed on gifts during the lifetime. The rate depended on the family relationships of the beneficiaries, and spouses and small inheritances were exempt. This tax was repealed in 1870. 8For a history, see Darien P. Jacobson, Brian G. Raub, and Barry W. Johnson, The Estate Tax: Ninety Years and Counting, Internal Revenue Service, Statistics of Income Bulletin, Summer 2007, pp. 118-128, https://www.irs.gov/ pub/irs-soi/ninetyestate.pdf, and Joint Committee on Taxation, History, Present Law, And Analysis Of The Federal Wealth Transfer Tax System, JCX-52-15, March 26, 2015, https://www.jct.gov/publications/2015/jcx-52-15/. For a history of the gift tax, see David Joulfanian, The Federal Gift Tax: History, Law, and Economics, U.S. Department of the Treasury, Office of Tax Analysis, OTA Paper 100, November 2007, https://home.treasury.gov/system/files/131/wp 100.pdf. Congressional Research Service 4 The Estate and Gift Tax: An Overview The 1894 income tax was not a transfer tax, but it included inheritances and gifts in income. It was short-lived after being found unconstitutional by the Supreme Court in Pollock v. Farmers’ Loan and Trust Company. In 1898, an estate tax was enacted to finance the Spanish-American War. Rates were graduated depending on degree of kinship and size, bequests to spouses were exempt, and there was an overall exemption that excluded small estates. It was repealed in 1902. The Modern Estate and Gift Tax Lawmakers enacted the direct ancestor of the current estate tax in 1916. It contained exemptions that excluded small estates, and rates were graduated based on the size of the estate. Over time, rates were increased, but the basic form of the tax remained. The top rate was 10% in 1916 with a $50,000 exemption, and it was increased to 25% in 1917, with the first $50,000 taxed at 2%. At the end of World War I in 1918, rates were reduced on smaller estates and charitable deductions were allowed. The top rate was increased to 40% in 1924, and a credit for state taxes was allowed for up to 25% of estate tax liability. The top rate was reduced to 20% from 1926 to 1931, increased to 40% in 1932, and eventually rose as high as 77% from 1941 to 1976. A separate gift tax was enacted in 1924 with the same rates and exemptions, and an annual exclusion per donee of $500. The tax was repealed in 1926, then reenacted in 1932 with a $5,000 annual exclusion per donee. In 1942, changes addressed the difference in treatment in community property states, where each spouse owned half the assets and only the half owned by the decedent was subject to tax. In other states where couples could own assets jointly, exclusions were allowed only if the surviving spouse contributed to the assets. The 1942 act treated assets in community property states the same as in other states. In 1948, this rule was changed to allow a deduction for property transferred to a spouse whether by the will or by law. The 1942 act made other changes in rates and exemptions and instituted a $3,000 annual gift exclusion per donee. The Tax Reform Act of 1976 (P.L. 94-455) created the modern unified estate and gift tax with a unified credit and graduated rates applied to all transfers. The 1976 act also instituted carryover basis for inherited assets, but that provision resulted in considerable controversy and was repealed retroactively in 1980. The exemption was increased from $60,000 to $120,000, and the top rate was lowered to 70%. The Economic Growth and Tax Relief Act of 2001 (EGTRRA; P.L. 107-16) provided for a gradual reduction in the estate tax. The law applied a unified exemption for both lifetime gifts and the estate of $675,000 prior to these changes. Under EGTRRA, the estate tax exemption rose from $675,000 in 2001 to $3.5 million in 2009, and the top tax rate fell from 55% to 45%. Although combined estate and gift tax rates are graduated, the exemption is effectively in the form of a credit that eliminates tax due at lower rates, resulting in a flat rate on taxable assets under 2009 law. The gift tax exemption was, however, restricted to $1 million. For 2010, EGTRRA scheduled the elimination of the estate tax, although it retained the gift tax and its $1 million exemption. EGTRRA also provided for a carryover of basis for assets inherited at death in 2010, so that, in contrast with prior law, heirs who sold assets would have to pay tax on gains accrued during the decedent’s lifetime. This provision had a $1.3 million exemption for gain (plus $3 million for a spouse). Congressional Research Service 5 The Estate and Gift Tax: An Overview As with other provisions of EGTRRA, the estate tax revisions were to expire in 2011, returning the tax provisions to their pre-EGTRRA levels. The exemption would have reverted to $1 million (a value that had already been scheduled for pre-EGTRRA law) and the rate to 55% (with some graduated rates). The carryover basis provision effective in 2010 would have been eliminated (so that heirs would not be taxed on gain accumulated during the decedent’s life when they inherited assets). During debate on the estate tax, most agreed that the 2010 provisions would not be continued and, indeed, could be repealed retroactively. President Obama proposed a permanent extension of the 2009 rules (a $3.5 million exemption and a 45% tax rate), and the House provided for that permanent extension on December 3, 2009 (H.R. 4154). The Senate Democratic leadership indicated a plan to retroactively reinstate the 2009 rules for 2010 and beyond. Senate Minority Leader McConnell proposed an alternative of a 35% tax rate and a $5 million exemption.9 A similar proposal for a $5 million exemption and a 35% rate, which also included the ability of the surviving spouse to inherit any unused exemption of the decedent, is often referred to as Lincoln Kyl (named after two Senators who sponsored it). Other proposals began with the $3.5 million exemption and 45% rate and would have phased in the $5 million exemption and 55% rate. Some Members of Congress argued for permanent estate tax repeal.10 At the end of 2010, P.L. 111-312 enacted a temporary two-year extension of the estate and gift tax, with a $5 million unified exemption, a 35% rate, and inheritance of unused spousal exemptions. For 2010, estates could elect to be taxed under the estate tax or under the carryover rules. These provisions provided for estate tax rules through 2012, after which the provisions would have reverted to the pre-EGTRRA rules ($1 million exemption, 55% top rate) absent legislation. The American Taxpayer Relief Act of 2012 (P.L. 112-240) established the permanent exemption ($5.25 million, indexed for inflation?) and rate (40%) described above. The 2017 tax revision (P.L. 115-97) doubled the exemption for the years 2018 through 2025. The House had proposed doubling the exemption through 2024 and then repealing the estate tax and lowering the gift tax rates to 35%. One issue that arises with the expiration of the increased exemptions is the treatment of gifts that had been transferred with exemptions higher than the exemptions that the law would revert to.
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Answer all user questions using only information from the prompt provided by the user. Do not use any outside sources, or any information stored in your databases. Which wars have been financed with estate taxes? History Early History of U.S. Taxes on Transfers Taxes on the transfer of assets have existed throughout history, dating back to ancient Egypt. In the United States, they were used prior to the modern estate and gift tax in 1916 to finance wars and similar emergencies.8 The first was enacted in 1797 to expand the Navy, given strained relationships with France. At that time, a documentary stamp tax on the inventories of deceased persons, the receipt of inheritances from an estate (except those to a wife, children, or grandchildren), and the probates and letters of administration of estates was imposed. These taxes were fixed amounts, although they were larger for larger inheritances and small inheritances were exempt. These taxes were repealed in 1802. In 1862, during the Civil War, an inheritance tax was imposed. Unlike the current estate tax, the tax was imposed on the beneficiaries, but unlike the stamp tax, it was a percentage of the inheritance. The tax was also imposed on gifts during the lifetime. The rate depended on the family relationships of the beneficiaries, and spouses and small inheritances were exempt. This tax was repealed in 1870. 8For a history, see Darien P. Jacobson, Brian G. Raub, and Barry W. Johnson, The Estate Tax: Ninety Years and Counting, Internal Revenue Service, Statistics of Income Bulletin, Summer 2007, pp. 118-128, https://www.irs.gov/ pub/irs-soi/ninetyestate.pdf, and Joint Committee on Taxation, History, Present Law, And Analysis Of The Federal Wealth Transfer Tax System, JCX-52-15, March 26, 2015, https://www.jct.gov/publications/2015/jcx-52-15/. For a history of the gift tax, see David Joulfanian, The Federal Gift Tax: History, Law, and Economics, U.S. Department of the Treasury, Office of Tax Analysis, OTA Paper 100, November 2007, https://home.treasury.gov/system/files/131/wp 100.pdf. Congressional Research Service 4 The Estate and Gift Tax: An Overview The 1894 income tax was not a transfer tax, but it included inheritances and gifts in income. It was short-lived after being found unconstitutional by the Supreme Court in Pollock v. Farmers’ Loan and Trust Company. In 1898, an estate tax was enacted to finance the Spanish-American War. Rates were graduated depending on degree of kinship and size, bequests to spouses were exempt, and there was an overall exemption that excluded small estates. It was repealed in 1902. The Modern Estate and Gift Tax Lawmakers enacted the direct ancestor of the current estate tax in 1916. It contained exemptions that excluded small estates, and rates were graduated based on the size of the estate. Over time, rates were increased, but the basic form of the tax remained. The top rate was 10% in 1916 with a $50,000 exemption, and it was increased to 25% in 1917, with the first $50,000 taxed at 2%. At the end of World War I in 1918, rates were reduced on smaller estates and charitable deductions were allowed. The top rate was increased to 40% in 1924, and a credit for state taxes was allowed for up to 25% of estate tax liability. The top rate was reduced to 20% from 1926 to 1931, increased to 40% in 1932, and eventually rose as high as 77% from 1941 to 1976. A separate gift tax was enacted in 1924 with the same rates and exemptions, and an annual exclusion per donee of $500. The tax was repealed in 1926, then reenacted in 1932 with a $5,000 annual exclusion per donee. In 1942, changes addressed the difference in treatment in community property states, where each spouse owned half the assets and only the half owned by the decedent was subject to tax. In other states where couples could own assets jointly, exclusions were allowed only if the surviving spouse contributed to the assets. The 1942 act treated assets in community property states the same as in other states. In 1948, this rule was changed to allow a deduction for property transferred to a spouse whether by the will or by law. The 1942 act made other changes in rates and exemptions and instituted a $3,000 annual gift exclusion per donee. The Tax Reform Act of 1976 (P.L. 94-455) created the modern unified estate and gift tax with a unified credit and graduated rates applied to all transfers. The 1976 act also instituted carryover basis for inherited assets, but that provision resulted in considerable controversy and was repealed retroactively in 1980. The exemption was increased from $60,000 to $120,000, and the top rate was lowered to 70%. The Economic Growth and Tax Relief Act of 2001 (EGTRRA; P.L. 107-16) provided for a gradual reduction in the estate tax. The law applied a unified exemption for both lifetime gifts and the estate of $675,000 prior to these changes. Under EGTRRA, the estate tax exemption rose from $675,000 in 2001 to $3.5 million in 2009, and the top tax rate fell from 55% to 45%. Although combined estate and gift tax rates are graduated, the exemption is effectively in the form of a credit that eliminates tax due at lower rates, resulting in a flat rate on taxable assets under 2009 law. The gift tax exemption was, however, restricted to $1 million. For 2010, EGTRRA scheduled the elimination of the estate tax, although it retained the gift tax and its $1 million exemption. EGTRRA also provided for a carryover of basis for assets inherited at death in 2010, so that, in contrast with prior law, heirs who sold assets would have to pay tax on gains accrued during the decedent’s lifetime. This provision had a $1.3 million exemption for gain (plus $3 million for a spouse). Congressional Research Service 5 The Estate and Gift Tax: An Overview As with other provisions of EGTRRA, the estate tax revisions were to expire in 2011, returning the tax provisions to their pre-EGTRRA levels. The exemption would have reverted to $1 million (a value that had already been scheduled for pre-EGTRRA law) and the rate to 55% (with some graduated rates). The carryover basis provision effective in 2010 would have been eliminated (so that heirs would not be taxed on gain accumulated during the decedent’s life when they inherited assets). During debate on the estate tax, most agreed that the 2010 provisions would not be continued and, indeed, could be repealed retroactively. President Obama proposed a permanent extension of the 2009 rules (a $3.5 million exemption and a 45% tax rate), and the House provided for that permanent extension on December 3, 2009 (H.R. 4154). The Senate Democratic leadership indicated a plan to retroactively reinstate the 2009 rules for 2010 and beyond. Senate Minority Leader McConnell proposed an alternative of a 35% tax rate and a $5 million exemption.9 A similar proposal for a $5 million exemption and a 35% rate, which also included the ability of the surviving spouse to inherit any unused exemption of the decedent, is often referred to as Lincoln Kyl (named after two Senators who sponsored it). Other proposals began with the $3.5 million exemption and 45% rate and would have phased in the $5 million exemption and 55% rate. Some Members of Congress argued for permanent estate tax repeal.10 At the end of 2010, P.L. 111-312 enacted a temporary two-year extension of the estate and gift tax, with a $5 million unified exemption, a 35% rate, and inheritance of unused spousal exemptions. For 2010, estates could elect to be taxed under the estate tax or under the carryover rules. These provisions provided for estate tax rules through 2012, after which the provisions would have reverted to the pre-EGTRRA rules ($1 million exemption, 55% top rate) absent legislation. The American Taxpayer Relief Act of 2012 (P.L. 112-240) established the permanent exemption ($5.25 million, indexed for inflation?) and rate (40%) described above. The 2017 tax revision (P.L. 115-97) doubled the exemption for the years 2018 through 2025. The House had proposed doubling the exemption through 2024 and then repealing the estate tax and lowering the gift tax rates to 35%. One issue that arises with the expiration of the increased exemptions is the treatment of gifts that had been transferred with exemptions higher than the exemptions that the law would revert to.
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Answer all user questions using only information from the prompt provided by the user. Do not use any outside sources, or any information stored in your databases.
EVIDENCE:
History Early History of U.S. Taxes on Transfers Taxes on the transfer of assets have existed throughout history, dating back to ancient Egypt. In the United States, they were used prior to the modern estate and gift tax in 1916 to finance wars and similar emergencies.8 The first was enacted in 1797 to expand the Navy, given strained relationships with France. At that time, a documentary stamp tax on the inventories of deceased persons, the receipt of inheritances from an estate (except those to a wife, children, or grandchildren), and the probates and letters of administration of estates was imposed. These taxes were fixed amounts, although they were larger for larger inheritances and small inheritances were exempt. These taxes were repealed in 1802. In 1862, during the Civil War, an inheritance tax was imposed. Unlike the current estate tax, the tax was imposed on the beneficiaries, but unlike the stamp tax, it was a percentage of the inheritance. The tax was also imposed on gifts during the lifetime. The rate depended on the family relationships of the beneficiaries, and spouses and small inheritances were exempt. This tax was repealed in 1870. 8For a history, see Darien P. Jacobson, Brian G. Raub, and Barry W. Johnson, The Estate Tax: Ninety Years and Counting, Internal Revenue Service, Statistics of Income Bulletin, Summer 2007, pp. 118-128, https://www.irs.gov/ pub/irs-soi/ninetyestate.pdf, and Joint Committee on Taxation, History, Present Law, And Analysis Of The Federal Wealth Transfer Tax System, JCX-52-15, March 26, 2015, https://www.jct.gov/publications/2015/jcx-52-15/. For a history of the gift tax, see David Joulfanian, The Federal Gift Tax: History, Law, and Economics, U.S. Department of the Treasury, Office of Tax Analysis, OTA Paper 100, November 2007, https://home.treasury.gov/system/files/131/wp 100.pdf. Congressional Research Service 4 The Estate and Gift Tax: An Overview The 1894 income tax was not a transfer tax, but it included inheritances and gifts in income. It was short-lived after being found unconstitutional by the Supreme Court in Pollock v. Farmers’ Loan and Trust Company. In 1898, an estate tax was enacted to finance the Spanish-American War. Rates were graduated depending on degree of kinship and size, bequests to spouses were exempt, and there was an overall exemption that excluded small estates. It was repealed in 1902. The Modern Estate and Gift Tax Lawmakers enacted the direct ancestor of the current estate tax in 1916. It contained exemptions that excluded small estates, and rates were graduated based on the size of the estate. Over time, rates were increased, but the basic form of the tax remained. The top rate was 10% in 1916 with a $50,000 exemption, and it was increased to 25% in 1917, with the first $50,000 taxed at 2%. At the end of World War I in 1918, rates were reduced on smaller estates and charitable deductions were allowed. The top rate was increased to 40% in 1924, and a credit for state taxes was allowed for up to 25% of estate tax liability. The top rate was reduced to 20% from 1926 to 1931, increased to 40% in 1932, and eventually rose as high as 77% from 1941 to 1976. A separate gift tax was enacted in 1924 with the same rates and exemptions, and an annual exclusion per donee of $500. The tax was repealed in 1926, then reenacted in 1932 with a $5,000 annual exclusion per donee. In 1942, changes addressed the difference in treatment in community property states, where each spouse owned half the assets and only the half owned by the decedent was subject to tax. In other states where couples could own assets jointly, exclusions were allowed only if the surviving spouse contributed to the assets. The 1942 act treated assets in community property states the same as in other states. In 1948, this rule was changed to allow a deduction for property transferred to a spouse whether by the will or by law. The 1942 act made other changes in rates and exemptions and instituted a $3,000 annual gift exclusion per donee. The Tax Reform Act of 1976 (P.L. 94-455) created the modern unified estate and gift tax with a unified credit and graduated rates applied to all transfers. The 1976 act also instituted carryover basis for inherited assets, but that provision resulted in considerable controversy and was repealed retroactively in 1980. The exemption was increased from $60,000 to $120,000, and the top rate was lowered to 70%. The Economic Growth and Tax Relief Act of 2001 (EGTRRA; P.L. 107-16) provided for a gradual reduction in the estate tax. The law applied a unified exemption for both lifetime gifts and the estate of $675,000 prior to these changes. Under EGTRRA, the estate tax exemption rose from $675,000 in 2001 to $3.5 million in 2009, and the top tax rate fell from 55% to 45%. Although combined estate and gift tax rates are graduated, the exemption is effectively in the form of a credit that eliminates tax due at lower rates, resulting in a flat rate on taxable assets under 2009 law. The gift tax exemption was, however, restricted to $1 million. For 2010, EGTRRA scheduled the elimination of the estate tax, although it retained the gift tax and its $1 million exemption. EGTRRA also provided for a carryover of basis for assets inherited at death in 2010, so that, in contrast with prior law, heirs who sold assets would have to pay tax on gains accrued during the decedent’s lifetime. This provision had a $1.3 million exemption for gain (plus $3 million for a spouse). Congressional Research Service 5 The Estate and Gift Tax: An Overview As with other provisions of EGTRRA, the estate tax revisions were to expire in 2011, returning the tax provisions to their pre-EGTRRA levels. The exemption would have reverted to $1 million (a value that had already been scheduled for pre-EGTRRA law) and the rate to 55% (with some graduated rates). The carryover basis provision effective in 2010 would have been eliminated (so that heirs would not be taxed on gain accumulated during the decedent’s life when they inherited assets). During debate on the estate tax, most agreed that the 2010 provisions would not be continued and, indeed, could be repealed retroactively. President Obama proposed a permanent extension of the 2009 rules (a $3.5 million exemption and a 45% tax rate), and the House provided for that permanent extension on December 3, 2009 (H.R. 4154). The Senate Democratic leadership indicated a plan to retroactively reinstate the 2009 rules for 2010 and beyond. Senate Minority Leader McConnell proposed an alternative of a 35% tax rate and a $5 million exemption.9 A similar proposal for a $5 million exemption and a 35% rate, which also included the ability of the surviving spouse to inherit any unused exemption of the decedent, is often referred to as Lincoln Kyl (named after two Senators who sponsored it). Other proposals began with the $3.5 million exemption and 45% rate and would have phased in the $5 million exemption and 55% rate. Some Members of Congress argued for permanent estate tax repeal.10 At the end of 2010, P.L. 111-312 enacted a temporary two-year extension of the estate and gift tax, with a $5 million unified exemption, a 35% rate, and inheritance of unused spousal exemptions. For 2010, estates could elect to be taxed under the estate tax or under the carryover rules. These provisions provided for estate tax rules through 2012, after which the provisions would have reverted to the pre-EGTRRA rules ($1 million exemption, 55% top rate) absent legislation. The American Taxpayer Relief Act of 2012 (P.L. 112-240) established the permanent exemption ($5.25 million, indexed for inflation?) and rate (40%) described above. The 2017 tax revision (P.L. 115-97) doubled the exemption for the years 2018 through 2025. The House had proposed doubling the exemption through 2024 and then repealing the estate tax and lowering the gift tax rates to 35%. One issue that arises with the expiration of the increased exemptions is the treatment of gifts that had been transferred with exemptions higher than the exemptions that the law would revert to.
USER:
Which wars have been financed with estate taxes?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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| 27
| 8
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Use the source provided only.
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Please answer the following based on the legal specifications: what happens if there is a price change or conflict in a promotion?
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Page # 1 OVERVIEW 1. BY PLACING AN ORDER FOR PRODUCTS FROM THIS WEBSITE, YOU AFFIRM THAT YOU ARE OF LEGAL AGE TO ENTER INTO THIS AGREEMENT, AND YOU ACCEPT AND ARE BOUND BY THESE TERMS AND CONDITIONS. YOU MAY NOT ORDER OR OBTAIN PRODUCTS OR SERVICES FROM THIS WEBSITE IF YOU (A) DO NOT AGREE TO THESE TERMS, (B) ARE NOT THE OLDER OF (i) AT LEAST 18 YEARS OF AGE OR (ii) LEGAL AGE TO FORM A BINDING CONTRACT WITH LAZARUS NATURALS, OR (C) ARE PROHIBITED FROM ACCESSING OR USING THIS WEBSITE OR ANY OF THIS WEBSITE’S CONTENTS, GOODS OR SERVICES BY APPLICABLE LAW. These terms and conditions (these “Terms”) apply to the purchase and sale of products and services through the Lazarus Naturals website (the “Website”). These Terms are subject to change by Lazarus Naturals (referred to as “us”, “we”, or “our” as the context may require) without prior written notice at any time, in our sole discretion. Any changes to the Terms will be in effect as of the “Last Updated Date” referenced on the Website. You should review these Terms prior to purchasing any product or services that are available through this Website. Your ordering of products or services, or continued use of this Website after the “Last Updated Date,’ will constitute your acceptance of and agreement to such changes. 2. Order Acceptance and Cancellation. You agree that your order is an offer to buy, under these Terms, all products and services listed in your order. All orders must be accepted by us or we will not be obligated to sell the products or services to you. We may choose not to accept orders at our sole discretion, even after we send you a confirmation email with your order number and details of the items you have ordered. 3. Prices and Payment Terms. (a) All prices, discounts, and promotions posted on this Website are subject to change without notice. The price charged for a product or service will be the price in effect at the time the order is placed and will be set out in your order confirmation email. Price increases will only apply to orders placed after such changes. Posted prices do not include taxes or charges for shipping and handling. All such taxes and charges will be added to your merchandise total, and will be itemized in your shopping cart and in your order confirmation email. We strive to display accurate price information, however we may, on occasion, make inadvertent typographical errors, inaccuracies or omissions related to pricing and availability. We reserve the right to correct any errors, inaccuracies, or omissions at any time and to cancel any orders arising from such occurrences. Page # 2 (b) We may offer from time to time promotions on the Website that may affect pricing and that are governed by terms and conditions separate from these Terms. If there is a conflict between the terms for a promotion and these Terms, the promotion terms will govern. (c) Terms of payment are within our sole discretion and payment must be received by us before our acceptance of an order. We accept all major credit and debit cards for all purchases. You represent and warrant that (i) the credit and debit card information you supply to us is true, correct and complete, (ii) you are duly authorized to use such credit and debit card for the purchase, (iii) charges incurred by you will be honored by your credit and debit card company, and (iv) you will pay charges incurred by you at the posted prices, including shipping and handling charges and all applicable taxes, if any, regardless of the amount quoted on the Website at the time of your order. Our use of personal information provided by you is governed by our Privacy Policy. 4. Shipments; Delivery; Title and Risk of Loss. (a) We will arrange for shipment of the products to you. Please check our Shipping and Return Policy for specific delivery options. You will pay all shipping and handling charges unless otherwise specified in the order confirmation. (b) Title and risk of loss pass to you upon our transfer of the products to the carrier. Shipping and delivery dates are estimates only and cannot be guaranteed. We are not liable for any delays in shipments. 5. Returns and Refunds. Our return policy is that we will accept any return within 30 days of delivery for any reason. Please check our Shipping and Return Policy for more specific information. 6. Limited Warranty. (a) We warrant to you that for a period of 90 days from the date of shipment ("Warranty Period”), the products purchased through the Website will materially conform to our published specifications in effect as of the date of shipment. (b) EXCEPT FOR THE WARRANTIES SET FORTH IN THIS SECTION 6, WE MAKE NO WARRANTY WHATSOEVER WITH RESPECT TO THE PRODUCTS OR SERVICES PURCHASED THROUGH THE WEBSITE, INCLUDING ANY (i) WARRANTY CONCERNING Page # 3 ANY HEALTH OR NUTRITIONAL BENEFIT, EFFECT, OR USE; (ii) WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE;WHETHER EXPRESS OR IMPLIED BY LAW, COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE OF TRADE, OR OTHERWISE. (c) We shall not be liable for a breach of the warranties set forth in this Section 6 unless: (i) you give written notice of the defective products or services, as the case may be, reasonably described, to us within 90 days of the time when the product is delivered; (ii) provide proof of purchase and purchase information; (iii) if applicable, we are given a reasonable opportunity after receiving the notice of breach of the warranty set forth in this Section to examine such products and you (if we so request) return such products to our place of business at your cost for the examination to take place there; and (iv) we reasonably verify your claim that the products or services are our products and are defective. (d) We shall not be liable for a breach of the warranty set forth in this Section if: (i) you make any further use of such products after you give such notice; (ii) the defect arises because you failed to follow our oral or written instructions as to the storage, use or maintenance of the products; or (iii) you alter such products without our prior written consent. (e) With respect to any such products during the Warranty Period, we shall, in our sole discretion, either: (i) replace with substantially similar products that are non-defective or (ii) credit or refund the amounts paid by you for such products provided that, if we so request, you shall, at your expense, return such products to us. (f) THE REMEDIES SET FORTH IN THIS SECTION 6 SHALL BE THE YOUR SOLE AND EXCLUSIVE REMEDY AND OUR ENTIRE LIABILITY FOR ANY BREACH OF THE LIMITED WARRANTIES SET FORTH IN THIS SECTION 6. 7. Limitation of Liability. (a) INNO EVENT SHALL WE BE LIABLE TO YOU OR ANY THIRD PARTY FOR ANY LOSS OF USE, REVENUE OR PROFIT, OR FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES WHETHER ARISING OUT OF BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE AND WHETHER OR NOT WE HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING THE FAILURE OF ANY AGREED OR OTHER REMEDY OF ITS ESSENTIAL PURPOSE. (b) INNO EVENT SHALL OUR AGGREGATE LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT, WHETHER ARISING OUT OF OR RELATED TO BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, EXCEED THE Page # 4 AMOUNTS PAID BY YOU FOR THE PRODUCTS AND SERVICES SOLD THROUGH THE WEBSITE. (c) The limitation of liability set forth above shall: (i) only apply to the extent permitted by law and (ii) not apply to (A) liability resulting from our gross negligence or willful misconduct and (B) death or bodily injury resulting from our acts or omissions. 8. Legal Disclaimer. This Website is not intended to provide medical advice, diagnosis or treatment. The information provided on this Website is “as is” and provided for informational purposes only. Lazarus Naturals does not make any representations or warranties, express or implied, with respect to the information on this Website in relation to the health or benefits of CBD. Please consult with your physician or healthcare professional regarding any medical or health-related diagnosis or treatment options. If you think you are suffering from a medical condition, please seek medical attention. If you are thinking of making any changes to your diet, nutrition, or lifestyle, please consult with your healthcare provider. Do not use CBD products if you are pregnant or thinking of becoming pregnant. 9. Force Majeure. We will not be liable or responsible to you, nor be deemed to have defaulted or breached these Terms, for any failure or delay in our performance under these Terms when and to the extent such failure or delay is caused by or results from acts or circumstances beyond our reasonable control, including, without limitation, acts of God, flood, fire, earthquake, explosion, governmental actions, war, invasion or hostilities (whether war is declared or not), terrorist threats or acts, riot or other civil unrest, national emergency, revolution, insurrection, epidemic, lockouts, strikes or other labor disputes (whether or not relating to our workforce), or restraints or delays affecting carriers or inability or delay in obtaining supplies of adequate or suitable materials, materials or telecommunication breakdown or power outage. 10. Governing Law and Jurisdiction. This Website is operated from the US. All matters arising out of or relating to these Terms are governed by and construed in accordance with the internal laws of the State of Oregon, without giving effect to any choice or conflict of law provision or rule (whether of the State of Oregon or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than those of the State of Oregon. 11. Dispute Resolution and Binding Arbitration. Page # 5 (a) YOU AND LAZARUS NATURALS ARE AGREEING TO GIVE UP ANY RIGHTS TO LITIGATE CLAIMS IN A COURT OR BEFORE A JURY. OTHER RIGHTS THAT YOU WOULD HAVE IF YOU WENT TO COURT MAY ALSO BE UNAVAILABLE OR MAY BE LIMITED IN ARBITRATION. (b) ANY CLAIM, DISPUTE OR CONTROVERSY (WHETHER IN CONTRACT, TORT OR OTHERWISE, WHETHER PRE-EXISTING, PRESENT OR FUTURE, AND INCLUDING STATUTORY, CONSUMER PROTECTION, COMMON LAW, INTENTIONAL TORT, INJUNCTIVE AND EQUITABLE CLAIMS) BETWEEN YOU AND US ARISING FROM OR RELATING IN ANY WAY TO YOUR PURCHASE OF PRODUCTS OR SERVICES THROUGH THE WEBSITE, WILL BE RESOLVED EXCLUSIVELY AND FINALLY BY BINDING ARBITRATION. (c) The arbitration will be administered by the American Arbitration Association ("AAA") in accordance with the Consumer Arbitration Rules (the “AAA Rules”) then in effect, except as modified by this Section (The AAA Rules are available at www.adr.org/arb_med or by calling the AAA at 1-800-778-7879.) The Federal Arbitration Act will govern the interpretation and enforcement of this section. (d) The arbitrator will have exclusive authority to resolve any dispute relating to arbitrability and/or enforceability of this arbitration provision, including any unconscionability challenge or any other challenge that the arbitration provision or the agreement is void, voidable, or otherwise invalid. The arbitrator will be empowered to grant whatever relief would be available in court under law or in equity. Any award of the arbitrator(s) will be final and binding on each of the parties, and may be entered as a judgment in any court of competent jurisdiction. (e) If any provision of this arbitration agreement is found unenforceable, the unenforceable provision will be severed and the remaining arbitration terms will be enforced. 12. Assignment. You will not assign any of your rights or delegate any of your obligations under these Terms without our prior written consent. Any purported assignment or delegation in violation of this Section is null and void. No assignment or delegation relieves you of any of your obligations under these Terms.
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Use the source provided only. Please answer the following based on the legal specifications: what happens if there is a price change or conflict in a promotion? Page # 1 OVERVIEW 1. BY PLACING AN ORDER FOR PRODUCTS FROM THIS WEBSITE, YOU AFFIRM THAT YOU ARE OF LEGAL AGE TO ENTER INTO THIS AGREEMENT, AND YOU ACCEPT AND ARE BOUND BY THESE TERMS AND CONDITIONS. YOU MAY NOT ORDER OR OBTAIN PRODUCTS OR SERVICES FROM THIS WEBSITE IF YOU (A) DO NOT AGREE TO THESE TERMS, (B) ARE NOT THE OLDER OF (i) AT LEAST 18 YEARS OF AGE OR (ii) LEGAL AGE TO FORM A BINDING CONTRACT WITH LAZARUS NATURALS, OR (C) ARE PROHIBITED FROM ACCESSING OR USING THIS WEBSITE OR ANY OF THIS WEBSITE’S CONTENTS, GOODS OR SERVICES BY APPLICABLE LAW. These terms and conditions (these “Terms”) apply to the purchase and sale of products and services through the Lazarus Naturals website (the “Website”). These Terms are subject to change by Lazarus Naturals (referred to as “us”, “we”, or “our” as the context may require) without prior written notice at any time, in our sole discretion. Any changes to the Terms will be in effect as of the “Last Updated Date” referenced on the Website. You should review these Terms prior to purchasing any product or services that are available through this Website. Your ordering of products or services, or continued use of this Website after the “Last Updated Date,’ will constitute your acceptance of and agreement to such changes. 2. Order Acceptance and Cancellation. You agree that your order is an offer to buy, under these Terms, all products and services listed in your order. All orders must be accepted by us or we will not be obligated to sell the products or services to you. We may choose not to accept orders at our sole discretion, even after we send you a confirmation email with your order number and details of the items you have ordered. 3. Prices and Payment Terms. (a) All prices, discounts, and promotions posted on this Website are subject to change without notice. The price charged for a product or service will be the price in effect at the time the order is placed and will be set out in your order confirmation email. Price increases will only apply to orders placed after such changes. Posted prices do not include taxes or charges for shipping and handling. All such taxes and charges will be added to your merchandise total, and will be itemized in your shopping cart and in your order confirmation email. We strive to display accurate price information, however we may, on occasion, make inadvertent typographical errors, inaccuracies or omissions related to pricing and availability. We reserve the right to correct any errors, inaccuracies, or omissions at any time and to cancel any orders arising from such occurrences. Page # 2 (b) We may offer from time to time promotions on the Website that may affect pricing and that are governed by terms and conditions separate from these Terms. If there is a conflict between the terms for a promotion and these Terms, the promotion terms will govern. (c) Terms of payment are within our sole discretion and payment must be received by us before our acceptance of an order. We accept all major credit and debit cards for all purchases. You represent and warrant that (i) the credit and debit card information you supply to us is true, correct and complete, (ii) you are duly authorized to use such credit and debit card for the purchase, (iii) charges incurred by you will be honored by your credit and debit card company, and (iv) you will pay charges incurred by you at the posted prices, including shipping and handling charges and all applicable taxes, if any, regardless of the amount quoted on the Website at the time of your order. Our use of personal information provided by you is governed by our Privacy Policy. 4. Shipments; Delivery; Title and Risk of Loss. (a) We will arrange for shipment of the products to you. Please check our Shipping and Return Policy for specific delivery options. You will pay all shipping and handling charges unless otherwise specified in the order confirmation. (b) Title and risk of loss pass to you upon our transfer of the products to the carrier. Shipping and delivery dates are estimates only and cannot be guaranteed. We are not liable for any delays in shipments. 5. Returns and Refunds. Our return policy is that we will accept any return within 30 days of delivery for any reason. Please check our Shipping and Return Policy for more specific information. 6. Limited Warranty. (a) We warrant to you that for a period of 90 days from the date of shipment ("Warranty Period”), the products purchased through the Website will materially conform to our published specifications in effect as of the date of shipment. (b) EXCEPT FOR THE WARRANTIES SET FORTH IN THIS SECTION 6, WE MAKE NO WARRANTY WHATSOEVER WITH RESPECT TO THE PRODUCTS OR SERVICES PURCHASED THROUGH THE WEBSITE, INCLUDING ANY (i) WARRANTY CONCERNING Page # 3 ANY HEALTH OR NUTRITIONAL BENEFIT, EFFECT, OR USE; (ii) WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE;WHETHER EXPRESS OR IMPLIED BY LAW, COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE OF TRADE, OR OTHERWISE. (c) We shall not be liable for a breach of the warranties set forth in this Section 6 unless: (i) you give written notice of the defective products or services, as the case may be, reasonably described, to us within 90 days of the time when the product is delivered; (ii) provide proof of purchase and purchase information; (iii) if applicable, we are given a reasonable opportunity after receiving the notice of breach of the warranty set forth in this Section to examine such products and you (if we so request) return such products to our place of business at your cost for the examination to take place there; and (iv) we reasonably verify your claim that the products or services are our products and are defective. (d) We shall not be liable for a breach of the warranty set forth in this Section if: (i) you make any further use of such products after you give such notice; (ii) the defect arises because you failed to follow our oral or written instructions as to the storage, use or maintenance of the products; or (iii) you alter such products without our prior written consent. (e) With respect to any such products during the Warranty Period, we shall, in our sole discretion, either: (i) replace with substantially similar products that are non-defective or (ii) credit or refund the amounts paid by you for such products provided that, if we so request, you shall, at your expense, return such products to us. (f) THE REMEDIES SET FORTH IN THIS SECTION 6 SHALL BE THE YOUR SOLE AND EXCLUSIVE REMEDY AND OUR ENTIRE LIABILITY FOR ANY BREACH OF THE LIMITED WARRANTIES SET FORTH IN THIS SECTION 6. 7. Limitation of Liability. (a) INNO EVENT SHALL WE BE LIABLE TO YOU OR ANY THIRD PARTY FOR ANY LOSS OF USE, REVENUE OR PROFIT, OR FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES WHETHER ARISING OUT OF BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE AND WHETHER OR NOT WE HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING THE FAILURE OF ANY AGREED OR OTHER REMEDY OF ITS ESSENTIAL PURPOSE. (b) INNO EVENT SHALL OUR AGGREGATE LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT, WHETHER ARISING OUT OF OR RELATED TO BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, EXCEED THE Page # 4 AMOUNTS PAID BY YOU FOR THE PRODUCTS AND SERVICES SOLD THROUGH THE WEBSITE. (c) The limitation of liability set forth above shall: (i) only apply to the extent permitted by law and (ii) not apply to (A) liability resulting from our gross negligence or willful misconduct and (B) death or bodily injury resulting from our acts or omissions. 8. Legal Disclaimer. This Website is not intended to provide medical advice, diagnosis or treatment. The information provided on this Website is “as is” and provided for informational purposes only. Lazarus Naturals does not make any representations or warranties, express or implied, with respect to the information on this Website in relation to the health or benefits of CBD. Please consult with your physician or healthcare professional regarding any medical or health-related diagnosis or treatment options. If you think you are suffering from a medical condition, please seek medical attention. If you are thinking of making any changes to your diet, nutrition, or lifestyle, please consult with your healthcare provider. Do not use CBD products if you are pregnant or thinking of becoming pregnant. 9. Force Majeure. We will not be liable or responsible to you, nor be deemed to have defaulted or breached these Terms, for any failure or delay in our performance under these Terms when and to the extent such failure or delay is caused by or results from acts or circumstances beyond our reasonable control, including, without limitation, acts of God, flood, fire, earthquake, explosion, governmental actions, war, invasion or hostilities (whether war is declared or not), terrorist threats or acts, riot or other civil unrest, national emergency, revolution, insurrection, epidemic, lockouts, strikes or other labor disputes (whether or not relating to our workforce), or restraints or delays affecting carriers or inability or delay in obtaining supplies of adequate or suitable materials, materials or telecommunication breakdown or power outage. 10. Governing Law and Jurisdiction. This Website is operated from the US. All matters arising out of or relating to these Terms are governed by and construed in accordance with the internal laws of the State of Oregon, without giving effect to any choice or conflict of law provision or rule (whether of the State of Oregon or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than those of the State of Oregon. 11. Dispute Resolution and Binding Arbitration. Page # 5 (a) YOU AND LAZARUS NATURALS ARE AGREEING TO GIVE UP ANY RIGHTS TO LITIGATE CLAIMS IN A COURT OR BEFORE A JURY. OTHER RIGHTS THAT YOU WOULD HAVE IF YOU WENT TO COURT MAY ALSO BE UNAVAILABLE OR MAY BE LIMITED IN ARBITRATION. (b) ANY CLAIM, DISPUTE OR CONTROVERSY (WHETHER IN CONTRACT, TORT OR OTHERWISE, WHETHER PRE-EXISTING, PRESENT OR FUTURE, AND INCLUDING STATUTORY, CONSUMER PROTECTION, COMMON LAW, INTENTIONAL TORT, INJUNCTIVE AND EQUITABLE CLAIMS) BETWEEN YOU AND US ARISING FROM OR RELATING IN ANY WAY TO YOUR PURCHASE OF PRODUCTS OR SERVICES THROUGH THE WEBSITE, WILL BE RESOLVED EXCLUSIVELY AND FINALLY BY BINDING ARBITRATION. (c) The arbitration will be administered by the American Arbitration Association ("AAA") in accordance with the Consumer Arbitration Rules (the “AAA Rules”) then in effect, except as modified by this Section (The AAA Rules are available at www.adr.org/arb_med or by calling the AAA at 1-800-778-7879.) The Federal Arbitration Act will govern the interpretation and enforcement of this section. (d) The arbitrator will have exclusive authority to resolve any dispute relating to arbitrability and/or enforceability of this arbitration provision, including any unconscionability challenge or any other challenge that the arbitration provision or the agreement is void, voidable, or otherwise invalid. The arbitrator will be empowered to grant whatever relief would be available in court under law or in equity. Any award of the arbitrator(s) will be final and binding on each of the parties, and may be entered as a judgment in any court of competent jurisdiction. (e) If any provision of this arbitration agreement is found unenforceable, the unenforceable provision will be severed and the remaining arbitration terms will be enforced. 12. Assignment. You will not assign any of your rights or delegate any of your obligations under these Terms without our prior written consent. Any purported assignment or delegation in violation of this Section is null and void. No assignment or delegation relieves you of any of your obligations under these Terms.
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Use the source provided only.
EVIDENCE:
Page # 1 OVERVIEW 1. BY PLACING AN ORDER FOR PRODUCTS FROM THIS WEBSITE, YOU AFFIRM THAT YOU ARE OF LEGAL AGE TO ENTER INTO THIS AGREEMENT, AND YOU ACCEPT AND ARE BOUND BY THESE TERMS AND CONDITIONS. YOU MAY NOT ORDER OR OBTAIN PRODUCTS OR SERVICES FROM THIS WEBSITE IF YOU (A) DO NOT AGREE TO THESE TERMS, (B) ARE NOT THE OLDER OF (i) AT LEAST 18 YEARS OF AGE OR (ii) LEGAL AGE TO FORM A BINDING CONTRACT WITH LAZARUS NATURALS, OR (C) ARE PROHIBITED FROM ACCESSING OR USING THIS WEBSITE OR ANY OF THIS WEBSITE’S CONTENTS, GOODS OR SERVICES BY APPLICABLE LAW. These terms and conditions (these “Terms”) apply to the purchase and sale of products and services through the Lazarus Naturals website (the “Website”). These Terms are subject to change by Lazarus Naturals (referred to as “us”, “we”, or “our” as the context may require) without prior written notice at any time, in our sole discretion. Any changes to the Terms will be in effect as of the “Last Updated Date” referenced on the Website. You should review these Terms prior to purchasing any product or services that are available through this Website. Your ordering of products or services, or continued use of this Website after the “Last Updated Date,’ will constitute your acceptance of and agreement to such changes. 2. Order Acceptance and Cancellation. You agree that your order is an offer to buy, under these Terms, all products and services listed in your order. All orders must be accepted by us or we will not be obligated to sell the products or services to you. We may choose not to accept orders at our sole discretion, even after we send you a confirmation email with your order number and details of the items you have ordered. 3. Prices and Payment Terms. (a) All prices, discounts, and promotions posted on this Website are subject to change without notice. The price charged for a product or service will be the price in effect at the time the order is placed and will be set out in your order confirmation email. Price increases will only apply to orders placed after such changes. Posted prices do not include taxes or charges for shipping and handling. All such taxes and charges will be added to your merchandise total, and will be itemized in your shopping cart and in your order confirmation email. We strive to display accurate price information, however we may, on occasion, make inadvertent typographical errors, inaccuracies or omissions related to pricing and availability. We reserve the right to correct any errors, inaccuracies, or omissions at any time and to cancel any orders arising from such occurrences. Page # 2 (b) We may offer from time to time promotions on the Website that may affect pricing and that are governed by terms and conditions separate from these Terms. If there is a conflict between the terms for a promotion and these Terms, the promotion terms will govern. (c) Terms of payment are within our sole discretion and payment must be received by us before our acceptance of an order. We accept all major credit and debit cards for all purchases. You represent and warrant that (i) the credit and debit card information you supply to us is true, correct and complete, (ii) you are duly authorized to use such credit and debit card for the purchase, (iii) charges incurred by you will be honored by your credit and debit card company, and (iv) you will pay charges incurred by you at the posted prices, including shipping and handling charges and all applicable taxes, if any, regardless of the amount quoted on the Website at the time of your order. Our use of personal information provided by you is governed by our Privacy Policy. 4. Shipments; Delivery; Title and Risk of Loss. (a) We will arrange for shipment of the products to you. Please check our Shipping and Return Policy for specific delivery options. You will pay all shipping and handling charges unless otherwise specified in the order confirmation. (b) Title and risk of loss pass to you upon our transfer of the products to the carrier. Shipping and delivery dates are estimates only and cannot be guaranteed. We are not liable for any delays in shipments. 5. Returns and Refunds. Our return policy is that we will accept any return within 30 days of delivery for any reason. Please check our Shipping and Return Policy for more specific information. 6. Limited Warranty. (a) We warrant to you that for a period of 90 days from the date of shipment ("Warranty Period”), the products purchased through the Website will materially conform to our published specifications in effect as of the date of shipment. (b) EXCEPT FOR THE WARRANTIES SET FORTH IN THIS SECTION 6, WE MAKE NO WARRANTY WHATSOEVER WITH RESPECT TO THE PRODUCTS OR SERVICES PURCHASED THROUGH THE WEBSITE, INCLUDING ANY (i) WARRANTY CONCERNING Page # 3 ANY HEALTH OR NUTRITIONAL BENEFIT, EFFECT, OR USE; (ii) WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE;WHETHER EXPRESS OR IMPLIED BY LAW, COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE OF TRADE, OR OTHERWISE. (c) We shall not be liable for a breach of the warranties set forth in this Section 6 unless: (i) you give written notice of the defective products or services, as the case may be, reasonably described, to us within 90 days of the time when the product is delivered; (ii) provide proof of purchase and purchase information; (iii) if applicable, we are given a reasonable opportunity after receiving the notice of breach of the warranty set forth in this Section to examine such products and you (if we so request) return such products to our place of business at your cost for the examination to take place there; and (iv) we reasonably verify your claim that the products or services are our products and are defective. (d) We shall not be liable for a breach of the warranty set forth in this Section if: (i) you make any further use of such products after you give such notice; (ii) the defect arises because you failed to follow our oral or written instructions as to the storage, use or maintenance of the products; or (iii) you alter such products without our prior written consent. (e) With respect to any such products during the Warranty Period, we shall, in our sole discretion, either: (i) replace with substantially similar products that are non-defective or (ii) credit or refund the amounts paid by you for such products provided that, if we so request, you shall, at your expense, return such products to us. (f) THE REMEDIES SET FORTH IN THIS SECTION 6 SHALL BE THE YOUR SOLE AND EXCLUSIVE REMEDY AND OUR ENTIRE LIABILITY FOR ANY BREACH OF THE LIMITED WARRANTIES SET FORTH IN THIS SECTION 6. 7. Limitation of Liability. (a) INNO EVENT SHALL WE BE LIABLE TO YOU OR ANY THIRD PARTY FOR ANY LOSS OF USE, REVENUE OR PROFIT, OR FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES WHETHER ARISING OUT OF BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE AND WHETHER OR NOT WE HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING THE FAILURE OF ANY AGREED OR OTHER REMEDY OF ITS ESSENTIAL PURPOSE. (b) INNO EVENT SHALL OUR AGGREGATE LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT, WHETHER ARISING OUT OF OR RELATED TO BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, EXCEED THE Page # 4 AMOUNTS PAID BY YOU FOR THE PRODUCTS AND SERVICES SOLD THROUGH THE WEBSITE. (c) The limitation of liability set forth above shall: (i) only apply to the extent permitted by law and (ii) not apply to (A) liability resulting from our gross negligence or willful misconduct and (B) death or bodily injury resulting from our acts or omissions. 8. Legal Disclaimer. This Website is not intended to provide medical advice, diagnosis or treatment. The information provided on this Website is “as is” and provided for informational purposes only. Lazarus Naturals does not make any representations or warranties, express or implied, with respect to the information on this Website in relation to the health or benefits of CBD. Please consult with your physician or healthcare professional regarding any medical or health-related diagnosis or treatment options. If you think you are suffering from a medical condition, please seek medical attention. If you are thinking of making any changes to your diet, nutrition, or lifestyle, please consult with your healthcare provider. Do not use CBD products if you are pregnant or thinking of becoming pregnant. 9. Force Majeure. We will not be liable or responsible to you, nor be deemed to have defaulted or breached these Terms, for any failure or delay in our performance under these Terms when and to the extent such failure or delay is caused by or results from acts or circumstances beyond our reasonable control, including, without limitation, acts of God, flood, fire, earthquake, explosion, governmental actions, war, invasion or hostilities (whether war is declared or not), terrorist threats or acts, riot or other civil unrest, national emergency, revolution, insurrection, epidemic, lockouts, strikes or other labor disputes (whether or not relating to our workforce), or restraints or delays affecting carriers or inability or delay in obtaining supplies of adequate or suitable materials, materials or telecommunication breakdown or power outage. 10. Governing Law and Jurisdiction. This Website is operated from the US. All matters arising out of or relating to these Terms are governed by and construed in accordance with the internal laws of the State of Oregon, without giving effect to any choice or conflict of law provision or rule (whether of the State of Oregon or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than those of the State of Oregon. 11. Dispute Resolution and Binding Arbitration. Page # 5 (a) YOU AND LAZARUS NATURALS ARE AGREEING TO GIVE UP ANY RIGHTS TO LITIGATE CLAIMS IN A COURT OR BEFORE A JURY. OTHER RIGHTS THAT YOU WOULD HAVE IF YOU WENT TO COURT MAY ALSO BE UNAVAILABLE OR MAY BE LIMITED IN ARBITRATION. (b) ANY CLAIM, DISPUTE OR CONTROVERSY (WHETHER IN CONTRACT, TORT OR OTHERWISE, WHETHER PRE-EXISTING, PRESENT OR FUTURE, AND INCLUDING STATUTORY, CONSUMER PROTECTION, COMMON LAW, INTENTIONAL TORT, INJUNCTIVE AND EQUITABLE CLAIMS) BETWEEN YOU AND US ARISING FROM OR RELATING IN ANY WAY TO YOUR PURCHASE OF PRODUCTS OR SERVICES THROUGH THE WEBSITE, WILL BE RESOLVED EXCLUSIVELY AND FINALLY BY BINDING ARBITRATION. (c) The arbitration will be administered by the American Arbitration Association ("AAA") in accordance with the Consumer Arbitration Rules (the “AAA Rules”) then in effect, except as modified by this Section (The AAA Rules are available at www.adr.org/arb_med or by calling the AAA at 1-800-778-7879.) The Federal Arbitration Act will govern the interpretation and enforcement of this section. (d) The arbitrator will have exclusive authority to resolve any dispute relating to arbitrability and/or enforceability of this arbitration provision, including any unconscionability challenge or any other challenge that the arbitration provision or the agreement is void, voidable, or otherwise invalid. The arbitrator will be empowered to grant whatever relief would be available in court under law or in equity. Any award of the arbitrator(s) will be final and binding on each of the parties, and may be entered as a judgment in any court of competent jurisdiction. (e) If any provision of this arbitration agreement is found unenforceable, the unenforceable provision will be severed and the remaining arbitration terms will be enforced. 12. Assignment. You will not assign any of your rights or delegate any of your obligations under these Terms without our prior written consent. Any purported assignment or delegation in violation of this Section is null and void. No assignment or delegation relieves you of any of your obligations under these Terms.
USER:
Please answer the following based on the legal specifications: what happens if there is a price change or conflict in a promotion?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Only use the text below to answer.
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What are the definitions of the acronyms defined in this text?
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Mpox is a rare zoonotic disease caused by infection with monkeypox virus (MPXV) which belongs to the Orthopoxvirus genus in the family Poxviridae1. The specific animal reservoir of MPXV remains unknown. MPXV is found naturally in certain Central and West African countries. There are two main clades (variants) of mpox: Clade one (I) (formerly Congo Basin clade) and Clade two (II) (formerly West African clade). Clade II consists of two subclades (IIa and IIb). In addition to systemic symptoms, mpox is characterised by painful skin rash or mucosal lesions. Person to person transmission occurs through close contact with lesions, body fluids, respiratory droplets and contaminated materials such as bedding. Most cases of mpox infection are mild. Infections due to clade I are associated with more severe disease and a higher case fatality ratio. Until April 2022, export of mpox beyond endemic regions in Africa was rare, and limited to cases that had travelled to endemic areas, or to zoonotic transmission from imported animals.1 On 16 May 2022, the UK Health Security Agency reported four mpox cases among men with no links to an endemic area, and who self-identified as gay, bisexual and other men who have sex with men (gbMSM).2 On 18 May 2022, Portugal reported five confirmed and 20 suspect mpox cases among gbMSM.3 Global case numbers increased quickly. By 25 May 2022, 219 confirmed cases had been reported worldwide.4 On 23 July 2022, the World Health Organization (WHO), declared the global mpox outbreak a Public Health Emergency of International Concern (PHEIC).5 Since 1 January 2022 and as of 8 May 2023, 87,377 confirmed cases including 140 deaths, have been reported from 111 countries.6 Isolates from outbreak cases belonged to MPXV Clade II (previously known as the West African clade) - specifically subclade IIb. 7 On 10 May 2023, WHO determined mpox no longer constituted a PHEIC.8 We describe the epidemiology of mpox cases and the response to the mpox outbreak between May 2022 and May 2023. Mpox was made a notifiable disease in Ireland on 27 May 2022.9 Cases were reported to Ireland’s Computerised Infectious Disease Reporting (CIDR) system.10 In addition to the standard notification, Public Health Areas (PHAs) collected additional data about cases, including demographic factors, clinical details, potential exposures and vaccination history. Laboratory testing for MPXV was undertaken at the National Virus Reference Laboratory11and the Molecular Virology Laboratory at St James’s Hospital. PHAs also undertook contact tracing and risk assessment for close contacts. A national database was developed which allowed information on mpox close contacts to be recorded, including the setting in which exposure may have occurred (i.e. household, sexual, occupational), and vaccination status (e.g. previously vaccinated, or provided with postexposure prophylaxis). 12, 13 Data are presented on all confirmed mpox cases notified on CIDR up to midnight 27 May 2023 and extracted on 30 May 2023. Epidemiology of mpox cases Between 27 May 2022 and 27 May 2023, 229 confirmed cases of mpox were notified. The first case was notified on 31 May 2022 (week 22 2022) (Figure 1). The earliest known date of onset of symptoms among confirmed cases was 13 May 2022 (week 19 2022). Cases peaked in week 34 2022 (21-27 August 2022). In the first 23 weeks of 2023, only two confirmed cases were notified, one each in January and April. Gender was male in 226 cases and female in three cases. Median age was 35 years (range 16-68 years), with 46% of cases aged between 18-34 years and 79.8% aged between 18-44 years. The majority of cases were either born in Ireland (46.8%) or Latin America (32.3%). Summary characteristics of confirmed mpox cases are presented in Table 1. Contact tracing Interim public health guidance for the management of mpox outbreak cases and their contacts was released on 3 June 2022, adapted from earlier guidance for sporadic mpox cases.14 The purpose of contact tracing initially was to limit transmission, to identify vulnerable contacts at risk for more severe disease (pregnant women, young children and immunocompromised), and to raise awareness among contacts so that they would seek medical help early if they became symptomatic. Later, when vaccine was available, eligible contact were offered post exposure prophylaxis (PEP) vaccination. Initially, mpox was viewed as a High Consequence Infectious Disease (HCID) with high-risk contacts recommended to quarantine for 21 days.15 As understanding of the clinical severity and transmission risks increased, this approach was modified. Following ongoing dynamic risk assessments; quarantine of contacts was no longer required; there was a progressive easing of the definition of a high-risk contact; and cases (and their clinical samples and waste) linked to the global outbreak i.e. caused by MPXV subclade IIb, were no longer managed as HCID. Establishment of an Incident Management Team A national incident management team (IMT) first met on 16 May 2022, the same day as the UK first issued their alert. Given the close links between gbMSM communities across Europe, and in particular between Ireland and the UK, the likelihood of cases arising in Ireland was considered high. The IMT was responsible for monitoring of national and global situation, ongoing risk assessment, and advising on and coordinating the response measures. The IMT initially met daily when the event first emerged, and then weekly. Recognising the breadth of the response required, involving input across many different parts of the health service, and in particular the magnitude of implementing a national vaccination programme, the IMT transitioned into a National Crisis Management Team (NCMT) led by the Acute Operations division of the HSE in September 2022. The IMT and subsequent NCMT included representation from a wide range of disciplines and sectors across the health service including: public health; virology; clinical services including sexual health, infectious diseases, paediatrics, obstetrics, occupational health and general practice; infection prevention and control; the National Immunisation Office (NIO); the HSE Sexual Health and Crisis Pregnancy Programme (SHCPP); the National Ambulance Service; HSE Communications; acute hospital and community operations. From the onset, the IMT included representation from the gbMSM community with members from the Gay Health Network (GHN), an alliance of organisations with mandates to promote the sexual health of gbMSM in Ireland, and the MPOWER programme at HIV Ireland, a peer-driven communitylevel programme focusing on the sexual health and wellbeing among gbMSM16, 17. On transitioning to the NCMT format, MPOWER continued to be represented on the group. Guidance and service development IMT members initially, and subsequently the Pathways of Care Programme of the NCMT, worked with the Health Protection Research and Guideline Development Unit in developing and maintaining a suite of guidance on clinical and public health management of probable and confirmed cases and their close contacts, including assessment and testing, contact tracing, infection prevention and control, transportation, and waste management.18 Guidance was reviewed and updated at regular intervals as the outbreak evolved and understanding increased. Community engagement Supported by the Sexual Health Crisis Pregnancy Programme (SHCPP) and HSE Communications, GHN and MPOWER continued to develop and deliver a range of communications and engagement activities for the gbMSM community including posters at social venues and events, social media messaging, adverts and news pieces in gbMSM media, out-reach activities and community stakeholder events. This collaborative and peerled approach ensured the delivery of key messaging that is intended to be informative but not stigmatising. It has been recognised as an example of best practice for risk communication and community engagement on mpox by ECDC and the WHO.19, 20 Vaccination On 27 May 2022, Ireland’s National Immunisation Advisory Committee (NIAC) recommended that modified Vaccinia Ankara-Bavarian Nordic (MVA-BN), be offered to high and intermediate risk contacts of a case of mpox as PEP and healthcare workers at highest risk of exposure as pre-exposure prophylaxis (PREP).21 On 13 June 2022, the first doses of MVA-BN vaccine were delivered to community vaccination centres (CVCs), where PEP was primarily administered, occasionally supported by mobile vaccination teams, hospitals, and PHA teams.21 On 29 July 2022, NIAC recommended mpox vaccine as PrEP to those at high risk of exposure. Given the limited vaccine supply in the context of a global outbreak, the HSE through the advice and guidance of clinical and ethical experts and by working closely with gbMSM advocacy and support groups, offered PrEP in a phased manner. In the first phase (commencing August 2022), eligible people (gbMSM and transgender people who had a notification of early infectious syphilis between December 2021 and July 2022) were invited for vaccination in sexual health clinics. In November 2022, PrEP vaccination was extended to self-identified individuals at risk of mpox who could register online for vaccination and was administered in CVCs.23 Based on advice of the EMA, on 22 August NIAC endorsed lower dose intradermal administration rather than subcutaneous administration. This increased the number of people who could be offered vaccination23, 24. By the end of May 2023, 5,214 people had been fully vaccinated.
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What are the definitions of the acronyms defined in this text? Only use the text below to answer. Mpox is a rare zoonotic disease caused by infection with monkeypox virus (MPXV) which belongs to the Orthopoxvirus genus in the family Poxviridae1. The specific animal reservoir of MPXV remains unknown. MPXV is found naturally in certain Central and West African countries. There are two main clades (variants) of mpox: Clade one (I) (formerly Congo Basin clade) and Clade two (II) (formerly West African clade). Clade II consists of two subclades (IIa and IIb). In addition to systemic symptoms, mpox is characterised by painful skin rash or mucosal lesions. Person to person transmission occurs through close contact with lesions, body fluids, respiratory droplets and contaminated materials such as bedding. Most cases of mpox infection are mild. Infections due to clade I are associated with more severe disease and a higher case fatality ratio. Until April 2022, export of mpox beyond endemic regions in Africa was rare, and limited to cases that had travelled to endemic areas, or to zoonotic transmission from imported animals.1 On 16 May 2022, the UK Health Security Agency reported four mpox cases among men with no links to an endemic area, and who self-identified as gay, bisexual and other men who have sex with men (gbMSM).2 On 18 May 2022, Portugal reported five confirmed and 20 suspect mpox cases among gbMSM.3 Global case numbers increased quickly. By 25 May 2022, 219 confirmed cases had been reported worldwide.4 On 23 July 2022, the World Health Organization (WHO), declared the global mpox outbreak a Public Health Emergency of International Concern (PHEIC).5 Since 1 January 2022 and as of 8 May 2023, 87,377 confirmed cases including 140 deaths, have been reported from 111 countries.6 Isolates from outbreak cases belonged to MPXV Clade II (previously known as the West African clade) - specifically subclade IIb. 7 On 10 May 2023, WHO determined mpox no longer constituted a PHEIC.8 We describe the epidemiology of mpox cases and the response to the mpox outbreak between May 2022 and May 2023. Mpox was made a notifiable disease in Ireland on 27 May 2022.9 Cases were reported to Ireland’s Computerised Infectious Disease Reporting (CIDR) system.10 In addition to the standard notification, Public Health Areas (PHAs) collected additional data about cases, including demographic factors, clinical details, potential exposures and vaccination history. Laboratory testing for MPXV was undertaken at the National Virus Reference Laboratory11and the Molecular Virology Laboratory at St James’s Hospital. PHAs also undertook contact tracing and risk assessment for close contacts. A national database was developed which allowed information on mpox close contacts to be recorded, including the setting in which exposure may have occurred (i.e. household, sexual, occupational), and vaccination status (e.g. previously vaccinated, or provided with postexposure prophylaxis). 12, 13 Data are presented on all confirmed mpox cases notified on CIDR up to midnight 27 May 2023 and extracted on 30 May 2023. Epidemiology of mpox cases Between 27 May 2022 and 27 May 2023, 229 confirmed cases of mpox were notified. The first case was notified on 31 May 2022 (week 22 2022) (Figure 1). The earliest known date of onset of symptoms among confirmed cases was 13 May 2022 (week 19 2022). Cases peaked in week 34 2022 (21-27 August 2022). In the first 23 weeks of 2023, only two confirmed cases were notified, one each in January and April. Gender was male in 226 cases and female in three cases. Median age was 35 years (range 16-68 years), with 46% of cases aged between 18-34 years and 79.8% aged between 18-44 years. The majority of cases were either born in Ireland (46.8%) or Latin America (32.3%). Summary characteristics of confirmed mpox cases are presented in Table 1. Contact tracing Interim public health guidance for the management of mpox outbreak cases and their contacts was released on 3 June 2022, adapted from earlier guidance for sporadic mpox cases.14 The purpose of contact tracing initially was to limit transmission, to identify vulnerable contacts at risk for more severe disease (pregnant women, young children and immunocompromised), and to raise awareness among contacts so that they would seek medical help early if they became symptomatic. Later, when vaccine was available, eligible contact were offered post exposure prophylaxis (PEP) vaccination. Initially, mpox was viewed as a High Consequence Infectious Disease (HCID) with high-risk contacts recommended to quarantine for 21 days.15 As understanding of the clinical severity and transmission risks increased, this approach was modified. Following ongoing dynamic risk assessments; quarantine of contacts was no longer required; there was a progressive easing of the definition of a high-risk contact; and cases (and their clinical samples and waste) linked to the global outbreak i.e. caused by MPXV subclade IIb, were no longer managed as HCID. Establishment of an Incident Management Team A national incident management team (IMT) first met on 16 May 2022, the same day as the UK first issued their alert. Given the close links between gbMSM communities across Europe, and in particular between Ireland and the UK, the likelihood of cases arising in Ireland was considered high. The IMT was responsible for monitoring of national and global situation, ongoing risk assessment, and advising on and coordinating the response measures. The IMT initially met daily when the event first emerged, and then weekly. Recognising the breadth of the response required, involving input across many different parts of the health service, and in particular the magnitude of implementing a national vaccination programme, the IMT transitioned into a National Crisis Management Team (NCMT) led by the Acute Operations division of the HSE in September 2022. The IMT and subsequent NCMT included representation from a wide range of disciplines and sectors across the health service including: public health; virology; clinical services including sexual health, infectious diseases, paediatrics, obstetrics, occupational health and general practice; infection prevention and control; the National Immunisation Office (NIO); the HSE Sexual Health and Crisis Pregnancy Programme (SHCPP); the National Ambulance Service; HSE Communications; acute hospital and community operations. From the onset, the IMT included representation from the gbMSM community with members from the Gay Health Network (GHN), an alliance of organisations with mandates to promote the sexual health of gbMSM in Ireland, and the MPOWER programme at HIV Ireland, a peer-driven communitylevel programme focusing on the sexual health and wellbeing among gbMSM16, 17. On transitioning to the NCMT format, MPOWER continued to be represented on the group. Guidance and service development IMT members initially, and subsequently the Pathways of Care Programme of the NCMT, worked with the Health Protection Research and Guideline Development Unit in developing and maintaining a suite of guidance on clinical and public health management of probable and confirmed cases and their close contacts, including assessment and testing, contact tracing, infection prevention and control, transportation, and waste management.18 Guidance was reviewed and updated at regular intervals as the outbreak evolved and understanding increased. Community engagement Supported by the Sexual Health Crisis Pregnancy Programme (SHCPP) and HSE Communications, GHN and MPOWER continued to develop and deliver a range of communications and engagement activities for the gbMSM community including posters at social venues and events, social media messaging, adverts and news pieces in gbMSM media, out-reach activities and community stakeholder events. This collaborative and peerled approach ensured the delivery of key messaging that is intended to be informative but not stigmatising. It has been recognised as an example of best practice for risk communication and community engagement on mpox by ECDC and the WHO.19, 20 Vaccination On 27 May 2022, Ireland’s National Immunisation Advisory Committee (NIAC) recommended that modified Vaccinia Ankara-Bavarian Nordic (MVA-BN), be offered to high and intermediate risk contacts of a case of mpox as PEP and healthcare workers at highest risk of exposure as pre-exposure prophylaxis (PREP).21 On 13 June 2022, the first doses of MVA-BN vaccine were delivered to community vaccination centres (CVCs), where PEP was primarily administered, occasionally supported by mobile vaccination teams, hospitals, and PHA teams.21 On 29 July 2022, NIAC recommended mpox vaccine as PrEP to those at high risk of exposure. Given the limited vaccine supply in the context of a global outbreak, the HSE through the advice and guidance of clinical and ethical experts and by working closely with gbMSM advocacy and support groups, offered PrEP in a phased manner. In the first phase (commencing August 2022), eligible people (gbMSM and transgender people who had a notification of early infectious syphilis between December 2021 and July 2022) were invited for vaccination in sexual health clinics. In November 2022, PrEP vaccination was extended to self-identified individuals at risk of mpox who could register online for vaccination and was administered in CVCs.23 Based on advice of the EMA, on 22 August NIAC endorsed lower dose intradermal administration rather than subcutaneous administration. This increased the number of people who could be offered vaccination23, 24. By the end of May 2023, 5,214 people had been fully vaccinated.
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Only use the text below to answer.
EVIDENCE:
Mpox is a rare zoonotic disease caused by infection with monkeypox virus (MPXV) which belongs to the Orthopoxvirus genus in the family Poxviridae1. The specific animal reservoir of MPXV remains unknown. MPXV is found naturally in certain Central and West African countries. There are two main clades (variants) of mpox: Clade one (I) (formerly Congo Basin clade) and Clade two (II) (formerly West African clade). Clade II consists of two subclades (IIa and IIb). In addition to systemic symptoms, mpox is characterised by painful skin rash or mucosal lesions. Person to person transmission occurs through close contact with lesions, body fluids, respiratory droplets and contaminated materials such as bedding. Most cases of mpox infection are mild. Infections due to clade I are associated with more severe disease and a higher case fatality ratio. Until April 2022, export of mpox beyond endemic regions in Africa was rare, and limited to cases that had travelled to endemic areas, or to zoonotic transmission from imported animals.1 On 16 May 2022, the UK Health Security Agency reported four mpox cases among men with no links to an endemic area, and who self-identified as gay, bisexual and other men who have sex with men (gbMSM).2 On 18 May 2022, Portugal reported five confirmed and 20 suspect mpox cases among gbMSM.3 Global case numbers increased quickly. By 25 May 2022, 219 confirmed cases had been reported worldwide.4 On 23 July 2022, the World Health Organization (WHO), declared the global mpox outbreak a Public Health Emergency of International Concern (PHEIC).5 Since 1 January 2022 and as of 8 May 2023, 87,377 confirmed cases including 140 deaths, have been reported from 111 countries.6 Isolates from outbreak cases belonged to MPXV Clade II (previously known as the West African clade) - specifically subclade IIb. 7 On 10 May 2023, WHO determined mpox no longer constituted a PHEIC.8 We describe the epidemiology of mpox cases and the response to the mpox outbreak between May 2022 and May 2023. Mpox was made a notifiable disease in Ireland on 27 May 2022.9 Cases were reported to Ireland’s Computerised Infectious Disease Reporting (CIDR) system.10 In addition to the standard notification, Public Health Areas (PHAs) collected additional data about cases, including demographic factors, clinical details, potential exposures and vaccination history. Laboratory testing for MPXV was undertaken at the National Virus Reference Laboratory11and the Molecular Virology Laboratory at St James’s Hospital. PHAs also undertook contact tracing and risk assessment for close contacts. A national database was developed which allowed information on mpox close contacts to be recorded, including the setting in which exposure may have occurred (i.e. household, sexual, occupational), and vaccination status (e.g. previously vaccinated, or provided with postexposure prophylaxis). 12, 13 Data are presented on all confirmed mpox cases notified on CIDR up to midnight 27 May 2023 and extracted on 30 May 2023. Epidemiology of mpox cases Between 27 May 2022 and 27 May 2023, 229 confirmed cases of mpox were notified. The first case was notified on 31 May 2022 (week 22 2022) (Figure 1). The earliest known date of onset of symptoms among confirmed cases was 13 May 2022 (week 19 2022). Cases peaked in week 34 2022 (21-27 August 2022). In the first 23 weeks of 2023, only two confirmed cases were notified, one each in January and April. Gender was male in 226 cases and female in three cases. Median age was 35 years (range 16-68 years), with 46% of cases aged between 18-34 years and 79.8% aged between 18-44 years. The majority of cases were either born in Ireland (46.8%) or Latin America (32.3%). Summary characteristics of confirmed mpox cases are presented in Table 1. Contact tracing Interim public health guidance for the management of mpox outbreak cases and their contacts was released on 3 June 2022, adapted from earlier guidance for sporadic mpox cases.14 The purpose of contact tracing initially was to limit transmission, to identify vulnerable contacts at risk for more severe disease (pregnant women, young children and immunocompromised), and to raise awareness among contacts so that they would seek medical help early if they became symptomatic. Later, when vaccine was available, eligible contact were offered post exposure prophylaxis (PEP) vaccination. Initially, mpox was viewed as a High Consequence Infectious Disease (HCID) with high-risk contacts recommended to quarantine for 21 days.15 As understanding of the clinical severity and transmission risks increased, this approach was modified. Following ongoing dynamic risk assessments; quarantine of contacts was no longer required; there was a progressive easing of the definition of a high-risk contact; and cases (and their clinical samples and waste) linked to the global outbreak i.e. caused by MPXV subclade IIb, were no longer managed as HCID. Establishment of an Incident Management Team A national incident management team (IMT) first met on 16 May 2022, the same day as the UK first issued their alert. Given the close links between gbMSM communities across Europe, and in particular between Ireland and the UK, the likelihood of cases arising in Ireland was considered high. The IMT was responsible for monitoring of national and global situation, ongoing risk assessment, and advising on and coordinating the response measures. The IMT initially met daily when the event first emerged, and then weekly. Recognising the breadth of the response required, involving input across many different parts of the health service, and in particular the magnitude of implementing a national vaccination programme, the IMT transitioned into a National Crisis Management Team (NCMT) led by the Acute Operations division of the HSE in September 2022. The IMT and subsequent NCMT included representation from a wide range of disciplines and sectors across the health service including: public health; virology; clinical services including sexual health, infectious diseases, paediatrics, obstetrics, occupational health and general practice; infection prevention and control; the National Immunisation Office (NIO); the HSE Sexual Health and Crisis Pregnancy Programme (SHCPP); the National Ambulance Service; HSE Communications; acute hospital and community operations. From the onset, the IMT included representation from the gbMSM community with members from the Gay Health Network (GHN), an alliance of organisations with mandates to promote the sexual health of gbMSM in Ireland, and the MPOWER programme at HIV Ireland, a peer-driven communitylevel programme focusing on the sexual health and wellbeing among gbMSM16, 17. On transitioning to the NCMT format, MPOWER continued to be represented on the group. Guidance and service development IMT members initially, and subsequently the Pathways of Care Programme of the NCMT, worked with the Health Protection Research and Guideline Development Unit in developing and maintaining a suite of guidance on clinical and public health management of probable and confirmed cases and their close contacts, including assessment and testing, contact tracing, infection prevention and control, transportation, and waste management.18 Guidance was reviewed and updated at regular intervals as the outbreak evolved and understanding increased. Community engagement Supported by the Sexual Health Crisis Pregnancy Programme (SHCPP) and HSE Communications, GHN and MPOWER continued to develop and deliver a range of communications and engagement activities for the gbMSM community including posters at social venues and events, social media messaging, adverts and news pieces in gbMSM media, out-reach activities and community stakeholder events. This collaborative and peerled approach ensured the delivery of key messaging that is intended to be informative but not stigmatising. It has been recognised as an example of best practice for risk communication and community engagement on mpox by ECDC and the WHO.19, 20 Vaccination On 27 May 2022, Ireland’s National Immunisation Advisory Committee (NIAC) recommended that modified Vaccinia Ankara-Bavarian Nordic (MVA-BN), be offered to high and intermediate risk contacts of a case of mpox as PEP and healthcare workers at highest risk of exposure as pre-exposure prophylaxis (PREP).21 On 13 June 2022, the first doses of MVA-BN vaccine were delivered to community vaccination centres (CVCs), where PEP was primarily administered, occasionally supported by mobile vaccination teams, hospitals, and PHA teams.21 On 29 July 2022, NIAC recommended mpox vaccine as PrEP to those at high risk of exposure. Given the limited vaccine supply in the context of a global outbreak, the HSE through the advice and guidance of clinical and ethical experts and by working closely with gbMSM advocacy and support groups, offered PrEP in a phased manner. In the first phase (commencing August 2022), eligible people (gbMSM and transgender people who had a notification of early infectious syphilis between December 2021 and July 2022) were invited for vaccination in sexual health clinics. In November 2022, PrEP vaccination was extended to self-identified individuals at risk of mpox who could register online for vaccination and was administered in CVCs.23 Based on advice of the EMA, on 22 August NIAC endorsed lower dose intradermal administration rather than subcutaneous administration. This increased the number of people who could be offered vaccination23, 24. By the end of May 2023, 5,214 people had been fully vaccinated.
USER:
What are the definitions of the acronyms defined in this text?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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ONLY USE THE DATA I PROVIDE Limit your response to 100 words Provide a definition and explanation If you cannot answer using the contexts alone, say "I cannot determine the answer to that due to lack of context"
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What is the holistic approach to financial planning?
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**How To Build Wealth In Your 40s** Is It Too Late To Start Building Wealth At 40? Many people wonder whether it's too late to start building wealth once they reach their 40s. The truth is, it's never too late to begin saving and taking steps toward financial security, no matter your age. While starting late may present some challenges, such as having a shorter timeline to reach your financial goals, it's still possible to make significant progress toward building a better financial future. The key is to take a holistic approach to planning. This means identifying areas where you can cut expenses, increase income, and make smarter investment decisions. Establishing an emergency fund, reducing debt, and maximizing contributions to retirement accounts can also help you achieve financial stability. Remember, building wealth is a journey, not a destination. With the right mindset, dedication, and expert guidance, you can overcome any obstacles and achieve financial success. Keep reading for more tips and strategies on how to build wealth in your 40s! 9 Ways To Build Wealth In Your 40s If you're looking to secure your financial future and make the most of your prime earning years, we're here to provide you with expert advice and proven strategies on how to build wealth in your 40s. With a little dedication and hard work, you can build a solid financial foundation and create the life you desire. 1. Settle Mortgage Early Paying off your mortgage early can be a smart move in your 40s. By reducing or eliminating this significant expense, you can free up funds to invest in your future, such as contributing extra income to retirement accounts or creating multiple income streams. To settle your mortgage early, consider making extra payments towards the principal, refinancing to a shorter term, or accelerating your payment schedule. By doing so, you can reduce your overall interest payments and save money over the life of the loan. Keep in mind that settling your mortgage early may not be the best option for everyone, depending on your individual circumstances. 2. Be Debt-Free Debt can be a significant obstacle to building wealth in your 40s. With high-interest rates and fees, it can eat away at your income and make it difficult to save for retirement or invest in your future. However, being debt-free should be a top priority in your financial plan. By reducing or eliminating your debt, you can free up funds to invest in your future, create multiple income streams, or build your emergency savings. To start, consider creating a debt reduction plan that prioritizes high-interest debt, such as credit card debt or personal loans. Consolidating debt or negotiating with creditors to reduce interest rates and fees can also help you make progress toward being debt-free. Another key strategy is to avoid high-interest debt, such as credit card bills, medical bills, and car loans. By reducing your debt load, you can free up funds to invest in your future and build your retirement savings. 3. Don't Be A Spendthrift It's easy to fall into the trap of overspending and indulging in luxurious lifestyle expenses. However, if you want to build wealth in your 40s, you need to be mindful of your spending habits and live within your means. One effective strategy is to create a budget and stick to it. By tracking your expenses and identifying areas where you can cut back, you can save more money and invest it towards your financial goals. 4. Build Your Investment Portfolio Building a diversified investment portfolio can be a smart move in your 40s. By investing in a mix of stocks, bonds, and other assets, you can reduce your overall risk and maximize your potential returns. To get your retirement contributions started, consider opening a retirement account, such as a Roth IRA or a 401(k), and making regular contributions. You can also explore other investment accounts, such as brokerage accounts or mutual funds, to diversify your portfolio and achieve your financial goals. Keep in mind that building an investment portfolio requires careful planning and attention to your financial situation. 5. Expand Your Income Sources In your 40s, it's important to find ways to expand your income sources to maximize your earnings potential and achieve your financial goals. Consider investment accounts or high-growth stocks to boost your retirement savings options and build your net worth. Starting a small business can also be a great way to create multiple passive income- streams and increase your monthly income. In addition, seeking the help of an advisor can guide you in developing a financial plan that can explore opportunities to expand your income sources. They can provide you with practical strategies to increase your monthly income and net worth, making your financial future more secure. 6. Build An Emergency Fund Setting aside an emergency fund is essential to achieving financial stability in your 40s. It can help cover unexpected expenses such as medical bills, funeral expenses, or other debts, allowing you to maintain your lifestyle expenses and stay financially secure. To build an emergency fund, consider setting up a savings plan dedicated to unexpected expenses. This can also include exploring options for life insurance policies or personal finance strategies to protect your financial future and minimize the impact of unexpected expenses. 7. Invest In Index Funds Investing in index funds can be a smart way to build wealth in your 40s. Index funds are a type of mutual fund that tracks a specific index, such as the S&P 500, and provides a low-cost way to diversify your investment portfolio. One of the main benefits of investing in index funds is that they offer a high level of stability and consistency, making them an attractive option for risk-averse investors. Additionally, index funds typically have lower expense ratios compared to actively managed funds, which can result in higher returns for investors over the long term. With index funds, you can invest in a wide range of assets, including stocks, bonds, and real estate, which can provide you with greater exposure to different sectors and industries. Another advantage of index funds is their passive management style, which means that you don't need to constantly monitor and adjust your investments. This can be particularly beneficial for busy professionals in their 40s who don't have the time or expertise to actively manage their investment portfolios. However, it's important to note that investing in index funds still involves risk and requires careful consideration of your financial goals and risk tolerance. It's also important to regularly review and rebalance your portfolio to ensure that it aligns with your investment objectives. 8. Invest In A Skill Developing a new skill is one of the most effective ways to build wealth in your 40s. Whether it's learning a new language or taking courses to enhance your professional expertise, investing in yourself can lead to a higher salary, increased job security, and, ultimately, greater financial stability. By doing so, you can open up opportunities to expand your income sources, explore higher-paying job roles, or even start a small business on the side. With additional income, you can pay off mortgage payments or credit card debt, save for retirement, or even free money to invest in other areas of your financial plan. Moreover, upskilling also allows you to stay competitive in the job market and adapt to changing industry trends. This can lead to increased job security and the ability to negotiate a higher salary or better benefits. However, it's important to note that investing in a skill requires an investment - both time and money. You may need to take courses, attend conferences, or pay for specialized training. It's important to include these expenses in your planning and consider them as part of your retirement savings goals. Ultimately, learning a skill or improving on existing ones can be a wise financial decision that can pay off in the long run. By enhancing your knowledge and expertise, you can secure a brighter financial future and achieve greater personal and professional fulfillment. 9. Hire A Financial Advisor If You’re Earning Good Working with a financial advisor can also help you identify opportunities to save more money and optimize your investment portfolio. They can help you explore the world of financial planning, retirement plans, savings options, and various investment areas. Furthermore, an advisor can assist you in evaluating your financial situation and developing a long-term strategy that helps you achieve financial stability and security. Conclusion As you embark on your journey to building wealth in your 40s, it's important to remember that financial stability is within reach. By implementing the strategies we've discussed, including settling your mortgage early, being debt-free, expanding your income sources, building an emergency fund, and investing wisely, you can take control of your financial situation and achieve your retirement savings goals. Managing your living expenses and obtaining good health insurance are essential parts of building a secure financial future. By following these principles and seeking expert guidance as necessary, you can build a solid financial foundation that will serve you well throughout your life. Remember, building wealth takes time and patience, but with perseverance and smart decision-making, you can achieve financial stability and enjoy a prosperous future.
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<INSTRUCTIONS> ONLY USE THE DATA I PROVIDE Limit your response to 100 words Provide a definition and explanation If you cannot answer using the contexts alone, say "I cannot determine the answer to that due to lack of context" <CONTEXT> **How To Build Wealth In Your 40s** Is It Too Late To Start Building Wealth At 40? Many people wonder whether it's too late to start building wealth once they reach their 40s. The truth is, it's never too late to begin saving and taking steps toward financial security, no matter your age. While starting late may present some challenges, such as having a shorter timeline to reach your financial goals, it's still possible to make significant progress toward building a better financial future. The key is to take a holistic approach to planning. This means identifying areas where you can cut expenses, increase income, and make smarter investment decisions. Establishing an emergency fund, reducing debt, and maximizing contributions to retirement accounts can also help you achieve financial stability. Remember, building wealth is a journey, not a destination. With the right mindset, dedication, and expert guidance, you can overcome any obstacles and achieve financial success. Keep reading for more tips and strategies on how to build wealth in your 40s! 9 Ways To Build Wealth In Your 40s If you're looking to secure your financial future and make the most of your prime earning years, we're here to provide you with expert advice and proven strategies on how to build wealth in your 40s. With a little dedication and hard work, you can build a solid financial foundation and create the life you desire. 1. Settle Mortgage Early Paying off your mortgage early can be a smart move in your 40s. By reducing or eliminating this significant expense, you can free up funds to invest in your future, such as contributing extra income to retirement accounts or creating multiple income streams. To settle your mortgage early, consider making extra payments towards the principal, refinancing to a shorter term, or accelerating your payment schedule. By doing so, you can reduce your overall interest payments and save money over the life of the loan. Keep in mind that settling your mortgage early may not be the best option for everyone, depending on your individual circumstances. 2. Be Debt-Free Debt can be a significant obstacle to building wealth in your 40s. With high-interest rates and fees, it can eat away at your income and make it difficult to save for retirement or invest in your future. However, being debt-free should be a top priority in your financial plan. By reducing or eliminating your debt, you can free up funds to invest in your future, create multiple income streams, or build your emergency savings. To start, consider creating a debt reduction plan that prioritizes high-interest debt, such as credit card debt or personal loans. Consolidating debt or negotiating with creditors to reduce interest rates and fees can also help you make progress toward being debt-free. Another key strategy is to avoid high-interest debt, such as credit card bills, medical bills, and car loans. By reducing your debt load, you can free up funds to invest in your future and build your retirement savings. 3. Don't Be A Spendthrift It's easy to fall into the trap of overspending and indulging in luxurious lifestyle expenses. However, if you want to build wealth in your 40s, you need to be mindful of your spending habits and live within your means. One effective strategy is to create a budget and stick to it. By tracking your expenses and identifying areas where you can cut back, you can save more money and invest it towards your financial goals. 4. Build Your Investment Portfolio Building a diversified investment portfolio can be a smart move in your 40s. By investing in a mix of stocks, bonds, and other assets, you can reduce your overall risk and maximize your potential returns. To get your retirement contributions started, consider opening a retirement account, such as a Roth IRA or a 401(k), and making regular contributions. You can also explore other investment accounts, such as brokerage accounts or mutual funds, to diversify your portfolio and achieve your financial goals. Keep in mind that building an investment portfolio requires careful planning and attention to your financial situation. 5. Expand Your Income Sources In your 40s, it's important to find ways to expand your income sources to maximize your earnings potential and achieve your financial goals. Consider investment accounts or high-growth stocks to boost your retirement savings options and build your net worth. Starting a small business can also be a great way to create multiple passive income- streams and increase your monthly income. In addition, seeking the help of an advisor can guide you in developing a financial plan that can explore opportunities to expand your income sources. They can provide you with practical strategies to increase your monthly income and net worth, making your financial future more secure. 6. Build An Emergency Fund Setting aside an emergency fund is essential to achieving financial stability in your 40s. It can help cover unexpected expenses such as medical bills, funeral expenses, or other debts, allowing you to maintain your lifestyle expenses and stay financially secure. To build an emergency fund, consider setting up a savings plan dedicated to unexpected expenses. This can also include exploring options for life insurance policies or personal finance strategies to protect your financial future and minimize the impact of unexpected expenses. 7. Invest In Index Funds Investing in index funds can be a smart way to build wealth in your 40s. Index funds are a type of mutual fund that tracks a specific index, such as the S&P 500, and provides a low-cost way to diversify your investment portfolio. One of the main benefits of investing in index funds is that they offer a high level of stability and consistency, making them an attractive option for risk-averse investors. Additionally, index funds typically have lower expense ratios compared to actively managed funds, which can result in higher returns for investors over the long term. With index funds, you can invest in a wide range of assets, including stocks, bonds, and real estate, which can provide you with greater exposure to different sectors and industries. Another advantage of index funds is their passive management style, which means that you don't need to constantly monitor and adjust your investments. This can be particularly beneficial for busy professionals in their 40s who don't have the time or expertise to actively manage their investment portfolios. However, it's important to note that investing in index funds still involves risk and requires careful consideration of your financial goals and risk tolerance. It's also important to regularly review and rebalance your portfolio to ensure that it aligns with your investment objectives. 8. Invest In A Skill Developing a new skill is one of the most effective ways to build wealth in your 40s. Whether it's learning a new language or taking courses to enhance your professional expertise, investing in yourself can lead to a higher salary, increased job security, and, ultimately, greater financial stability. By doing so, you can open up opportunities to expand your income sources, explore higher-paying job roles, or even start a small business on the side. With additional income, you can pay off mortgage payments or credit card debt, save for retirement, or even free money to invest in other areas of your financial plan. Moreover, upskilling also allows you to stay competitive in the job market and adapt to changing industry trends. This can lead to increased job security and the ability to negotiate a higher salary or better benefits. However, it's important to note that investing in a skill requires an investment - both time and money. You may need to take courses, attend conferences, or pay for specialized training. It's important to include these expenses in your planning and consider them as part of your retirement savings goals. Ultimately, learning a skill or improving on existing ones can be a wise financial decision that can pay off in the long run. By enhancing your knowledge and expertise, you can secure a brighter financial future and achieve greater personal and professional fulfillment. 9. Hire A Financial Advisor If You’re Earning Good Working with a financial advisor can also help you identify opportunities to save more money and optimize your investment portfolio. They can help you explore the world of financial planning, retirement plans, savings options, and various investment areas. Furthermore, an advisor can assist you in evaluating your financial situation and developing a long-term strategy that helps you achieve financial stability and security. Conclusion As you embark on your journey to building wealth in your 40s, it's important to remember that financial stability is within reach. By implementing the strategies we've discussed, including settling your mortgage early, being debt-free, expanding your income sources, building an emergency fund, and investing wisely, you can take control of your financial situation and achieve your retirement savings goals. Managing your living expenses and obtaining good health insurance are essential parts of building a secure financial future. By following these principles and seeking expert guidance as necessary, you can build a solid financial foundation that will serve you well throughout your life. Remember, building wealth takes time and patience, but with perseverance and smart decision-making, you can achieve financial stability and enjoy a prosperous future. <QUERY> What is the holistic approach to financial planning?
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ONLY USE THE DATA I PROVIDE Limit your response to 100 words Provide a definition and explanation If you cannot answer using the contexts alone, say "I cannot determine the answer to that due to lack of context"
EVIDENCE:
**How To Build Wealth In Your 40s** Is It Too Late To Start Building Wealth At 40? Many people wonder whether it's too late to start building wealth once they reach their 40s. The truth is, it's never too late to begin saving and taking steps toward financial security, no matter your age. While starting late may present some challenges, such as having a shorter timeline to reach your financial goals, it's still possible to make significant progress toward building a better financial future. The key is to take a holistic approach to planning. This means identifying areas where you can cut expenses, increase income, and make smarter investment decisions. Establishing an emergency fund, reducing debt, and maximizing contributions to retirement accounts can also help you achieve financial stability. Remember, building wealth is a journey, not a destination. With the right mindset, dedication, and expert guidance, you can overcome any obstacles and achieve financial success. Keep reading for more tips and strategies on how to build wealth in your 40s! 9 Ways To Build Wealth In Your 40s If you're looking to secure your financial future and make the most of your prime earning years, we're here to provide you with expert advice and proven strategies on how to build wealth in your 40s. With a little dedication and hard work, you can build a solid financial foundation and create the life you desire. 1. Settle Mortgage Early Paying off your mortgage early can be a smart move in your 40s. By reducing or eliminating this significant expense, you can free up funds to invest in your future, such as contributing extra income to retirement accounts or creating multiple income streams. To settle your mortgage early, consider making extra payments towards the principal, refinancing to a shorter term, or accelerating your payment schedule. By doing so, you can reduce your overall interest payments and save money over the life of the loan. Keep in mind that settling your mortgage early may not be the best option for everyone, depending on your individual circumstances. 2. Be Debt-Free Debt can be a significant obstacle to building wealth in your 40s. With high-interest rates and fees, it can eat away at your income and make it difficult to save for retirement or invest in your future. However, being debt-free should be a top priority in your financial plan. By reducing or eliminating your debt, you can free up funds to invest in your future, create multiple income streams, or build your emergency savings. To start, consider creating a debt reduction plan that prioritizes high-interest debt, such as credit card debt or personal loans. Consolidating debt or negotiating with creditors to reduce interest rates and fees can also help you make progress toward being debt-free. Another key strategy is to avoid high-interest debt, such as credit card bills, medical bills, and car loans. By reducing your debt load, you can free up funds to invest in your future and build your retirement savings. 3. Don't Be A Spendthrift It's easy to fall into the trap of overspending and indulging in luxurious lifestyle expenses. However, if you want to build wealth in your 40s, you need to be mindful of your spending habits and live within your means. One effective strategy is to create a budget and stick to it. By tracking your expenses and identifying areas where you can cut back, you can save more money and invest it towards your financial goals. 4. Build Your Investment Portfolio Building a diversified investment portfolio can be a smart move in your 40s. By investing in a mix of stocks, bonds, and other assets, you can reduce your overall risk and maximize your potential returns. To get your retirement contributions started, consider opening a retirement account, such as a Roth IRA or a 401(k), and making regular contributions. You can also explore other investment accounts, such as brokerage accounts or mutual funds, to diversify your portfolio and achieve your financial goals. Keep in mind that building an investment portfolio requires careful planning and attention to your financial situation. 5. Expand Your Income Sources In your 40s, it's important to find ways to expand your income sources to maximize your earnings potential and achieve your financial goals. Consider investment accounts or high-growth stocks to boost your retirement savings options and build your net worth. Starting a small business can also be a great way to create multiple passive income- streams and increase your monthly income. In addition, seeking the help of an advisor can guide you in developing a financial plan that can explore opportunities to expand your income sources. They can provide you with practical strategies to increase your monthly income and net worth, making your financial future more secure. 6. Build An Emergency Fund Setting aside an emergency fund is essential to achieving financial stability in your 40s. It can help cover unexpected expenses such as medical bills, funeral expenses, or other debts, allowing you to maintain your lifestyle expenses and stay financially secure. To build an emergency fund, consider setting up a savings plan dedicated to unexpected expenses. This can also include exploring options for life insurance policies or personal finance strategies to protect your financial future and minimize the impact of unexpected expenses. 7. Invest In Index Funds Investing in index funds can be a smart way to build wealth in your 40s. Index funds are a type of mutual fund that tracks a specific index, such as the S&P 500, and provides a low-cost way to diversify your investment portfolio. One of the main benefits of investing in index funds is that they offer a high level of stability and consistency, making them an attractive option for risk-averse investors. Additionally, index funds typically have lower expense ratios compared to actively managed funds, which can result in higher returns for investors over the long term. With index funds, you can invest in a wide range of assets, including stocks, bonds, and real estate, which can provide you with greater exposure to different sectors and industries. Another advantage of index funds is their passive management style, which means that you don't need to constantly monitor and adjust your investments. This can be particularly beneficial for busy professionals in their 40s who don't have the time or expertise to actively manage their investment portfolios. However, it's important to note that investing in index funds still involves risk and requires careful consideration of your financial goals and risk tolerance. It's also important to regularly review and rebalance your portfolio to ensure that it aligns with your investment objectives. 8. Invest In A Skill Developing a new skill is one of the most effective ways to build wealth in your 40s. Whether it's learning a new language or taking courses to enhance your professional expertise, investing in yourself can lead to a higher salary, increased job security, and, ultimately, greater financial stability. By doing so, you can open up opportunities to expand your income sources, explore higher-paying job roles, or even start a small business on the side. With additional income, you can pay off mortgage payments or credit card debt, save for retirement, or even free money to invest in other areas of your financial plan. Moreover, upskilling also allows you to stay competitive in the job market and adapt to changing industry trends. This can lead to increased job security and the ability to negotiate a higher salary or better benefits. However, it's important to note that investing in a skill requires an investment - both time and money. You may need to take courses, attend conferences, or pay for specialized training. It's important to include these expenses in your planning and consider them as part of your retirement savings goals. Ultimately, learning a skill or improving on existing ones can be a wise financial decision that can pay off in the long run. By enhancing your knowledge and expertise, you can secure a brighter financial future and achieve greater personal and professional fulfillment. 9. Hire A Financial Advisor If You’re Earning Good Working with a financial advisor can also help you identify opportunities to save more money and optimize your investment portfolio. They can help you explore the world of financial planning, retirement plans, savings options, and various investment areas. Furthermore, an advisor can assist you in evaluating your financial situation and developing a long-term strategy that helps you achieve financial stability and security. Conclusion As you embark on your journey to building wealth in your 40s, it's important to remember that financial stability is within reach. By implementing the strategies we've discussed, including settling your mortgage early, being debt-free, expanding your income sources, building an emergency fund, and investing wisely, you can take control of your financial situation and achieve your retirement savings goals. Managing your living expenses and obtaining good health insurance are essential parts of building a secure financial future. By following these principles and seeking expert guidance as necessary, you can build a solid financial foundation that will serve you well throughout your life. Remember, building wealth takes time and patience, but with perseverance and smart decision-making, you can achieve financial stability and enjoy a prosperous future.
USER:
What is the holistic approach to financial planning?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
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What is the purpose of the drug Metoprolol and what are some of the potential side effects of its usage? Make your response at least 150 words.
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Metoprolol is used alone or in combination with other medications to treat high blood pressure. It also is used to treat chronic (long-term) angina (chest pain). Metoprolol is also used to improve survival after a heart attack. Metoprolol also is used in combination with other medications to treat heart failure. Metoprolol is in a class of medications called beta blockers. It works by relaxing blood vessels and slowing heart rate to improve blood flow and decrease blood pressure. High blood pressure is a common condition and when not treated, can cause damage to the brain, heart, blood vessels, kidneys and other parts of the body. Damage to these organs may cause heart disease, a heart attack, heart failure, stroke, kidney failure, loss of vision, and other problems. In addition to taking medication, making lifestyle changes will also help to control your blood pressure. These changes include eating a diet that is low in fat and salt, maintaining a healthy weight, exercising at least 30 minutes most days, not smoking, and using alcohol in moderation. How should this medicine be used? Metoprolol comes as a tablet, an extended-release (long-acting) tablet, and an extended-release capsule to take by mouth. The regular tablet is usually taken once or twice a day with meals or immediately after meals. The extended-release tablet and extended-release capsule are usually taken once a day. To help you remember to take metoprolol, take it around the same time(s) every day. Follow the directions on your prescription label carefully, and ask your doctor or pharmacist to explain any part you do not understand. Take metoprolol exactly as directed. Do not take more or less of it or take it more often than prescribed by your doctor. The extended-release tablet may be split. Swallow the whole or half extended-release tablets whole; do not chew or crush them. Swallow the extended-release capsules whole; do not split, chew, or crush them. If you are unable to swallow the capsules, you may open the capsule and sprinkle the contents over a spoonful of soft food, such as applesauce, pudding, or yogurt and swallow the mixture immediately. Do not swallow the mixture more than 60 minutes after you sprinkle the contents of the capsule. Your doctor may start you on a low dose of metoprolol and gradually increase your dose. Metoprolol helps to control your condition but will not cure it. Continue to take metoprolol even if you feel well. Do not stop taking metoprolol without talking to your doctor. If you suddenly stop taking metoprolol you may experience serious heart problems such as severe chest pain, a heart attack, or an irregular heartbeat. Your doctor will probably want to decrease your dose gradually over 1 to 2 weeks and will monitor you closely. Other uses for this medicine Metoprolol is also used sometimes to treat certain types of irregular heartbeats. Talk to your doctor about the possible risks of using this medication for your condition. This medication may be prescribed for other uses; ask your doctor or pharmacist for more information. What special precautions should I follow? Before taking metoprolol, tell your doctor and pharmacist if you are allergic to metoprolol, any other medications, or any of the ingredients in metoprolol tablets, extended-release tablets, or extended-release capsules. Ask your pharmacist for a list of the ingredients. tell your doctor and pharmacist what prescription and nonprescription medications, vitamins, nutritional supplements, and herbal products you are taking or plan to take. Your doctor may need to change the doses of your medications or monitor you carefully for side effects. tell your doctor if you have a slow or irregular heartbeat or heart failure. Your doctor may tell you not to take metoprolol. tell your doctor if you have or have ever had asthma or other lung diseases; problems with blood circulation; pheochromocytoma (a tumor that develops on a gland near the kidneys and may cause high blood pressure and fast heartbeat); heart or liver disease;diabetes; or hyperthyroidism (an overactive thyroid gland). Also tell your doctor if you have ever had a serious allergic reaction to a food or any other substance. tell your doctor if you are pregnant, plan to become pregnant, or are breastfeeding. If you become pregnant while taking metoprolol, call your doctor. if you are having surgery, including dental surgery, tell the doctor or dentist that you are taking metoprolol. you should know that metoprolol may make you drowsy. Do not drive a car or operate machinery until you know how this medication affects you. do not drink any alcoholic drinks or take any prescription or nonprescription medications that contain alcohol if you are taking metoprolol extended-release capsules. Ask your doctor or pharmacist if you do not know if a medication that you plan to take contains alcohol. you should know that metoprolol may increase the risk of hypoglycemia (low blood sugar) and prevent the warning signs and symptoms that would tell you that your blood sugar is low. Let your doctor know if you are unable to eat or drink normally or are vomiting while you are taking metoprolol. You should know the symptoms of low blood sugar and what to do if you have these symptoms. you should know that if you have allergic reactions to different substances, your reactions may be worse while you are using metoprolol, and your allergic reactions may not respond to the usual doses of injectable epinephrine. What special dietary instructions should I follow? IUnless your doctor tells you otherwise, continue your normal diet. What should I do if I forget a dose? Skip the missed dose and continue your regular dosing schedule. Do not take a double dose to make up for a missed one. What side effects can this medication cause? Metoprolol may cause side effects. Tell your doctor if any of these symptoms are severe or do not go away: dizziness or lightheadedness tiredness depression diarrhea nausea dry mouth stomach pain vomiting gas or bloating heartburn runny nose Some side effects can be serious. The following symptoms are uncommon, but if you experience any of them, call your doctor immediately: shortness of breath or difficulty breathing wheezing weight gain fainting rapid, pounding, or irregular heartbeat Metoprolol may cause other side effects. Call your doctor if you have any unusual problems while taking this medication. If you experience a serious side effect, you or your doctor may send a report to the Food and Drug Administration's (FDA) MedWatch Adverse Event Reporting program online (https://www.fda.gov/Safety/MedWatch) or by phone (1-800-332-1088).
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== What is the purpose of the drug Metoprolol and what are some of the potential side effects of its usage? Make your response at least 150 words. {passage 0} ========== Metoprolol is used alone or in combination with other medications to treat high blood pressure. It also is used to treat chronic (long-term) angina (chest pain). Metoprolol is also used to improve survival after a heart attack. Metoprolol also is used in combination with other medications to treat heart failure. Metoprolol is in a class of medications called beta blockers. It works by relaxing blood vessels and slowing heart rate to improve blood flow and decrease blood pressure. High blood pressure is a common condition and when not treated, can cause damage to the brain, heart, blood vessels, kidneys and other parts of the body. Damage to these organs may cause heart disease, a heart attack, heart failure, stroke, kidney failure, loss of vision, and other problems. In addition to taking medication, making lifestyle changes will also help to control your blood pressure. These changes include eating a diet that is low in fat and salt, maintaining a healthy weight, exercising at least 30 minutes most days, not smoking, and using alcohol in moderation. How should this medicine be used? Metoprolol comes as a tablet, an extended-release (long-acting) tablet, and an extended-release capsule to take by mouth. The regular tablet is usually taken once or twice a day with meals or immediately after meals. The extended-release tablet and extended-release capsule are usually taken once a day. To help you remember to take metoprolol, take it around the same time(s) every day. Follow the directions on your prescription label carefully, and ask your doctor or pharmacist to explain any part you do not understand. Take metoprolol exactly as directed. Do not take more or less of it or take it more often than prescribed by your doctor. The extended-release tablet may be split. Swallow the whole or half extended-release tablets whole; do not chew or crush them. Swallow the extended-release capsules whole; do not split, chew, or crush them. If you are unable to swallow the capsules, you may open the capsule and sprinkle the contents over a spoonful of soft food, such as applesauce, pudding, or yogurt and swallow the mixture immediately. Do not swallow the mixture more than 60 minutes after you sprinkle the contents of the capsule. Your doctor may start you on a low dose of metoprolol and gradually increase your dose. Metoprolol helps to control your condition but will not cure it. Continue to take metoprolol even if you feel well. Do not stop taking metoprolol without talking to your doctor. If you suddenly stop taking metoprolol you may experience serious heart problems such as severe chest pain, a heart attack, or an irregular heartbeat. Your doctor will probably want to decrease your dose gradually over 1 to 2 weeks and will monitor you closely. Other uses for this medicine Metoprolol is also used sometimes to treat certain types of irregular heartbeats. Talk to your doctor about the possible risks of using this medication for your condition. This medication may be prescribed for other uses; ask your doctor or pharmacist for more information. What special precautions should I follow? Before taking metoprolol, tell your doctor and pharmacist if you are allergic to metoprolol, any other medications, or any of the ingredients in metoprolol tablets, extended-release tablets, or extended-release capsules. Ask your pharmacist for a list of the ingredients. tell your doctor and pharmacist what prescription and nonprescription medications, vitamins, nutritional supplements, and herbal products you are taking or plan to take. Your doctor may need to change the doses of your medications or monitor you carefully for side effects. tell your doctor if you have a slow or irregular heartbeat or heart failure. Your doctor may tell you not to take metoprolol. tell your doctor if you have or have ever had asthma or other lung diseases; problems with blood circulation; pheochromocytoma (a tumor that develops on a gland near the kidneys and may cause high blood pressure and fast heartbeat); heart or liver disease;diabetes; or hyperthyroidism (an overactive thyroid gland). Also tell your doctor if you have ever had a serious allergic reaction to a food or any other substance. tell your doctor if you are pregnant, plan to become pregnant, or are breastfeeding. If you become pregnant while taking metoprolol, call your doctor. if you are having surgery, including dental surgery, tell the doctor or dentist that you are taking metoprolol. you should know that metoprolol may make you drowsy. Do not drive a car or operate machinery until you know how this medication affects you. do not drink any alcoholic drinks or take any prescription or nonprescription medications that contain alcohol if you are taking metoprolol extended-release capsules. Ask your doctor or pharmacist if you do not know if a medication that you plan to take contains alcohol. you should know that metoprolol may increase the risk of hypoglycemia (low blood sugar) and prevent the warning signs and symptoms that would tell you that your blood sugar is low. Let your doctor know if you are unable to eat or drink normally or are vomiting while you are taking metoprolol. You should know the symptoms of low blood sugar and what to do if you have these symptoms. you should know that if you have allergic reactions to different substances, your reactions may be worse while you are using metoprolol, and your allergic reactions may not respond to the usual doses of injectable epinephrine. What special dietary instructions should I follow? IUnless your doctor tells you otherwise, continue your normal diet. What should I do if I forget a dose? Skip the missed dose and continue your regular dosing schedule. Do not take a double dose to make up for a missed one. What side effects can this medication cause? Metoprolol may cause side effects. Tell your doctor if any of these symptoms are severe or do not go away: dizziness or lightheadedness tiredness depression diarrhea nausea dry mouth stomach pain vomiting gas or bloating heartburn runny nose Some side effects can be serious. The following symptoms are uncommon, but if you experience any of them, call your doctor immediately: shortness of breath or difficulty breathing wheezing weight gain fainting rapid, pounding, or irregular heartbeat Metoprolol may cause other side effects. Call your doctor if you have any unusual problems while taking this medication. If you experience a serious side effect, you or your doctor may send a report to the Food and Drug Administration's (FDA) MedWatch Adverse Event Reporting program online (https://www.fda.gov/Safety/MedWatch) or by phone (1-800-332-1088). https://medlineplus.gov/druginfo/meds/a682864.html
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
EVIDENCE:
Metoprolol is used alone or in combination with other medications to treat high blood pressure. It also is used to treat chronic (long-term) angina (chest pain). Metoprolol is also used to improve survival after a heart attack. Metoprolol also is used in combination with other medications to treat heart failure. Metoprolol is in a class of medications called beta blockers. It works by relaxing blood vessels and slowing heart rate to improve blood flow and decrease blood pressure. High blood pressure is a common condition and when not treated, can cause damage to the brain, heart, blood vessels, kidneys and other parts of the body. Damage to these organs may cause heart disease, a heart attack, heart failure, stroke, kidney failure, loss of vision, and other problems. In addition to taking medication, making lifestyle changes will also help to control your blood pressure. These changes include eating a diet that is low in fat and salt, maintaining a healthy weight, exercising at least 30 minutes most days, not smoking, and using alcohol in moderation. How should this medicine be used? Metoprolol comes as a tablet, an extended-release (long-acting) tablet, and an extended-release capsule to take by mouth. The regular tablet is usually taken once or twice a day with meals or immediately after meals. The extended-release tablet and extended-release capsule are usually taken once a day. To help you remember to take metoprolol, take it around the same time(s) every day. Follow the directions on your prescription label carefully, and ask your doctor or pharmacist to explain any part you do not understand. Take metoprolol exactly as directed. Do not take more or less of it or take it more often than prescribed by your doctor. The extended-release tablet may be split. Swallow the whole or half extended-release tablets whole; do not chew or crush them. Swallow the extended-release capsules whole; do not split, chew, or crush them. If you are unable to swallow the capsules, you may open the capsule and sprinkle the contents over a spoonful of soft food, such as applesauce, pudding, or yogurt and swallow the mixture immediately. Do not swallow the mixture more than 60 minutes after you sprinkle the contents of the capsule. Your doctor may start you on a low dose of metoprolol and gradually increase your dose. Metoprolol helps to control your condition but will not cure it. Continue to take metoprolol even if you feel well. Do not stop taking metoprolol without talking to your doctor. If you suddenly stop taking metoprolol you may experience serious heart problems such as severe chest pain, a heart attack, or an irregular heartbeat. Your doctor will probably want to decrease your dose gradually over 1 to 2 weeks and will monitor you closely. Other uses for this medicine Metoprolol is also used sometimes to treat certain types of irregular heartbeats. Talk to your doctor about the possible risks of using this medication for your condition. This medication may be prescribed for other uses; ask your doctor or pharmacist for more information. What special precautions should I follow? Before taking metoprolol, tell your doctor and pharmacist if you are allergic to metoprolol, any other medications, or any of the ingredients in metoprolol tablets, extended-release tablets, or extended-release capsules. Ask your pharmacist for a list of the ingredients. tell your doctor and pharmacist what prescription and nonprescription medications, vitamins, nutritional supplements, and herbal products you are taking or plan to take. Your doctor may need to change the doses of your medications or monitor you carefully for side effects. tell your doctor if you have a slow or irregular heartbeat or heart failure. Your doctor may tell you not to take metoprolol. tell your doctor if you have or have ever had asthma or other lung diseases; problems with blood circulation; pheochromocytoma (a tumor that develops on a gland near the kidneys and may cause high blood pressure and fast heartbeat); heart or liver disease;diabetes; or hyperthyroidism (an overactive thyroid gland). Also tell your doctor if you have ever had a serious allergic reaction to a food or any other substance. tell your doctor if you are pregnant, plan to become pregnant, or are breastfeeding. If you become pregnant while taking metoprolol, call your doctor. if you are having surgery, including dental surgery, tell the doctor or dentist that you are taking metoprolol. you should know that metoprolol may make you drowsy. Do not drive a car or operate machinery until you know how this medication affects you. do not drink any alcoholic drinks or take any prescription or nonprescription medications that contain alcohol if you are taking metoprolol extended-release capsules. Ask your doctor or pharmacist if you do not know if a medication that you plan to take contains alcohol. you should know that metoprolol may increase the risk of hypoglycemia (low blood sugar) and prevent the warning signs and symptoms that would tell you that your blood sugar is low. Let your doctor know if you are unable to eat or drink normally or are vomiting while you are taking metoprolol. You should know the symptoms of low blood sugar and what to do if you have these symptoms. you should know that if you have allergic reactions to different substances, your reactions may be worse while you are using metoprolol, and your allergic reactions may not respond to the usual doses of injectable epinephrine. What special dietary instructions should I follow? IUnless your doctor tells you otherwise, continue your normal diet. What should I do if I forget a dose? Skip the missed dose and continue your regular dosing schedule. Do not take a double dose to make up for a missed one. What side effects can this medication cause? Metoprolol may cause side effects. Tell your doctor if any of these symptoms are severe or do not go away: dizziness or lightheadedness tiredness depression diarrhea nausea dry mouth stomach pain vomiting gas or bloating heartburn runny nose Some side effects can be serious. The following symptoms are uncommon, but if you experience any of them, call your doctor immediately: shortness of breath or difficulty breathing wheezing weight gain fainting rapid, pounding, or irregular heartbeat Metoprolol may cause other side effects. Call your doctor if you have any unusual problems while taking this medication. If you experience a serious side effect, you or your doctor may send a report to the Food and Drug Administration's (FDA) MedWatch Adverse Event Reporting program online (https://www.fda.gov/Safety/MedWatch) or by phone (1-800-332-1088).
USER:
What is the purpose of the drug Metoprolol and what are some of the potential side effects of its usage? Make your response at least 150 words.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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"================ <TEXT PASSAGE> ======= [context document] ================ <QUESTION> ======= [user request] ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
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My doctor said he can't use Nexobrid to remove an eschar on my arm because of my papaya allergy. Can you explain why this allergy prevents me from using this treatment, even though papayas aren't an ingredient? Explain in 50 words or less.
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2.2 Recommended Dosage Recommended Dosage in Adults Apply a 3 mm thick layer (approximate thickness of a tongue depressor) of NEXOBRID to a burn wound area of up to 15% body surface area (BSA) in one application in adult patients. Remove NEXOBRID after 4 hours [see Dosage and Administration (2.5)]. A second application of NEXOBRID may be applied 24 hours following the first application to either the same area previously treated with NEXOBRID or to a new area in adult patients. Apply a second application if: • The wound area is more than 15% BSA, or • Multiple wound areas on different body surfaces require two treatments for logistical reasons such as body position, or • The first application’s eschar removal was not complete. For both applications, the total treated area must not exceed 20% BSA. Recommended Dosage in Pediatric Patients Pediatric Patients 6 Years of Age and Older Apply a 3 mm thick layer (approximate thickness of a tongue depressor) of NEXOBRID to a burn wound area of up to 15% BSA in one application in pediatric patients 6 years of age and older. Remove NEXOBRID after 4 hours [see Dosage and Administration (2.5)]. A second application of NEXOBRID is not recommended. Pediatric Patients Less Than 6 Years of Age Apply a 3 mm thick layer (approximate thickness of a tongue depressor) of NEXOBRID to a burn wound area of up to 10% BSA in one application in pediatric patients less than 6 years of age. Remove NEXOBRID after 4 hours [see Dosage and Administration (2.5)]. A second application of NEXOBRID is not recommended. 2.3 Preparation of Patient and Burn Wound Treatment Area Prepare the wound area as follows: 1. Thoroughly clean the wound to remove any charred tissue, blisters, and any topical products. 2. Apply a dressing soaked with an antibacterial solution to the treatment area for at least 2 hours. 3. Ensure the wound bed is clear of any remnants of topical agents (e.g., silver sulfadiazine, povidone iodine). 4 4. Apply an ointment skin protectant (e.g., petrolatum) 2 to 3 cm outside of the treatment area to create an ointment barrier. Avoid applying the protectant ointment to the treatment area itself, as this would impede direct contact of NEXOBRID with the eschar. 5. Protect any other open wounds (e.g., laceration, abraded skin, escharotomy incision) with skin protectant ointments or ointment gauze to prevent possible exposure to NEXOBRID. 2.4 Preparation and Application of NEXOBRID Gather the following sterile supplies prior to NEXOBRID preparation and application: • Instrument for mixing (e.g., spatula or tongue depressor) • Tongue depressor for NEXOBRID application • 0.9% Sodium Chloride Irrigation • Occlusive film dressing • Loose, thick fluffy dressing and bandage Preparation Prepare NEXOBRID at the patient’s bedside within 15 minutes of the intended application. Using aseptic technique, mix NEXOBRID lyophilized powder and gel vehicle as follows: 1. Pour the NEXOBRID lyophilized powder into the gel vehicle jar. 2. Thoroughly mix the NEXOBRID lyophilized powder and gel vehicle using a sterile instrument (e.g., tongue depressor or spatula) until the mixture is uniform. The mixed lyophilized powder and gel vehicle produce NEXOBRID in a final concentration of 8.8% w/w. DISCARD NEXOBRID IF NOT USED WITHIN 15 MINUTES OF PREPARATION, as the enzymatic activity of NEXOBRID decreases progressively following mixing. Application Apply NEXOBRID within 15 minutes of preparation as follows: 1. Moisten the treatment area by sprinkling sterile 0.9% Sodium Chloride Irrigation onto the burn wound. 2. Using a sterile tongue depressor, completely cover the moistened burn wound treatment area with the mixed NEXOBRID in a 3 mm thick layer (approximate thickness of a tongue depressor). Ensure NEXOBRID covers the entire target treatment area. 3. Cover the treated wound with a sterile occlusive film dressing. 4. Gently press the occlusive film dressing at the area of contact with the ointment barrier to ensure adherence between the occlusive film dressing and the ointment barrier and to achieve complete containment of NEXOBRID on the treatment area. There should be no visible air under the occlusive film dressing. 5. Cover the occlusive film dressing with a sterile loose, thick, fluffy dressing and secure with a sterile bandage. 6. Discard any unused portions of NEXOBRID. 5 2.5 Removal of NEXOBRID Remove NEXOBRID after 4 hours. Gather the following sterile supplies prior to NEXOBRID removal: • Blunt-edged instruments (e.g., tongue depressor) • Large dry gauze • Gauze soaked with 0.9% Sodium Chloride Irrigation • Dressing soaked with an antibacterial solution 1. Remove the occlusive film dressing using aseptic technique. 2. Remove the ointment barrier using a sterile blunt-edged instrument. 3. Remove the dissolved eschar from the wound by scraping it away with a sterile blunt-edged instrument. 4. Wipe the wound thoroughly with a large sterile dry gauze, then wipe with a sterile gauze that has been soaked with sterile 0.9% Sodium Chloride Irrigation. Rub the treated area until the appearance of a clean dermis or subcutaneous tissues with pinpoint bleeding. 5. To remove remnants of dissolved eschar, apply a dressing soaked with an antibacterial solution for at least 2 hours. 5 WARNINGS AND PRECAUTIONS 5.1 Hypersensitivity Reactions NEXOBRID-Treated Patients Serious hypersensitivity reactions, including anaphylaxis, have been reported with postmarketing use of NEXOBRID. If a hypersensitivity reaction occurs, remove NEXOBRID (if applicable) and initiate appropriate therapy. NEXOBRID is contraindicated in patients with a known hypersensitivity to anacaulase- bcdb, bromelain, pineapples or to any other component of NEXOBRID. NEXOBRID is also contraindicated in patients with known hypersensitivity to papayas or papain because of the risk of cross-sensitivity. Healthcare Providers Preparing and Applying NEXOBRID Healthcare personnel should take appropriate precautions to avoid exposure when preparing and handling NEXOBRID (e.g., gloves, surgical masks, other protective coverings, as needed). In the event of inadvertent skin exposure, rinse NEXOBRID off with water to reduce the likelihood of skin sensitization. 5.2 Coagulopathy A reduction of platelet aggregation and plasma fibrinogen levels and a moderate increase in partial thromboplastin and prothrombin times have been reported in the literature as possible effects following oral administration of bromelain, a component of NEXOBRID. In vitro and animal data suggest that bromelain can also promote fibrinolysis. Avoid use of NEXOBRID in patients with uncontrolled disorders of coagulation. Use NEXOBRID with caution in patients on anticoagulant therapy or other drugs affecting coagulation, and in patients with low platelet counts and increased risk of bleeding from other causes (e.g., peptic ulcers and sepsis). Monitor patients for possible signs of coagulation abnormalities and signs of bleeding.
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"================ <TEXT PASSAGE> ======= 2.2 Recommended Dosage Recommended Dosage in Adults Apply a 3 mm thick layer (approximate thickness of a tongue depressor) of NEXOBRID to a burn wound area of up to 15% body surface area (BSA) in one application in adult patients. Remove NEXOBRID after 4 hours [see Dosage and Administration (2.5)]. A second application of NEXOBRID may be applied 24 hours following the first application to either the same area previously treated with NEXOBRID or to a new area in adult patients. Apply a second application if: • The wound area is more than 15% BSA, or • Multiple wound areas on different body surfaces require two treatments for logistical reasons such as body position, or • The first application’s eschar removal was not complete. For both applications, the total treated area must not exceed 20% BSA. Recommended Dosage in Pediatric Patients Pediatric Patients 6 Years of Age and Older Apply a 3 mm thick layer (approximate thickness of a tongue depressor) of NEXOBRID to a burn wound area of up to 15% BSA in one application in pediatric patients 6 years of age and older. Remove NEXOBRID after 4 hours [see Dosage and Administration (2.5)]. A second application of NEXOBRID is not recommended. Pediatric Patients Less Than 6 Years of Age Apply a 3 mm thick layer (approximate thickness of a tongue depressor) of NEXOBRID to a burn wound area of up to 10% BSA in one application in pediatric patients less than 6 years of age. Remove NEXOBRID after 4 hours [see Dosage and Administration (2.5)]. A second application of NEXOBRID is not recommended. 2.3 Preparation of Patient and Burn Wound Treatment Area Prepare the wound area as follows: 1. Thoroughly clean the wound to remove any charred tissue, blisters, and any topical products. 2. Apply a dressing soaked with an antibacterial solution to the treatment area for at least 2 hours. 3. Ensure the wound bed is clear of any remnants of topical agents (e.g., silver sulfadiazine, povidone iodine). 4 4. Apply an ointment skin protectant (e.g., petrolatum) 2 to 3 cm outside of the treatment area to create an ointment barrier. Avoid applying the protectant ointment to the treatment area itself, as this would impede direct contact of NEXOBRID with the eschar. 5. Protect any other open wounds (e.g., laceration, abraded skin, escharotomy incision) with skin protectant ointments or ointment gauze to prevent possible exposure to NEXOBRID. 2.4 Preparation and Application of NEXOBRID Gather the following sterile supplies prior to NEXOBRID preparation and application: • Instrument for mixing (e.g., spatula or tongue depressor) • Tongue depressor for NEXOBRID application • 0.9% Sodium Chloride Irrigation • Occlusive film dressing • Loose, thick fluffy dressing and bandage Preparation Prepare NEXOBRID at the patient’s bedside within 15 minutes of the intended application. Using aseptic technique, mix NEXOBRID lyophilized powder and gel vehicle as follows: 1. Pour the NEXOBRID lyophilized powder into the gel vehicle jar. 2. Thoroughly mix the NEXOBRID lyophilized powder and gel vehicle using a sterile instrument (e.g., tongue depressor or spatula) until the mixture is uniform. The mixed lyophilized powder and gel vehicle produce NEXOBRID in a final concentration of 8.8% w/w. DISCARD NEXOBRID IF NOT USED WITHIN 15 MINUTES OF PREPARATION, as the enzymatic activity of NEXOBRID decreases progressively following mixing. Application Apply NEXOBRID within 15 minutes of preparation as follows: 1. Moisten the treatment area by sprinkling sterile 0.9% Sodium Chloride Irrigation onto the burn wound. 2. Using a sterile tongue depressor, completely cover the moistened burn wound treatment area with the mixed NEXOBRID in a 3 mm thick layer (approximate thickness of a tongue depressor). Ensure NEXOBRID covers the entire target treatment area. 3. Cover the treated wound with a sterile occlusive film dressing. 4. Gently press the occlusive film dressing at the area of contact with the ointment barrier to ensure adherence between the occlusive film dressing and the ointment barrier and to achieve complete containment of NEXOBRID on the treatment area. There should be no visible air under the occlusive film dressing. 5. Cover the occlusive film dressing with a sterile loose, thick, fluffy dressing and secure with a sterile bandage. 6. Discard any unused portions of NEXOBRID. 5 2.5 Removal of NEXOBRID Remove NEXOBRID after 4 hours. Gather the following sterile supplies prior to NEXOBRID removal: • Blunt-edged instruments (e.g., tongue depressor) • Large dry gauze • Gauze soaked with 0.9% Sodium Chloride Irrigation • Dressing soaked with an antibacterial solution 1. Remove the occlusive film dressing using aseptic technique. 2. Remove the ointment barrier using a sterile blunt-edged instrument. 3. Remove the dissolved eschar from the wound by scraping it away with a sterile blunt-edged instrument. 4. Wipe the wound thoroughly with a large sterile dry gauze, then wipe with a sterile gauze that has been soaked with sterile 0.9% Sodium Chloride Irrigation. Rub the treated area until the appearance of a clean dermis or subcutaneous tissues with pinpoint bleeding. 5. To remove remnants of dissolved eschar, apply a dressing soaked with an antibacterial solution for at least 2 hours. 5 WARNINGS AND PRECAUTIONS 5.1 Hypersensitivity Reactions NEXOBRID-Treated Patients Serious hypersensitivity reactions, including anaphylaxis, have been reported with postmarketing use of NEXOBRID. If a hypersensitivity reaction occurs, remove NEXOBRID (if applicable) and initiate appropriate therapy. NEXOBRID is contraindicated in patients with a known hypersensitivity to anacaulase- bcdb, bromelain, pineapples or to any other component of NEXOBRID. NEXOBRID is also contraindicated in patients with known hypersensitivity to papayas or papain because of the risk of cross-sensitivity. Healthcare Providers Preparing and Applying NEXOBRID Healthcare personnel should take appropriate precautions to avoid exposure when preparing and handling NEXOBRID (e.g., gloves, surgical masks, other protective coverings, as needed). In the event of inadvertent skin exposure, rinse NEXOBRID off with water to reduce the likelihood of skin sensitization. 5.2 Coagulopathy A reduction of platelet aggregation and plasma fibrinogen levels and a moderate increase in partial thromboplastin and prothrombin times have been reported in the literature as possible effects following oral administration of bromelain, a component of NEXOBRID. In vitro and animal data suggest that bromelain can also promote fibrinolysis. Avoid use of NEXOBRID in patients with uncontrolled disorders of coagulation. Use NEXOBRID with caution in patients on anticoagulant therapy or other drugs affecting coagulation, and in patients with low platelet counts and increased risk of bleeding from other causes (e.g., peptic ulcers and sepsis). Monitor patients for possible signs of coagulation abnormalities and signs of bleeding. https://www.nexobrid-us.com/pdf/nexobrid-full-prescribing-information.pdf ================ <QUESTION> ======= My doctor said he can't use Nexobrid to remove an eschar on my arm because of my papaya allergy. Can you explain why this allergy prevents me from using this treatment, even though papayas aren't an ingredient? Explain in 50 words or less. ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
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"================ <TEXT PASSAGE> ======= [context document] ================ <QUESTION> ======= [user request] ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
EVIDENCE:
2.2 Recommended Dosage Recommended Dosage in Adults Apply a 3 mm thick layer (approximate thickness of a tongue depressor) of NEXOBRID to a burn wound area of up to 15% body surface area (BSA) in one application in adult patients. Remove NEXOBRID after 4 hours [see Dosage and Administration (2.5)]. A second application of NEXOBRID may be applied 24 hours following the first application to either the same area previously treated with NEXOBRID or to a new area in adult patients. Apply a second application if: • The wound area is more than 15% BSA, or • Multiple wound areas on different body surfaces require two treatments for logistical reasons such as body position, or • The first application’s eschar removal was not complete. For both applications, the total treated area must not exceed 20% BSA. Recommended Dosage in Pediatric Patients Pediatric Patients 6 Years of Age and Older Apply a 3 mm thick layer (approximate thickness of a tongue depressor) of NEXOBRID to a burn wound area of up to 15% BSA in one application in pediatric patients 6 years of age and older. Remove NEXOBRID after 4 hours [see Dosage and Administration (2.5)]. A second application of NEXOBRID is not recommended. Pediatric Patients Less Than 6 Years of Age Apply a 3 mm thick layer (approximate thickness of a tongue depressor) of NEXOBRID to a burn wound area of up to 10% BSA in one application in pediatric patients less than 6 years of age. Remove NEXOBRID after 4 hours [see Dosage and Administration (2.5)]. A second application of NEXOBRID is not recommended. 2.3 Preparation of Patient and Burn Wound Treatment Area Prepare the wound area as follows: 1. Thoroughly clean the wound to remove any charred tissue, blisters, and any topical products. 2. Apply a dressing soaked with an antibacterial solution to the treatment area for at least 2 hours. 3. Ensure the wound bed is clear of any remnants of topical agents (e.g., silver sulfadiazine, povidone iodine). 4 4. Apply an ointment skin protectant (e.g., petrolatum) 2 to 3 cm outside of the treatment area to create an ointment barrier. Avoid applying the protectant ointment to the treatment area itself, as this would impede direct contact of NEXOBRID with the eschar. 5. Protect any other open wounds (e.g., laceration, abraded skin, escharotomy incision) with skin protectant ointments or ointment gauze to prevent possible exposure to NEXOBRID. 2.4 Preparation and Application of NEXOBRID Gather the following sterile supplies prior to NEXOBRID preparation and application: • Instrument for mixing (e.g., spatula or tongue depressor) • Tongue depressor for NEXOBRID application • 0.9% Sodium Chloride Irrigation • Occlusive film dressing • Loose, thick fluffy dressing and bandage Preparation Prepare NEXOBRID at the patient’s bedside within 15 minutes of the intended application. Using aseptic technique, mix NEXOBRID lyophilized powder and gel vehicle as follows: 1. Pour the NEXOBRID lyophilized powder into the gel vehicle jar. 2. Thoroughly mix the NEXOBRID lyophilized powder and gel vehicle using a sterile instrument (e.g., tongue depressor or spatula) until the mixture is uniform. The mixed lyophilized powder and gel vehicle produce NEXOBRID in a final concentration of 8.8% w/w. DISCARD NEXOBRID IF NOT USED WITHIN 15 MINUTES OF PREPARATION, as the enzymatic activity of NEXOBRID decreases progressively following mixing. Application Apply NEXOBRID within 15 minutes of preparation as follows: 1. Moisten the treatment area by sprinkling sterile 0.9% Sodium Chloride Irrigation onto the burn wound. 2. Using a sterile tongue depressor, completely cover the moistened burn wound treatment area with the mixed NEXOBRID in a 3 mm thick layer (approximate thickness of a tongue depressor). Ensure NEXOBRID covers the entire target treatment area. 3. Cover the treated wound with a sterile occlusive film dressing. 4. Gently press the occlusive film dressing at the area of contact with the ointment barrier to ensure adherence between the occlusive film dressing and the ointment barrier and to achieve complete containment of NEXOBRID on the treatment area. There should be no visible air under the occlusive film dressing. 5. Cover the occlusive film dressing with a sterile loose, thick, fluffy dressing and secure with a sterile bandage. 6. Discard any unused portions of NEXOBRID. 5 2.5 Removal of NEXOBRID Remove NEXOBRID after 4 hours. Gather the following sterile supplies prior to NEXOBRID removal: • Blunt-edged instruments (e.g., tongue depressor) • Large dry gauze • Gauze soaked with 0.9% Sodium Chloride Irrigation • Dressing soaked with an antibacterial solution 1. Remove the occlusive film dressing using aseptic technique. 2. Remove the ointment barrier using a sterile blunt-edged instrument. 3. Remove the dissolved eschar from the wound by scraping it away with a sterile blunt-edged instrument. 4. Wipe the wound thoroughly with a large sterile dry gauze, then wipe with a sterile gauze that has been soaked with sterile 0.9% Sodium Chloride Irrigation. Rub the treated area until the appearance of a clean dermis or subcutaneous tissues with pinpoint bleeding. 5. To remove remnants of dissolved eschar, apply a dressing soaked with an antibacterial solution for at least 2 hours. 5 WARNINGS AND PRECAUTIONS 5.1 Hypersensitivity Reactions NEXOBRID-Treated Patients Serious hypersensitivity reactions, including anaphylaxis, have been reported with postmarketing use of NEXOBRID. If a hypersensitivity reaction occurs, remove NEXOBRID (if applicable) and initiate appropriate therapy. NEXOBRID is contraindicated in patients with a known hypersensitivity to anacaulase- bcdb, bromelain, pineapples or to any other component of NEXOBRID. NEXOBRID is also contraindicated in patients with known hypersensitivity to papayas or papain because of the risk of cross-sensitivity. Healthcare Providers Preparing and Applying NEXOBRID Healthcare personnel should take appropriate precautions to avoid exposure when preparing and handling NEXOBRID (e.g., gloves, surgical masks, other protective coverings, as needed). In the event of inadvertent skin exposure, rinse NEXOBRID off with water to reduce the likelihood of skin sensitization. 5.2 Coagulopathy A reduction of platelet aggregation and plasma fibrinogen levels and a moderate increase in partial thromboplastin and prothrombin times have been reported in the literature as possible effects following oral administration of bromelain, a component of NEXOBRID. In vitro and animal data suggest that bromelain can also promote fibrinolysis. Avoid use of NEXOBRID in patients with uncontrolled disorders of coagulation. Use NEXOBRID with caution in patients on anticoagulant therapy or other drugs affecting coagulation, and in patients with low platelet counts and increased risk of bleeding from other causes (e.g., peptic ulcers and sepsis). Monitor patients for possible signs of coagulation abnormalities and signs of bleeding.
USER:
My doctor said he can't use Nexobrid to remove an eschar on my arm because of my papaya allergy. Can you explain why this allergy prevents me from using this treatment, even though papayas aren't an ingredient? Explain in 50 words or less.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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In this task, your answers must be based solely on information provided in the prompt. Information from prior knowledge and external sources is not permitted.
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Summarize the included text in a bullet point list and use bold to highlight any company names.
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Future Possibilities of Big Tech in Finance This report generally provides an overview of Big Tech’s current financial offerings, how the existing regulatory framework applies to these operations, and related policy implications. However, should Big Tech seek to expand its offerings, as its actions have sometimes suggested and some observers have speculated, the relevant concerns may change considerably. At the same time, regulatory treatment may change irrespective of Big Tech’s activities, as policymakers and lawmakers continue to assess various Big Tech financial-services-related activities, such as data practices, and potential antitrust issues. For policymakers concerned about the potential implications of becoming dominant in financial markets, financial products where Big Tech could expand is also relevant for current policy. This section considers the potential evolution of financial services offered by Big Tech and the attendant policy implications. While it considers possible alternatives and issues that may arise from possible paths, the report does not assume that any one is more or less likely or that the companies are considering pursuing any particular strategy. Investment Advisory Services Investment advisory services refer to professionals that provide advice on securities to investors and include asset, portfolio, and wealth managers.156 More than 90% of wealth managers believe Big Tech companies will enter the market, with greater than 50% expecting significant disruption if it happens, according to a November 2021 survey.157 Over the past decade, fintechs have entered the investment management area, using machine learning to offer services such as robo- advising and retail stock trading. If Big Tech companies were to consider this approach, they would have to register as investment advisors with the Securities and Exchange Commission. They may also be required to register with the Financial Industry Regulatory Authority if they plan to offer brokerage services. Insurance According to one major management consulting firm, “[o]utside tech-powered giants … are shaping the insurance market.”158 Both Amazon and Google have partnered with insurance companies, much like they did banks, to offer various insurance products.159 Any intention to push further without relying on a partner would invite regulation at the state level,160 where most of the regulation of insurance occurs: The role of the federal government in regulating private insurance is relatively limited compared with its role in banking and securities. Insurance companies, unlike banks and securities firms, have been chartered and regulated solely by the states for the past 150 years. There are no federal regulators of insurance akin to those for securities or banks, such as the Securities and Exchange Commission (SEC) or the Office of the Comptroller of the Currency (OCC), respectively.161 Banking There are few issues at the nexus of technology and finance that generate greater interest and speculation than the prospect of Big Tech’s entry into banking. As it stands, some have pursued nonbank lending. The “Plex” project (see “Google “Plex” textbox), which Google abandoned in late 2021, was the most direct step to date by the industry, seeming to confirm collective and long-held suspicions that Big Techs were interested in becoming banks. However, if any of the companies were to consider an expansion into more bank-like activities, such as accepting deposits, their only option would likely be to pursue an industrial loan company charter, which has a complex framework and history. Legislative Framework Generally, U.S. law prohibits commercial enterprises (i.e., nonfinancial firms) from operating banks. Since at least as far back as the Glass-Steagall Act (Sections 20, 21, 26, and 32 of the Banking Act of 1933; P.L. 73-66), and then in the Bank Holding Company Act, Congress has sought to separate banking enterprises that take deposits and make loans from commercial enterprises producing and selling goods and services.162 In short, the separation aims to prevent one company from both offering a product and the loan to purchase that product funded with deposits publicly guaranteed by FDIC insurance. One exception to this general separation of commerce and banking is the role of industrial loan companies (ILCs). ILCs are financial institutions charted in six states163 that function much like typical banks. Unlike other banks, ILCs can be owned by nonfinancial, commercial firms. Under the Bank Holding Company Act (12 U.S.C. 1841 (c)(2)(h)), ILCs, provided they meet certain criteria, are exempt from the definition of bank. Pursuant to that exemption, a company that owns a bank is not a bank holding company and as such is not subject to oversight by the Federal Reserve. However, ILCs are considered state banks for the purposes of the FDIC Act (12 U.S.C. 1813 (a)(2)). Under that law, they are defined as banks and thus eligible for deposit insurance. Thus, this patchwork legal framework creates the opportunity for a company with other commercial interests to offer banking services, obtain deposit insurance, and operate nationally without being subject to consolidated supervision by the Federal Reserve System. Relevant History Historically, nonfinancial companies interested in a banking license have taken the ILC approach. In the mid-2000s, both Walmart and Home Depot began unsuccessful attempts to establish or acquire ILCs.165 Both ultimately dropped their attempts in the face of public opposition, after which the FDIC imposed an official moratorium on considering new insurance applications from ILCs between July 2006 and January 2008, and Section 603 of the Dodd-Frank Act imposed another temporary statutory moratorium between July 2010 and July 2013. Though the official moratoria had ended, the FDIC did not grant an ILC insurance application again until March 2020, when it approved two ILCs—Nelnet and Square166—for deposit insurance. Square offers many of the same services as the Big Techs in this report, including mobile wallet with payment and peer-to-peer transfer functions.167 Also relevant is an outstanding application for an ILC charter by Japanese e-commerce company Rakuten. Rakuten filed its most recent ILC application on January 15, 2021, following two previous applications that it withdrew before rulings. Rakuten is sometimes referred to as the “Amazon of Japan”168 and has a similar business model to U.S. Big Tech companies. As such, any decision by the FDIC will have regulatory arbitrage considerations (see “Systemic Risk” above) and is likely to be interpreted by others with similar models considering entering banking. Theoretically, a Big Tech with an ILC charter could benefit from access to deposits and deposit insurance without the increased regulatory burden and costs of consolidated financial oversight by the Federal Reserve System
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In this task, your answers must be based solely on information provided in the prompt. Information from prior knowledge and external sources is not permitted. Summarize the included text in a bullet point list and use bold to highlight any company names. Future Possibilities of Big Tech in Finance This report generally provides an overview of Big Tech’s current financial offerings, how the existing regulatory framework applies to these operations, and related policy implications. However, should Big Tech seek to expand its offerings, as its actions have sometimes suggested and some observers have speculated, the relevant concerns may change considerably. At the same time, regulatory treatment may change irrespective of Big Tech’s activities, as policymakers and lawmakers continue to assess various Big Tech financial-services-related activities, such as data practices, and potential antitrust issues. For policymakers concerned about the potential implications of becoming dominant in financial markets, financial products where Big Tech could expand is also relevant for current policy. This section considers the potential evolution of financial services offered by Big Tech and the attendant policy implications. While it considers possible alternatives and issues that may arise from possible paths, the report does not assume that any one is more or less likely or that the companies are considering pursuing any particular strategy. Investment Advisory Services Investment advisory services refer to professionals that provide advice on securities to investors and include asset, portfolio, and wealth managers.156 More than 90% of wealth managers believe Big Tech companies will enter the market, with greater than 50% expecting significant disruption if it happens, according to a November 2021 survey.157 Over the past decade, fintechs have entered the investment management area, using machine learning to offer services such as robo- advising and retail stock trading. If Big Tech companies were to consider this approach, they would have to register as investment advisors with the Securities and Exchange Commission. They may also be required to register with the Financial Industry Regulatory Authority if they plan to offer brokerage services. Insurance According to one major management consulting firm, “[o]utside tech-powered giants … are shaping the insurance market.”158 Both Amazon and Google have partnered with insurance companies, much like they did banks, to offer various insurance products.159 Any intention to push further without relying on a partner would invite regulation at the state level,160 where most of the regulation of insurance occurs: The role of the federal government in regulating private insurance is relatively limited compared with its role in banking and securities. Insurance companies, unlike banks and securities firms, have been chartered and regulated solely by the states for the past 150 years. There are no federal regulators of insurance akin to those for securities or banks, such as the Securities and Exchange Commission (SEC) or the Office of the Comptroller of the Currency (OCC), respectively.161 Banking There are few issues at the nexus of technology and finance that generate greater interest and speculation than the prospect of Big Tech’s entry into banking. As it stands, some have pursued nonbank lending. The “Plex” project (see “Google “Plex” textbox), which Google abandoned in late 2021, was the most direct step to date by the industry, seeming to confirm collective and long-held suspicions that Big Techs were interested in becoming banks. However, if any of the companies were to consider an expansion into more bank-like activities, such as accepting deposits, their only option would likely be to pursue an industrial loan company charter, which has a complex framework and history. Legislative Framework Generally, U.S. law prohibits commercial enterprises (i.e., nonfinancial firms) from operating banks. Since at least as far back as the Glass-Steagall Act (Sections 20, 21, 26, and 32 of the Banking Act of 1933; P.L. 73-66), and then in the Bank Holding Company Act, Congress has sought to separate banking enterprises that take deposits and make loans from commercial enterprises producing and selling goods and services.162 In short, the separation aims to prevent one company from both offering a product and the loan to purchase that product funded with deposits publicly guaranteed by FDIC insurance. One exception to this general separation of commerce and banking is the role of industrial loan companies (ILCs). ILCs are financial institutions charted in six states163 that function much like typical banks. Unlike other banks, ILCs can be owned by nonfinancial, commercial firms. Under the Bank Holding Company Act (12 U.S.C. 1841 (c)(2)(h)), ILCs, provided they meet certain criteria, are exempt from the definition of bank. Pursuant to that exemption, a company that owns a bank is not a bank holding company and as such is not subject to oversight by the Federal Reserve. However, ILCs are considered state banks for the purposes of the FDIC Act (12 U.S.C. 1813 (a)(2)). Under that law, they are defined as banks and thus eligible for deposit insurance. Thus, this patchwork legal framework creates the opportunity for a company with other commercial interests to offer banking services, obtain deposit insurance, and operate nationally without being subject to consolidated supervision by the Federal Reserve System. Relevant History Historically, nonfinancial companies interested in a banking license have taken the ILC approach. In the mid-2000s, both Walmart and Home Depot began unsuccessful attempts to establish or acquire ILCs.165 Both ultimately dropped their attempts in the face of public opposition, after which the FDIC imposed an official moratorium on considering new insurance applications from ILCs between July 2006 and January 2008, and Section 603 of the Dodd-Frank Act imposed another temporary statutory moratorium between July 2010 and July 2013. Though the official moratoria had ended, the FDIC did not grant an ILC insurance application again until March 2020, when it approved two ILCs—Nelnet and Square166—for deposit insurance. Square offers many of the same services as the Big Techs in this report, including mobile wallet with payment and peer-to-peer transfer functions.167 Also relevant is an outstanding application for an ILC charter by Japanese e-commerce company Rakuten. Rakuten filed its most recent ILC application on January 15, 2021, following two previous applications that it withdrew before rulings. Rakuten is sometimes referred to as the “Amazon of Japan”168 and has a similar business model to U.S. Big Tech companies. As such, any decision by the FDIC will have regulatory arbitrage considerations (see “Systemic Risk” above) and is likely to be interpreted by others with similar models considering entering banking. Theoretically, a Big Tech with an ILC charter could benefit from access to deposits and deposit insurance without the increased regulatory burden and costs of consolidated financial oversight by the Federal Reserve System
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In this task, your answers must be based solely on information provided in the prompt. Information from prior knowledge and external sources is not permitted.
EVIDENCE:
Future Possibilities of Big Tech in Finance This report generally provides an overview of Big Tech’s current financial offerings, how the existing regulatory framework applies to these operations, and related policy implications. However, should Big Tech seek to expand its offerings, as its actions have sometimes suggested and some observers have speculated, the relevant concerns may change considerably. At the same time, regulatory treatment may change irrespective of Big Tech’s activities, as policymakers and lawmakers continue to assess various Big Tech financial-services-related activities, such as data practices, and potential antitrust issues. For policymakers concerned about the potential implications of becoming dominant in financial markets, financial products where Big Tech could expand is also relevant for current policy. This section considers the potential evolution of financial services offered by Big Tech and the attendant policy implications. While it considers possible alternatives and issues that may arise from possible paths, the report does not assume that any one is more or less likely or that the companies are considering pursuing any particular strategy. Investment Advisory Services Investment advisory services refer to professionals that provide advice on securities to investors and include asset, portfolio, and wealth managers.156 More than 90% of wealth managers believe Big Tech companies will enter the market, with greater than 50% expecting significant disruption if it happens, according to a November 2021 survey.157 Over the past decade, fintechs have entered the investment management area, using machine learning to offer services such as robo- advising and retail stock trading. If Big Tech companies were to consider this approach, they would have to register as investment advisors with the Securities and Exchange Commission. They may also be required to register with the Financial Industry Regulatory Authority if they plan to offer brokerage services. Insurance According to one major management consulting firm, “[o]utside tech-powered giants … are shaping the insurance market.”158 Both Amazon and Google have partnered with insurance companies, much like they did banks, to offer various insurance products.159 Any intention to push further without relying on a partner would invite regulation at the state level,160 where most of the regulation of insurance occurs: The role of the federal government in regulating private insurance is relatively limited compared with its role in banking and securities. Insurance companies, unlike banks and securities firms, have been chartered and regulated solely by the states for the past 150 years. There are no federal regulators of insurance akin to those for securities or banks, such as the Securities and Exchange Commission (SEC) or the Office of the Comptroller of the Currency (OCC), respectively.161 Banking There are few issues at the nexus of technology and finance that generate greater interest and speculation than the prospect of Big Tech’s entry into banking. As it stands, some have pursued nonbank lending. The “Plex” project (see “Google “Plex” textbox), which Google abandoned in late 2021, was the most direct step to date by the industry, seeming to confirm collective and long-held suspicions that Big Techs were interested in becoming banks. However, if any of the companies were to consider an expansion into more bank-like activities, such as accepting deposits, their only option would likely be to pursue an industrial loan company charter, which has a complex framework and history. Legislative Framework Generally, U.S. law prohibits commercial enterprises (i.e., nonfinancial firms) from operating banks. Since at least as far back as the Glass-Steagall Act (Sections 20, 21, 26, and 32 of the Banking Act of 1933; P.L. 73-66), and then in the Bank Holding Company Act, Congress has sought to separate banking enterprises that take deposits and make loans from commercial enterprises producing and selling goods and services.162 In short, the separation aims to prevent one company from both offering a product and the loan to purchase that product funded with deposits publicly guaranteed by FDIC insurance. One exception to this general separation of commerce and banking is the role of industrial loan companies (ILCs). ILCs are financial institutions charted in six states163 that function much like typical banks. Unlike other banks, ILCs can be owned by nonfinancial, commercial firms. Under the Bank Holding Company Act (12 U.S.C. 1841 (c)(2)(h)), ILCs, provided they meet certain criteria, are exempt from the definition of bank. Pursuant to that exemption, a company that owns a bank is not a bank holding company and as such is not subject to oversight by the Federal Reserve. However, ILCs are considered state banks for the purposes of the FDIC Act (12 U.S.C. 1813 (a)(2)). Under that law, they are defined as banks and thus eligible for deposit insurance. Thus, this patchwork legal framework creates the opportunity for a company with other commercial interests to offer banking services, obtain deposit insurance, and operate nationally without being subject to consolidated supervision by the Federal Reserve System. Relevant History Historically, nonfinancial companies interested in a banking license have taken the ILC approach. In the mid-2000s, both Walmart and Home Depot began unsuccessful attempts to establish or acquire ILCs.165 Both ultimately dropped their attempts in the face of public opposition, after which the FDIC imposed an official moratorium on considering new insurance applications from ILCs between July 2006 and January 2008, and Section 603 of the Dodd-Frank Act imposed another temporary statutory moratorium between July 2010 and July 2013. Though the official moratoria had ended, the FDIC did not grant an ILC insurance application again until March 2020, when it approved two ILCs—Nelnet and Square166—for deposit insurance. Square offers many of the same services as the Big Techs in this report, including mobile wallet with payment and peer-to-peer transfer functions.167 Also relevant is an outstanding application for an ILC charter by Japanese e-commerce company Rakuten. Rakuten filed its most recent ILC application on January 15, 2021, following two previous applications that it withdrew before rulings. Rakuten is sometimes referred to as the “Amazon of Japan”168 and has a similar business model to U.S. Big Tech companies. As such, any decision by the FDIC will have regulatory arbitrage considerations (see “Systemic Risk” above) and is likely to be interpreted by others with similar models considering entering banking. Theoretically, a Big Tech with an ILC charter could benefit from access to deposits and deposit insurance without the increased regulatory burden and costs of consolidated financial oversight by the Federal Reserve System
USER:
Summarize the included text in a bullet point list and use bold to highlight any company names.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Answer in a full sentence, no less than 50 words, and cite the part of the text that supports your statement.
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Under the EEOC does an employer always have to modify the dress code to accommodate for an employee's religious practices?
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## U.S. Equal Employment Opportunity Commision ### Prohibited Employment Policies/Practices Under the laws enforced by EEOC, it is illegal to discriminate against someone (applicant or employee) because of that person's race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. It is also illegal to retaliate against a person because he or she complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit. ### The law forbids discrimination in every aspect of employment. The laws enforced by EEOC prohibit an employer or other covered entity from using neutral employment policies and practices that have a disproportionately negative effect on applicants or employees of a particular race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), or national origin, or on an individual with a disability or class of individuals with disabilities, if the polices or practices at issue are not job-related and necessary to the operation of the business. The laws enforced by EEOC also prohibit an employer from using neutral employment policies and practices that have a disproportionately negative impact on applicants or employees age 40 or older, if the policies or practices at issue are not based on a reasonable factor other than age. ### Job Advertisements It is illegal for an employer to publish a job advertisement that shows a preference for or discourages someone from applying for a job because of his or her race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. ### Recruitment It is also illegal for an employer to recruit new employees in a way that discriminates against them because of their race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. ### Application & Hiring It is illegal for an employer to discriminate against a job applicant because of his or her race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. For example, an employer may not refuse to give employment applications to people of a certain race. If an employer requires job applicants to take a test, the test must be necessary and related to the job and the employer may not exclude people of a particular race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, or individuals with disabilities. In addition, the employer may not use a test that excludes applicants age 40 or older if the test is not based on a reasonable factor other than age. If a job applicant with a disability needs an accommodation (such as a sign language interpreter) to apply for a job, the employer is required to provide the accommodation, so long as the accommodation does not cause the employer significant difficulty or expense. ### Background Checks See "Pre-Employment Inquiries" below. ### Job Referrals It is illegal for an employer, employment agency or union to take into account a person's race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information when making decisions about job referrals. ### Job Assignments & Promotions It is illegal for an employer to make decisions about job assignments and promotions based on an employee's race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. For example, an employer may not give preference to employees of a certain race when making shift assignments and may not segregate employees of a particular national origin from other employees or from customers. If an employer requires employees to take a test before making decisions about assignments or promotions, the test may not exclude people of a particular race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), or national origin, or individuals with disabilities, unless the employer can show that the test is necessary and related to the job. In addition, the employer may not use a test that excludes employees age 40 or older if the test is not based on a reasonable factor other than age. ### Pay And Benefits It is illegal for an employer to discriminate against an employee in the payment of wages or employee benefits on the bases of race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. Employee benefits include sick and vacation leave, insurance, access to overtime as well as overtime pay, and retirement programs. For example, an employer many not pay Hispanic workers less than African-American workers because of their national origin, and men and women in the same workplace must be given equal pay for equal work. ### Discipline & Discharge An employer may not take into account a person's race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information when making decisions about discipline or discharge. For example, if two employees commit a similar offense, an employer many not discipline them differently because of their race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. ### Reasonable Accommodation & Disability The law requires that an employer provide reasonable accommodation to an employee or job applicant with a disability, unless doing so would cause significant difficulty or expense for the employer. Reasonable Accommodation & Pregnancy, Childbirth, or Related Medical Conditions The law requires that an employer provide reasonable accommodation to a qualified employee or job applicant with a known limitation related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions, unless doing so would cause significant difficulty or expense for the employer. ### Reasonable Accommodation & Religion The law requires an employer to reasonably accommodate an employee's religious beliefs or practices, unless doing so would cause difficulty or expense for the employer. This means an employer may have to make reasonable adjustments at work that will allow the employee to practice his or her religion, such as allowing an employee to voluntarily swap shifts with a co- worker so that he or she can attend religious services. ### Training & Apprenticeship Programs It is illegal for a training or apprenticeship program to discriminate on the bases of race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. For example, an employer may not deny training opportunities to African-American employees because of their race. In some situations, an employer may be allowed to set age limits for participation in an apprenticeship program. ### Harassment It is illegal to harass an employee because of race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. It is also illegal to harass someone because they have complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit. Harassment can take the form of slurs, graffiti, offensive or derogatory comments, or other verbal or physical conduct. Sexual harassment (including unwelcome sexual advances, requests for sexual favors, and other conduct of a sexual nature) is also unlawful. Although the law does not prohibit simple teasing, offhand comments, or isolated incidents that are not very serious, harassment is illegal if it is so frequent or severe that it creates a hostile or offensive work environment or if it results in an adverse employment decision (such as the victim being fired or demoted). ### Terms & Conditions Of Employment The law makes it illegal for an employer to make any employment decision because of a person's race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. That means an employer may not discriminate when it comes to such things as hiring, firing, promotions, and pay. It also means an employer may not discriminate, for example, when granting breaks, approving leave, assigning work stations, or setting any other term or condition of employment. ### Pre-Employment Inquiries (General) As a general rule, the information obtained and requested through the pre-employment process should be limited to those essential for determining if a person is qualified for the job; whereas, information regarding race, sex, national origin, age, and religion are irrelevant in such determinations. Although state and federal equal opportunity laws do not clearly forbid employers from making pre-employment inquiries that relate to, or disproportionately screen out members based on race, color, sex, national origin, religion, or age, such inquiries may be used as evidence of an employer's intent to discriminate unless the questions asked can be justified by some business purpose. Therefore, inquiries about organizations, clubs, societies, and lodges of which an applicant may be a member or any other questions, which may indicate the applicant's race, sex, national origin, disability status, age, religion, color or ancestry if answered, should generally be avoided. Similarly, employers should not ask for a photograph of an applicant. If needed for identification purposes, a photograph may be obtained after an offer of employment is made and accepted. ### Pre-Employment Inquiries and: * Race * Height & Weight * Financial Information * Unemployed Status * Background Checks * Religious Affiliation Or Beliefs * Citizenship * Marital Status, Number Of Children * Gender * Disability * Medical Questions & Examinations ### Dress Code In general, an employer may establish a dress code which applies to all employees or employees within certain job categories. However, there are a few possible exceptions. While an employer may require all workers to follow a uniform dress code even if the dress code conflicts with some workers' ethnic beliefs or practices, a dress code must not treat some employees less favorably because of their national origin. For example, a dress code that prohibits certain kinds of ethnic dress, such as traditional African or East Indian attire, but otherwise permits casual dress would treat some employees less favorably because of their national origin. Moreover, if the dress code conflicts with an employee's religious practices and the employee requests an accommodation, the employer must modify the dress code or permit an exception to the dress code unless doing so would result in undue hardship. Similarly, if an employee requests an accommodation to the dress code because of his disability, the employer must modify the dress code or permit an exception to the dress code, unless doing so would result in undue hardship. ### Constructive Discharge/Forced To Resign Discriminatory practices under the laws EEOC enforces also include constructive discharge or forcing an employee to resign by making the work environment so intolerable a reasonable person would not be able to stay.
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<Context> ========== ## U.S. Equal Employment Opportunity Commision ### Prohibited Employment Policies/Practices Under the laws enforced by EEOC, it is illegal to discriminate against someone (applicant or employee) because of that person's race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. It is also illegal to retaliate against a person because he or she complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit. ### The law forbids discrimination in every aspect of employment. The laws enforced by EEOC prohibit an employer or other covered entity from using neutral employment policies and practices that have a disproportionately negative effect on applicants or employees of a particular race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), or national origin, or on an individual with a disability or class of individuals with disabilities, if the polices or practices at issue are not job-related and necessary to the operation of the business. The laws enforced by EEOC also prohibit an employer from using neutral employment policies and practices that have a disproportionately negative impact on applicants or employees age 40 or older, if the policies or practices at issue are not based on a reasonable factor other than age. ### Job Advertisements It is illegal for an employer to publish a job advertisement that shows a preference for or discourages someone from applying for a job because of his or her race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. ### Recruitment It is also illegal for an employer to recruit new employees in a way that discriminates against them because of their race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. ### Application & Hiring It is illegal for an employer to discriminate against a job applicant because of his or her race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. For example, an employer may not refuse to give employment applications to people of a certain race. If an employer requires job applicants to take a test, the test must be necessary and related to the job and the employer may not exclude people of a particular race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, or individuals with disabilities. In addition, the employer may not use a test that excludes applicants age 40 or older if the test is not based on a reasonable factor other than age. If a job applicant with a disability needs an accommodation (such as a sign language interpreter) to apply for a job, the employer is required to provide the accommodation, so long as the accommodation does not cause the employer significant difficulty or expense. ### Background Checks See "Pre-Employment Inquiries" below. ### Job Referrals It is illegal for an employer, employment agency or union to take into account a person's race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information when making decisions about job referrals. ### Job Assignments & Promotions It is illegal for an employer to make decisions about job assignments and promotions based on an employee's race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. For example, an employer may not give preference to employees of a certain race when making shift assignments and may not segregate employees of a particular national origin from other employees or from customers. If an employer requires employees to take a test before making decisions about assignments or promotions, the test may not exclude people of a particular race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), or national origin, or individuals with disabilities, unless the employer can show that the test is necessary and related to the job. In addition, the employer may not use a test that excludes employees age 40 or older if the test is not based on a reasonable factor other than age. ### Pay And Benefits It is illegal for an employer to discriminate against an employee in the payment of wages or employee benefits on the bases of race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. Employee benefits include sick and vacation leave, insurance, access to overtime as well as overtime pay, and retirement programs. For example, an employer many not pay Hispanic workers less than African-American workers because of their national origin, and men and women in the same workplace must be given equal pay for equal work. ### Discipline & Discharge An employer may not take into account a person's race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information when making decisions about discipline or discharge. For example, if two employees commit a similar offense, an employer many not discipline them differently because of their race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. ### Reasonable Accommodation & Disability The law requires that an employer provide reasonable accommodation to an employee or job applicant with a disability, unless doing so would cause significant difficulty or expense for the employer. Reasonable Accommodation & Pregnancy, Childbirth, or Related Medical Conditions The law requires that an employer provide reasonable accommodation to a qualified employee or job applicant with a known limitation related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions, unless doing so would cause significant difficulty or expense for the employer. ### Reasonable Accommodation & Religion The law requires an employer to reasonably accommodate an employee's religious beliefs or practices, unless doing so would cause difficulty or expense for the employer. This means an employer may have to make reasonable adjustments at work that will allow the employee to practice his or her religion, such as allowing an employee to voluntarily swap shifts with a co- worker so that he or she can attend religious services. ### Training & Apprenticeship Programs It is illegal for a training or apprenticeship program to discriminate on the bases of race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. For example, an employer may not deny training opportunities to African-American employees because of their race. In some situations, an employer may be allowed to set age limits for participation in an apprenticeship program. ### Harassment It is illegal to harass an employee because of race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. It is also illegal to harass someone because they have complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit. Harassment can take the form of slurs, graffiti, offensive or derogatory comments, or other verbal or physical conduct. Sexual harassment (including unwelcome sexual advances, requests for sexual favors, and other conduct of a sexual nature) is also unlawful. Although the law does not prohibit simple teasing, offhand comments, or isolated incidents that are not very serious, harassment is illegal if it is so frequent or severe that it creates a hostile or offensive work environment or if it results in an adverse employment decision (such as the victim being fired or demoted). ### Terms & Conditions Of Employment The law makes it illegal for an employer to make any employment decision because of a person's race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. That means an employer may not discriminate when it comes to such things as hiring, firing, promotions, and pay. It also means an employer may not discriminate, for example, when granting breaks, approving leave, assigning work stations, or setting any other term or condition of employment. ### Pre-Employment Inquiries (General) As a general rule, the information obtained and requested through the pre-employment process should be limited to those essential for determining if a person is qualified for the job; whereas, information regarding race, sex, national origin, age, and religion are irrelevant in such determinations. Although state and federal equal opportunity laws do not clearly forbid employers from making pre-employment inquiries that relate to, or disproportionately screen out members based on race, color, sex, national origin, religion, or age, such inquiries may be used as evidence of an employer's intent to discriminate unless the questions asked can be justified by some business purpose. Therefore, inquiries about organizations, clubs, societies, and lodges of which an applicant may be a member or any other questions, which may indicate the applicant's race, sex, national origin, disability status, age, religion, color or ancestry if answered, should generally be avoided. Similarly, employers should not ask for a photograph of an applicant. If needed for identification purposes, a photograph may be obtained after an offer of employment is made and accepted. ### Pre-Employment Inquiries and: * Race * Height & Weight * Financial Information * Unemployed Status * Background Checks * Religious Affiliation Or Beliefs * Citizenship * Marital Status, Number Of Children * Gender * Disability * Medical Questions & Examinations ### Dress Code In general, an employer may establish a dress code which applies to all employees or employees within certain job categories. However, there are a few possible exceptions. While an employer may require all workers to follow a uniform dress code even if the dress code conflicts with some workers' ethnic beliefs or practices, a dress code must not treat some employees less favorably because of their national origin. For example, a dress code that prohibits certain kinds of ethnic dress, such as traditional African or East Indian attire, but otherwise permits casual dress would treat some employees less favorably because of their national origin. Moreover, if the dress code conflicts with an employee's religious practices and the employee requests an accommodation, the employer must modify the dress code or permit an exception to the dress code unless doing so would result in undue hardship. Similarly, if an employee requests an accommodation to the dress code because of his disability, the employer must modify the dress code or permit an exception to the dress code, unless doing so would result in undue hardship. ### Constructive Discharge/Forced To Resign Discriminatory practices under the laws EEOC enforces also include constructive discharge or forcing an employee to resign by making the work environment so intolerable a reasonable person would not be able to stay. <Question> ========== Under the EEOC does an employer always have to modify the dress code to accommodate for an employee's religious practices? <System Instruction> ========== Answer in a full sentence, no less than 50 words, and cite the part of the text that supports your statement.
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Answer in a full sentence, no less than 50 words, and cite the part of the text that supports your statement.
EVIDENCE:
## U.S. Equal Employment Opportunity Commision ### Prohibited Employment Policies/Practices Under the laws enforced by EEOC, it is illegal to discriminate against someone (applicant or employee) because of that person's race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. It is also illegal to retaliate against a person because he or she complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit. ### The law forbids discrimination in every aspect of employment. The laws enforced by EEOC prohibit an employer or other covered entity from using neutral employment policies and practices that have a disproportionately negative effect on applicants or employees of a particular race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), or national origin, or on an individual with a disability or class of individuals with disabilities, if the polices or practices at issue are not job-related and necessary to the operation of the business. The laws enforced by EEOC also prohibit an employer from using neutral employment policies and practices that have a disproportionately negative impact on applicants or employees age 40 or older, if the policies or practices at issue are not based on a reasonable factor other than age. ### Job Advertisements It is illegal for an employer to publish a job advertisement that shows a preference for or discourages someone from applying for a job because of his or her race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. ### Recruitment It is also illegal for an employer to recruit new employees in a way that discriminates against them because of their race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. ### Application & Hiring It is illegal for an employer to discriminate against a job applicant because of his or her race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. For example, an employer may not refuse to give employment applications to people of a certain race. If an employer requires job applicants to take a test, the test must be necessary and related to the job and the employer may not exclude people of a particular race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, or individuals with disabilities. In addition, the employer may not use a test that excludes applicants age 40 or older if the test is not based on a reasonable factor other than age. If a job applicant with a disability needs an accommodation (such as a sign language interpreter) to apply for a job, the employer is required to provide the accommodation, so long as the accommodation does not cause the employer significant difficulty or expense. ### Background Checks See "Pre-Employment Inquiries" below. ### Job Referrals It is illegal for an employer, employment agency or union to take into account a person's race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information when making decisions about job referrals. ### Job Assignments & Promotions It is illegal for an employer to make decisions about job assignments and promotions based on an employee's race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. For example, an employer may not give preference to employees of a certain race when making shift assignments and may not segregate employees of a particular national origin from other employees or from customers. If an employer requires employees to take a test before making decisions about assignments or promotions, the test may not exclude people of a particular race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), or national origin, or individuals with disabilities, unless the employer can show that the test is necessary and related to the job. In addition, the employer may not use a test that excludes employees age 40 or older if the test is not based on a reasonable factor other than age. ### Pay And Benefits It is illegal for an employer to discriminate against an employee in the payment of wages or employee benefits on the bases of race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. Employee benefits include sick and vacation leave, insurance, access to overtime as well as overtime pay, and retirement programs. For example, an employer many not pay Hispanic workers less than African-American workers because of their national origin, and men and women in the same workplace must be given equal pay for equal work. ### Discipline & Discharge An employer may not take into account a person's race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information when making decisions about discipline or discharge. For example, if two employees commit a similar offense, an employer many not discipline them differently because of their race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. ### Reasonable Accommodation & Disability The law requires that an employer provide reasonable accommodation to an employee or job applicant with a disability, unless doing so would cause significant difficulty or expense for the employer. Reasonable Accommodation & Pregnancy, Childbirth, or Related Medical Conditions The law requires that an employer provide reasonable accommodation to a qualified employee or job applicant with a known limitation related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions, unless doing so would cause significant difficulty or expense for the employer. ### Reasonable Accommodation & Religion The law requires an employer to reasonably accommodate an employee's religious beliefs or practices, unless doing so would cause difficulty or expense for the employer. This means an employer may have to make reasonable adjustments at work that will allow the employee to practice his or her religion, such as allowing an employee to voluntarily swap shifts with a co- worker so that he or she can attend religious services. ### Training & Apprenticeship Programs It is illegal for a training or apprenticeship program to discriminate on the bases of race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. For example, an employer may not deny training opportunities to African-American employees because of their race. In some situations, an employer may be allowed to set age limits for participation in an apprenticeship program. ### Harassment It is illegal to harass an employee because of race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. It is also illegal to harass someone because they have complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit. Harassment can take the form of slurs, graffiti, offensive or derogatory comments, or other verbal or physical conduct. Sexual harassment (including unwelcome sexual advances, requests for sexual favors, and other conduct of a sexual nature) is also unlawful. Although the law does not prohibit simple teasing, offhand comments, or isolated incidents that are not very serious, harassment is illegal if it is so frequent or severe that it creates a hostile or offensive work environment or if it results in an adverse employment decision (such as the victim being fired or demoted). ### Terms & Conditions Of Employment The law makes it illegal for an employer to make any employment decision because of a person's race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. That means an employer may not discriminate when it comes to such things as hiring, firing, promotions, and pay. It also means an employer may not discriminate, for example, when granting breaks, approving leave, assigning work stations, or setting any other term or condition of employment. ### Pre-Employment Inquiries (General) As a general rule, the information obtained and requested through the pre-employment process should be limited to those essential for determining if a person is qualified for the job; whereas, information regarding race, sex, national origin, age, and religion are irrelevant in such determinations. Although state and federal equal opportunity laws do not clearly forbid employers from making pre-employment inquiries that relate to, or disproportionately screen out members based on race, color, sex, national origin, religion, or age, such inquiries may be used as evidence of an employer's intent to discriminate unless the questions asked can be justified by some business purpose. Therefore, inquiries about organizations, clubs, societies, and lodges of which an applicant may be a member or any other questions, which may indicate the applicant's race, sex, national origin, disability status, age, religion, color or ancestry if answered, should generally be avoided. Similarly, employers should not ask for a photograph of an applicant. If needed for identification purposes, a photograph may be obtained after an offer of employment is made and accepted. ### Pre-Employment Inquiries and: * Race * Height & Weight * Financial Information * Unemployed Status * Background Checks * Religious Affiliation Or Beliefs * Citizenship * Marital Status, Number Of Children * Gender * Disability * Medical Questions & Examinations ### Dress Code In general, an employer may establish a dress code which applies to all employees or employees within certain job categories. However, there are a few possible exceptions. While an employer may require all workers to follow a uniform dress code even if the dress code conflicts with some workers' ethnic beliefs or practices, a dress code must not treat some employees less favorably because of their national origin. For example, a dress code that prohibits certain kinds of ethnic dress, such as traditional African or East Indian attire, but otherwise permits casual dress would treat some employees less favorably because of their national origin. Moreover, if the dress code conflicts with an employee's religious practices and the employee requests an accommodation, the employer must modify the dress code or permit an exception to the dress code unless doing so would result in undue hardship. Similarly, if an employee requests an accommodation to the dress code because of his disability, the employer must modify the dress code or permit an exception to the dress code, unless doing so would result in undue hardship. ### Constructive Discharge/Forced To Resign Discriminatory practices under the laws EEOC enforces also include constructive discharge or forcing an employee to resign by making the work environment so intolerable a reasonable person would not be able to stay.
USER:
Under the EEOC does an employer always have to modify the dress code to accommodate for an employee's religious practices?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 21
| 20
| 1,813
| null | 847
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You base your responses on the provided text and do not use any external knowledge. You also do not use any prior knowledge. Your response should be 3-5 bullet points long, with each bullet point no longer than 1 sentence.
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What is pixel density?
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1. Introduction This step-by-step guide helps you select the best cameras for your operational requirements and surveillance scenarios. Lack of industry standards and the complexity of the matter cause many integrators to lose sight of a key prerequisite in any installation: the operational requirements or the true purpose of the surveillance. In this guide, we present the Pixel Density Model – a method that allows you to relate the operational requirements of your system to modern surveillance video and IP cameras. 2. Moving into IP Selecting the appropriate surveillance camera to fulfill operational requirements has always been a challenge. With the introduction of IP cameras, and especially through the development of megapixel and HDTV cameras, the need has emerged for a new way to determine how to meet operational requirements. In these six steps, we describe a model to relate operational requirements to modern video and IP cameras. When recommending cameras and discussing what is the “best” camera on the market, it is easy to focus on datasheets and technical specifications. This causes many integrators to lose sight of a key prerequisite in any installation, namely the operational requirements or the actual purpose of the surveillance. Previously when surveillance was all analog, selecting a camera to match an operational requirement was mostly about selecting the appropriate lens since there wasn’t a wide variety of resolutions to choose from. Most CCTV systems are designed to monitor human behavior, so the human body was used as a yardstick. In order to differentiate between diverse types of scenarios, various categories were established based on percentage representation of the height of a human body within the field of view. While not a global standard in any way, it became quite common to distinguish between the need for detection, recognition, and identification. As correct as the percentages in Figure 1 might be for a standard analog resolution, they pose a few challenges when moving into the diverse resolutions of IP cameras. To bridge the gap, attempts have been made to translate from TV lines to pixels to produce tables like the one shown in Figure 2, where the way of thinking about analog operational requirements in terms of percentages has been translated for IP. This might be correct, but it is difficult – if not impossible – to work with complexity such as this in a real-life context. Surely there must be a better way 3. Pixel density The growth of IP surveillance forces us to a make paradigm shift in the way we define our operational requirements. Advancements in camera technology have resulted in a multitude of resolutions and formats. Instead of using vertical height and percentage, we should focus on pixel density in the horizontal dimension. The term pixel density in this context refers to the number of pixels representing the object of our operational requirement – commonly a human, or more specifically, a human face. One reason why we have chosen to use the face is its distinct identifying features. Furthermore, the variances in face widths are less than those of body lengths or widths, which results in a smaller margin of error. The average human face is 16 centimeters wide (= 6.3 inches wide). Following suggested operational requirements from SKL, the Swedish National Laboratory of Forensic Science, and supported by our own test results at Axis Communications, we have chosen to use 80 pixels as the requirement for facial identification for challenging conditions . (see Figure 3). To some, this number might sound high, and in fact some vendors or independent sources recommend 40 pixels for a face or 100 pixels per foot for recognition. The argument behind the higher number is that for identification, there are limited other telltale signs. For recognition, previous knowledge adds factors such as how a person moves – a property easy to observe and recognize, but difficult to identify and describe accurately. To ensure sufficient video quality even if the object isn’t facing the camera straight on, or if the lighting is not optimal, the higher number provides an adequate safety margin. 1 Challenging conditions: Situations with very varying or weak lighting. People, objects and vehicles are seen from an angle where details are in shade, or facing away from the camera. It could also occur in situations where people, objects and vehicles are moving at very high speed through an area. More often occurring in outdoor situations without additional lighting, or indoor situations during very dark conditions. 2 See European Standard EN 50132-7:2012 by CENELEC www.cenelec.eu 3 Good conditions: Situations with decent lighting. People, objects and vehicles are moving at reasonable speed, and seen from an angle where sufficient details are visible. More often occurring in indoor situations where lighting is even, or outdoor situations with additional lighting.
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1. Introduction This step-by-step guide helps you select the best cameras for your operational requirements and surveillance scenarios. Lack of industry standards and the complexity of the matter cause many integrators to lose sight of a key prerequisite in any installation: the operational requirements or the true purpose of the surveillance. In this guide, we present the Pixel Density Model – a method that allows you to relate the operational requirements of your system to modern surveillance video and IP cameras. 2. Moving into IP Selecting the appropriate surveillance camera to fulfill operational requirements has always been a challenge. With the introduction of IP cameras, and especially through the development of megapixel and HDTV cameras, the need has emerged for a new way to determine how to meet operational requirements. In these six steps, we describe a model to relate operational requirements to modern video and IP cameras. When recommending cameras and discussing what is the “best” camera on the market, it is easy to focus on datasheets and technical specifications. This causes many integrators to lose sight of a key prerequisite in any installation, namely the operational requirements or the actual purpose of the surveillance. Previously when surveillance was all analog, selecting a camera to match an operational requirement was mostly about selecting the appropriate lens since there wasn’t a wide variety of resolutions to choose from. Most CCTV systems are designed to monitor human behavior, so the human body was used as a yardstick. In order to differentiate between diverse types of scenarios, various categories were established based on percentage representation of the height of a human body within the field of view. While not a global standard in any way, it became quite common to distinguish between the need for detection, recognition, and identification. As correct as the percentages in Figure 1 might be for a standard analog resolution, they pose a few challenges when moving into the diverse resolutions of IP cameras. To bridge the gap, attempts have been made to translate from TV lines to pixels to produce tables like the one shown in Figure 2, where the way of thinking about analog operational requirements in terms of percentages has been translated for IP. This might be correct, but it is difficult – if not impossible – to work with complexity such as this in a real-life context. Surely there must be a better way 3. Pixel density The growth of IP surveillance forces us to a make paradigm shift in the way we define our operational requirements. Advancements in camera technology have resulted in a multitude of resolutions and formats. Instead of using vertical height and percentage, we should focus on pixel density in the horizontal dimension. The term pixel density in this context refers to the number of pixels representing the object of our operational requirement – commonly a human, or more specifically, a human face. One reason why we have chosen to use the face is its distinct identifying features. Furthermore, the variances in face widths are less than those of body lengths or widths, which results in a smaller margin of error. The average human face is 16 centimeters wide (= 6.3 inches wide). Following suggested operational requirements from SKL, the Swedish National Laboratory of Forensic Science, and supported by our own test results at Axis Communications, we have chosen to use 80 pixels as the requirement for facial identification for challenging conditions . (see Figure 3). To some, this number might sound high, and in fact some vendors or independent sources recommend 40 pixels for a face or 100 pixels per foot for recognition. The argument behind the higher number is that for identification, there are limited other telltale signs. For recognition, previous knowledge adds factors such as how a person moves – a property easy to observe and recognize, but difficult to identify and describe accurately. To ensure sufficient video quality even if the object isn’t facing the camera straight on, or if the lighting is not optimal, the higher number provides an adequate safety margin. 1 Challenging conditions: Situations with very varying or weak lighting. People, objects and vehicles are seen from an angle where details are in shade, or facing away from the camera. It could also occur in situations where people, objects and vehicles are moving at very high speed through an area. More often occurring in outdoor situations without additional lighting, or indoor situations during very dark conditions. 2 See European Standard EN 50132-7:2012 by CENELEC www.cenelec.eu 3 Good conditions: Situations with decent lighting. People, objects and vehicles are moving at reasonable speed, and seen from an angle where sufficient details are visible. More often occurring in indoor situations where lighting is even, or outdoor situations with additional lighting. What is pixel density? You base your responses on the provided text and do not use any external knowledge. You also do not use any prior knowledge. Your response should be 3-5 bullet points long, with each bullet point no longer than 1 sentence.
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You base your responses on the provided text and do not use any external knowledge. You also do not use any prior knowledge. Your response should be 3-5 bullet points long, with each bullet point no longer than 1 sentence.
EVIDENCE:
1. Introduction This step-by-step guide helps you select the best cameras for your operational requirements and surveillance scenarios. Lack of industry standards and the complexity of the matter cause many integrators to lose sight of a key prerequisite in any installation: the operational requirements or the true purpose of the surveillance. In this guide, we present the Pixel Density Model – a method that allows you to relate the operational requirements of your system to modern surveillance video and IP cameras. 2. Moving into IP Selecting the appropriate surveillance camera to fulfill operational requirements has always been a challenge. With the introduction of IP cameras, and especially through the development of megapixel and HDTV cameras, the need has emerged for a new way to determine how to meet operational requirements. In these six steps, we describe a model to relate operational requirements to modern video and IP cameras. When recommending cameras and discussing what is the “best” camera on the market, it is easy to focus on datasheets and technical specifications. This causes many integrators to lose sight of a key prerequisite in any installation, namely the operational requirements or the actual purpose of the surveillance. Previously when surveillance was all analog, selecting a camera to match an operational requirement was mostly about selecting the appropriate lens since there wasn’t a wide variety of resolutions to choose from. Most CCTV systems are designed to monitor human behavior, so the human body was used as a yardstick. In order to differentiate between diverse types of scenarios, various categories were established based on percentage representation of the height of a human body within the field of view. While not a global standard in any way, it became quite common to distinguish between the need for detection, recognition, and identification. As correct as the percentages in Figure 1 might be for a standard analog resolution, they pose a few challenges when moving into the diverse resolutions of IP cameras. To bridge the gap, attempts have been made to translate from TV lines to pixels to produce tables like the one shown in Figure 2, where the way of thinking about analog operational requirements in terms of percentages has been translated for IP. This might be correct, but it is difficult – if not impossible – to work with complexity such as this in a real-life context. Surely there must be a better way 3. Pixel density The growth of IP surveillance forces us to a make paradigm shift in the way we define our operational requirements. Advancements in camera technology have resulted in a multitude of resolutions and formats. Instead of using vertical height and percentage, we should focus on pixel density in the horizontal dimension. The term pixel density in this context refers to the number of pixels representing the object of our operational requirement – commonly a human, or more specifically, a human face. One reason why we have chosen to use the face is its distinct identifying features. Furthermore, the variances in face widths are less than those of body lengths or widths, which results in a smaller margin of error. The average human face is 16 centimeters wide (= 6.3 inches wide). Following suggested operational requirements from SKL, the Swedish National Laboratory of Forensic Science, and supported by our own test results at Axis Communications, we have chosen to use 80 pixels as the requirement for facial identification for challenging conditions . (see Figure 3). To some, this number might sound high, and in fact some vendors or independent sources recommend 40 pixels for a face or 100 pixels per foot for recognition. The argument behind the higher number is that for identification, there are limited other telltale signs. For recognition, previous knowledge adds factors such as how a person moves – a property easy to observe and recognize, but difficult to identify and describe accurately. To ensure sufficient video quality even if the object isn’t facing the camera straight on, or if the lighting is not optimal, the higher number provides an adequate safety margin. 1 Challenging conditions: Situations with very varying or weak lighting. People, objects and vehicles are seen from an angle where details are in shade, or facing away from the camera. It could also occur in situations where people, objects and vehicles are moving at very high speed through an area. More often occurring in outdoor situations without additional lighting, or indoor situations during very dark conditions. 2 See European Standard EN 50132-7:2012 by CENELEC www.cenelec.eu 3 Good conditions: Situations with decent lighting. People, objects and vehicles are moving at reasonable speed, and seen from an angle where sufficient details are visible. More often occurring in indoor situations where lighting is even, or outdoor situations with additional lighting.
USER:
What is pixel density?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 40
| 4
| 794
| null | 517
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Read the attached text, and then answer the question that follows using only details from the context provided. You will NOT refer to outside sources for your response.
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Based on the text above, what factors can contribute to wealth accumulation through homeownership?
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Introduction In many respects, the notion that owning a home is an effective means of accumulating wealth among low-income and minority households has been the keystone underlying efforts to support homeownership in recent decades. The renewed emphasis on boosting homeownership rates as a policy goal that arose in the early 1990s can be traced in no small part to the seminal work by Oliver and Shapiro (1990) and Sherraden (1991) highlighting the importance of assets as a fundamental determinant of the long-run well-being of families and individuals. The efforts of these scholars led to a heightened awareness of the importance of assets in determining life's opportunities, enabling investments in education and businesses, providing economic security in times of lost jobs or poor health, and passing on advantages to children. Assessments of differences in asset ownership placed particularly emphasis on the tremendous gaps in homeownership rates by race/ethnicity and income and the importance of these gaps in explaining differences in wealth. In announcing their own initiatives to close these homeownership gaps, both President Clinton and President Bush gave prominent attention to the foundational role that homeownership plays in providing financial security (Herbert and Belsky, 2006). But while faith in homeownership's financial benefits are widely subscribed to, there have long been challenges to the view that owning a home is necessarily an effective means of producing wealth for lower-income and minority households. In 2001 the Joint Center for Housing Studies hosted a symposium with the goal of "examining the unexamined goal" of boosting low-income homeownership (Retsinas and Belsky, 2002a). The general conclusion that emerged from this collection of papers was that lower-income households do benefit from owning homes, although this conclusion was subject to a variety of "caveats and codicils" (Retsinas and Belsky, 2002b, page 11). A few of these caveats related to whether financial benefits were likely to materialize, with papers finding that all too commonly homebuyers sold their homes for real losses while alternative investments offered higher returns (Belsky and Duda, 2002; Goetzmann and Speigel, 2002). In perhaps the most comprehensive critique of the policy emphasis of fostering low-income homeownership, Shlay (2006) reviewed existing scholarly evidence to cast doubt on the likelihood that either the financial or social benefits of owning would be realized. These criticisms have only grown louder in the aftermath of the housing bust, as trillions of dollars in wealth evaporated leaving more than 10 million homeowners owing more than their homes are worth and leading to more than 4 million owners losing their homes to foreclosure (Joint Center for Housing Studies, 2012; Kiviat, 2010; Li and Yang, 2010; Davis, 2012). Many of the criticisms raised about 1 the financial risks of homeownership are not new, but the experience of the last five years has certainly given new impetus to these arguments. But there are also concerns that changes in the mortgage market and in consumer behavior may have exacerbated these risks, increasing the odds that owners will, at best, be less likely to realize any financial gains from owning and, at worse, face a heightened risk of foreclosure. The goal of this paper is to reassess in the light of recent experience whether homeownership is likely to be an effective means of wealth creation for low-income and minority households. Has the experience of the last decade proven the arguments of earlier critics of homeownership? Have changes in the market affected whether these benefits are likely to be realized? The paper takes three approaches to address these questions. We begin by presenting a conceptualization of the risks and rewards of homeownership as a financial choice, with a particular eye toward whether the odds of a beneficial outcome are lower for lower-income and minority owners. This review also assesses whether recent experience has altered this calculus-as opposed to just raising our awareness of the proper weighting of the likelihood of realizing the benefits while sidestepping the risks. Next, we review the existing literature examining the financial benefits of owning a home, including both studies simulating the returns to owning and renting as well as studies using panel surveys to track actual wealth accumulation among owners and renters. Finally, we examine data from the Survey of Consumer Finance (SCF) and the Panel Study of Income Dynamics (PSID) covering the last decade to assess how owning a home has been associated with changes in household financial balance sheets over this period. To preview our conclusions, we find that while there is no doubt that homeownership entails real financial risks, there continues to be strong support for the association between owning a home and accumulating wealth. This relationship held even during the tumultuous period from 1999 to 2009, under less than ideal conditions. Importantly, while homeownership is associated with somewhat lower gains in wealth among minorities and lower-income households, these gains are on average still positive and substantial. In contrast, renters generally do not see any gains in wealth. Those who buy homes but do not sustain this ownership also do not experience any gains in wealth, but are generally left no worse off in wealth terms than they were prior to buying a home-although of course there may still be substantial costs from these failed attempts at owning in terms of physical and mental health as well as future costs of credit. We conclude that homeownership continues to represent an important opportunity for individuals and families of limited means to accumulate wealth. As such, policies to support homeownership can be justified as a means of alleviating wealth disparities by extending this 2 opportunity to those who are in a position to succeed as owners under the right conditions. The key, of course, is to identify the conditions where lower-income and minority households are most likely to succeed as owners and so realize this potential while avoiding the significant costs of failure. Assessing the Financial Risks and Rewards of Homeownership Before turning to evidence about the financial returns to homeownership, it is helpful to start by framing the arguments about why homeownership is thought to be an effective means of generating wealth as well as the counter arguments about why these benefits may not materialize, particularly for lower-income and minority homeowners. We then consider how changes in mortgage markets and consumer behavior may have altered the likelihood that owning will lead to financial gains. This framing helps provide a basis for interpreting the findings from the following two sections of the paper that examine evidence about the association between homeowning and wealth accumulation. The Potential Financial Benefits of Owning The belief that homeownership can be an important means of creating wealth has its roots in five factors. First, the widespread use of amortizing mortgages to finance the acquisition of the home results in forced savings as a portion of the financing cost each month goes toward principal reduction. While modest in the early years of repayment, the share of the payment going toward principal increases over time. For example, assuming a 30-year loan with a 5 percent interest rate, a homeowner will have paid off about 8 percent of the mortgage after 5 years, 19 percent after 10 years, and nearly a third after 15 years. Assuming a household purchases a home in their early 30s and keeps on a path to pay off the mortgage over a thirty-year period, these forced savings will represent a sizable nest egg when they reach retirement age. In addition, an often overlooked aspect of forced savings associated with homeownership is the accumulation of the downpayment itself, which often entails a committed effort to accumulate savings in a short period. Second, homes are generally assumed to experience some degree of real appreciation over time, reflecting increased overall demand for housing due to growth in both population and incomes against a backdrop of a fixed supply of land located near centers of economic activity. Shiller (2005) has been the most notable critic of this point of view, arguing that over the very long-run real house prices have only barely exceeded inflation. Lawler (2012), however, has argued that Shiller's house price estimates and measures of inflation result in an underestimate of real house price growth. Analysis of trends in real house prices across a range of market areas support the conclusion that these trends 3 reflect a complex interaction of supply and demand factors in local markets that defy simple categorization (Capozza et al. 2002, Gallin, 2006). At a national level the Federal Housing Finance Agency house price index indicates that between 1975 and 2012 the compound annual growth rate in house prices has exceed inflation by 0.8 percentage points. Even at a modest rate of increase, the compounding of these returns over a longer period of time can be produce substantial increase in real home values. Assuming just a 0.8 percent annual real increase in house values over 30 years an owner will experience a real gain of about 26 percent in the overall house value. The use of financing can further leverage these returns. A homebuyer with a modest downpayment gets the benefit of increases in the overall asset value despite their small equity stake. While the cost of financing can create a situation of negative leverage if the increase in house values is lower than the cost of financing (so that the financing costs exceed the increase in the asset value), this risk diminishes over time as the value of the house compounds while the debt payment is fixed. Through leverage, the rate of return on an investment in a home can be substantial even when the increase in house values is modest. Consider the case where a buyer puts down 5 percent and the house appreciates at 4 percent annually. After 5 years the home will have increased in value by nearly 22 percent or more than 4 times the initial 5 percent downpayment. Even allowing for selling costs of 6 percent, this would represent an annualized return of 31 percent on the owner's initial investment. Due to leverage, even nominal increases in home values that do not exceed inflation can result in real returns. In the above example, if inflation matched the 4 percent growth in home prices, the owner would still have earned a substantial real return on their initial investment. Federal income tax benefits from owning a home can also be substantial. The ability to deduct mortgage interest and property taxes is the most apparent of these benefits. Taxpayers who are able to make full use of these deductions receive a discount on these portions of ongoing housing costs at the taxpayer's marginal tax rate, ranging from 15 percent for moderate income households up to 39 percent for the highest tax bracket. In addition, capital gains on the sale of a principal residence up to $250,000 for single persons and $500,000 for married couples are also excluded from capital gains taxation, which is currently 15 percent for most households and 20 percent for the highest income bracket.1 1 An additional tax benefit that is often overlooked is the fact that while owner occupants benefit from the use of their home as a residence they do not have to pay any tax on these benefits, referred to as the implicit rental income from the property (that is, the rent one would have to pay to occupy the home) (Ozanne, 2012). The loss of revenue to the U.S. Treasury from this exclusion is substantial, outweighing the costs of the mortgage interest deduction. 4 Finally, owning a home provides a hedge against inflation in rents over time. Sinai and Souleles (2005) find that homeownership rates and housing values are both higher in markets where rents are more volatile, indicating the value placed on being able to protect against rent fluctuations. Under most circumstances, mortgage payments also decline in real terms over time, reducing housing costs as a share of income. For long-term owners, this can result in fairly substantial savings in the out of pocket costs for required for housing. Assuming a fixed rate mortgage, inflation of 3 percent, 1 percent growth in both real house prices and the costs of property taxes, insurance and maintenance, real monthly housing costs would decline by about 10 percent after 5 years, 15 percent after 10 years, and 30 percent by the last year of the mortgage. Once the mortgage is paid off, the out of pocket costs of owning in real terms are less than half the payments made at the time of purchase. Housing costs for renters, in contrast, would be expected to keep pace with inflation in housing prices. The Potential Financial Risks of Owning Combined, the financial benefits outlined above can fuel significant wealth accumulation. But as the last few years have made painfully clear, the financial benefits associated with owning a home are not without risk. To begin with, house prices can be volatile. That was certainly the case in the wake of the housing bust, as nominal prices fell nationally by some 25 percent or more (depending upon the specific price index used), with the hardest hit markets experiencing declines of more than 40 percent. Almost no area of the country was spared from some degree of decline. According to the FHFA index, nominal prices fell in every state with the exception of North Dakota. But while recent experience is notable for the breadth and depth of price declines, there are other examples of fairly significant price declines over the last few decades, including declines of between 10 and 20 percent in some Oil Patch states in the 1980s and in New England, California and Hawaii in the early 1990s. There are also a number of markets where house prices trends have historically been more stable, but in these areas long-run real price increases have either not kept pace with inflation or have been modest. House price growth has been particularly weak in a number of markets in the Midwest and South where population and income growth have been low. Based on long-run state level indexes from FHFA, between 1975 and 2012 there were 10 states in these regions where the compound annual growth in house prices did not exceed general price inflation. Even before the bust, homeowners in these markets did not have the benefit of real growth in house prices over the long term. In nine other states house price growth did beat inflation, but by less than 0.25 percent on an annual basis. Thus, in about two-fifths of states real house price growth was either non-existent or trivial. At the other 5 extreme there were 17 states, mostly along the Pacific coast and in the Northeast that experienced real house price growth of more than 1 percent, including 5 states that exceeded 2 percent. There are also peculiar aspects of owning a home that further exacerbate the financial risks of these investments. Homeowners make a significant investment in a specific location and cannot diversify the risk of home price declines by spreading this investment across assets or across markets. Homes values are also high relative to incomes and so account for a large share of household wealth. Wolff (2012) reports that in 2010 the value of the principal residence accounted for two-thirds of total wealth among households in the middle three quintiles of the wealth distribution. With so much wealth tied up in one asset, homeowners are particularly vulnerable to changes in home values. The use of debt financing for a large share of the purchase further magnifies these risks, with even small drops in prices wiping out substantial shares of homeowner equity. Indeed, at the height of the housing bust the number of households underwater on their mortgages was estimated by CoreLogic to have exceeded 11 million while Zillow placed the number closer to 15 million. When assessed purely on the basis of real growth in values over time, housing also compares poorly to the returns offered by investments in diversified portfolios of stock or bonds. Geotzmann and Speigel (2002) compare the change in home prices in 12 market areas between 1980 and 1999 to a range of alternative investments and find that housing was consistently dominated as an investment asset by all of the financial alternatives considered, leading them to conclude that it is "surprising that housing continues to represent a significant portion of American household portfolios" (page 260). However, Flavin and Yamashita (2002) take a more expansive view of the returns on housing investments by including the value derived from occupying the unit, the use of financial leverage, and the ability to claim income tax deductions. This fuller treatment of housing's returns finds that the average rate of return was slightly below returns for investments in stocks, but the variance of these returns were also lower and so somewhat less risky. Still, even if the returns to housing are deemed to be competitive with alternative investments the concern remains that it accounts for an excessive share of low-wealth household's portfolios. Housing investments are also handicapped by high transaction costs associated with buying and selling these assets. Home buyers face fees for mortgage origination, title search and insurance, state and local taxes, home inspections, and legal fees, all of which can add up to several percentage points of the home value. Real estate broker commissions typically also command 6 percent of the sales price. These high transaction costs can absorb a significant share of home price appreciation from the first few years of occupancy. Given these high costs, home owners who are forced by circumstances to move 6 within a few years of buying will face the risk of loss of at least some share of their initial investment even if home values have risen modestly. The need to maintain the home also imposes financial risks on owners. While routine maintenance can keep both the physical structure and the home's major systems in good working order, major investments are periodically needed, such as painting the exterior or replacing the roof or heating system. These projects incur high costs that may be difficult for owners to afford. While owners may have the opportunity to plan for these investments over time, in some cases a system will fail with little warning and produce an unexpected cost that the owner cannot afford, creating a financial strain that in the most extreme cases can jeopardize the ability to maintain ownership. Finally, the financial costs of failing to sustain homeownership are high-in addition to the traumatic impacts that foreclosures can have on the health and psychic well-being of the owner (Carr and Anacker, 2012). Owners who default on their mortgage will not only lose whatever equity stake they had in the home, they are also likely to deplete their savings in a bid to maintain ownership and suffer significant damage to their credit history making it difficult and costly to obtain credit for several years to come. Factors Contributing to Wealth Accumulation Through Homeownership Whether and to what extent a homebuyer will realize the potential benefits of owning while avoiding succumbing to the risks depends on a complex set of factors. Herbert and Belsky (2006) present a detailed conceptual model of the factors that contribute to whether homeownership produces wealth over the life course, which is briefly summarized here. The most obvious factor is the timing of purchase relative to housing price cycles. The recent boom and bust in house prices presents a prime example. Homebuyers who bought in the early 2000s were poised to benefit from the massive run-up in prices that occurred in many markets, while those that bought in the mid 2000s entered just in time for the historic freefall in prices that followed. While other price cycles in recent decades may not have been as dramatic, the consequences of buying near troughs or peaks on wealth accumulation would have been similar. Belsky and Duda (2002) examined data on repeat sales in four market areas between 1982 and 1999 and found that roughly half of owners who bought and sold their homes within this time period failed to realize gains that beat inflation after assuming a 6 percent sales cost (although most did earn a return in nominal terms). Whether owners realized a positive return depended strongly on where in the housing price cycle they bought and sold their homes. 7 Belsky and Duda (2002) conclude that "although the golden rule of real estate is often cited as location, location, location, an equally golden rule is timing, timing, timing" (Page 223). Their conclusion points to another critical factor in how likely a home is to appreciate in value - in what market and in which specific neighborhood the home is located. As noted above, there have been sizeable differences across market areas in long-term house price trends, with areas along the coasts experiencing real gains of one percent or more over the last several decades while areas in the Midwest and South have had little or no gains. But there are also substantial variations in price trends across neighborhoods within a single market (for reviews of this literature see Herbert and Belsky, 2006; Dietz and Haurin, 2003; and McCarthy, Van Zandt and Rohe, 2001). Whether a household bought a home in Boston or Cleveland is an important factor in the returns realized, but so is whether the home was in a desirable area or a declining neighborhood. The terms of financing used to buy the home also matter. Higher interest rates lower the share of payments that are devoted to principal reduction in the early years of repayment, slowing wealth accumulation. The higher monthly costs of the mortgage also erode the ability of the household to meet other expenses and to save on an ongoing basis as additional interest payments over the life of the mortgage can be substantial. For example, over a thirty-year term a loan for $150,000 at 7 percent interest will require $69,000 more in interest payments than a 5 percent loan. Higher origination fees also sap savings, reducing the quality and size of home that is affordable and lowering the rate of return on housing investments. Choices about refinancing over time can also exert a strong influence on wealth accumulation. Taking advantage of declines in mortgage interest rates to reduce financing costs can save owners hundreds of dollars each month, and tens of thousands over the life of a mortgage-although continually resetting the term of the mortgage will reduce opportunities for forced savings. On the other hand, refinancing to take cash out of the property can erode wealth accumulation, particularly if the extracted funds are used to finance consumption rather than investments in the home, education, business or financial opportunities. Wealth accumulation will be further undermined if the new loan comes with high fees and higher interest rates. Of course, the ability to tap housing wealth as a buffer against income shocks is one of the virtues of developing this cushion, but using home equity to finance an unaffordable lifestyle is an unsustainable path. A host of other factors come into play in determining how much housing wealth is realized over the span of a lifetime. For example, buying higher valued homes-if successful-can produce more wealth both through forced savings and by earning returns on a higher valued asset. By the same 8 means, those who trade up to more expensive homes over time may also accrue greater housing wealth. The age at which a first home is purchased can also be significant, giving the household a longer period to accumulate wealth. Of course, the quality of the home purchased and the owner's ability to maintain it will also affect both ongoing maintenance costs and how much the home appreciates over time. But arguably the most fundamental factor-the true golden rule of how to accumulate wealth. through homeownership-is whether ownership is sustained over the long term. Housing booms aside, many of the financial benefits are slow to accumulate, including the slow build up of forced savings, the compounding of values at low appreciation rates, and the decline in monthly housing costs in real terms over time. The expression "time heals all wounds" may also be applicable to many of homeownerships most critical risks. The losses associated with buying near the peak of a price cycle will diminish over time as owners benefit from the next upswing in prices. And even in areas whether real growth in house prices does not occur or is limited, over the long term owners will still amass some degree of wealth through paying off the mortgage and as a result of savings from lower housing costs. On the flip side, a failure to sustain homeownership-particularly when the end result is a foreclosure-will wipe out any accrued wealth and bring additional costs in the form a damaged credit history that will incur further costs over time and limit opportunities to buy another home in the near term. To some degree whether ownership is sustained will depend on choices that owners make over time - including whether the home they buy is affordable, whether they make prudent choices about refinancing, and whether they maintain the home to avoid larger home repair bills. But whether owning is sustained also will depend on whether the household can weather any number of significant events that can fundamentally alter their financial circumstances, such as loss of a job, a serious health problem, or change in the family composition due to the birth of a child, death, divorce, or the need to care for a parent or relative. Over the course of a lifetime, these events are likely to befall most everyone. Whether homeownership can be sustained in the wake of these events will depend on the ability of the household to adjust to their changed circumstances and whether they have enough available savings to cushion the blow. Impediments to Wealth Creation among Lower-Income and Minority Homeowners Up to this point the discussion presented has considered homeownership's financial risks and rewards in a general sense. But the concern of this paper is specifically with the potential for homeownership to serve as an effective means of wealth accumulation for lower-income and minority 9 households. How are the odds of generating wealth as a homeowner likely to differ for these households?? In keeping with the fundamental importance of sustained homeownership to accumulate wealth, the chief concern is that these groups of homebuyers face a more difficult time in maintaining ownership. Studies analyzing panel data to document homeownership spells among first-time buyers consistently find that low-income and minority owners have a lower probability of maintaining homeownership for at least five years. In an analysis of the National Longitudinal Survey of Youth (NLSY) from 1979 through 2000 Haurin and Rosenthal (2004) find that ownership is less likely to be sustained among both these groups. Specifically, only 57 percent of low-income buyers were found to still own their first home five years later, compared to 70 percent of high-income owners (with income categories defined by income quartiles at age 25). First homeownership spells were also found to be much shorter for minorities, averaging 6.5 years among whites, compared to 4.4 years for blacks and 5.4 years for Hispanics. In an analysis of the PSID covering the period from 1976 through 1993 Reid (2004) had similar results, with only 47 percent of low-income owners still owning their first homes 5 years later compared to 77 percent of high income owners (with incomes here defined based on average income in the years prior to homeownership compared to area median incomes). Reid further found that minorities had a harder time staying in their first home, with 42 percent of low-income non-whites still owning after five years compared to 54 percent of low-income whites. While these results raise clear concerns about the high risk of failed homeownership among these groups, the focus on a single homeownership spell may overstate the extent to which homeowning is not sustained in the long run. Haurin and Rosenthal (2004) also examine subsequent tenure experience in their panel and find that the share of households that return to owning a second time is very high for both whites and minorities. Over the 21 year period in their panel, 86 percent of whites who ever bought a home either never returned to renting or regained owning after a subsequent spell as a renter, with only slightly lower rates for blacks (81 percent) and Hispanics (84 percent). However, they do find that minorities spend more years in their intervening spells as renters, which reduces the overall amount of time they can accumulate benefits from owning. Another critical difference in the financial returns to owning for low-income households is that the ability to deduct mortgage interest and property taxes from federal taxable income may be of little or no value. In order to benefit from these tax provisions, the amount of available deductions must 2 Galster and Santiago (2008) provide a useful framing of this issues and a comprehensive review of the relevant literature. 10 exceed the standard deduction, which stood at $5,950 for individuals and $11,900 for married couples in 2012. For taxpayers with lower valued homes, particularly married couples, the costs of mortgage interest and property taxes even when added to other deductions for state taxes and charitable contributions, may not greatly exceed the standard deduction. In addition, the value of these deductions depends on the taxpayer's marginal tax rate, which will lower for low- and moderate-income households. In fact the share of the total value of the mortgage interest deduction going to moderate income households is fairly small. According to estimates from the Joint Committee on Taxation (2013), only 3 percent of the total deductions went to filers with incomes under $50,000, 9 percent to those with incomes between $50,000 and $75,000, and 11 percent to those with income between $75,000 and $100,000, leaving 77 percent of the benefit going to those earning above $100,000. To the extent that these tax benefits swing the financial scales in favor homeownership, this tilting of the calculus is not very evident for low- and moderate-income tax filers. There are also systematic differences in mortgage terms and characteristics by income and race/ethnicity that can also affect the financial returns to owning. The development of the nonprime lending industry that began in the 1990s and came to full blossom during the housing boom produced much greater variation in mortgage terms and pricing than had previously been evident. A fairly extensive literature has documented the greater prevalence of subprime lending among minorities and, to a lesser extent, low-income borrowers and communities (see, for example, Bradford, 2002; Calem, Gillen and Wachter, 2004; Apgar and Calder, 2005; Avery, Brevort, and Canner, 2007; Belsky and Richardson, 2010). As described above, higher costs of financing can significantly reduce the financial benefits of owning. While the expansion of financing options beyond a "one size fits all who qualify" approach to lending has the potential to extend homeownership opportunities to a greater range of households, there is significant evidence that the cost of credit was often higher than risk alone would warrant. Bocian, Ernst and Li (2008) present perhaps the most compelling evidence through an analysis of a large data set on nonprime loans that documents a wide range of risk measures, including credit scores as well as income and race/ethnicity. They find that even after controlling for observable differences in credit quality both blacks and Hispanics were significantly more likely to obtain high- priced mortgages for home purchase, while blacks were also more likely to obtain higher-priced refinance loans. These higher costs of borrowing not only limit the wealth producing capacity of homeownership, they also increase the risk of failing to sustain homeownership. In fact, Haurin and Rosenthal (2004) find that a 1 percentage point increase in the mortgage interest rate increases the rate of homeownership termination by 30 percent. 11 Low-income and minority borrowers are also less likely to refinance when interest rates decline. In an analysis of loans guaranteed by Freddie Mac during the 1990s Van Order and Zorn (2002) find that low-income and minority borrowers were less likely to refinance as interest rates fell. Their analysis also found that once borrower risk measures and loan characteristics were taken into account there were no remaining differences in refinance rates by income-although this just indicates that refinancing may be constrained by credit factors. Minorities, on the other hand, still had lower rates of refinancing even after controlling for these factors, suggesting that there were impediments to refinancing by these borrowers that were in addition to measurable credit factors. Nothaft and Chang (2005) analyze data from the American Housing Survey (AHS) from the late 1980s through 2001 and also find that minority and low-income owners were less likely to refinance when interest rates declined. These authors use their results to estimate the foregone savings from missed refinance opportunities, which are more than $20 billion each for black and low-income homeowners. To the extent that low-income and minority homebuyers may be more likely to purchase homes in poor condition they are also exposed to greater risks of high costs of maintenance and repair. Herbert and Belsky (2006) find that compared to whites, black and Hispanic first-time homebuyers were more likely to buy homes that were moderately or severely inadequate as characterized by the AHS- 6.5 percent for blacks and 8.8 percent for Hispanics compared to 4.3 percent among whites. A similar gap was also evident between low- and high-income households. While there has been little study of the incidence of unexpected home repair needs, a study by Rohe and his colleagues (2003) of participants in homeownership counseling programs found a fairly significant incidence of the need for unexpected repairs. Roughly half of 343 recent homebuyers reported that they had experienced a major unexpected cost in the first few years after buying their home, with the most common problem being a repair to one of the home's major systems. Finally, there are also concerns that lower-income households and minorities may be more likely to purchase homes in neighborhoods with less potential for house price appreciation. This is a particularly salient issue for minorities given the high degree of residential segregation by race and ethnicity that continues to be evident in the US. However, Herbert and Belsky (2006) present a detailed review of this literature and conclude that "taken as a whole the literature indicates that there is no reason to believe that low-value segments of the housing market will necessarily experience less appreciation than higher-valued homes. In fact, at different points in time and in different market areas, low-valued homes and neighborhoods have experienced greater appreciation rates. Although the opposite is also true." (Page 76) The evidence about differences in appreciation rates by neighborhood 12 racial composition is less definitive. Here Herbert and Belsky (2006) conclude that "it does appear that homes in mostly black areas may be less likely to experience appreciation, but this conclusion is tempered by the small number of studies and the fact that they mostly analyzed trends from the 1970s. and 1980s, which may no longer be relevant" (page 77). Findings by Boehm and Schlottmann (2004) regarding differences in wealth gains from homeownership by race and income are instructive in this regard. They find that over the period from 1984 to 1992 there was little difference in appreciation rates in the specific neighborhoods where minorities and low-income households lived. Instead, they found that differences in housing equity accumulation were tied to the lower valued homes and the shorter duration of ownership for lower- income and minority households. Thus, differences in appreciation rates may be less of a concern in whether housing leads to wealth accumulation than these other considerations. Re-assessing the Calculus of Wealth Accumulation through Homeownership As the above review has shown, there were significant concerns about the risks of homeownership as an investment well before the housing bubble burst. For critics of homeownership as a wealth building tool the experience of the housing bust was in many respects a confirmation of their fears. Still, there were several markets developments during the boom years that magnified these preexisting risks. Most notably there was a marked increase in the prevalence of riskier mortgages, including those calling for little or no documentation of income, adjustable rate loans that exposed borrowers to payment shocks from the expiration of initial teaser rates or reduced payment options, allowances for higher debt to income ratios, and greater availability of loans for borrowers with very low credit scores. Downpayment requirements also eased as loan-to-value ratios (LTVs) of 95 percent or more became more common and borrowers also used "piggyback" second mortgages to finance much of the difference between the homes' value and a conforming first mortgage at an 80-percent LTV. Not unrelated to the greater availability of mortgage credit, house prices also exhibited much greater volatility than in the past, with a dramatic increase in prices that greatly outpaced trends in both incomes and rents and belied an unsustainable bubble. The greater availability of credit also increased the opportunity for lower-income households to miss-time the market. Belsky and Duda (2002) found that during the 1980s and 1990s lower-valued homes were less likely to be transacted around market peaks, so buyers of these homes were less likely to buy high and sell low. They speculated that this was due to the natural affordability constraints that took hold as markets peaked. But during the boom of 13 the 2000s lower-valued homes experienced greater volatility in prices, arguably reflecting much greater credit availability at the peak than was true in past cycles (Joint Center for Housing Studies, 2011). However, there are good reasons to believe-or certainly to hope-that the conditions that gave rise to this excessive risk taking and associated housing bubble will not be repeated any time soon. The Dodd-Frank Act includes a number of provisions to reduce the degree of risk for both borrowers and investors in the mortgage market. The Qualified Mortgage (QM) is aimed at ensuring that borrowers have the ability to repay mortgages by requiring full documentation of income and assets, setting tighter debt to income standards, and excluding a variety of mortgage terms that expose borrowers to payment shocks. The Qualified Residential Mortgage (QRM) is aimed at ensuring greater protections for investors in mortgage backed securities by requiring the creators of these securities to retain an interest in these investments if the loans included in the loan pool do not conform to certain risk standards that essentially mirror those of the Qualified Mortgage. Dodd-Frank also established the Consumer Financial Protection Bureau to fill a gap in the regulatory structure by creating an agency charged with looking out for consumers' interests in financial transactions. Beyond these regulatory changes, there is also a heightened awareness of the risks of mortgage investments on the part of private sector actors who have suffered significant financial losses with the bursting of the housing bubble. Regulatory changes aside, these private actors are unlikely to embrace riskier lending any time soon. The Federal Reserve and other federal regulators are certainly more attuned to the possibility of a bubble in housing prices and so are more likely to act in the event that signs of a bubble re-emerge. But even in the absence of the excessive risks of the last decade, homeownership will remain a risky proposition. Thus, at best, we may return to the market conditions that existed prior to the boom and the real risks that these conditions posed for investments in owner-occupied housing. In that regard, an assessment of experience in wealth creation through homeownership prior to the boom is relevant for what we might expect in the future. On the other hand it does seem likely-and arguably even desirable given how tight credit has become-that some greater degree of risk taking will emerge to make credit available to the many lower-income and lower-wealth households that would like to own a home. In fact, the QM standard of a total debt-to-income ratio of up to 43 percent does curtail the higher levels that became evident during the boom, but this cutoff still represents a liberalization from standards for conventional mortgages that prevailed in the 1990s. There may also have been a shift in consumer attitudes toward mortgage debt, with fewer households seeking to pay off mortgages over time and thus exposing themselves for longer periods to the risks associated with these leveraged investments. Over time, as 14 conditions return to normal and the market adjusts to new regulatory structures, we are likely to see mortgages originated outside of the QM and QRM boxes. In that regard, an assessment of the experience of homeowners through the boom and bust is instructive as a stress test of how likely homeownership is to build wealth under more extreme market conditions. The next two sections of the paper look to assess homeownership's potential for wealth building from these two perspectives. First by presenting a review of the literature assessing homeownerships' association with wealth building prior to the 2000s and then by analyzing data from the last decade to examine how homeownership was associated with changes in wealth through the turbulent conditions of the 2000s. Review of Previous Studies Assessing the Financial Returns to Homeownership As the discussion up to this point has intended to illustrate, whether owning a home will lead to the accumulation of wealth is the result of complex set of factors related to the choices that households make in buying their home and how these choices interact with market conditions both at the time of purchase and over time. This complexity makes it quite difficult to assess whether in practice owning is likely to be an effective means of increasing a household's wealth. A further complicating factor is that there is a substantial selection bias in who becomes a homeowner, as there is reason to believe that those who are most secure in their financial condition and most inclined to save are more likely to become owners. For this reason, comparisons of the wealth profiles of owners and renters may not be able to attribute any observed differences solely to the influence of homeownership on the ability to accrue wealth. There are two broad classes of studies that have attempted to assess the financial benefits of homeownership in light of these challenges. One group relies on simulations that compare the theoretical costs and benefits of owning and renting under a variety of assumptions about market conditions and household choices. A key appeal of these studies is that they essentially remove concerns about selection bias by assuming otherwise identical households operate under a consistent set of decision rules. They can also isolate the influence of specific factors to shed light on the paths that are most likely to make owning or renting financially beneficial. But while these studies highlight the potential financial returns to owning and renting, they do not capture how households are likely to actually behave in these situations and so leave open the question of whether the potential returns of these tenure choices are likely to be realized in practice. 15 Another group of studies rely on panel studies that track households over time to examine how choices about owning and renting are correlated with changes in wealth. The findings from this type of analysis provide evidence of whether in practice owners are more likely to accrue wealth than renters and how this experience differs by income and race/ethnicity. Where the theoretical comparisons of owning and renting also generally focus on a single spell of homeownership - that is, the financial outcome associated with the period between buying and selling a single home - panel studies can track households through multiple transitions in and out of owning to assess outcomes from a series of tenure choices over time. The main drawback of these studies is the lingering concern that owners may be inherently different from renters in ways that observable household characteristics cannot capture. Some of these studies employ statistical methods to try to control for this selection bias, although it is doubtful that these controls can fully account for these differences. Both classes of studies provide important insights into the opportunities and drawbacks of homeownership as a means of increasing household wealth. When viewed as a whole the findings from both streams of research help paint a clearer picture of whether and how homeownership may help foster wealth creation. The sections that follow highlight key findings from each of these literature strands. Simulations of the Financial Returns to Owning and Renting Beginning with Mills (1990) there have been a number of studies that have simulated the financial returns to owning and renting under a variety of assumptions to identify whether and under what circumstances owning or renting is likely to be more financially beneficial (Capone, 1995; Belsky, Retsinas, and Duda, 2007; Rappaport, 2010; Beracha and Johnson, 2012). While the studies differ in important respects, the general approach is to compare the "all-in" costs of owning - including mortgage interest, property taxes, insurance, maintenance, and transaction costs along with offsetting gains in property value - to the costs of renting a comparable housing unit. Either implicit or explicit in these comparisons is that renters save and invest both the initial investment that owners make in buying their homes as well as any annual savings in housing costs. There are a host of assumptions that underlie these calculations, but among the most influential factors are the estimate of rents as a share of house value, the length of time the home is owned, the basis for simulating trends in house prices and rents over time, and the treatment of income tax benefits. The studies differ in fundamental ways related to the range of assumptions tested and the method for comparing returns to owning and renting and, as a result, individually reach somewhat 16 different conclusions about which tenure choice is likely to be preferred. But collectively the studies lead to some general conclusions about the relative financial merits of owning and renting. Perhaps the most fundamental conclusion from these studies that runs counter to the prevailing sense that homeownership is a powerful source of wealth is that under a variety of conditions renting is often more likely to be a better financial choice than owning. Belsky, Retsinas and Duda (2007) compare owning and renting in four different market areas chosen to represent different degrees of price appreciation and volatility over the period studied from 1983 through 2001. They focus on holding periods of 3, 5 and 7 years during their window of study and report the share of different holding periods where owning results in higher financial returns than renting. Overall they find that in only 53 percent of the 3-year holding periods would owning be preferred to renting. Increasing the holding period to 7 years-which allows for more time to work off the high transaction costs of buying and selling a home-only increases this proportion to 63 percent. Rappaport (2010) reaches a similar conclusion based on an analysis of national trends in market conditions between 1970 and 1999 and an assumed 10-year period of owning a home. He finds that owning a home unambiguously built more wealth in about half of the possible 10-year periods, renting was clearly better in another quarter and likely, but not unambiguously, preferred in the remaining periods. Finally, Beracha and Johnson (2012) come to a similar conclusion in an analysis of all possible 8-year holding periods given actual market conditions at both the national and regional level between 1978 and 2009. They find that between 65 and 75 percent of cases renting offered greater opportunities for accruing wealth than owning, depending on whether renters employing a more conservative or aggressive investment approach. In parsing the findings of these studies, there are several factors that are the critical drivers of the results. Perhaps the most obvious is the importance of the timing of home purchase relative to market cycles in prices and interest rates. Depending on the future course of prices, rents and interest rates one or the other tenure would be strongly preferred at different points in time. The importance of timing may be most clearly demonstrated in Belsky, Retsinas and Duda (2007) when they consider different holding periods among owners. In general, it would be expected that longer holding periods should favor owning as more time is allowed to overcome high transaction costs, pay down additional principal, and ride out price cycles. Instead, they find that in most markets the likelihood of owning being preferred to renting was little changed by the holding period as short holding periods offered the possibility of catching only the upswing in prices while longer holds made it more likely that owners would share in some portion of a downturn. Only in Chicago, which did not experience such dramatic swings in prices, were longer holding periods found to be much more likely to benefit owning. 17 Still, the issue of holding period is an important consideration. The analysis by both Mills and Capone solved for the holding period that was needed for owning to yield a higher return than renting on the assumption that longer holding periods would always favor homeownership. In his base case scenario Mills found a holding period of slightly longer than 7 years was needed for owning to be preferred. The more recent studies that have showed the importance of market timing either assumed a single fixed holding period of 8 to 10 years (as in Beracha and Johnson and Rappaport) or a range of relative short holding periods (as in Belsky, Retsinas and Duda). If owning does become more favorable over a longer period of time - for example, slightly longer than 8 to 10 years - these assessments would not capture this. In fact, many households move in and out of homeownership over time so a more complete assessment of the financial implications of tenure choice would take into account multiple homeownership spells. While one spell of owning may yield low returns, if homeowning is sustained or resumed then the household may yet benefit from the next upswing. Another important factor driving the findings are assumptions made about rents as a share of house value. This ratio is difficult to estimate both because of systematic differences in the nature of the owner and renter occupied stock and because market values and rents are hard to observe simultaneously. How much renters have to pay to rent a comparable home is obviously a key driver of financial outcomes as it determines how much they can save annually by renting, thereby adding to their wealth. Mills (1990) found that among the variables used in his simulation, his results were most sensitive to the ratio of rents to house values as a single percentage point change up or down leading to fluctuations in the required holding period from 3 to 23 years. Capone (1995) built on Mills study to examine the rent-versus-buy decision specifically for lower income households. He makes note of the importance of the rent-to-price ratio assumption and argues that Mills assumption of 7 percent was well below the ratios observed in low-cost segments of the market, where ratios of 10 to 12 percent were more reasonable. Under Capone's assumption that renters faced much higher rents he found that owners only needed to hold onto their homes for about 3 years for owning to be preferred. In contrast, Belsky, Retsinas and Duda rely on rent to price ratios is in the range of 5 to 7 percent, while the series used by Beracha and Johnson derived by Davis, Lehnert, and Martin (2008) appears to average about 5 percent. In both cases these assumptions are more favorable to renting than the assumptions used by either Mills or Capone. In recognition of the importance of this assumption, Rappaport structures his analysis to estimate the rent-to-price ratio that is the breakeven point between owning and renting. He then compares this estimate to what he feels is a plausible range for this ratio of 18 between 5 and 10 percent based on analysis of different market areas over time. At the higher end of this range owning would almost always be preferred, while the lower end leads to his conclusion that owning is clearly preferred to renting in only about half of the holding periods considered. In short, high or low values of this ratio can swamp other considerations, yet, as Rappaport demonstrates, pinning down actual values for this ratio is not an easy task. Several of the studies have examined the issue of whether tax benefits are important to whether owning makes more financial sense than renting. Mills assumes that owners can take full advantage of tax benefits at a 28 percent marginal rate. When he reduces the marginal rate to 15 percent he finds that owning is never preferred. Capone, though, demonstrates, that this knife edge does not hold if a higher rent to price ratio is assumed. In his base case analysis, owners are only assumed to benefit from tax benefits if they exceed the standard deduction and since he assumes a much more modest house in keeping with his focus on lower-income households, the tax benefits are essentially non-existent. As a result, reducing the tax benefits in his analysis does not change his conclusion that owning is a better financial choice even after only a few years. Belsky, Retsinas and Duda also examine the importance of tax benefits for lower-income owners. Like Capone, they adjust the value of tax deductions to account for the size of the home purchased and the amount of the standard deduction. They also find that tax benefits by themselves generally do not change the calculus of whether owning beats renting financially. So while tax benefits are an important factor among higher income households, as Mills found, it has little effect on the calculus for lower-income households. Despite getting limited benefits from tax breaks under a variety of circumstances Capone and Belsky, Retsinas and Duda find that lower-income households can fare better financially by owning. Belsky, Retsinas and Duda also make a unique contribution by examining how the returns to homeownership are affected by higher mortgage costs. They examine two scenarios: one where owners face interest rates that are 2 percentage points higher than prime rates and another where they are 5 percentage points higher. Under the first scenario, the likelihood that owning would be preferred to renting is decreased by moderate amounts (between 6 and 17 percentage points), while under the later scenario owning is rarely a better financial choice than renting. In short, they find that higher interest rates do reduce the financial appeal of homeownership, although the impact is most pronounced at extremely high levels. Lastly, and in some ways most critically, the finding that renting offers the potential for higher returns than owners depends in large part on renters taking steps to invest the annual savings in housing costs compared to renting. Building on Beracha and Johnson (2012), Beracha, Skiba, and 19 Johnson (2012) examine how variations in key assumptions regarding trends in prices, rents, interest rates, downpayment shares, and the returns available from alternative investments affect the buy versus rent financial calculus. They find that modifying most factors in isolation have only a moderate effect on whether renting is favored over owning. However, when they drop the assumption that renters actual invest any annual savings in housing costs on top of the initial downpayment they find that renting rarely results in higher wealth than owning. Thus, they find that the forced savings aspect of homeownership is of fundamental importance in determining whether owning will lead to greater wealth. This finding is echoed in the results of Boehm and Schlottmann (2004) who employ a somewhat unique approach to simulating the impact of homeownership on wealth accumulation. This study uses the Panel Study of Income Dynamics (PSID) to model the probability of moving in and out of homeownership on an annual basis over the period from 1984 through 1992. These same data are also used to estimate the house value that a household would opt for if a home were purchased in a given year. The estimated house value is then inflated based on house price trends in the census tract where the household resided to yield each household's expected gain in wealth from homeownership. This analysis finds that while minorities and low-income households do accrue wealth from homeownership, the amounts are much less than for higher income whites both because they own for fewer years and because they buy lower valued homes. But importantly, while the expected wealth accumulation among these households is less than that earned by higher income whites it is still positive. The authors also use the PSID to document that these same low-income and minority households essentially had no growth. in non-housing wealth over the same period. So in that regard the estimates of potential wealth created through homeownership were all the more important. Evidence from Panel Surveys about Wealth Accumulation through Homeownership As the findings from Beracha and Johnson (2012) and Boehm and Schlottmann (2004) suggest, the theoretical advantages of renting may not be realized if in practice renters do not take advantage of the opportunities afforded to them for saving and investing derived from the lower cost of renting. In contrast, studies making use of panel surveys that track households over time provide insights into the wealth accumulation associated with actual choices about renting and owning. These studies universally find that owning a home is associated with higher levels of wealth accumulation even after controlling for a range of household characteristics. While the gains are also consistently smaller in magnitude for lower-income and minority households, these studies also find that in contrast to owners similar renters 20 experience little or no gains in wealth. These findings hold even when steps are taken to account for selection bias in who becomes a homeowner. Although these methods may not fully account for the differences between owners and renters, there remains a strong case that homeowning does make a positive contribution to household balance sheets regardless of income or race/ethnicity. Haurin, Hendershott and Wachter (1996) was among the first studies to use panel survey data to track wealth trajectories associated with homeownership. The primary focus of this study was on the accumulation of wealth in anticipation of becoming an owner rather than how owning a home over time contributes to wealth accumulation, but their findings provide important insights into one way in which homeownership adds to wealth. They use the National Longitudinal Survey of Youth (NLSY) to track young renters age 20 to 28 in 1985 through 1990 and observe both their annual wealth levels and the timing of any transitions into homeownership. They find that household wealth goes up markedly during the transition to homeownership, increasing by 33 percent on average in the year prior to buying a home and then more than doubling in the year they first own. When they examine factors that contribute to this jump in wealth they find that marrying makes a significant contribution along with an increase in hours worked and a slightly higher incidence of inheritance and gifts. Their results suggest that an important mechanism by which homeownership adds to wealth is through the incentive to save in anticipation of buying a home. Even before realizing any returns on the investment in the home itself, the drive to become an owner results in substantially higher wealth than those who remain renters. Adding to this effect Haurin and his colleagues also find that wealth increases more rapidly in the years after becoming a homeowner-by 17 percent on average annually among their sample. Reid (2004) uses panel data from the PSID for the period 1976 through 1994 to examine the financial outcomes of homeownership among low-income households who bought their first home at some point during this period (with low-income defined as those with incomes consistently below 80 percent of area median income before first buying a home). She takes two approaches to examining the returns to homeownership for this group. First, she estimates the change in home values for both low- income and minority homeowners compared to higher-income and white owners. She finds that the rate of increase in home values for these groups was fairly modest, failing to beat the returns that would have been earned on an investment in Treasury bills over the same time. Reid then examines wealth holdings of households by tenure status at the end of her period of observation. She finds that while low-income and minority owners generally built much less wealth than higher-income and white households, the amount of their housing wealth was non-trivial and was many times larger than their other forms of wealth. Like Boehm and Schlottmann, she also finds that those who were renters at the 21 end of the period essentially held no wealth of any kind. Reid, however, does not undertake a multivariate analysis to control for other factors that may account for the differences between owners and renters. Nor does she factor in the impact of failed efforts at homeownership on wealth. But the fact that home equity accounts for such a large share of wealth among low-income and minority households points to the important role that owning a home played in fostering wealth accumulation. Di, Belsky and Liu (2007) was the first study to directly assess the relationship between homeownership and wealth accumulation over time while attempting to account for household characteristics and to include some measure of potential selection bias in who becomes an owner. The study uses the PSID to track households who were renters in 1989 through 2001 to observe transitions into and out of homeownership. The change in household wealth over time is then modeled as a function of starting wealth, a range of household characteristics thought to influence wealth, and, their principal measure of interest, the amount of time spent as an owner. In order to take into account a household's propensity to save, the study uses the PSID from 1984 through 1989 to estimate the share of income that was saved as an indication of savings behavior prior to the period when tenure transitions are observed as a means of controlling for this tendency in assessing differences in savings behavior after buying a home. Their principal finding is a positive and statistically significant association between additional years of homeownership and changes in wealth. The authors include a square term for the number of years owned to take into account anticipated impacts of the timing of moves into homeownership over the period as there was an initial decline in house values during the first years of their panel followed by more robust increases in later years. This square term is negative and significant indicating those who bought earlier in the period had lower cumulative gains in wealth. The largest estimated gains in wealth of $13,000 per year of ownership occurred among those who owned for 8 years. But for those who owned for the maximum possible period of 12 years the gains were only $3,333 per year. Prior savings tendency was positively associated with increases in wealth as expected, but was not statistically significant and so did not appear to capture any important difference in household behavior that was not already accounted for by other explanatory variables. Turner and Luea (2009) undertake a very similar analysis using the PSID sample for the period from 1987 to 2001. In contrast to Di, Belsky and Liu who only include initial renters, their study sample includes all households in the sample as of 2001 that were age 65 or younger regardless of whether they were renters at the start of the period. The study pools observations for the sample on household wealth from three points in time: 1994, 1999, and 2001. For each observation they include a count of the number of years the household has owned a home since 1988 as their explanatory variable of 22 interest. The approach used in this study attempts to control for selection bias into homeownership by estimating a random effects model that includes a household specific constant term. Turner and Luea also separate the sample into two income classes to see whether the association between homeownership and wealth growth differs by income. Low- and moderate-income (LMI) households were those who had incomes below 120 percent of area median income in all three periods when wealth was observed. The results indicate that each year of homeownership is associated with nearly $14,000 in additional wealth, perhaps not surprisingly quite similar to the amount found by Di, Belsky and Liu using the same survey over a nearly identical period (although with a somewhat different sample). When controls are included for LMI status, Turner and Luea find that these households have somewhat lower wealth accumulation of between $6,000 and $10,000 per year. But they note that since the average wealth holding of LMI households in 2001 was about $89,000 this annual rate of increase accounts for a fairly sizeable share of total wealth. In an unpublished dissertation, Mamgain (2011) extends the work of Turner and Luea by employing a two-stage model to add stronger controls for selection into homeownership. Like most of the other studies, Mamgain also uses the PSID, but his period of observation is from 1999 through 2007. Despite the different time period examined, when he replicates Turner and Luea his analysis yields similar results regarding the magnitude of the association between homeownership and wealth (although by ending the study period in 2007 it does not include the sharp loss of both housing and financial wealth that followed 2007). When Mamgain adds additional controls to his model to capture the intention to move, the respondent's health status, their ownership of other real estate and an estimate of current LTV he finds a somewhat lower impact of additional years of owning, but the estimate is still significant and positive. Importantly, when he employs his two-stage approach to include both a selection term and an instrumental measure of current tenure his estimate of the impact of each. additional year on owning does not change. He also estimates separate models by income level and finds that there is no difference in the impact of owning across income classes—all are positive and significant. In short, like other studies he does not find a significant impact of selection bias on his findings and he also finds that low-income owners are also likely to benefit from owning homes. 3 3 He does differ from previous studies in how he estimates the contribution of owning to wealth gains, by focusing on impacts at much lower household wealth levels. He finds that assuming wealth of about $2,500 for the lowest income group (at or below 150 percent of the poverty level) owning a home only adds a few hundred dollars a year to the household's bottom line. But with total wealth set a level well below the median among owners in this income class this result seems implausible. 23 None of the studies estimating statistical models to assess the contribution of homeownership to wealth accumulation analyzed whether there were differences in this experience by race and ethnicity. As discussed above, there are significant racial and ethnic differences in residential location, size of home, and characteristics of financing used, all of which could contribute to differences in wealth outcomes. Shapiro, Meschede, and Osoro (2013) use the PSID from 1984 through 2009 specifically to examine the factors associated with more rapid growth in wealth among whites over this period compared to blacks. Tracking the same set of households over this period they find that gains in median wealth among whites exceeded those among blacks by $152,000. Based on the results of a multivariate analysis they found that the single largest driver of this divergence in wealth was the additional time whites spend as homeowners, which they estimate accounted for 27 percent of the additional white gains. The next most significant factors were differences in income (20 percent), unemployment spells (9 percent), lower shares with a college education (5 percent), and differences in inheritance and financial support from family (5 percent). They also find that years of homeownership exerted a stronger influence on gains in wealth for blacks than it did for whites. While the authors do not attempt to control for any selection bias to control for who becomes a homeowner, none of the previous studies that have taken these steps have found these controls to change their findings. Conclusions Drawn from the Previous Literature Studies presenting simulations of the financial returns to renting and owning make a convincing case that in many markets over many periods of time and under a variety of assumptions renting ought to support greater wealth accumulation than owning. However, as virtually all of the panel studies document, in practice owning has consistently been found to be associated with greater increases in wealth even after controlling for differences in household income, education, marital status, starting wealth, inheritances, and other factors. Importantly, these same studies also consistently find that owning has a positive effect on wealth accumulation among both lower-income households and minorities, although the gains are smaller than for higher-income households and whites generally. Housing wealth among lower-income and minority households also often accounts a substantial share of total wealth for these groups. On the other hand, renters in these same demographic groups are consistently found to accrue little to no wealth over time. How can we reconcile the findings from simulation studies that renting should often be more financially advantageous than owning with the findings from the analysis of panel surveys that unambiguously find owning to be more favorable? One explanation may be that behavioral issues play 24 a key role. Efforts to save for a downpayment lead to a large jump in wealth that is then further supported by at least modest appreciation and some pay down of principal over time. Renters may have the opportunity to accrue savings and invest them in higher yielding opportunities but lack strong incentives and effective mechanisms for carrying through on this opportunity. There is also likely some degree of selection bias at work in who becomes a homeowner. While studies do control for income, education, marital status and other factors that would contribute in differences in the ability to save, there are likely differences in motivation and personal attributes that are related to both savings practices and whether someone becomes an owner. While controls included in studies to capture this effect have not diluted the association between homeownership and increases in wealth, this may simply reflect the challenge of capturing these difficult to measure factors. Studies using panel surveys may also make the benefits of homeownership appear more assured than they actually are by not fully capturing the impact of failed attempts at owning on changes in wealth. Studies to date have focused on measuring homeownership as the number of years spent as a homeowner, which does not distinguish between short sustained spells of owning from similar periods of owning that end in foreclosure or other financial distress. So while homeownership on average may increase wealth, it is undoubtedly the case that for some share of households owning a home had a negative impact on their balance sheet. Finally, the studies reviewed here may also not fully reflect changes that have occurred over time in both market conditions and household behavior. Most of the studies cited reflect experiences as owners during the 1980s and 1990s and so do not capture the market dynamics that began in the late 1990s but came to full bloom during the boom years of the 2000s, including the much greater availability of and appetite for high loan-to-value loans, higher cost loans, sharp swings in house prices, and much higher risks of default even before the national foreclosure crisis began. The next section turns to an analysis of data from the 2000s to examine whether findings about homeownership's positive association with wealth accumulation held over this period, particularly for low-income and minority households who were most likely to have used high cost mortgage products. Experience with Homeownership and Wealth Accumulation through the Boom and Bust Given the substantial changes in the availability, cost and terms of mortgage financing that began in the 1990s and accelerated through the mid-2000s and the accompanying boom and bust in home prices, there is good reason to believe that the experience of homeowners in accumulating wealth over the last decade has been substantially different from what is documented in much of the existing 25 literature for earlier periods. In this section of the paper we present information on wealth accumulation through homeownership during the housing market boom and bust of the 2000s. In the first section, we present findings from the tri-annual Survey of Consumer Finance (SCF) to present a high level picture of the contribution of homeownership to household balance sheets over time. The SCF also provides insights into how a greater tendency both to use high loan-to-value (LTV) loans to purchase homes and to take cash out through refinancing may have reduced wealth associated with homeownership. While the SCF does document the substantial decline in housing wealth following the bust, it also shows that, despite these losses, average homeownership wealth is generally higher than it was in the mid-1990s and continues to represent a substantial portion of household wealth for minorities and lower-income households. The SCF also shows that while the degree of leverage in the housing market showed a marked increase in the years following the Tax Reform Act of 1986, the distribution of LTVs did not change a great deal between the mid 1990s and the housing boom years. However, the crash in housing prices did push LTVs to historic highs. We then turn to an analysis of the PSID for the period from 1999 to 2009 to examine how homeownership spells contributed to trends in household wealth over this period. While house prices grew substantially for much of this period, it also captures most of the decline in prices as well. Whereas previous studies have focused solely on how each additional year of homeownership contributes to household wealth, we are also interested in assessing how failed attempts at homeownership affect wealth to assess the downside risks of owning as well. We find that on average homeownership's contribution to household wealth over this period was remarkably similar to that found in earlier periods. The results also confirm previous findings that while lower-income households and minorities realized lower wealth gains from owning, on average these gains were positive and significant. The results also show that a failure to sustain homeownership is associated with a substantial loss of wealth for established owners, although those who made a failed transition from owning to renting are no worse off financially than those who remained renters over the whole period. Thus, despite the many ways in which market conditions over this period might have been expected to undermine homeownership's wealth building potential, our analysis of the PSID finds that owning maintained a strong association with improvements in wealth over the decade from 1999 to 2009. Long-Run Trends in Housing Wealth and Mortgage Debt The sharp rise in home prices in many parts of the country is reflected in the substantial increase in average real housing equity among homeowners, roughly doubling (a gain of 96 percent) between 26 1995 and 2007 among all homeowners (Table 1). The gains were nearly as large among African- Americans (88 percent) and even larger among Hispanics (123 percent), although generally lower among households in the bottom two income quartiles where home equity increased by only 56 and 42 percent, respectively. The loss in housing equity between 2007 and 2010 was substantial, erasing 26 percent of home equity on average for all homeowners and taking back much of the gains made since 2001 for most groups. Mirroring their larger gains during the boom, Hispanics suffered the greatest loss of housing wealth, dropping by nearly half. Across income groups the declines were more moderate among those in the bottom half of the income distribution. But despite these substantial losses, average real home equity in 2010 was still higher on average than in 1995 for all of the groups shown, and in many cases considerably higher. Whites and those in the highest income quartile had the largest gains, with average home equity up by 51 percent and 78 percent respectively. African-Americans and the lowest income quartile also maintained substantial gains of 39 percent and 35 percent, respectively. Hispanics and those in the middle income quartiles made the least progress, with average home equity up by only 12 to 18 percent. Throughout this period the share of net wealth accounted for by home equity among all homeowners fluctuated between 22 and 29 percent, with much of the movement due to changes in non-housing net wealth. Between 1989 and 1998 home equity's share of average wealth fell from 29 to 22 percent as the stock market boomed while home values languished. Between 1998 and 2007 home equity's share of net wealth rose to 25 percent as the stock market absorbed the dot com bust while housing prices soared. Between 2007 and 2010 losses in housing wealth outpaced losses in other financial assets so housing's share of wealth fell back to 22 percent. Thus, despite the significant growth in housing equity in the first half of the 2000s it never came to account for an outsized portion of household net wealth among all homeowners.
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Read the attached text, and then answer the question that follows using only details from the context provided. You will NOT refer to outside sources for your response. Based on the text above, what factors can contribute to wealth accumulation through homeownership? Introduction In many respects, the notion that owning a home is an effective means of accumulating wealth among low-income and minority households has been the keystone underlying efforts to support homeownership in recent decades. The renewed emphasis on boosting homeownership rates as a policy goal that arose in the early 1990s can be traced in no small part to the seminal work by Oliver and Shapiro (1990) and Sherraden (1991) highlighting the importance of assets as a fundamental determinant of the long-run well-being of families and individuals. The efforts of these scholars led to a heightened awareness of the importance of assets in determining life's opportunities, enabling investments in education and businesses, providing economic security in times of lost jobs or poor health, and passing on advantages to children. Assessments of differences in asset ownership placed particularly emphasis on the tremendous gaps in homeownership rates by race/ethnicity and income and the importance of these gaps in explaining differences in wealth. In announcing their own initiatives to close these homeownership gaps, both President Clinton and President Bush gave prominent attention to the foundational role that homeownership plays in providing financial security (Herbert and Belsky, 2006). But while faith in homeownership's financial benefits are widely subscribed to, there have long been challenges to the view that owning a home is necessarily an effective means of producing wealth for lower-income and minority households. In 2001 the Joint Center for Housing Studies hosted a symposium with the goal of "examining the unexamined goal" of boosting low-income homeownership (Retsinas and Belsky, 2002a). The general conclusion that emerged from this collection of papers was that lower-income households do benefit from owning homes, although this conclusion was subject to a variety of "caveats and codicils" (Retsinas and Belsky, 2002b, page 11). A few of these caveats related to whether financial benefits were likely to materialize, with papers finding that all too commonly homebuyers sold their homes for real losses while alternative investments offered higher returns (Belsky and Duda, 2002; Goetzmann and Speigel, 2002). In perhaps the most comprehensive critique of the policy emphasis of fostering low-income homeownership, Shlay (2006) reviewed existing scholarly evidence to cast doubt on the likelihood that either the financial or social benefits of owning would be realized. These criticisms have only grown louder in the aftermath of the housing bust, as trillions of dollars in wealth evaporated leaving more than 10 million homeowners owing more than their homes are worth and leading to more than 4 million owners losing their homes to foreclosure (Joint Center for Housing Studies, 2012; Kiviat, 2010; Li and Yang, 2010; Davis, 2012). Many of the criticisms raised about 1 the financial risks of homeownership are not new, but the experience of the last five years has certainly given new impetus to these arguments. But there are also concerns that changes in the mortgage market and in consumer behavior may have exacerbated these risks, increasing the odds that owners will, at best, be less likely to realize any financial gains from owning and, at worse, face a heightened risk of foreclosure. The goal of this paper is to reassess in the light of recent experience whether homeownership is likely to be an effective means of wealth creation for low-income and minority households. Has the experience of the last decade proven the arguments of earlier critics of homeownership? Have changes in the market affected whether these benefits are likely to be realized? The paper takes three approaches to address these questions. We begin by presenting a conceptualization of the risks and rewards of homeownership as a financial choice, with a particular eye toward whether the odds of a beneficial outcome are lower for lower-income and minority owners. This review also assesses whether recent experience has altered this calculus-as opposed to just raising our awareness of the proper weighting of the likelihood of realizing the benefits while sidestepping the risks. Next, we review the existing literature examining the financial benefits of owning a home, including both studies simulating the returns to owning and renting as well as studies using panel surveys to track actual wealth accumulation among owners and renters. Finally, we examine data from the Survey of Consumer Finance (SCF) and the Panel Study of Income Dynamics (PSID) covering the last decade to assess how owning a home has been associated with changes in household financial balance sheets over this period. To preview our conclusions, we find that while there is no doubt that homeownership entails real financial risks, there continues to be strong support for the association between owning a home and accumulating wealth. This relationship held even during the tumultuous period from 1999 to 2009, under less than ideal conditions. Importantly, while homeownership is associated with somewhat lower gains in wealth among minorities and lower-income households, these gains are on average still positive and substantial. In contrast, renters generally do not see any gains in wealth. Those who buy homes but do not sustain this ownership also do not experience any gains in wealth, but are generally left no worse off in wealth terms than they were prior to buying a home-although of course there may still be substantial costs from these failed attempts at owning in terms of physical and mental health as well as future costs of credit. We conclude that homeownership continues to represent an important opportunity for individuals and families of limited means to accumulate wealth. As such, policies to support homeownership can be justified as a means of alleviating wealth disparities by extending this 2 opportunity to those who are in a position to succeed as owners under the right conditions. The key, of course, is to identify the conditions where lower-income and minority households are most likely to succeed as owners and so realize this potential while avoiding the significant costs of failure. Assessing the Financial Risks and Rewards of Homeownership Before turning to evidence about the financial returns to homeownership, it is helpful to start by framing the arguments about why homeownership is thought to be an effective means of generating wealth as well as the counter arguments about why these benefits may not materialize, particularly for lower-income and minority homeowners. We then consider how changes in mortgage markets and consumer behavior may have altered the likelihood that owning will lead to financial gains. This framing helps provide a basis for interpreting the findings from the following two sections of the paper that examine evidence about the association between homeowning and wealth accumulation. The Potential Financial Benefits of Owning The belief that homeownership can be an important means of creating wealth has its roots in five factors. First, the widespread use of amortizing mortgages to finance the acquisition of the home results in forced savings as a portion of the financing cost each month goes toward principal reduction. While modest in the early years of repayment, the share of the payment going toward principal increases over time. For example, assuming a 30-year loan with a 5 percent interest rate, a homeowner will have paid off about 8 percent of the mortgage after 5 years, 19 percent after 10 years, and nearly a third after 15 years. Assuming a household purchases a home in their early 30s and keeps on a path to pay off the mortgage over a thirty-year period, these forced savings will represent a sizable nest egg when they reach retirement age. In addition, an often overlooked aspect of forced savings associated with homeownership is the accumulation of the downpayment itself, which often entails a committed effort to accumulate savings in a short period. Second, homes are generally assumed to experience some degree of real appreciation over time, reflecting increased overall demand for housing due to growth in both population and incomes against a backdrop of a fixed supply of land located near centers of economic activity. Shiller (2005) has been the most notable critic of this point of view, arguing that over the very long-run real house prices have only barely exceeded inflation. Lawler (2012), however, has argued that Shiller's house price estimates and measures of inflation result in an underestimate of real house price growth. Analysis of trends in real house prices across a range of market areas support the conclusion that these trends 3 reflect a complex interaction of supply and demand factors in local markets that defy simple categorization (Capozza et al. 2002, Gallin, 2006). At a national level the Federal Housing Finance Agency house price index indicates that between 1975 and 2012 the compound annual growth rate in house prices has exceed inflation by 0.8 percentage points. Even at a modest rate of increase, the compounding of these returns over a longer period of time can be produce substantial increase in real home values. Assuming just a 0.8 percent annual real increase in house values over 30 years an owner will experience a real gain of about 26 percent in the overall house value. The use of financing can further leverage these returns. A homebuyer with a modest downpayment gets the benefit of increases in the overall asset value despite their small equity stake. While the cost of financing can create a situation of negative leverage if the increase in house values is lower than the cost of financing (so that the financing costs exceed the increase in the asset value), this risk diminishes over time as the value of the house compounds while the debt payment is fixed. Through leverage, the rate of return on an investment in a home can be substantial even when the increase in house values is modest. Consider the case where a buyer puts down 5 percent and the house appreciates at 4 percent annually. After 5 years the home will have increased in value by nearly 22 percent or more than 4 times the initial 5 percent downpayment. Even allowing for selling costs of 6 percent, this would represent an annualized return of 31 percent on the owner's initial investment. Due to leverage, even nominal increases in home values that do not exceed inflation can result in real returns. In the above example, if inflation matched the 4 percent growth in home prices, the owner would still have earned a substantial real return on their initial investment. Federal income tax benefits from owning a home can also be substantial. The ability to deduct mortgage interest and property taxes is the most apparent of these benefits. Taxpayers who are able to make full use of these deductions receive a discount on these portions of ongoing housing costs at the taxpayer's marginal tax rate, ranging from 15 percent for moderate income households up to 39 percent for the highest tax bracket. In addition, capital gains on the sale of a principal residence up to $250,000 for single persons and $500,000 for married couples are also excluded from capital gains taxation, which is currently 15 percent for most households and 20 percent for the highest income bracket.1 1 An additional tax benefit that is often overlooked is the fact that while owner occupants benefit from the use of their home as a residence they do not have to pay any tax on these benefits, referred to as the implicit rental income from the property (that is, the rent one would have to pay to occupy the home) (Ozanne, 2012). The loss of revenue to the U.S. Treasury from this exclusion is substantial, outweighing the costs of the mortgage interest deduction. 4 Finally, owning a home provides a hedge against inflation in rents over time. Sinai and Souleles (2005) find that homeownership rates and housing values are both higher in markets where rents are more volatile, indicating the value placed on being able to protect against rent fluctuations. Under most circumstances, mortgage payments also decline in real terms over time, reducing housing costs as a share of income. For long-term owners, this can result in fairly substantial savings in the out of pocket costs for required for housing. Assuming a fixed rate mortgage, inflation of 3 percent, 1 percent growth in both real house prices and the costs of property taxes, insurance and maintenance, real monthly housing costs would decline by about 10 percent after 5 years, 15 percent after 10 years, and 30 percent by the last year of the mortgage. Once the mortgage is paid off, the out of pocket costs of owning in real terms are less than half the payments made at the time of purchase. Housing costs for renters, in contrast, would be expected to keep pace with inflation in housing prices. The Potential Financial Risks of Owning Combined, the financial benefits outlined above can fuel significant wealth accumulation. But as the last few years have made painfully clear, the financial benefits associated with owning a home are not without risk. To begin with, house prices can be volatile. That was certainly the case in the wake of the housing bust, as nominal prices fell nationally by some 25 percent or more (depending upon the specific price index used), with the hardest hit markets experiencing declines of more than 40 percent. Almost no area of the country was spared from some degree of decline. According to the FHFA index, nominal prices fell in every state with the exception of North Dakota. But while recent experience is notable for the breadth and depth of price declines, there are other examples of fairly significant price declines over the last few decades, including declines of between 10 and 20 percent in some Oil Patch states in the 1980s and in New England, California and Hawaii in the early 1990s. There are also a number of markets where house prices trends have historically been more stable, but in these areas long-run real price increases have either not kept pace with inflation or have been modest. House price growth has been particularly weak in a number of markets in the Midwest and South where population and income growth have been low. Based on long-run state level indexes from FHFA, between 1975 and 2012 there were 10 states in these regions where the compound annual growth in house prices did not exceed general price inflation. Even before the bust, homeowners in these markets did not have the benefit of real growth in house prices over the long term. In nine other states house price growth did beat inflation, but by less than 0.25 percent on an annual basis. Thus, in about two-fifths of states real house price growth was either non-existent or trivial. At the other 5 extreme there were 17 states, mostly along the Pacific coast and in the Northeast that experienced real house price growth of more than 1 percent, including 5 states that exceeded 2 percent. There are also peculiar aspects of owning a home that further exacerbate the financial risks of these investments. Homeowners make a significant investment in a specific location and cannot diversify the risk of home price declines by spreading this investment across assets or across markets. Homes values are also high relative to incomes and so account for a large share of household wealth. Wolff (2012) reports that in 2010 the value of the principal residence accounted for two-thirds of total wealth among households in the middle three quintiles of the wealth distribution. With so much wealth tied up in one asset, homeowners are particularly vulnerable to changes in home values. The use of debt financing for a large share of the purchase further magnifies these risks, with even small drops in prices wiping out substantial shares of homeowner equity. Indeed, at the height of the housing bust the number of households underwater on their mortgages was estimated by CoreLogic to have exceeded 11 million while Zillow placed the number closer to 15 million. When assessed purely on the basis of real growth in values over time, housing also compares poorly to the returns offered by investments in diversified portfolios of stock or bonds. Geotzmann and Speigel (2002) compare the change in home prices in 12 market areas between 1980 and 1999 to a range of alternative investments and find that housing was consistently dominated as an investment asset by all of the financial alternatives considered, leading them to conclude that it is "surprising that housing continues to represent a significant portion of American household portfolios" (page 260). However, Flavin and Yamashita (2002) take a more expansive view of the returns on housing investments by including the value derived from occupying the unit, the use of financial leverage, and the ability to claim income tax deductions. This fuller treatment of housing's returns finds that the average rate of return was slightly below returns for investments in stocks, but the variance of these returns were also lower and so somewhat less risky. Still, even if the returns to housing are deemed to be competitive with alternative investments the concern remains that it accounts for an excessive share of low-wealth household's portfolios. Housing investments are also handicapped by high transaction costs associated with buying and selling these assets. Home buyers face fees for mortgage origination, title search and insurance, state and local taxes, home inspections, and legal fees, all of which can add up to several percentage points of the home value. Real estate broker commissions typically also command 6 percent of the sales price. These high transaction costs can absorb a significant share of home price appreciation from the first few years of occupancy. Given these high costs, home owners who are forced by circumstances to move 6 within a few years of buying will face the risk of loss of at least some share of their initial investment even if home values have risen modestly. The need to maintain the home also imposes financial risks on owners. While routine maintenance can keep both the physical structure and the home's major systems in good working order, major investments are periodically needed, such as painting the exterior or replacing the roof or heating system. These projects incur high costs that may be difficult for owners to afford. While owners may have the opportunity to plan for these investments over time, in some cases a system will fail with little warning and produce an unexpected cost that the owner cannot afford, creating a financial strain that in the most extreme cases can jeopardize the ability to maintain ownership. Finally, the financial costs of failing to sustain homeownership are high-in addition to the traumatic impacts that foreclosures can have on the health and psychic well-being of the owner (Carr and Anacker, 2012). Owners who default on their mortgage will not only lose whatever equity stake they had in the home, they are also likely to deplete their savings in a bid to maintain ownership and suffer significant damage to their credit history making it difficult and costly to obtain credit for several years to come. Factors Contributing to Wealth Accumulation Through Homeownership Whether and to what extent a homebuyer will realize the potential benefits of owning while avoiding succumbing to the risks depends on a complex set of factors. Herbert and Belsky (2006) present a detailed conceptual model of the factors that contribute to whether homeownership produces wealth over the life course, which is briefly summarized here. The most obvious factor is the timing of purchase relative to housing price cycles. The recent boom and bust in house prices presents a prime example. Homebuyers who bought in the early 2000s were poised to benefit from the massive run-up in prices that occurred in many markets, while those that bought in the mid 2000s entered just in time for the historic freefall in prices that followed. While other price cycles in recent decades may not have been as dramatic, the consequences of buying near troughs or peaks on wealth accumulation would have been similar. Belsky and Duda (2002) examined data on repeat sales in four market areas between 1982 and 1999 and found that roughly half of owners who bought and sold their homes within this time period failed to realize gains that beat inflation after assuming a 6 percent sales cost (although most did earn a return in nominal terms). Whether owners realized a positive return depended strongly on where in the housing price cycle they bought and sold their homes. 7 Belsky and Duda (2002) conclude that "although the golden rule of real estate is often cited as location, location, location, an equally golden rule is timing, timing, timing" (Page 223). Their conclusion points to another critical factor in how likely a home is to appreciate in value - in what market and in which specific neighborhood the home is located. As noted above, there have been sizeable differences across market areas in long-term house price trends, with areas along the coasts experiencing real gains of one percent or more over the last several decades while areas in the Midwest and South have had little or no gains. But there are also substantial variations in price trends across neighborhoods within a single market (for reviews of this literature see Herbert and Belsky, 2006; Dietz and Haurin, 2003; and McCarthy, Van Zandt and Rohe, 2001). Whether a household bought a home in Boston or Cleveland is an important factor in the returns realized, but so is whether the home was in a desirable area or a declining neighborhood. The terms of financing used to buy the home also matter. Higher interest rates lower the share of payments that are devoted to principal reduction in the early years of repayment, slowing wealth accumulation. The higher monthly costs of the mortgage also erode the ability of the household to meet other expenses and to save on an ongoing basis as additional interest payments over the life of the mortgage can be substantial. For example, over a thirty-year term a loan for $150,000 at 7 percent interest will require $69,000 more in interest payments than a 5 percent loan. Higher origination fees also sap savings, reducing the quality and size of home that is affordable and lowering the rate of return on housing investments. Choices about refinancing over time can also exert a strong influence on wealth accumulation. Taking advantage of declines in mortgage interest rates to reduce financing costs can save owners hundreds of dollars each month, and tens of thousands over the life of a mortgage-although continually resetting the term of the mortgage will reduce opportunities for forced savings. On the other hand, refinancing to take cash out of the property can erode wealth accumulation, particularly if the extracted funds are used to finance consumption rather than investments in the home, education, business or financial opportunities. Wealth accumulation will be further undermined if the new loan comes with high fees and higher interest rates. Of course, the ability to tap housing wealth as a buffer against income shocks is one of the virtues of developing this cushion, but using home equity to finance an unaffordable lifestyle is an unsustainable path. A host of other factors come into play in determining how much housing wealth is realized over the span of a lifetime. For example, buying higher valued homes-if successful-can produce more wealth both through forced savings and by earning returns on a higher valued asset. By the same 8 means, those who trade up to more expensive homes over time may also accrue greater housing wealth. The age at which a first home is purchased can also be significant, giving the household a longer period to accumulate wealth. Of course, the quality of the home purchased and the owner's ability to maintain it will also affect both ongoing maintenance costs and how much the home appreciates over time. But arguably the most fundamental factor-the true golden rule of how to accumulate wealth. through homeownership-is whether ownership is sustained over the long term. Housing booms aside, many of the financial benefits are slow to accumulate, including the slow build up of forced savings, the compounding of values at low appreciation rates, and the decline in monthly housing costs in real terms over time. The expression "time heals all wounds" may also be applicable to many of homeownerships most critical risks. The losses associated with buying near the peak of a price cycle will diminish over time as owners benefit from the next upswing in prices. And even in areas whether real growth in house prices does not occur or is limited, over the long term owners will still amass some degree of wealth through paying off the mortgage and as a result of savings from lower housing costs. On the flip side, a failure to sustain homeownership-particularly when the end result is a foreclosure-will wipe out any accrued wealth and bring additional costs in the form a damaged credit history that will incur further costs over time and limit opportunities to buy another home in the near term. To some degree whether ownership is sustained will depend on choices that owners make over time - including whether the home they buy is affordable, whether they make prudent choices about refinancing, and whether they maintain the home to avoid larger home repair bills. But whether owning is sustained also will depend on whether the household can weather any number of significant events that can fundamentally alter their financial circumstances, such as loss of a job, a serious health problem, or change in the family composition due to the birth of a child, death, divorce, or the need to care for a parent or relative. Over the course of a lifetime, these events are likely to befall most everyone. Whether homeownership can be sustained in the wake of these events will depend on the ability of the household to adjust to their changed circumstances and whether they have enough available savings to cushion the blow. Impediments to Wealth Creation among Lower-Income and Minority Homeowners Up to this point the discussion presented has considered homeownership's financial risks and rewards in a general sense. But the concern of this paper is specifically with the potential for homeownership to serve as an effective means of wealth accumulation for lower-income and minority 9 households. How are the odds of generating wealth as a homeowner likely to differ for these households?? In keeping with the fundamental importance of sustained homeownership to accumulate wealth, the chief concern is that these groups of homebuyers face a more difficult time in maintaining ownership. Studies analyzing panel data to document homeownership spells among first-time buyers consistently find that low-income and minority owners have a lower probability of maintaining homeownership for at least five years. In an analysis of the National Longitudinal Survey of Youth (NLSY) from 1979 through 2000 Haurin and Rosenthal (2004) find that ownership is less likely to be sustained among both these groups. Specifically, only 57 percent of low-income buyers were found to still own their first home five years later, compared to 70 percent of high-income owners (with income categories defined by income quartiles at age 25). First homeownership spells were also found to be much shorter for minorities, averaging 6.5 years among whites, compared to 4.4 years for blacks and 5.4 years for Hispanics. In an analysis of the PSID covering the period from 1976 through 1993 Reid (2004) had similar results, with only 47 percent of low-income owners still owning their first homes 5 years later compared to 77 percent of high income owners (with incomes here defined based on average income in the years prior to homeownership compared to area median incomes). Reid further found that minorities had a harder time staying in their first home, with 42 percent of low-income non-whites still owning after five years compared to 54 percent of low-income whites. While these results raise clear concerns about the high risk of failed homeownership among these groups, the focus on a single homeownership spell may overstate the extent to which homeowning is not sustained in the long run. Haurin and Rosenthal (2004) also examine subsequent tenure experience in their panel and find that the share of households that return to owning a second time is very high for both whites and minorities. Over the 21 year period in their panel, 86 percent of whites who ever bought a home either never returned to renting or regained owning after a subsequent spell as a renter, with only slightly lower rates for blacks (81 percent) and Hispanics (84 percent). However, they do find that minorities spend more years in their intervening spells as renters, which reduces the overall amount of time they can accumulate benefits from owning. Another critical difference in the financial returns to owning for low-income households is that the ability to deduct mortgage interest and property taxes from federal taxable income may be of little or no value. In order to benefit from these tax provisions, the amount of available deductions must 2 Galster and Santiago (2008) provide a useful framing of this issues and a comprehensive review of the relevant literature. 10 exceed the standard deduction, which stood at $5,950 for individuals and $11,900 for married couples in 2012. For taxpayers with lower valued homes, particularly married couples, the costs of mortgage interest and property taxes even when added to other deductions for state taxes and charitable contributions, may not greatly exceed the standard deduction. In addition, the value of these deductions depends on the taxpayer's marginal tax rate, which will lower for low- and moderate-income households. In fact the share of the total value of the mortgage interest deduction going to moderate income households is fairly small. According to estimates from the Joint Committee on Taxation (2013), only 3 percent of the total deductions went to filers with incomes under $50,000, 9 percent to those with incomes between $50,000 and $75,000, and 11 percent to those with income between $75,000 and $100,000, leaving 77 percent of the benefit going to those earning above $100,000. To the extent that these tax benefits swing the financial scales in favor homeownership, this tilting of the calculus is not very evident for low- and moderate-income tax filers. There are also systematic differences in mortgage terms and characteristics by income and race/ethnicity that can also affect the financial returns to owning. The development of the nonprime lending industry that began in the 1990s and came to full blossom during the housing boom produced much greater variation in mortgage terms and pricing than had previously been evident. A fairly extensive literature has documented the greater prevalence of subprime lending among minorities and, to a lesser extent, low-income borrowers and communities (see, for example, Bradford, 2002; Calem, Gillen and Wachter, 2004; Apgar and Calder, 2005; Avery, Brevort, and Canner, 2007; Belsky and Richardson, 2010). As described above, higher costs of financing can significantly reduce the financial benefits of owning. While the expansion of financing options beyond a "one size fits all who qualify" approach to lending has the potential to extend homeownership opportunities to a greater range of households, there is significant evidence that the cost of credit was often higher than risk alone would warrant. Bocian, Ernst and Li (2008) present perhaps the most compelling evidence through an analysis of a large data set on nonprime loans that documents a wide range of risk measures, including credit scores as well as income and race/ethnicity. They find that even after controlling for observable differences in credit quality both blacks and Hispanics were significantly more likely to obtain high- priced mortgages for home purchase, while blacks were also more likely to obtain higher-priced refinance loans. These higher costs of borrowing not only limit the wealth producing capacity of homeownership, they also increase the risk of failing to sustain homeownership. In fact, Haurin and Rosenthal (2004) find that a 1 percentage point increase in the mortgage interest rate increases the rate of homeownership termination by 30 percent. 11 Low-income and minority borrowers are also less likely to refinance when interest rates decline. In an analysis of loans guaranteed by Freddie Mac during the 1990s Van Order and Zorn (2002) find that low-income and minority borrowers were less likely to refinance as interest rates fell. Their analysis also found that once borrower risk measures and loan characteristics were taken into account there were no remaining differences in refinance rates by income-although this just indicates that refinancing may be constrained by credit factors. Minorities, on the other hand, still had lower rates of refinancing even after controlling for these factors, suggesting that there were impediments to refinancing by these borrowers that were in addition to measurable credit factors. Nothaft and Chang (2005) analyze data from the American Housing Survey (AHS) from the late 1980s through 2001 and also find that minority and low-income owners were less likely to refinance when interest rates declined. These authors use their results to estimate the foregone savings from missed refinance opportunities, which are more than $20 billion each for black and low-income homeowners. To the extent that low-income and minority homebuyers may be more likely to purchase homes in poor condition they are also exposed to greater risks of high costs of maintenance and repair. Herbert and Belsky (2006) find that compared to whites, black and Hispanic first-time homebuyers were more likely to buy homes that were moderately or severely inadequate as characterized by the AHS- 6.5 percent for blacks and 8.8 percent for Hispanics compared to 4.3 percent among whites. A similar gap was also evident between low- and high-income households. While there has been little study of the incidence of unexpected home repair needs, a study by Rohe and his colleagues (2003) of participants in homeownership counseling programs found a fairly significant incidence of the need for unexpected repairs. Roughly half of 343 recent homebuyers reported that they had experienced a major unexpected cost in the first few years after buying their home, with the most common problem being a repair to one of the home's major systems. Finally, there are also concerns that lower-income households and minorities may be more likely to purchase homes in neighborhoods with less potential for house price appreciation. This is a particularly salient issue for minorities given the high degree of residential segregation by race and ethnicity that continues to be evident in the US. However, Herbert and Belsky (2006) present a detailed review of this literature and conclude that "taken as a whole the literature indicates that there is no reason to believe that low-value segments of the housing market will necessarily experience less appreciation than higher-valued homes. In fact, at different points in time and in different market areas, low-valued homes and neighborhoods have experienced greater appreciation rates. Although the opposite is also true." (Page 76) The evidence about differences in appreciation rates by neighborhood 12 racial composition is less definitive. Here Herbert and Belsky (2006) conclude that "it does appear that homes in mostly black areas may be less likely to experience appreciation, but this conclusion is tempered by the small number of studies and the fact that they mostly analyzed trends from the 1970s. and 1980s, which may no longer be relevant" (page 77). Findings by Boehm and Schlottmann (2004) regarding differences in wealth gains from homeownership by race and income are instructive in this regard. They find that over the period from 1984 to 1992 there was little difference in appreciation rates in the specific neighborhoods where minorities and low-income households lived. Instead, they found that differences in housing equity accumulation were tied to the lower valued homes and the shorter duration of ownership for lower- income and minority households. Thus, differences in appreciation rates may be less of a concern in whether housing leads to wealth accumulation than these other considerations. Re-assessing the Calculus of Wealth Accumulation through Homeownership As the above review has shown, there were significant concerns about the risks of homeownership as an investment well before the housing bubble burst. For critics of homeownership as a wealth building tool the experience of the housing bust was in many respects a confirmation of their fears. Still, there were several markets developments during the boom years that magnified these preexisting risks. Most notably there was a marked increase in the prevalence of riskier mortgages, including those calling for little or no documentation of income, adjustable rate loans that exposed borrowers to payment shocks from the expiration of initial teaser rates or reduced payment options, allowances for higher debt to income ratios, and greater availability of loans for borrowers with very low credit scores. Downpayment requirements also eased as loan-to-value ratios (LTVs) of 95 percent or more became more common and borrowers also used "piggyback" second mortgages to finance much of the difference between the homes' value and a conforming first mortgage at an 80-percent LTV. Not unrelated to the greater availability of mortgage credit, house prices also exhibited much greater volatility than in the past, with a dramatic increase in prices that greatly outpaced trends in both incomes and rents and belied an unsustainable bubble. The greater availability of credit also increased the opportunity for lower-income households to miss-time the market. Belsky and Duda (2002) found that during the 1980s and 1990s lower-valued homes were less likely to be transacted around market peaks, so buyers of these homes were less likely to buy high and sell low. They speculated that this was due to the natural affordability constraints that took hold as markets peaked. But during the boom of 13 the 2000s lower-valued homes experienced greater volatility in prices, arguably reflecting much greater credit availability at the peak than was true in past cycles (Joint Center for Housing Studies, 2011). However, there are good reasons to believe-or certainly to hope-that the conditions that gave rise to this excessive risk taking and associated housing bubble will not be repeated any time soon. The Dodd-Frank Act includes a number of provisions to reduce the degree of risk for both borrowers and investors in the mortgage market. The Qualified Mortgage (QM) is aimed at ensuring that borrowers have the ability to repay mortgages by requiring full documentation of income and assets, setting tighter debt to income standards, and excluding a variety of mortgage terms that expose borrowers to payment shocks. The Qualified Residential Mortgage (QRM) is aimed at ensuring greater protections for investors in mortgage backed securities by requiring the creators of these securities to retain an interest in these investments if the loans included in the loan pool do not conform to certain risk standards that essentially mirror those of the Qualified Mortgage. Dodd-Frank also established the Consumer Financial Protection Bureau to fill a gap in the regulatory structure by creating an agency charged with looking out for consumers' interests in financial transactions. Beyond these regulatory changes, there is also a heightened awareness of the risks of mortgage investments on the part of private sector actors who have suffered significant financial losses with the bursting of the housing bubble. Regulatory changes aside, these private actors are unlikely to embrace riskier lending any time soon. The Federal Reserve and other federal regulators are certainly more attuned to the possibility of a bubble in housing prices and so are more likely to act in the event that signs of a bubble re-emerge. But even in the absence of the excessive risks of the last decade, homeownership will remain a risky proposition. Thus, at best, we may return to the market conditions that existed prior to the boom and the real risks that these conditions posed for investments in owner-occupied housing. In that regard, an assessment of experience in wealth creation through homeownership prior to the boom is relevant for what we might expect in the future. On the other hand it does seem likely-and arguably even desirable given how tight credit has become-that some greater degree of risk taking will emerge to make credit available to the many lower-income and lower-wealth households that would like to own a home. In fact, the QM standard of a total debt-to-income ratio of up to 43 percent does curtail the higher levels that became evident during the boom, but this cutoff still represents a liberalization from standards for conventional mortgages that prevailed in the 1990s. There may also have been a shift in consumer attitudes toward mortgage debt, with fewer households seeking to pay off mortgages over time and thus exposing themselves for longer periods to the risks associated with these leveraged investments. Over time, as 14 conditions return to normal and the market adjusts to new regulatory structures, we are likely to see mortgages originated outside of the QM and QRM boxes. In that regard, an assessment of the experience of homeowners through the boom and bust is instructive as a stress test of how likely homeownership is to build wealth under more extreme market conditions. The next two sections of the paper look to assess homeownership's potential for wealth building from these two perspectives. First by presenting a review of the literature assessing homeownerships' association with wealth building prior to the 2000s and then by analyzing data from the last decade to examine how homeownership was associated with changes in wealth through the turbulent conditions of the 2000s. Review of Previous Studies Assessing the Financial Returns to Homeownership As the discussion up to this point has intended to illustrate, whether owning a home will lead to the accumulation of wealth is the result of complex set of factors related to the choices that households make in buying their home and how these choices interact with market conditions both at the time of purchase and over time. This complexity makes it quite difficult to assess whether in practice owning is likely to be an effective means of increasing a household's wealth. A further complicating factor is that there is a substantial selection bias in who becomes a homeowner, as there is reason to believe that those who are most secure in their financial condition and most inclined to save are more likely to become owners. For this reason, comparisons of the wealth profiles of owners and renters may not be able to attribute any observed differences solely to the influence of homeownership on the ability to accrue wealth. There are two broad classes of studies that have attempted to assess the financial benefits of homeownership in light of these challenges. One group relies on simulations that compare the theoretical costs and benefits of owning and renting under a variety of assumptions about market conditions and household choices. A key appeal of these studies is that they essentially remove concerns about selection bias by assuming otherwise identical households operate under a consistent set of decision rules. They can also isolate the influence of specific factors to shed light on the paths that are most likely to make owning or renting financially beneficial. But while these studies highlight the potential financial returns to owning and renting, they do not capture how households are likely to actually behave in these situations and so leave open the question of whether the potential returns of these tenure choices are likely to be realized in practice. 15 Another group of studies rely on panel studies that track households over time to examine how choices about owning and renting are correlated with changes in wealth. The findings from this type of analysis provide evidence of whether in practice owners are more likely to accrue wealth than renters and how this experience differs by income and race/ethnicity. Where the theoretical comparisons of owning and renting also generally focus on a single spell of homeownership - that is, the financial outcome associated with the period between buying and selling a single home - panel studies can track households through multiple transitions in and out of owning to assess outcomes from a series of tenure choices over time. The main drawback of these studies is the lingering concern that owners may be inherently different from renters in ways that observable household characteristics cannot capture. Some of these studies employ statistical methods to try to control for this selection bias, although it is doubtful that these controls can fully account for these differences. Both classes of studies provide important insights into the opportunities and drawbacks of homeownership as a means of increasing household wealth. When viewed as a whole the findings from both streams of research help paint a clearer picture of whether and how homeownership may help foster wealth creation. The sections that follow highlight key findings from each of these literature strands. Simulations of the Financial Returns to Owning and Renting Beginning with Mills (1990) there have been a number of studies that have simulated the financial returns to owning and renting under a variety of assumptions to identify whether and under what circumstances owning or renting is likely to be more financially beneficial (Capone, 1995; Belsky, Retsinas, and Duda, 2007; Rappaport, 2010; Beracha and Johnson, 2012). While the studies differ in important respects, the general approach is to compare the "all-in" costs of owning - including mortgage interest, property taxes, insurance, maintenance, and transaction costs along with offsetting gains in property value - to the costs of renting a comparable housing unit. Either implicit or explicit in these comparisons is that renters save and invest both the initial investment that owners make in buying their homes as well as any annual savings in housing costs. There are a host of assumptions that underlie these calculations, but among the most influential factors are the estimate of rents as a share of house value, the length of time the home is owned, the basis for simulating trends in house prices and rents over time, and the treatment of income tax benefits. The studies differ in fundamental ways related to the range of assumptions tested and the method for comparing returns to owning and renting and, as a result, individually reach somewhat 16 different conclusions about which tenure choice is likely to be preferred. But collectively the studies lead to some general conclusions about the relative financial merits of owning and renting. Perhaps the most fundamental conclusion from these studies that runs counter to the prevailing sense that homeownership is a powerful source of wealth is that under a variety of conditions renting is often more likely to be a better financial choice than owning. Belsky, Retsinas and Duda (2007) compare owning and renting in four different market areas chosen to represent different degrees of price appreciation and volatility over the period studied from 1983 through 2001. They focus on holding periods of 3, 5 and 7 years during their window of study and report the share of different holding periods where owning results in higher financial returns than renting. Overall they find that in only 53 percent of the 3-year holding periods would owning be preferred to renting. Increasing the holding period to 7 years-which allows for more time to work off the high transaction costs of buying and selling a home-only increases this proportion to 63 percent. Rappaport (2010) reaches a similar conclusion based on an analysis of national trends in market conditions between 1970 and 1999 and an assumed 10-year period of owning a home. He finds that owning a home unambiguously built more wealth in about half of the possible 10-year periods, renting was clearly better in another quarter and likely, but not unambiguously, preferred in the remaining periods. Finally, Beracha and Johnson (2012) come to a similar conclusion in an analysis of all possible 8-year holding periods given actual market conditions at both the national and regional level between 1978 and 2009. They find that between 65 and 75 percent of cases renting offered greater opportunities for accruing wealth than owning, depending on whether renters employing a more conservative or aggressive investment approach. In parsing the findings of these studies, there are several factors that are the critical drivers of the results. Perhaps the most obvious is the importance of the timing of home purchase relative to market cycles in prices and interest rates. Depending on the future course of prices, rents and interest rates one or the other tenure would be strongly preferred at different points in time. The importance of timing may be most clearly demonstrated in Belsky, Retsinas and Duda (2007) when they consider different holding periods among owners. In general, it would be expected that longer holding periods should favor owning as more time is allowed to overcome high transaction costs, pay down additional principal, and ride out price cycles. Instead, they find that in most markets the likelihood of owning being preferred to renting was little changed by the holding period as short holding periods offered the possibility of catching only the upswing in prices while longer holds made it more likely that owners would share in some portion of a downturn. Only in Chicago, which did not experience such dramatic swings in prices, were longer holding periods found to be much more likely to benefit owning. 17 Still, the issue of holding period is an important consideration. The analysis by both Mills and Capone solved for the holding period that was needed for owning to yield a higher return than renting on the assumption that longer holding periods would always favor homeownership. In his base case scenario Mills found a holding period of slightly longer than 7 years was needed for owning to be preferred. The more recent studies that have showed the importance of market timing either assumed a single fixed holding period of 8 to 10 years (as in Beracha and Johnson and Rappaport) or a range of relative short holding periods (as in Belsky, Retsinas and Duda). If owning does become more favorable over a longer period of time - for example, slightly longer than 8 to 10 years - these assessments would not capture this. In fact, many households move in and out of homeownership over time so a more complete assessment of the financial implications of tenure choice would take into account multiple homeownership spells. While one spell of owning may yield low returns, if homeowning is sustained or resumed then the household may yet benefit from the next upswing. Another important factor driving the findings are assumptions made about rents as a share of house value. This ratio is difficult to estimate both because of systematic differences in the nature of the owner and renter occupied stock and because market values and rents are hard to observe simultaneously. How much renters have to pay to rent a comparable home is obviously a key driver of financial outcomes as it determines how much they can save annually by renting, thereby adding to their wealth. Mills (1990) found that among the variables used in his simulation, his results were most sensitive to the ratio of rents to house values as a single percentage point change up or down leading to fluctuations in the required holding period from 3 to 23 years. Capone (1995) built on Mills study to examine the rent-versus-buy decision specifically for lower income households. He makes note of the importance of the rent-to-price ratio assumption and argues that Mills assumption of 7 percent was well below the ratios observed in low-cost segments of the market, where ratios of 10 to 12 percent were more reasonable. Under Capone's assumption that renters faced much higher rents he found that owners only needed to hold onto their homes for about 3 years for owning to be preferred. In contrast, Belsky, Retsinas and Duda rely on rent to price ratios is in the range of 5 to 7 percent, while the series used by Beracha and Johnson derived by Davis, Lehnert, and Martin (2008) appears to average about 5 percent. In both cases these assumptions are more favorable to renting than the assumptions used by either Mills or Capone. In recognition of the importance of this assumption, Rappaport structures his analysis to estimate the rent-to-price ratio that is the breakeven point between owning and renting. He then compares this estimate to what he feels is a plausible range for this ratio of 18 between 5 and 10 percent based on analysis of different market areas over time. At the higher end of this range owning would almost always be preferred, while the lower end leads to his conclusion that owning is clearly preferred to renting in only about half of the holding periods considered. In short, high or low values of this ratio can swamp other considerations, yet, as Rappaport demonstrates, pinning down actual values for this ratio is not an easy task. Several of the studies have examined the issue of whether tax benefits are important to whether owning makes more financial sense than renting. Mills assumes that owners can take full advantage of tax benefits at a 28 percent marginal rate. When he reduces the marginal rate to 15 percent he finds that owning is never preferred. Capone, though, demonstrates, that this knife edge does not hold if a higher rent to price ratio is assumed. In his base case analysis, owners are only assumed to benefit from tax benefits if they exceed the standard deduction and since he assumes a much more modest house in keeping with his focus on lower-income households, the tax benefits are essentially non-existent. As a result, reducing the tax benefits in his analysis does not change his conclusion that owning is a better financial choice even after only a few years. Belsky, Retsinas and Duda also examine the importance of tax benefits for lower-income owners. Like Capone, they adjust the value of tax deductions to account for the size of the home purchased and the amount of the standard deduction. They also find that tax benefits by themselves generally do not change the calculus of whether owning beats renting financially. So while tax benefits are an important factor among higher income households, as Mills found, it has little effect on the calculus for lower-income households. Despite getting limited benefits from tax breaks under a variety of circumstances Capone and Belsky, Retsinas and Duda find that lower-income households can fare better financially by owning. Belsky, Retsinas and Duda also make a unique contribution by examining how the returns to homeownership are affected by higher mortgage costs. They examine two scenarios: one where owners face interest rates that are 2 percentage points higher than prime rates and another where they are 5 percentage points higher. Under the first scenario, the likelihood that owning would be preferred to renting is decreased by moderate amounts (between 6 and 17 percentage points), while under the later scenario owning is rarely a better financial choice than renting. In short, they find that higher interest rates do reduce the financial appeal of homeownership, although the impact is most pronounced at extremely high levels. Lastly, and in some ways most critically, the finding that renting offers the potential for higher returns than owners depends in large part on renters taking steps to invest the annual savings in housing costs compared to renting. Building on Beracha and Johnson (2012), Beracha, Skiba, and 19 Johnson (2012) examine how variations in key assumptions regarding trends in prices, rents, interest rates, downpayment shares, and the returns available from alternative investments affect the buy versus rent financial calculus. They find that modifying most factors in isolation have only a moderate effect on whether renting is favored over owning. However, when they drop the assumption that renters actual invest any annual savings in housing costs on top of the initial downpayment they find that renting rarely results in higher wealth than owning. Thus, they find that the forced savings aspect of homeownership is of fundamental importance in determining whether owning will lead to greater wealth. This finding is echoed in the results of Boehm and Schlottmann (2004) who employ a somewhat unique approach to simulating the impact of homeownership on wealth accumulation. This study uses the Panel Study of Income Dynamics (PSID) to model the probability of moving in and out of homeownership on an annual basis over the period from 1984 through 1992. These same data are also used to estimate the house value that a household would opt for if a home were purchased in a given year. The estimated house value is then inflated based on house price trends in the census tract where the household resided to yield each household's expected gain in wealth from homeownership. This analysis finds that while minorities and low-income households do accrue wealth from homeownership, the amounts are much less than for higher income whites both because they own for fewer years and because they buy lower valued homes. But importantly, while the expected wealth accumulation among these households is less than that earned by higher income whites it is still positive. The authors also use the PSID to document that these same low-income and minority households essentially had no growth. in non-housing wealth over the same period. So in that regard the estimates of potential wealth created through homeownership were all the more important. Evidence from Panel Surveys about Wealth Accumulation through Homeownership As the findings from Beracha and Johnson (2012) and Boehm and Schlottmann (2004) suggest, the theoretical advantages of renting may not be realized if in practice renters do not take advantage of the opportunities afforded to them for saving and investing derived from the lower cost of renting. In contrast, studies making use of panel surveys that track households over time provide insights into the wealth accumulation associated with actual choices about renting and owning. These studies universally find that owning a home is associated with higher levels of wealth accumulation even after controlling for a range of household characteristics. While the gains are also consistently smaller in magnitude for lower-income and minority households, these studies also find that in contrast to owners similar renters 20 experience little or no gains in wealth. These findings hold even when steps are taken to account for selection bias in who becomes a homeowner. Although these methods may not fully account for the differences between owners and renters, there remains a strong case that homeowning does make a positive contribution to household balance sheets regardless of income or race/ethnicity. Haurin, Hendershott and Wachter (1996) was among the first studies to use panel survey data to track wealth trajectories associated with homeownership. The primary focus of this study was on the accumulation of wealth in anticipation of becoming an owner rather than how owning a home over time contributes to wealth accumulation, but their findings provide important insights into one way in which homeownership adds to wealth. They use the National Longitudinal Survey of Youth (NLSY) to track young renters age 20 to 28 in 1985 through 1990 and observe both their annual wealth levels and the timing of any transitions into homeownership. They find that household wealth goes up markedly during the transition to homeownership, increasing by 33 percent on average in the year prior to buying a home and then more than doubling in the year they first own. When they examine factors that contribute to this jump in wealth they find that marrying makes a significant contribution along with an increase in hours worked and a slightly higher incidence of inheritance and gifts. Their results suggest that an important mechanism by which homeownership adds to wealth is through the incentive to save in anticipation of buying a home. Even before realizing any returns on the investment in the home itself, the drive to become an owner results in substantially higher wealth than those who remain renters. Adding to this effect Haurin and his colleagues also find that wealth increases more rapidly in the years after becoming a homeowner-by 17 percent on average annually among their sample. Reid (2004) uses panel data from the PSID for the period 1976 through 1994 to examine the financial outcomes of homeownership among low-income households who bought their first home at some point during this period (with low-income defined as those with incomes consistently below 80 percent of area median income before first buying a home). She takes two approaches to examining the returns to homeownership for this group. First, she estimates the change in home values for both low- income and minority homeowners compared to higher-income and white owners. She finds that the rate of increase in home values for these groups was fairly modest, failing to beat the returns that would have been earned on an investment in Treasury bills over the same time. Reid then examines wealth holdings of households by tenure status at the end of her period of observation. She finds that while low-income and minority owners generally built much less wealth than higher-income and white households, the amount of their housing wealth was non-trivial and was many times larger than their other forms of wealth. Like Boehm and Schlottmann, she also finds that those who were renters at the 21 end of the period essentially held no wealth of any kind. Reid, however, does not undertake a multivariate analysis to control for other factors that may account for the differences between owners and renters. Nor does she factor in the impact of failed efforts at homeownership on wealth. But the fact that home equity accounts for such a large share of wealth among low-income and minority households points to the important role that owning a home played in fostering wealth accumulation. Di, Belsky and Liu (2007) was the first study to directly assess the relationship between homeownership and wealth accumulation over time while attempting to account for household characteristics and to include some measure of potential selection bias in who becomes an owner. The study uses the PSID to track households who were renters in 1989 through 2001 to observe transitions into and out of homeownership. The change in household wealth over time is then modeled as a function of starting wealth, a range of household characteristics thought to influence wealth, and, their principal measure of interest, the amount of time spent as an owner. In order to take into account a household's propensity to save, the study uses the PSID from 1984 through 1989 to estimate the share of income that was saved as an indication of savings behavior prior to the period when tenure transitions are observed as a means of controlling for this tendency in assessing differences in savings behavior after buying a home. Their principal finding is a positive and statistically significant association between additional years of homeownership and changes in wealth. The authors include a square term for the number of years owned to take into account anticipated impacts of the timing of moves into homeownership over the period as there was an initial decline in house values during the first years of their panel followed by more robust increases in later years. This square term is negative and significant indicating those who bought earlier in the period had lower cumulative gains in wealth. The largest estimated gains in wealth of $13,000 per year of ownership occurred among those who owned for 8 years. But for those who owned for the maximum possible period of 12 years the gains were only $3,333 per year. Prior savings tendency was positively associated with increases in wealth as expected, but was not statistically significant and so did not appear to capture any important difference in household behavior that was not already accounted for by other explanatory variables. Turner and Luea (2009) undertake a very similar analysis using the PSID sample for the period from 1987 to 2001. In contrast to Di, Belsky and Liu who only include initial renters, their study sample includes all households in the sample as of 2001 that were age 65 or younger regardless of whether they were renters at the start of the period. The study pools observations for the sample on household wealth from three points in time: 1994, 1999, and 2001. For each observation they include a count of the number of years the household has owned a home since 1988 as their explanatory variable of 22 interest. The approach used in this study attempts to control for selection bias into homeownership by estimating a random effects model that includes a household specific constant term. Turner and Luea also separate the sample into two income classes to see whether the association between homeownership and wealth growth differs by income. Low- and moderate-income (LMI) households were those who had incomes below 120 percent of area median income in all three periods when wealth was observed. The results indicate that each year of homeownership is associated with nearly $14,000 in additional wealth, perhaps not surprisingly quite similar to the amount found by Di, Belsky and Liu using the same survey over a nearly identical period (although with a somewhat different sample). When controls are included for LMI status, Turner and Luea find that these households have somewhat lower wealth accumulation of between $6,000 and $10,000 per year. But they note that since the average wealth holding of LMI households in 2001 was about $89,000 this annual rate of increase accounts for a fairly sizeable share of total wealth. In an unpublished dissertation, Mamgain (2011) extends the work of Turner and Luea by employing a two-stage model to add stronger controls for selection into homeownership. Like most of the other studies, Mamgain also uses the PSID, but his period of observation is from 1999 through 2007. Despite the different time period examined, when he replicates Turner and Luea his analysis yields similar results regarding the magnitude of the association between homeownership and wealth (although by ending the study period in 2007 it does not include the sharp loss of both housing and financial wealth that followed 2007). When Mamgain adds additional controls to his model to capture the intention to move, the respondent's health status, their ownership of other real estate and an estimate of current LTV he finds a somewhat lower impact of additional years of owning, but the estimate is still significant and positive. Importantly, when he employs his two-stage approach to include both a selection term and an instrumental measure of current tenure his estimate of the impact of each. additional year on owning does not change. He also estimates separate models by income level and finds that there is no difference in the impact of owning across income classes—all are positive and significant. In short, like other studies he does not find a significant impact of selection bias on his findings and he also finds that low-income owners are also likely to benefit from owning homes. 3 3 He does differ from previous studies in how he estimates the contribution of owning to wealth gains, by focusing on impacts at much lower household wealth levels. He finds that assuming wealth of about $2,500 for the lowest income group (at or below 150 percent of the poverty level) owning a home only adds a few hundred dollars a year to the household's bottom line. But with total wealth set a level well below the median among owners in this income class this result seems implausible. 23 None of the studies estimating statistical models to assess the contribution of homeownership to wealth accumulation analyzed whether there were differences in this experience by race and ethnicity. As discussed above, there are significant racial and ethnic differences in residential location, size of home, and characteristics of financing used, all of which could contribute to differences in wealth outcomes. Shapiro, Meschede, and Osoro (2013) use the PSID from 1984 through 2009 specifically to examine the factors associated with more rapid growth in wealth among whites over this period compared to blacks. Tracking the same set of households over this period they find that gains in median wealth among whites exceeded those among blacks by $152,000. Based on the results of a multivariate analysis they found that the single largest driver of this divergence in wealth was the additional time whites spend as homeowners, which they estimate accounted for 27 percent of the additional white gains. The next most significant factors were differences in income (20 percent), unemployment spells (9 percent), lower shares with a college education (5 percent), and differences in inheritance and financial support from family (5 percent). They also find that years of homeownership exerted a stronger influence on gains in wealth for blacks than it did for whites. While the authors do not attempt to control for any selection bias to control for who becomes a homeowner, none of the previous studies that have taken these steps have found these controls to change their findings. Conclusions Drawn from the Previous Literature Studies presenting simulations of the financial returns to renting and owning make a convincing case that in many markets over many periods of time and under a variety of assumptions renting ought to support greater wealth accumulation than owning. However, as virtually all of the panel studies document, in practice owning has consistently been found to be associated with greater increases in wealth even after controlling for differences in household income, education, marital status, starting wealth, inheritances, and other factors. Importantly, these same studies also consistently find that owning has a positive effect on wealth accumulation among both lower-income households and minorities, although the gains are smaller than for higher-income households and whites generally. Housing wealth among lower-income and minority households also often accounts a substantial share of total wealth for these groups. On the other hand, renters in these same demographic groups are consistently found to accrue little to no wealth over time. How can we reconcile the findings from simulation studies that renting should often be more financially advantageous than owning with the findings from the analysis of panel surveys that unambiguously find owning to be more favorable? One explanation may be that behavioral issues play 24 a key role. Efforts to save for a downpayment lead to a large jump in wealth that is then further supported by at least modest appreciation and some pay down of principal over time. Renters may have the opportunity to accrue savings and invest them in higher yielding opportunities but lack strong incentives and effective mechanisms for carrying through on this opportunity. There is also likely some degree of selection bias at work in who becomes a homeowner. While studies do control for income, education, marital status and other factors that would contribute in differences in the ability to save, there are likely differences in motivation and personal attributes that are related to both savings practices and whether someone becomes an owner. While controls included in studies to capture this effect have not diluted the association between homeownership and increases in wealth, this may simply reflect the challenge of capturing these difficult to measure factors. Studies using panel surveys may also make the benefits of homeownership appear more assured than they actually are by not fully capturing the impact of failed attempts at owning on changes in wealth. Studies to date have focused on measuring homeownership as the number of years spent as a homeowner, which does not distinguish between short sustained spells of owning from similar periods of owning that end in foreclosure or other financial distress. So while homeownership on average may increase wealth, it is undoubtedly the case that for some share of households owning a home had a negative impact on their balance sheet. Finally, the studies reviewed here may also not fully reflect changes that have occurred over time in both market conditions and household behavior. Most of the studies cited reflect experiences as owners during the 1980s and 1990s and so do not capture the market dynamics that began in the late 1990s but came to full bloom during the boom years of the 2000s, including the much greater availability of and appetite for high loan-to-value loans, higher cost loans, sharp swings in house prices, and much higher risks of default even before the national foreclosure crisis began. The next section turns to an analysis of data from the 2000s to examine whether findings about homeownership's positive association with wealth accumulation held over this period, particularly for low-income and minority households who were most likely to have used high cost mortgage products. Experience with Homeownership and Wealth Accumulation through the Boom and Bust Given the substantial changes in the availability, cost and terms of mortgage financing that began in the 1990s and accelerated through the mid-2000s and the accompanying boom and bust in home prices, there is good reason to believe that the experience of homeowners in accumulating wealth over the last decade has been substantially different from what is documented in much of the existing 25 literature for earlier periods. In this section of the paper we present information on wealth accumulation through homeownership during the housing market boom and bust of the 2000s. In the first section, we present findings from the tri-annual Survey of Consumer Finance (SCF) to present a high level picture of the contribution of homeownership to household balance sheets over time. The SCF also provides insights into how a greater tendency both to use high loan-to-value (LTV) loans to purchase homes and to take cash out through refinancing may have reduced wealth associated with homeownership. While the SCF does document the substantial decline in housing wealth following the bust, it also shows that, despite these losses, average homeownership wealth is generally higher than it was in the mid-1990s and continues to represent a substantial portion of household wealth for minorities and lower-income households. The SCF also shows that while the degree of leverage in the housing market showed a marked increase in the years following the Tax Reform Act of 1986, the distribution of LTVs did not change a great deal between the mid 1990s and the housing boom years. However, the crash in housing prices did push LTVs to historic highs. We then turn to an analysis of the PSID for the period from 1999 to 2009 to examine how homeownership spells contributed to trends in household wealth over this period. While house prices grew substantially for much of this period, it also captures most of the decline in prices as well. Whereas previous studies have focused solely on how each additional year of homeownership contributes to household wealth, we are also interested in assessing how failed attempts at homeownership affect wealth to assess the downside risks of owning as well. We find that on average homeownership's contribution to household wealth over this period was remarkably similar to that found in earlier periods. The results also confirm previous findings that while lower-income households and minorities realized lower wealth gains from owning, on average these gains were positive and significant. The results also show that a failure to sustain homeownership is associated with a substantial loss of wealth for established owners, although those who made a failed transition from owning to renting are no worse off financially than those who remained renters over the whole period. Thus, despite the many ways in which market conditions over this period might have been expected to undermine homeownership's wealth building potential, our analysis of the PSID finds that owning maintained a strong association with improvements in wealth over the decade from 1999 to 2009. Long-Run Trends in Housing Wealth and Mortgage Debt The sharp rise in home prices in many parts of the country is reflected in the substantial increase in average real housing equity among homeowners, roughly doubling (a gain of 96 percent) between 26 1995 and 2007 among all homeowners (Table 1). The gains were nearly as large among African- Americans (88 percent) and even larger among Hispanics (123 percent), although generally lower among households in the bottom two income quartiles where home equity increased by only 56 and 42 percent, respectively. The loss in housing equity between 2007 and 2010 was substantial, erasing 26 percent of home equity on average for all homeowners and taking back much of the gains made since 2001 for most groups. Mirroring their larger gains during the boom, Hispanics suffered the greatest loss of housing wealth, dropping by nearly half. Across income groups the declines were more moderate among those in the bottom half of the income distribution. But despite these substantial losses, average real home equity in 2010 was still higher on average than in 1995 for all of the groups shown, and in many cases considerably higher. Whites and those in the highest income quartile had the largest gains, with average home equity up by 51 percent and 78 percent respectively. African-Americans and the lowest income quartile also maintained substantial gains of 39 percent and 35 percent, respectively. Hispanics and those in the middle income quartiles made the least progress, with average home equity up by only 12 to 18 percent. Throughout this period the share of net wealth accounted for by home equity among all homeowners fluctuated between 22 and 29 percent, with much of the movement due to changes in non-housing net wealth. Between 1989 and 1998 home equity's share of average wealth fell from 29 to 22 percent as the stock market boomed while home values languished. Between 1998 and 2007 home equity's share of net wealth rose to 25 percent as the stock market absorbed the dot com bust while housing prices soared. Between 2007 and 2010 losses in housing wealth outpaced losses in other financial assets so housing's share of wealth fell back to 22 percent. Thus, despite the significant growth in housing equity in the first half of the 2000s it never came to account for an outsized portion of household net wealth among all homeowners.
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Read the attached text, and then answer the question that follows using only details from the context provided. You will NOT refer to outside sources for your response.
EVIDENCE:
Introduction In many respects, the notion that owning a home is an effective means of accumulating wealth among low-income and minority households has been the keystone underlying efforts to support homeownership in recent decades. The renewed emphasis on boosting homeownership rates as a policy goal that arose in the early 1990s can be traced in no small part to the seminal work by Oliver and Shapiro (1990) and Sherraden (1991) highlighting the importance of assets as a fundamental determinant of the long-run well-being of families and individuals. The efforts of these scholars led to a heightened awareness of the importance of assets in determining life's opportunities, enabling investments in education and businesses, providing economic security in times of lost jobs or poor health, and passing on advantages to children. Assessments of differences in asset ownership placed particularly emphasis on the tremendous gaps in homeownership rates by race/ethnicity and income and the importance of these gaps in explaining differences in wealth. In announcing their own initiatives to close these homeownership gaps, both President Clinton and President Bush gave prominent attention to the foundational role that homeownership plays in providing financial security (Herbert and Belsky, 2006). But while faith in homeownership's financial benefits are widely subscribed to, there have long been challenges to the view that owning a home is necessarily an effective means of producing wealth for lower-income and minority households. In 2001 the Joint Center for Housing Studies hosted a symposium with the goal of "examining the unexamined goal" of boosting low-income homeownership (Retsinas and Belsky, 2002a). The general conclusion that emerged from this collection of papers was that lower-income households do benefit from owning homes, although this conclusion was subject to a variety of "caveats and codicils" (Retsinas and Belsky, 2002b, page 11). A few of these caveats related to whether financial benefits were likely to materialize, with papers finding that all too commonly homebuyers sold their homes for real losses while alternative investments offered higher returns (Belsky and Duda, 2002; Goetzmann and Speigel, 2002). In perhaps the most comprehensive critique of the policy emphasis of fostering low-income homeownership, Shlay (2006) reviewed existing scholarly evidence to cast doubt on the likelihood that either the financial or social benefits of owning would be realized. These criticisms have only grown louder in the aftermath of the housing bust, as trillions of dollars in wealth evaporated leaving more than 10 million homeowners owing more than their homes are worth and leading to more than 4 million owners losing their homes to foreclosure (Joint Center for Housing Studies, 2012; Kiviat, 2010; Li and Yang, 2010; Davis, 2012). Many of the criticisms raised about 1 the financial risks of homeownership are not new, but the experience of the last five years has certainly given new impetus to these arguments. But there are also concerns that changes in the mortgage market and in consumer behavior may have exacerbated these risks, increasing the odds that owners will, at best, be less likely to realize any financial gains from owning and, at worse, face a heightened risk of foreclosure. The goal of this paper is to reassess in the light of recent experience whether homeownership is likely to be an effective means of wealth creation for low-income and minority households. Has the experience of the last decade proven the arguments of earlier critics of homeownership? Have changes in the market affected whether these benefits are likely to be realized? The paper takes three approaches to address these questions. We begin by presenting a conceptualization of the risks and rewards of homeownership as a financial choice, with a particular eye toward whether the odds of a beneficial outcome are lower for lower-income and minority owners. This review also assesses whether recent experience has altered this calculus-as opposed to just raising our awareness of the proper weighting of the likelihood of realizing the benefits while sidestepping the risks. Next, we review the existing literature examining the financial benefits of owning a home, including both studies simulating the returns to owning and renting as well as studies using panel surveys to track actual wealth accumulation among owners and renters. Finally, we examine data from the Survey of Consumer Finance (SCF) and the Panel Study of Income Dynamics (PSID) covering the last decade to assess how owning a home has been associated with changes in household financial balance sheets over this period. To preview our conclusions, we find that while there is no doubt that homeownership entails real financial risks, there continues to be strong support for the association between owning a home and accumulating wealth. This relationship held even during the tumultuous period from 1999 to 2009, under less than ideal conditions. Importantly, while homeownership is associated with somewhat lower gains in wealth among minorities and lower-income households, these gains are on average still positive and substantial. In contrast, renters generally do not see any gains in wealth. Those who buy homes but do not sustain this ownership also do not experience any gains in wealth, but are generally left no worse off in wealth terms than they were prior to buying a home-although of course there may still be substantial costs from these failed attempts at owning in terms of physical and mental health as well as future costs of credit. We conclude that homeownership continues to represent an important opportunity for individuals and families of limited means to accumulate wealth. As such, policies to support homeownership can be justified as a means of alleviating wealth disparities by extending this 2 opportunity to those who are in a position to succeed as owners under the right conditions. The key, of course, is to identify the conditions where lower-income and minority households are most likely to succeed as owners and so realize this potential while avoiding the significant costs of failure. Assessing the Financial Risks and Rewards of Homeownership Before turning to evidence about the financial returns to homeownership, it is helpful to start by framing the arguments about why homeownership is thought to be an effective means of generating wealth as well as the counter arguments about why these benefits may not materialize, particularly for lower-income and minority homeowners. We then consider how changes in mortgage markets and consumer behavior may have altered the likelihood that owning will lead to financial gains. This framing helps provide a basis for interpreting the findings from the following two sections of the paper that examine evidence about the association between homeowning and wealth accumulation. The Potential Financial Benefits of Owning The belief that homeownership can be an important means of creating wealth has its roots in five factors. First, the widespread use of amortizing mortgages to finance the acquisition of the home results in forced savings as a portion of the financing cost each month goes toward principal reduction. While modest in the early years of repayment, the share of the payment going toward principal increases over time. For example, assuming a 30-year loan with a 5 percent interest rate, a homeowner will have paid off about 8 percent of the mortgage after 5 years, 19 percent after 10 years, and nearly a third after 15 years. Assuming a household purchases a home in their early 30s and keeps on a path to pay off the mortgage over a thirty-year period, these forced savings will represent a sizable nest egg when they reach retirement age. In addition, an often overlooked aspect of forced savings associated with homeownership is the accumulation of the downpayment itself, which often entails a committed effort to accumulate savings in a short period. Second, homes are generally assumed to experience some degree of real appreciation over time, reflecting increased overall demand for housing due to growth in both population and incomes against a backdrop of a fixed supply of land located near centers of economic activity. Shiller (2005) has been the most notable critic of this point of view, arguing that over the very long-run real house prices have only barely exceeded inflation. Lawler (2012), however, has argued that Shiller's house price estimates and measures of inflation result in an underestimate of real house price growth. Analysis of trends in real house prices across a range of market areas support the conclusion that these trends 3 reflect a complex interaction of supply and demand factors in local markets that defy simple categorization (Capozza et al. 2002, Gallin, 2006). At a national level the Federal Housing Finance Agency house price index indicates that between 1975 and 2012 the compound annual growth rate in house prices has exceed inflation by 0.8 percentage points. Even at a modest rate of increase, the compounding of these returns over a longer period of time can be produce substantial increase in real home values. Assuming just a 0.8 percent annual real increase in house values over 30 years an owner will experience a real gain of about 26 percent in the overall house value. The use of financing can further leverage these returns. A homebuyer with a modest downpayment gets the benefit of increases in the overall asset value despite their small equity stake. While the cost of financing can create a situation of negative leverage if the increase in house values is lower than the cost of financing (so that the financing costs exceed the increase in the asset value), this risk diminishes over time as the value of the house compounds while the debt payment is fixed. Through leverage, the rate of return on an investment in a home can be substantial even when the increase in house values is modest. Consider the case where a buyer puts down 5 percent and the house appreciates at 4 percent annually. After 5 years the home will have increased in value by nearly 22 percent or more than 4 times the initial 5 percent downpayment. Even allowing for selling costs of 6 percent, this would represent an annualized return of 31 percent on the owner's initial investment. Due to leverage, even nominal increases in home values that do not exceed inflation can result in real returns. In the above example, if inflation matched the 4 percent growth in home prices, the owner would still have earned a substantial real return on their initial investment. Federal income tax benefits from owning a home can also be substantial. The ability to deduct mortgage interest and property taxes is the most apparent of these benefits. Taxpayers who are able to make full use of these deductions receive a discount on these portions of ongoing housing costs at the taxpayer's marginal tax rate, ranging from 15 percent for moderate income households up to 39 percent for the highest tax bracket. In addition, capital gains on the sale of a principal residence up to $250,000 for single persons and $500,000 for married couples are also excluded from capital gains taxation, which is currently 15 percent for most households and 20 percent for the highest income bracket.1 1 An additional tax benefit that is often overlooked is the fact that while owner occupants benefit from the use of their home as a residence they do not have to pay any tax on these benefits, referred to as the implicit rental income from the property (that is, the rent one would have to pay to occupy the home) (Ozanne, 2012). The loss of revenue to the U.S. Treasury from this exclusion is substantial, outweighing the costs of the mortgage interest deduction. 4 Finally, owning a home provides a hedge against inflation in rents over time. Sinai and Souleles (2005) find that homeownership rates and housing values are both higher in markets where rents are more volatile, indicating the value placed on being able to protect against rent fluctuations. Under most circumstances, mortgage payments also decline in real terms over time, reducing housing costs as a share of income. For long-term owners, this can result in fairly substantial savings in the out of pocket costs for required for housing. Assuming a fixed rate mortgage, inflation of 3 percent, 1 percent growth in both real house prices and the costs of property taxes, insurance and maintenance, real monthly housing costs would decline by about 10 percent after 5 years, 15 percent after 10 years, and 30 percent by the last year of the mortgage. Once the mortgage is paid off, the out of pocket costs of owning in real terms are less than half the payments made at the time of purchase. Housing costs for renters, in contrast, would be expected to keep pace with inflation in housing prices. The Potential Financial Risks of Owning Combined, the financial benefits outlined above can fuel significant wealth accumulation. But as the last few years have made painfully clear, the financial benefits associated with owning a home are not without risk. To begin with, house prices can be volatile. That was certainly the case in the wake of the housing bust, as nominal prices fell nationally by some 25 percent or more (depending upon the specific price index used), with the hardest hit markets experiencing declines of more than 40 percent. Almost no area of the country was spared from some degree of decline. According to the FHFA index, nominal prices fell in every state with the exception of North Dakota. But while recent experience is notable for the breadth and depth of price declines, there are other examples of fairly significant price declines over the last few decades, including declines of between 10 and 20 percent in some Oil Patch states in the 1980s and in New England, California and Hawaii in the early 1990s. There are also a number of markets where house prices trends have historically been more stable, but in these areas long-run real price increases have either not kept pace with inflation or have been modest. House price growth has been particularly weak in a number of markets in the Midwest and South where population and income growth have been low. Based on long-run state level indexes from FHFA, between 1975 and 2012 there were 10 states in these regions where the compound annual growth in house prices did not exceed general price inflation. Even before the bust, homeowners in these markets did not have the benefit of real growth in house prices over the long term. In nine other states house price growth did beat inflation, but by less than 0.25 percent on an annual basis. Thus, in about two-fifths of states real house price growth was either non-existent or trivial. At the other 5 extreme there were 17 states, mostly along the Pacific coast and in the Northeast that experienced real house price growth of more than 1 percent, including 5 states that exceeded 2 percent. There are also peculiar aspects of owning a home that further exacerbate the financial risks of these investments. Homeowners make a significant investment in a specific location and cannot diversify the risk of home price declines by spreading this investment across assets or across markets. Homes values are also high relative to incomes and so account for a large share of household wealth. Wolff (2012) reports that in 2010 the value of the principal residence accounted for two-thirds of total wealth among households in the middle three quintiles of the wealth distribution. With so much wealth tied up in one asset, homeowners are particularly vulnerable to changes in home values. The use of debt financing for a large share of the purchase further magnifies these risks, with even small drops in prices wiping out substantial shares of homeowner equity. Indeed, at the height of the housing bust the number of households underwater on their mortgages was estimated by CoreLogic to have exceeded 11 million while Zillow placed the number closer to 15 million. When assessed purely on the basis of real growth in values over time, housing also compares poorly to the returns offered by investments in diversified portfolios of stock or bonds. Geotzmann and Speigel (2002) compare the change in home prices in 12 market areas between 1980 and 1999 to a range of alternative investments and find that housing was consistently dominated as an investment asset by all of the financial alternatives considered, leading them to conclude that it is "surprising that housing continues to represent a significant portion of American household portfolios" (page 260). However, Flavin and Yamashita (2002) take a more expansive view of the returns on housing investments by including the value derived from occupying the unit, the use of financial leverage, and the ability to claim income tax deductions. This fuller treatment of housing's returns finds that the average rate of return was slightly below returns for investments in stocks, but the variance of these returns were also lower and so somewhat less risky. Still, even if the returns to housing are deemed to be competitive with alternative investments the concern remains that it accounts for an excessive share of low-wealth household's portfolios. Housing investments are also handicapped by high transaction costs associated with buying and selling these assets. Home buyers face fees for mortgage origination, title search and insurance, state and local taxes, home inspections, and legal fees, all of which can add up to several percentage points of the home value. Real estate broker commissions typically also command 6 percent of the sales price. These high transaction costs can absorb a significant share of home price appreciation from the first few years of occupancy. Given these high costs, home owners who are forced by circumstances to move 6 within a few years of buying will face the risk of loss of at least some share of their initial investment even if home values have risen modestly. The need to maintain the home also imposes financial risks on owners. While routine maintenance can keep both the physical structure and the home's major systems in good working order, major investments are periodically needed, such as painting the exterior or replacing the roof or heating system. These projects incur high costs that may be difficult for owners to afford. While owners may have the opportunity to plan for these investments over time, in some cases a system will fail with little warning and produce an unexpected cost that the owner cannot afford, creating a financial strain that in the most extreme cases can jeopardize the ability to maintain ownership. Finally, the financial costs of failing to sustain homeownership are high-in addition to the traumatic impacts that foreclosures can have on the health and psychic well-being of the owner (Carr and Anacker, 2012). Owners who default on their mortgage will not only lose whatever equity stake they had in the home, they are also likely to deplete their savings in a bid to maintain ownership and suffer significant damage to their credit history making it difficult and costly to obtain credit for several years to come. Factors Contributing to Wealth Accumulation Through Homeownership Whether and to what extent a homebuyer will realize the potential benefits of owning while avoiding succumbing to the risks depends on a complex set of factors. Herbert and Belsky (2006) present a detailed conceptual model of the factors that contribute to whether homeownership produces wealth over the life course, which is briefly summarized here. The most obvious factor is the timing of purchase relative to housing price cycles. The recent boom and bust in house prices presents a prime example. Homebuyers who bought in the early 2000s were poised to benefit from the massive run-up in prices that occurred in many markets, while those that bought in the mid 2000s entered just in time for the historic freefall in prices that followed. While other price cycles in recent decades may not have been as dramatic, the consequences of buying near troughs or peaks on wealth accumulation would have been similar. Belsky and Duda (2002) examined data on repeat sales in four market areas between 1982 and 1999 and found that roughly half of owners who bought and sold their homes within this time period failed to realize gains that beat inflation after assuming a 6 percent sales cost (although most did earn a return in nominal terms). Whether owners realized a positive return depended strongly on where in the housing price cycle they bought and sold their homes. 7 Belsky and Duda (2002) conclude that "although the golden rule of real estate is often cited as location, location, location, an equally golden rule is timing, timing, timing" (Page 223). Their conclusion points to another critical factor in how likely a home is to appreciate in value - in what market and in which specific neighborhood the home is located. As noted above, there have been sizeable differences across market areas in long-term house price trends, with areas along the coasts experiencing real gains of one percent or more over the last several decades while areas in the Midwest and South have had little or no gains. But there are also substantial variations in price trends across neighborhoods within a single market (for reviews of this literature see Herbert and Belsky, 2006; Dietz and Haurin, 2003; and McCarthy, Van Zandt and Rohe, 2001). Whether a household bought a home in Boston or Cleveland is an important factor in the returns realized, but so is whether the home was in a desirable area or a declining neighborhood. The terms of financing used to buy the home also matter. Higher interest rates lower the share of payments that are devoted to principal reduction in the early years of repayment, slowing wealth accumulation. The higher monthly costs of the mortgage also erode the ability of the household to meet other expenses and to save on an ongoing basis as additional interest payments over the life of the mortgage can be substantial. For example, over a thirty-year term a loan for $150,000 at 7 percent interest will require $69,000 more in interest payments than a 5 percent loan. Higher origination fees also sap savings, reducing the quality and size of home that is affordable and lowering the rate of return on housing investments. Choices about refinancing over time can also exert a strong influence on wealth accumulation. Taking advantage of declines in mortgage interest rates to reduce financing costs can save owners hundreds of dollars each month, and tens of thousands over the life of a mortgage-although continually resetting the term of the mortgage will reduce opportunities for forced savings. On the other hand, refinancing to take cash out of the property can erode wealth accumulation, particularly if the extracted funds are used to finance consumption rather than investments in the home, education, business or financial opportunities. Wealth accumulation will be further undermined if the new loan comes with high fees and higher interest rates. Of course, the ability to tap housing wealth as a buffer against income shocks is one of the virtues of developing this cushion, but using home equity to finance an unaffordable lifestyle is an unsustainable path. A host of other factors come into play in determining how much housing wealth is realized over the span of a lifetime. For example, buying higher valued homes-if successful-can produce more wealth both through forced savings and by earning returns on a higher valued asset. By the same 8 means, those who trade up to more expensive homes over time may also accrue greater housing wealth. The age at which a first home is purchased can also be significant, giving the household a longer period to accumulate wealth. Of course, the quality of the home purchased and the owner's ability to maintain it will also affect both ongoing maintenance costs and how much the home appreciates over time. But arguably the most fundamental factor-the true golden rule of how to accumulate wealth. through homeownership-is whether ownership is sustained over the long term. Housing booms aside, many of the financial benefits are slow to accumulate, including the slow build up of forced savings, the compounding of values at low appreciation rates, and the decline in monthly housing costs in real terms over time. The expression "time heals all wounds" may also be applicable to many of homeownerships most critical risks. The losses associated with buying near the peak of a price cycle will diminish over time as owners benefit from the next upswing in prices. And even in areas whether real growth in house prices does not occur or is limited, over the long term owners will still amass some degree of wealth through paying off the mortgage and as a result of savings from lower housing costs. On the flip side, a failure to sustain homeownership-particularly when the end result is a foreclosure-will wipe out any accrued wealth and bring additional costs in the form a damaged credit history that will incur further costs over time and limit opportunities to buy another home in the near term. To some degree whether ownership is sustained will depend on choices that owners make over time - including whether the home they buy is affordable, whether they make prudent choices about refinancing, and whether they maintain the home to avoid larger home repair bills. But whether owning is sustained also will depend on whether the household can weather any number of significant events that can fundamentally alter their financial circumstances, such as loss of a job, a serious health problem, or change in the family composition due to the birth of a child, death, divorce, or the need to care for a parent or relative. Over the course of a lifetime, these events are likely to befall most everyone. Whether homeownership can be sustained in the wake of these events will depend on the ability of the household to adjust to their changed circumstances and whether they have enough available savings to cushion the blow. Impediments to Wealth Creation among Lower-Income and Minority Homeowners Up to this point the discussion presented has considered homeownership's financial risks and rewards in a general sense. But the concern of this paper is specifically with the potential for homeownership to serve as an effective means of wealth accumulation for lower-income and minority 9 households. How are the odds of generating wealth as a homeowner likely to differ for these households?? In keeping with the fundamental importance of sustained homeownership to accumulate wealth, the chief concern is that these groups of homebuyers face a more difficult time in maintaining ownership. Studies analyzing panel data to document homeownership spells among first-time buyers consistently find that low-income and minority owners have a lower probability of maintaining homeownership for at least five years. In an analysis of the National Longitudinal Survey of Youth (NLSY) from 1979 through 2000 Haurin and Rosenthal (2004) find that ownership is less likely to be sustained among both these groups. Specifically, only 57 percent of low-income buyers were found to still own their first home five years later, compared to 70 percent of high-income owners (with income categories defined by income quartiles at age 25). First homeownership spells were also found to be much shorter for minorities, averaging 6.5 years among whites, compared to 4.4 years for blacks and 5.4 years for Hispanics. In an analysis of the PSID covering the period from 1976 through 1993 Reid (2004) had similar results, with only 47 percent of low-income owners still owning their first homes 5 years later compared to 77 percent of high income owners (with incomes here defined based on average income in the years prior to homeownership compared to area median incomes). Reid further found that minorities had a harder time staying in their first home, with 42 percent of low-income non-whites still owning after five years compared to 54 percent of low-income whites. While these results raise clear concerns about the high risk of failed homeownership among these groups, the focus on a single homeownership spell may overstate the extent to which homeowning is not sustained in the long run. Haurin and Rosenthal (2004) also examine subsequent tenure experience in their panel and find that the share of households that return to owning a second time is very high for both whites and minorities. Over the 21 year period in their panel, 86 percent of whites who ever bought a home either never returned to renting or regained owning after a subsequent spell as a renter, with only slightly lower rates for blacks (81 percent) and Hispanics (84 percent). However, they do find that minorities spend more years in their intervening spells as renters, which reduces the overall amount of time they can accumulate benefits from owning. Another critical difference in the financial returns to owning for low-income households is that the ability to deduct mortgage interest and property taxes from federal taxable income may be of little or no value. In order to benefit from these tax provisions, the amount of available deductions must 2 Galster and Santiago (2008) provide a useful framing of this issues and a comprehensive review of the relevant literature. 10 exceed the standard deduction, which stood at $5,950 for individuals and $11,900 for married couples in 2012. For taxpayers with lower valued homes, particularly married couples, the costs of mortgage interest and property taxes even when added to other deductions for state taxes and charitable contributions, may not greatly exceed the standard deduction. In addition, the value of these deductions depends on the taxpayer's marginal tax rate, which will lower for low- and moderate-income households. In fact the share of the total value of the mortgage interest deduction going to moderate income households is fairly small. According to estimates from the Joint Committee on Taxation (2013), only 3 percent of the total deductions went to filers with incomes under $50,000, 9 percent to those with incomes between $50,000 and $75,000, and 11 percent to those with income between $75,000 and $100,000, leaving 77 percent of the benefit going to those earning above $100,000. To the extent that these tax benefits swing the financial scales in favor homeownership, this tilting of the calculus is not very evident for low- and moderate-income tax filers. There are also systematic differences in mortgage terms and characteristics by income and race/ethnicity that can also affect the financial returns to owning. The development of the nonprime lending industry that began in the 1990s and came to full blossom during the housing boom produced much greater variation in mortgage terms and pricing than had previously been evident. A fairly extensive literature has documented the greater prevalence of subprime lending among minorities and, to a lesser extent, low-income borrowers and communities (see, for example, Bradford, 2002; Calem, Gillen and Wachter, 2004; Apgar and Calder, 2005; Avery, Brevort, and Canner, 2007; Belsky and Richardson, 2010). As described above, higher costs of financing can significantly reduce the financial benefits of owning. While the expansion of financing options beyond a "one size fits all who qualify" approach to lending has the potential to extend homeownership opportunities to a greater range of households, there is significant evidence that the cost of credit was often higher than risk alone would warrant. Bocian, Ernst and Li (2008) present perhaps the most compelling evidence through an analysis of a large data set on nonprime loans that documents a wide range of risk measures, including credit scores as well as income and race/ethnicity. They find that even after controlling for observable differences in credit quality both blacks and Hispanics were significantly more likely to obtain high- priced mortgages for home purchase, while blacks were also more likely to obtain higher-priced refinance loans. These higher costs of borrowing not only limit the wealth producing capacity of homeownership, they also increase the risk of failing to sustain homeownership. In fact, Haurin and Rosenthal (2004) find that a 1 percentage point increase in the mortgage interest rate increases the rate of homeownership termination by 30 percent. 11 Low-income and minority borrowers are also less likely to refinance when interest rates decline. In an analysis of loans guaranteed by Freddie Mac during the 1990s Van Order and Zorn (2002) find that low-income and minority borrowers were less likely to refinance as interest rates fell. Their analysis also found that once borrower risk measures and loan characteristics were taken into account there were no remaining differences in refinance rates by income-although this just indicates that refinancing may be constrained by credit factors. Minorities, on the other hand, still had lower rates of refinancing even after controlling for these factors, suggesting that there were impediments to refinancing by these borrowers that were in addition to measurable credit factors. Nothaft and Chang (2005) analyze data from the American Housing Survey (AHS) from the late 1980s through 2001 and also find that minority and low-income owners were less likely to refinance when interest rates declined. These authors use their results to estimate the foregone savings from missed refinance opportunities, which are more than $20 billion each for black and low-income homeowners. To the extent that low-income and minority homebuyers may be more likely to purchase homes in poor condition they are also exposed to greater risks of high costs of maintenance and repair. Herbert and Belsky (2006) find that compared to whites, black and Hispanic first-time homebuyers were more likely to buy homes that were moderately or severely inadequate as characterized by the AHS- 6.5 percent for blacks and 8.8 percent for Hispanics compared to 4.3 percent among whites. A similar gap was also evident between low- and high-income households. While there has been little study of the incidence of unexpected home repair needs, a study by Rohe and his colleagues (2003) of participants in homeownership counseling programs found a fairly significant incidence of the need for unexpected repairs. Roughly half of 343 recent homebuyers reported that they had experienced a major unexpected cost in the first few years after buying their home, with the most common problem being a repair to one of the home's major systems. Finally, there are also concerns that lower-income households and minorities may be more likely to purchase homes in neighborhoods with less potential for house price appreciation. This is a particularly salient issue for minorities given the high degree of residential segregation by race and ethnicity that continues to be evident in the US. However, Herbert and Belsky (2006) present a detailed review of this literature and conclude that "taken as a whole the literature indicates that there is no reason to believe that low-value segments of the housing market will necessarily experience less appreciation than higher-valued homes. In fact, at different points in time and in different market areas, low-valued homes and neighborhoods have experienced greater appreciation rates. Although the opposite is also true." (Page 76) The evidence about differences in appreciation rates by neighborhood 12 racial composition is less definitive. Here Herbert and Belsky (2006) conclude that "it does appear that homes in mostly black areas may be less likely to experience appreciation, but this conclusion is tempered by the small number of studies and the fact that they mostly analyzed trends from the 1970s. and 1980s, which may no longer be relevant" (page 77). Findings by Boehm and Schlottmann (2004) regarding differences in wealth gains from homeownership by race and income are instructive in this regard. They find that over the period from 1984 to 1992 there was little difference in appreciation rates in the specific neighborhoods where minorities and low-income households lived. Instead, they found that differences in housing equity accumulation were tied to the lower valued homes and the shorter duration of ownership for lower- income and minority households. Thus, differences in appreciation rates may be less of a concern in whether housing leads to wealth accumulation than these other considerations. Re-assessing the Calculus of Wealth Accumulation through Homeownership As the above review has shown, there were significant concerns about the risks of homeownership as an investment well before the housing bubble burst. For critics of homeownership as a wealth building tool the experience of the housing bust was in many respects a confirmation of their fears. Still, there were several markets developments during the boom years that magnified these preexisting risks. Most notably there was a marked increase in the prevalence of riskier mortgages, including those calling for little or no documentation of income, adjustable rate loans that exposed borrowers to payment shocks from the expiration of initial teaser rates or reduced payment options, allowances for higher debt to income ratios, and greater availability of loans for borrowers with very low credit scores. Downpayment requirements also eased as loan-to-value ratios (LTVs) of 95 percent or more became more common and borrowers also used "piggyback" second mortgages to finance much of the difference between the homes' value and a conforming first mortgage at an 80-percent LTV. Not unrelated to the greater availability of mortgage credit, house prices also exhibited much greater volatility than in the past, with a dramatic increase in prices that greatly outpaced trends in both incomes and rents and belied an unsustainable bubble. The greater availability of credit also increased the opportunity for lower-income households to miss-time the market. Belsky and Duda (2002) found that during the 1980s and 1990s lower-valued homes were less likely to be transacted around market peaks, so buyers of these homes were less likely to buy high and sell low. They speculated that this was due to the natural affordability constraints that took hold as markets peaked. But during the boom of 13 the 2000s lower-valued homes experienced greater volatility in prices, arguably reflecting much greater credit availability at the peak than was true in past cycles (Joint Center for Housing Studies, 2011). However, there are good reasons to believe-or certainly to hope-that the conditions that gave rise to this excessive risk taking and associated housing bubble will not be repeated any time soon. The Dodd-Frank Act includes a number of provisions to reduce the degree of risk for both borrowers and investors in the mortgage market. The Qualified Mortgage (QM) is aimed at ensuring that borrowers have the ability to repay mortgages by requiring full documentation of income and assets, setting tighter debt to income standards, and excluding a variety of mortgage terms that expose borrowers to payment shocks. The Qualified Residential Mortgage (QRM) is aimed at ensuring greater protections for investors in mortgage backed securities by requiring the creators of these securities to retain an interest in these investments if the loans included in the loan pool do not conform to certain risk standards that essentially mirror those of the Qualified Mortgage. Dodd-Frank also established the Consumer Financial Protection Bureau to fill a gap in the regulatory structure by creating an agency charged with looking out for consumers' interests in financial transactions. Beyond these regulatory changes, there is also a heightened awareness of the risks of mortgage investments on the part of private sector actors who have suffered significant financial losses with the bursting of the housing bubble. Regulatory changes aside, these private actors are unlikely to embrace riskier lending any time soon. The Federal Reserve and other federal regulators are certainly more attuned to the possibility of a bubble in housing prices and so are more likely to act in the event that signs of a bubble re-emerge. But even in the absence of the excessive risks of the last decade, homeownership will remain a risky proposition. Thus, at best, we may return to the market conditions that existed prior to the boom and the real risks that these conditions posed for investments in owner-occupied housing. In that regard, an assessment of experience in wealth creation through homeownership prior to the boom is relevant for what we might expect in the future. On the other hand it does seem likely-and arguably even desirable given how tight credit has become-that some greater degree of risk taking will emerge to make credit available to the many lower-income and lower-wealth households that would like to own a home. In fact, the QM standard of a total debt-to-income ratio of up to 43 percent does curtail the higher levels that became evident during the boom, but this cutoff still represents a liberalization from standards for conventional mortgages that prevailed in the 1990s. There may also have been a shift in consumer attitudes toward mortgage debt, with fewer households seeking to pay off mortgages over time and thus exposing themselves for longer periods to the risks associated with these leveraged investments. Over time, as 14 conditions return to normal and the market adjusts to new regulatory structures, we are likely to see mortgages originated outside of the QM and QRM boxes. In that regard, an assessment of the experience of homeowners through the boom and bust is instructive as a stress test of how likely homeownership is to build wealth under more extreme market conditions. The next two sections of the paper look to assess homeownership's potential for wealth building from these two perspectives. First by presenting a review of the literature assessing homeownerships' association with wealth building prior to the 2000s and then by analyzing data from the last decade to examine how homeownership was associated with changes in wealth through the turbulent conditions of the 2000s. Review of Previous Studies Assessing the Financial Returns to Homeownership As the discussion up to this point has intended to illustrate, whether owning a home will lead to the accumulation of wealth is the result of complex set of factors related to the choices that households make in buying their home and how these choices interact with market conditions both at the time of purchase and over time. This complexity makes it quite difficult to assess whether in practice owning is likely to be an effective means of increasing a household's wealth. A further complicating factor is that there is a substantial selection bias in who becomes a homeowner, as there is reason to believe that those who are most secure in their financial condition and most inclined to save are more likely to become owners. For this reason, comparisons of the wealth profiles of owners and renters may not be able to attribute any observed differences solely to the influence of homeownership on the ability to accrue wealth. There are two broad classes of studies that have attempted to assess the financial benefits of homeownership in light of these challenges. One group relies on simulations that compare the theoretical costs and benefits of owning and renting under a variety of assumptions about market conditions and household choices. A key appeal of these studies is that they essentially remove concerns about selection bias by assuming otherwise identical households operate under a consistent set of decision rules. They can also isolate the influence of specific factors to shed light on the paths that are most likely to make owning or renting financially beneficial. But while these studies highlight the potential financial returns to owning and renting, they do not capture how households are likely to actually behave in these situations and so leave open the question of whether the potential returns of these tenure choices are likely to be realized in practice. 15 Another group of studies rely on panel studies that track households over time to examine how choices about owning and renting are correlated with changes in wealth. The findings from this type of analysis provide evidence of whether in practice owners are more likely to accrue wealth than renters and how this experience differs by income and race/ethnicity. Where the theoretical comparisons of owning and renting also generally focus on a single spell of homeownership - that is, the financial outcome associated with the period between buying and selling a single home - panel studies can track households through multiple transitions in and out of owning to assess outcomes from a series of tenure choices over time. The main drawback of these studies is the lingering concern that owners may be inherently different from renters in ways that observable household characteristics cannot capture. Some of these studies employ statistical methods to try to control for this selection bias, although it is doubtful that these controls can fully account for these differences. Both classes of studies provide important insights into the opportunities and drawbacks of homeownership as a means of increasing household wealth. When viewed as a whole the findings from both streams of research help paint a clearer picture of whether and how homeownership may help foster wealth creation. The sections that follow highlight key findings from each of these literature strands. Simulations of the Financial Returns to Owning and Renting Beginning with Mills (1990) there have been a number of studies that have simulated the financial returns to owning and renting under a variety of assumptions to identify whether and under what circumstances owning or renting is likely to be more financially beneficial (Capone, 1995; Belsky, Retsinas, and Duda, 2007; Rappaport, 2010; Beracha and Johnson, 2012). While the studies differ in important respects, the general approach is to compare the "all-in" costs of owning - including mortgage interest, property taxes, insurance, maintenance, and transaction costs along with offsetting gains in property value - to the costs of renting a comparable housing unit. Either implicit or explicit in these comparisons is that renters save and invest both the initial investment that owners make in buying their homes as well as any annual savings in housing costs. There are a host of assumptions that underlie these calculations, but among the most influential factors are the estimate of rents as a share of house value, the length of time the home is owned, the basis for simulating trends in house prices and rents over time, and the treatment of income tax benefits. The studies differ in fundamental ways related to the range of assumptions tested and the method for comparing returns to owning and renting and, as a result, individually reach somewhat 16 different conclusions about which tenure choice is likely to be preferred. But collectively the studies lead to some general conclusions about the relative financial merits of owning and renting. Perhaps the most fundamental conclusion from these studies that runs counter to the prevailing sense that homeownership is a powerful source of wealth is that under a variety of conditions renting is often more likely to be a better financial choice than owning. Belsky, Retsinas and Duda (2007) compare owning and renting in four different market areas chosen to represent different degrees of price appreciation and volatility over the period studied from 1983 through 2001. They focus on holding periods of 3, 5 and 7 years during their window of study and report the share of different holding periods where owning results in higher financial returns than renting. Overall they find that in only 53 percent of the 3-year holding periods would owning be preferred to renting. Increasing the holding period to 7 years-which allows for more time to work off the high transaction costs of buying and selling a home-only increases this proportion to 63 percent. Rappaport (2010) reaches a similar conclusion based on an analysis of national trends in market conditions between 1970 and 1999 and an assumed 10-year period of owning a home. He finds that owning a home unambiguously built more wealth in about half of the possible 10-year periods, renting was clearly better in another quarter and likely, but not unambiguously, preferred in the remaining periods. Finally, Beracha and Johnson (2012) come to a similar conclusion in an analysis of all possible 8-year holding periods given actual market conditions at both the national and regional level between 1978 and 2009. They find that between 65 and 75 percent of cases renting offered greater opportunities for accruing wealth than owning, depending on whether renters employing a more conservative or aggressive investment approach. In parsing the findings of these studies, there are several factors that are the critical drivers of the results. Perhaps the most obvious is the importance of the timing of home purchase relative to market cycles in prices and interest rates. Depending on the future course of prices, rents and interest rates one or the other tenure would be strongly preferred at different points in time. The importance of timing may be most clearly demonstrated in Belsky, Retsinas and Duda (2007) when they consider different holding periods among owners. In general, it would be expected that longer holding periods should favor owning as more time is allowed to overcome high transaction costs, pay down additional principal, and ride out price cycles. Instead, they find that in most markets the likelihood of owning being preferred to renting was little changed by the holding period as short holding periods offered the possibility of catching only the upswing in prices while longer holds made it more likely that owners would share in some portion of a downturn. Only in Chicago, which did not experience such dramatic swings in prices, were longer holding periods found to be much more likely to benefit owning. 17 Still, the issue of holding period is an important consideration. The analysis by both Mills and Capone solved for the holding period that was needed for owning to yield a higher return than renting on the assumption that longer holding periods would always favor homeownership. In his base case scenario Mills found a holding period of slightly longer than 7 years was needed for owning to be preferred. The more recent studies that have showed the importance of market timing either assumed a single fixed holding period of 8 to 10 years (as in Beracha and Johnson and Rappaport) or a range of relative short holding periods (as in Belsky, Retsinas and Duda). If owning does become more favorable over a longer period of time - for example, slightly longer than 8 to 10 years - these assessments would not capture this. In fact, many households move in and out of homeownership over time so a more complete assessment of the financial implications of tenure choice would take into account multiple homeownership spells. While one spell of owning may yield low returns, if homeowning is sustained or resumed then the household may yet benefit from the next upswing. Another important factor driving the findings are assumptions made about rents as a share of house value. This ratio is difficult to estimate both because of systematic differences in the nature of the owner and renter occupied stock and because market values and rents are hard to observe simultaneously. How much renters have to pay to rent a comparable home is obviously a key driver of financial outcomes as it determines how much they can save annually by renting, thereby adding to their wealth. Mills (1990) found that among the variables used in his simulation, his results were most sensitive to the ratio of rents to house values as a single percentage point change up or down leading to fluctuations in the required holding period from 3 to 23 years. Capone (1995) built on Mills study to examine the rent-versus-buy decision specifically for lower income households. He makes note of the importance of the rent-to-price ratio assumption and argues that Mills assumption of 7 percent was well below the ratios observed in low-cost segments of the market, where ratios of 10 to 12 percent were more reasonable. Under Capone's assumption that renters faced much higher rents he found that owners only needed to hold onto their homes for about 3 years for owning to be preferred. In contrast, Belsky, Retsinas and Duda rely on rent to price ratios is in the range of 5 to 7 percent, while the series used by Beracha and Johnson derived by Davis, Lehnert, and Martin (2008) appears to average about 5 percent. In both cases these assumptions are more favorable to renting than the assumptions used by either Mills or Capone. In recognition of the importance of this assumption, Rappaport structures his analysis to estimate the rent-to-price ratio that is the breakeven point between owning and renting. He then compares this estimate to what he feels is a plausible range for this ratio of 18 between 5 and 10 percent based on analysis of different market areas over time. At the higher end of this range owning would almost always be preferred, while the lower end leads to his conclusion that owning is clearly preferred to renting in only about half of the holding periods considered. In short, high or low values of this ratio can swamp other considerations, yet, as Rappaport demonstrates, pinning down actual values for this ratio is not an easy task. Several of the studies have examined the issue of whether tax benefits are important to whether owning makes more financial sense than renting. Mills assumes that owners can take full advantage of tax benefits at a 28 percent marginal rate. When he reduces the marginal rate to 15 percent he finds that owning is never preferred. Capone, though, demonstrates, that this knife edge does not hold if a higher rent to price ratio is assumed. In his base case analysis, owners are only assumed to benefit from tax benefits if they exceed the standard deduction and since he assumes a much more modest house in keeping with his focus on lower-income households, the tax benefits are essentially non-existent. As a result, reducing the tax benefits in his analysis does not change his conclusion that owning is a better financial choice even after only a few years. Belsky, Retsinas and Duda also examine the importance of tax benefits for lower-income owners. Like Capone, they adjust the value of tax deductions to account for the size of the home purchased and the amount of the standard deduction. They also find that tax benefits by themselves generally do not change the calculus of whether owning beats renting financially. So while tax benefits are an important factor among higher income households, as Mills found, it has little effect on the calculus for lower-income households. Despite getting limited benefits from tax breaks under a variety of circumstances Capone and Belsky, Retsinas and Duda find that lower-income households can fare better financially by owning. Belsky, Retsinas and Duda also make a unique contribution by examining how the returns to homeownership are affected by higher mortgage costs. They examine two scenarios: one where owners face interest rates that are 2 percentage points higher than prime rates and another where they are 5 percentage points higher. Under the first scenario, the likelihood that owning would be preferred to renting is decreased by moderate amounts (between 6 and 17 percentage points), while under the later scenario owning is rarely a better financial choice than renting. In short, they find that higher interest rates do reduce the financial appeal of homeownership, although the impact is most pronounced at extremely high levels. Lastly, and in some ways most critically, the finding that renting offers the potential for higher returns than owners depends in large part on renters taking steps to invest the annual savings in housing costs compared to renting. Building on Beracha and Johnson (2012), Beracha, Skiba, and 19 Johnson (2012) examine how variations in key assumptions regarding trends in prices, rents, interest rates, downpayment shares, and the returns available from alternative investments affect the buy versus rent financial calculus. They find that modifying most factors in isolation have only a moderate effect on whether renting is favored over owning. However, when they drop the assumption that renters actual invest any annual savings in housing costs on top of the initial downpayment they find that renting rarely results in higher wealth than owning. Thus, they find that the forced savings aspect of homeownership is of fundamental importance in determining whether owning will lead to greater wealth. This finding is echoed in the results of Boehm and Schlottmann (2004) who employ a somewhat unique approach to simulating the impact of homeownership on wealth accumulation. This study uses the Panel Study of Income Dynamics (PSID) to model the probability of moving in and out of homeownership on an annual basis over the period from 1984 through 1992. These same data are also used to estimate the house value that a household would opt for if a home were purchased in a given year. The estimated house value is then inflated based on house price trends in the census tract where the household resided to yield each household's expected gain in wealth from homeownership. This analysis finds that while minorities and low-income households do accrue wealth from homeownership, the amounts are much less than for higher income whites both because they own for fewer years and because they buy lower valued homes. But importantly, while the expected wealth accumulation among these households is less than that earned by higher income whites it is still positive. The authors also use the PSID to document that these same low-income and minority households essentially had no growth. in non-housing wealth over the same period. So in that regard the estimates of potential wealth created through homeownership were all the more important. Evidence from Panel Surveys about Wealth Accumulation through Homeownership As the findings from Beracha and Johnson (2012) and Boehm and Schlottmann (2004) suggest, the theoretical advantages of renting may not be realized if in practice renters do not take advantage of the opportunities afforded to them for saving and investing derived from the lower cost of renting. In contrast, studies making use of panel surveys that track households over time provide insights into the wealth accumulation associated with actual choices about renting and owning. These studies universally find that owning a home is associated with higher levels of wealth accumulation even after controlling for a range of household characteristics. While the gains are also consistently smaller in magnitude for lower-income and minority households, these studies also find that in contrast to owners similar renters 20 experience little or no gains in wealth. These findings hold even when steps are taken to account for selection bias in who becomes a homeowner. Although these methods may not fully account for the differences between owners and renters, there remains a strong case that homeowning does make a positive contribution to household balance sheets regardless of income or race/ethnicity. Haurin, Hendershott and Wachter (1996) was among the first studies to use panel survey data to track wealth trajectories associated with homeownership. The primary focus of this study was on the accumulation of wealth in anticipation of becoming an owner rather than how owning a home over time contributes to wealth accumulation, but their findings provide important insights into one way in which homeownership adds to wealth. They use the National Longitudinal Survey of Youth (NLSY) to track young renters age 20 to 28 in 1985 through 1990 and observe both their annual wealth levels and the timing of any transitions into homeownership. They find that household wealth goes up markedly during the transition to homeownership, increasing by 33 percent on average in the year prior to buying a home and then more than doubling in the year they first own. When they examine factors that contribute to this jump in wealth they find that marrying makes a significant contribution along with an increase in hours worked and a slightly higher incidence of inheritance and gifts. Their results suggest that an important mechanism by which homeownership adds to wealth is through the incentive to save in anticipation of buying a home. Even before realizing any returns on the investment in the home itself, the drive to become an owner results in substantially higher wealth than those who remain renters. Adding to this effect Haurin and his colleagues also find that wealth increases more rapidly in the years after becoming a homeowner-by 17 percent on average annually among their sample. Reid (2004) uses panel data from the PSID for the period 1976 through 1994 to examine the financial outcomes of homeownership among low-income households who bought their first home at some point during this period (with low-income defined as those with incomes consistently below 80 percent of area median income before first buying a home). She takes two approaches to examining the returns to homeownership for this group. First, she estimates the change in home values for both low- income and minority homeowners compared to higher-income and white owners. She finds that the rate of increase in home values for these groups was fairly modest, failing to beat the returns that would have been earned on an investment in Treasury bills over the same time. Reid then examines wealth holdings of households by tenure status at the end of her period of observation. She finds that while low-income and minority owners generally built much less wealth than higher-income and white households, the amount of their housing wealth was non-trivial and was many times larger than their other forms of wealth. Like Boehm and Schlottmann, she also finds that those who were renters at the 21 end of the period essentially held no wealth of any kind. Reid, however, does not undertake a multivariate analysis to control for other factors that may account for the differences between owners and renters. Nor does she factor in the impact of failed efforts at homeownership on wealth. But the fact that home equity accounts for such a large share of wealth among low-income and minority households points to the important role that owning a home played in fostering wealth accumulation. Di, Belsky and Liu (2007) was the first study to directly assess the relationship between homeownership and wealth accumulation over time while attempting to account for household characteristics and to include some measure of potential selection bias in who becomes an owner. The study uses the PSID to track households who were renters in 1989 through 2001 to observe transitions into and out of homeownership. The change in household wealth over time is then modeled as a function of starting wealth, a range of household characteristics thought to influence wealth, and, their principal measure of interest, the amount of time spent as an owner. In order to take into account a household's propensity to save, the study uses the PSID from 1984 through 1989 to estimate the share of income that was saved as an indication of savings behavior prior to the period when tenure transitions are observed as a means of controlling for this tendency in assessing differences in savings behavior after buying a home. Their principal finding is a positive and statistically significant association between additional years of homeownership and changes in wealth. The authors include a square term for the number of years owned to take into account anticipated impacts of the timing of moves into homeownership over the period as there was an initial decline in house values during the first years of their panel followed by more robust increases in later years. This square term is negative and significant indicating those who bought earlier in the period had lower cumulative gains in wealth. The largest estimated gains in wealth of $13,000 per year of ownership occurred among those who owned for 8 years. But for those who owned for the maximum possible period of 12 years the gains were only $3,333 per year. Prior savings tendency was positively associated with increases in wealth as expected, but was not statistically significant and so did not appear to capture any important difference in household behavior that was not already accounted for by other explanatory variables. Turner and Luea (2009) undertake a very similar analysis using the PSID sample for the period from 1987 to 2001. In contrast to Di, Belsky and Liu who only include initial renters, their study sample includes all households in the sample as of 2001 that were age 65 or younger regardless of whether they were renters at the start of the period. The study pools observations for the sample on household wealth from three points in time: 1994, 1999, and 2001. For each observation they include a count of the number of years the household has owned a home since 1988 as their explanatory variable of 22 interest. The approach used in this study attempts to control for selection bias into homeownership by estimating a random effects model that includes a household specific constant term. Turner and Luea also separate the sample into two income classes to see whether the association between homeownership and wealth growth differs by income. Low- and moderate-income (LMI) households were those who had incomes below 120 percent of area median income in all three periods when wealth was observed. The results indicate that each year of homeownership is associated with nearly $14,000 in additional wealth, perhaps not surprisingly quite similar to the amount found by Di, Belsky and Liu using the same survey over a nearly identical period (although with a somewhat different sample). When controls are included for LMI status, Turner and Luea find that these households have somewhat lower wealth accumulation of between $6,000 and $10,000 per year. But they note that since the average wealth holding of LMI households in 2001 was about $89,000 this annual rate of increase accounts for a fairly sizeable share of total wealth. In an unpublished dissertation, Mamgain (2011) extends the work of Turner and Luea by employing a two-stage model to add stronger controls for selection into homeownership. Like most of the other studies, Mamgain also uses the PSID, but his period of observation is from 1999 through 2007. Despite the different time period examined, when he replicates Turner and Luea his analysis yields similar results regarding the magnitude of the association between homeownership and wealth (although by ending the study period in 2007 it does not include the sharp loss of both housing and financial wealth that followed 2007). When Mamgain adds additional controls to his model to capture the intention to move, the respondent's health status, their ownership of other real estate and an estimate of current LTV he finds a somewhat lower impact of additional years of owning, but the estimate is still significant and positive. Importantly, when he employs his two-stage approach to include both a selection term and an instrumental measure of current tenure his estimate of the impact of each. additional year on owning does not change. He also estimates separate models by income level and finds that there is no difference in the impact of owning across income classes—all are positive and significant. In short, like other studies he does not find a significant impact of selection bias on his findings and he also finds that low-income owners are also likely to benefit from owning homes. 3 3 He does differ from previous studies in how he estimates the contribution of owning to wealth gains, by focusing on impacts at much lower household wealth levels. He finds that assuming wealth of about $2,500 for the lowest income group (at or below 150 percent of the poverty level) owning a home only adds a few hundred dollars a year to the household's bottom line. But with total wealth set a level well below the median among owners in this income class this result seems implausible. 23 None of the studies estimating statistical models to assess the contribution of homeownership to wealth accumulation analyzed whether there were differences in this experience by race and ethnicity. As discussed above, there are significant racial and ethnic differences in residential location, size of home, and characteristics of financing used, all of which could contribute to differences in wealth outcomes. Shapiro, Meschede, and Osoro (2013) use the PSID from 1984 through 2009 specifically to examine the factors associated with more rapid growth in wealth among whites over this period compared to blacks. Tracking the same set of households over this period they find that gains in median wealth among whites exceeded those among blacks by $152,000. Based on the results of a multivariate analysis they found that the single largest driver of this divergence in wealth was the additional time whites spend as homeowners, which they estimate accounted for 27 percent of the additional white gains. The next most significant factors were differences in income (20 percent), unemployment spells (9 percent), lower shares with a college education (5 percent), and differences in inheritance and financial support from family (5 percent). They also find that years of homeownership exerted a stronger influence on gains in wealth for blacks than it did for whites. While the authors do not attempt to control for any selection bias to control for who becomes a homeowner, none of the previous studies that have taken these steps have found these controls to change their findings. Conclusions Drawn from the Previous Literature Studies presenting simulations of the financial returns to renting and owning make a convincing case that in many markets over many periods of time and under a variety of assumptions renting ought to support greater wealth accumulation than owning. However, as virtually all of the panel studies document, in practice owning has consistently been found to be associated with greater increases in wealth even after controlling for differences in household income, education, marital status, starting wealth, inheritances, and other factors. Importantly, these same studies also consistently find that owning has a positive effect on wealth accumulation among both lower-income households and minorities, although the gains are smaller than for higher-income households and whites generally. Housing wealth among lower-income and minority households also often accounts a substantial share of total wealth for these groups. On the other hand, renters in these same demographic groups are consistently found to accrue little to no wealth over time. How can we reconcile the findings from simulation studies that renting should often be more financially advantageous than owning with the findings from the analysis of panel surveys that unambiguously find owning to be more favorable? One explanation may be that behavioral issues play 24 a key role. Efforts to save for a downpayment lead to a large jump in wealth that is then further supported by at least modest appreciation and some pay down of principal over time. Renters may have the opportunity to accrue savings and invest them in higher yielding opportunities but lack strong incentives and effective mechanisms for carrying through on this opportunity. There is also likely some degree of selection bias at work in who becomes a homeowner. While studies do control for income, education, marital status and other factors that would contribute in differences in the ability to save, there are likely differences in motivation and personal attributes that are related to both savings practices and whether someone becomes an owner. While controls included in studies to capture this effect have not diluted the association between homeownership and increases in wealth, this may simply reflect the challenge of capturing these difficult to measure factors. Studies using panel surveys may also make the benefits of homeownership appear more assured than they actually are by not fully capturing the impact of failed attempts at owning on changes in wealth. Studies to date have focused on measuring homeownership as the number of years spent as a homeowner, which does not distinguish between short sustained spells of owning from similar periods of owning that end in foreclosure or other financial distress. So while homeownership on average may increase wealth, it is undoubtedly the case that for some share of households owning a home had a negative impact on their balance sheet. Finally, the studies reviewed here may also not fully reflect changes that have occurred over time in both market conditions and household behavior. Most of the studies cited reflect experiences as owners during the 1980s and 1990s and so do not capture the market dynamics that began in the late 1990s but came to full bloom during the boom years of the 2000s, including the much greater availability of and appetite for high loan-to-value loans, higher cost loans, sharp swings in house prices, and much higher risks of default even before the national foreclosure crisis began. The next section turns to an analysis of data from the 2000s to examine whether findings about homeownership's positive association with wealth accumulation held over this period, particularly for low-income and minority households who were most likely to have used high cost mortgage products. Experience with Homeownership and Wealth Accumulation through the Boom and Bust Given the substantial changes in the availability, cost and terms of mortgage financing that began in the 1990s and accelerated through the mid-2000s and the accompanying boom and bust in home prices, there is good reason to believe that the experience of homeowners in accumulating wealth over the last decade has been substantially different from what is documented in much of the existing 25 literature for earlier periods. In this section of the paper we present information on wealth accumulation through homeownership during the housing market boom and bust of the 2000s. In the first section, we present findings from the tri-annual Survey of Consumer Finance (SCF) to present a high level picture of the contribution of homeownership to household balance sheets over time. The SCF also provides insights into how a greater tendency both to use high loan-to-value (LTV) loans to purchase homes and to take cash out through refinancing may have reduced wealth associated with homeownership. While the SCF does document the substantial decline in housing wealth following the bust, it also shows that, despite these losses, average homeownership wealth is generally higher than it was in the mid-1990s and continues to represent a substantial portion of household wealth for minorities and lower-income households. The SCF also shows that while the degree of leverage in the housing market showed a marked increase in the years following the Tax Reform Act of 1986, the distribution of LTVs did not change a great deal between the mid 1990s and the housing boom years. However, the crash in housing prices did push LTVs to historic highs. We then turn to an analysis of the PSID for the period from 1999 to 2009 to examine how homeownership spells contributed to trends in household wealth over this period. While house prices grew substantially for much of this period, it also captures most of the decline in prices as well. Whereas previous studies have focused solely on how each additional year of homeownership contributes to household wealth, we are also interested in assessing how failed attempts at homeownership affect wealth to assess the downside risks of owning as well. We find that on average homeownership's contribution to household wealth over this period was remarkably similar to that found in earlier periods. The results also confirm previous findings that while lower-income households and minorities realized lower wealth gains from owning, on average these gains were positive and significant. The results also show that a failure to sustain homeownership is associated with a substantial loss of wealth for established owners, although those who made a failed transition from owning to renting are no worse off financially than those who remained renters over the whole period. Thus, despite the many ways in which market conditions over this period might have been expected to undermine homeownership's wealth building potential, our analysis of the PSID finds that owning maintained a strong association with improvements in wealth over the decade from 1999 to 2009. Long-Run Trends in Housing Wealth and Mortgage Debt The sharp rise in home prices in many parts of the country is reflected in the substantial increase in average real housing equity among homeowners, roughly doubling (a gain of 96 percent) between 26 1995 and 2007 among all homeowners (Table 1). The gains were nearly as large among African- Americans (88 percent) and even larger among Hispanics (123 percent), although generally lower among households in the bottom two income quartiles where home equity increased by only 56 and 42 percent, respectively. The loss in housing equity between 2007 and 2010 was substantial, erasing 26 percent of home equity on average for all homeowners and taking back much of the gains made since 2001 for most groups. Mirroring their larger gains during the boom, Hispanics suffered the greatest loss of housing wealth, dropping by nearly half. Across income groups the declines were more moderate among those in the bottom half of the income distribution. But despite these substantial losses, average real home equity in 2010 was still higher on average than in 1995 for all of the groups shown, and in many cases considerably higher. Whites and those in the highest income quartile had the largest gains, with average home equity up by 51 percent and 78 percent respectively. African-Americans and the lowest income quartile also maintained substantial gains of 39 percent and 35 percent, respectively. Hispanics and those in the middle income quartiles made the least progress, with average home equity up by only 12 to 18 percent. Throughout this period the share of net wealth accounted for by home equity among all homeowners fluctuated between 22 and 29 percent, with much of the movement due to changes in non-housing net wealth. Between 1989 and 1998 home equity's share of average wealth fell from 29 to 22 percent as the stock market boomed while home values languished. Between 1998 and 2007 home equity's share of net wealth rose to 25 percent as the stock market absorbed the dot com bust while housing prices soared. Between 2007 and 2010 losses in housing wealth outpaced losses in other financial assets so housing's share of wealth fell back to 22 percent. Thus, despite the significant growth in housing equity in the first half of the 2000s it never came to account for an outsized portion of household net wealth among all homeowners.
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Based on the text above, what factors can contribute to wealth accumulation through homeownership?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Answer the following question using only information from the text included below. You must not utilize any other sources or your own reasoning in your response.
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What are some examples of informal financial services?
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Current debates in microfinance 1 1.1 Subsidised credit provision From the 1950s, governments and international aid donors subsidised credit delivery to small farmers in rural areas of many developing countries. It was assumed that poor people found great difficulty in obtaining adequate volumes of credit and were charged high rates of interest by monopolistic money-lenders. Development finance institutions, such as Agricultural Development Banks, were responsible for the delivery of cheap credit to poor farmers. These institutions attempted to supervise the uses to which loans were put, and repayment schedules were based on the expected income flow from the investment. Returns were often overestimated. For example, calculations would be based on agricultural yields for good years (Adams and Von Pischke, 1992). As a result, loans were often not repaid. The credibility and financial viability of these subsidised credit schemes were further weakened by the use of public money to waive outstanding and overdue loans at election time (Adams and Von Pischke, 1992; Lipton, 1996; Wiggins and Rogaly, 1989). A dependence on the fluctuating whims of governments and donors, together with poor investment decisions and low repayment rates made many of these development finance institutions unable to sustain their lend- ing programmes. Credit provision for poor people was transitory and limited. 1.2 The move to market-based solutions This model of subsidised credit was subjected to steady criticism from the mid-1970s as donors and other resource allocators switched attention from state intervention to market-based solutions. Policy-makers were reminded 5 Microfinance and Poverty Reduction that credit could also be described as debt and that the over-supply of subsidised credit without realistic assessment of people's ability to repay could result in impoverishment for borrowers. At the same time the concept of 'transaction costs', and the notion that full information about borrowers was not available to lenders, were used by the opponents of subsidised credit to justify the high interest-rates charged by money-lenders. Lending money carries with it the risk of non-repayment. In order to know who is creditworthy and who is not, and so reduce this risk, the lender screens potential borrowers. This involves gathering information on the circumstances of individuals, which may not be easy to obtain. Then enforcement costs are incurred to ensure repayment. Through this process risks are reduced, though not eliminated. Where a loan is disbursed on condition that it is used for a particular purpose, supervision costs also arise. Using these tools of analysis it was argued that private money-lenders charged interest rates which were higher than formal bank-rates because of the high costs they faced in terms of risk, particularly when lending without physical collateral. At the same time, it was argued that money-lenders were an efficient source of credit because their greater knowledge of the people to whom they were lending lowered screening costs. Moreover, potential borrowers faced high transaction costs when they sought loans from formal-sector finance institutions. These costs included the time, travel, and paperwork involved in obtaining credit, and were often pro- hibitive for poor clients, especially those most geographically isolated. On the basis of this analysis, a group of economists based at Ohio State University (USA), notably Dale Adams and J D Von Pischke, put forward the view that the provision of credit should be left almost entirely to the private sector. In concentrating on the problems of publicly subsidised credit, these economists ignored the social ties, power relations, and coercion associated with the activities of money-lenders. However, detailed micro-level research has demonstrated the widespread use of interlocked' contracts to force exchange to the disadvantage of poor people (Bhaduri, 1981). Powerful local people, including landlords, employers, and traders, are able to influence the terms of loans made to tenants, workers, and small producers via conditions set in transactions involving land, labour, or crops. For example, traders frequently lend working capital to small farmers on condition that their crops are sold to that trader at a pre-determined price. Similarly, loans are made to workers against the promise of labour to be provided at below the going rate at a set future date (Rogaly, 1996b). Against the background of these debates, recent developments in the design of microfinance schemes have generated an understandably high degree of excitement. This is because innovative features in design have 6 Current debates in microfinance reduced the costs and risks of making loans to poor and isolated people, and made financial services available to people who were previously excluded. 1.3 Making use of social collateral There was little knowledge among formal-sector financial intermediaries of alternatives to physical collateral, until the 1970s, when the Grameen Bank in Bangladesh began using 'peer-group monitoring' to reduce lending risk. The model for credit delivery in the Grameen Bank is as follows: • Groups of five self-select themselves; men's and women's group are kept separate but the members of a single group should have a similar economic background. • Membership is restricted to those with assets worth less than half an acre of land. ⚫ Activities begin with savings of Taka 1 per week per person and these savings remain compulsory throughout membership. • Loans are made to two members at a time and must be repaid in equal instalments over 50 weeks. . Each time a loan is taken the borrower must pay 5 per cent of the loan amount into a group fund. • The group is ultimately responsible for repayment if the individual defaults. • Between five and eight groups form a 'development centre' led by a chair- person and secretary and assisted by a Grameen Bank staff member. • Attendance at weekly group and centre meetings is compulsory. • All transactions are openly conducted at centre meetings. • Each member may purchase a share in the Bank worth Taka 100 Through this system the Grameen Bank has provided credit to over 2 million people in Bangladesh (94 per cent women) with a very low default rate. (Source: Khandker, Khalily and Khan, 1995.) However, peer-group monitoring has not proved necessary to other instit- utions seeking to do away with physical collateral. In Indonesia, government- sponsored banks have successfully used character references and locally- recruited lending agents (Chaves and Gonzales Vega, 1996). The peer-group 7 Microfinance and Poverty Reduction method of Grameen and the individual-user approach of the Bank Rakyat Indonesia (see 1.4) can both be seen as attempts to lower screening costs by using local 'insider' information about the creditworthiness of borrowers. The degree to which Grameen Bank employees themselves implement peer-group monitoring has recently been questioned. It is argued that the reason for the Grameen Bank's high repayment rates is the practice of weekly public meetings at which attendance is compulsory, for the payment of loan instalments and the collection of savings. The meetings reinforce a culture of discipline, routine payments, and staff accountability (Jain, 1996). Another means of improving loan recovery is to insist on regularity of repayment. This is likely to reflect the actual income-flow of the borrower much better than a lump-sum demand at the end of the loan period. Borrowers can make repayments out of their normal income rather than relying on the returns from a new-often untested-mini-business. Neverthe- less, where seasonal agriculture is the main source of income, and borrowers face seasonal hardship, regular repayment scheduling may cause problems. Microfinance specialists have argued that the prospects for scheme's stability are improved by innovations such as social collateral and regular repayments instalments. Indeed, financial sustainability has become an important goal in itself. To achieve sustainability, microfinance institutions, be they NGOs, government agencies, or commercial banks, need to ensure that the costs of providing the service are kept low and are covered by income earned through interest and fees on loans (see Havers, 1996). As microfinance deals, by definition, with small loans, the income generated through interest payments is also small in comparison with administration costs. To generate profits, therefore, it is necessary to increase scale - in other words, to lend to a large number of people (Otero and Rhyne, 1994). 1.4 Savings The regular repayments on loans required by large non-governmental micro- finance institutions in Bangladesh (including BRAC, ASA and Grameen) provide evidence that poor people can save in cash (Rutherford, 1995a). These intensive repayment regimes are very similar to those of rotating savings and credit associations: steady weekly payments, enforced by social collateral, in return for a lump sum. Loans made are, in reality, advances against this stream of savings. By insisting on regular savings, microfinance institutions can screen out some potential defaulters, build up the financial security of individuals, increase funds available for lending, and develop among members a degree of identification with the financial health of the institution. People involved in 8 Current debates in microfinance such schemes may previously have been unable to reach formal-sector banks, complete their procedures, qualify for loans or open savings accounts. 'A savings facility is an extremely valuable service in its own right, which often attracts many more clients than a credit programme, particularly from among the poorest' (Hulme and Mosley, 1996, p147). This evidence that poor people can save in cash has opened up further debate. A distinction is made between schemes in which borrowers must save small and regular amounts in order to obtain loans (termed 'compulsory' saving) and those which offer flexible savings facilities. In the latter case people can deposit and withdraw cash in whatever amounts, and as often, as they wish. This distinction is made especially strongly by Robinson (1995) in her account of the Bank Rakyat Indonesia. The BRI local banking system has about six times as many deposit accounts as loans. On 31 December 1993, BRI's local banking system had $2.1 billion in deposits. These were all voluntary savings. By 31 December 1995, there were 14.5 million savings accounts. Savers with BRI bave access to savings whenever they want. BRI deals with individuals rather than groups. Its savings programme was designed specifically to meet local demand for security, convenience of location, and choice of savings instruments offering different mixtures of liquidity and returns. BRI's local banking system has a loan limit of about $11,000. The idea is that good borrowers should not be forced to leave until they can qualify for the loans provided by ordinary commercial banks. In addition, BRI has a system which gives its borrowers an incentive to repay on time. An additional 25 per cent of the interest rate is added to the monthly payment. This amount is paid back to borrowers at the end of the loan period if they have made every payment in full and on time. There is a corresponding in-built penalty for those who have not. (Source: Robinson, 1994.) Robinson argues that there is an enormous unmet demand for flexible savings services. However, she also warns that managing a savings system of this type is much more complex than running a simple credit programme. Schemes which operate under these 'new' savings and credit technologies are an improvement on the old model of subsidised agricultural and micro- enterprise finance. The story of how they have succeeded in reaching poor people is now the subject of a large literature (for example, Rutherford, 1995b; Hulme and Mosley, 1996; Mansell-Carstens, 1995). That many more poor people can now obtain financial services is a major achievement of these 9 Microfinance and Poverty Reduction schemes. However, the questions of which poor people have been reached, and of whether poverty has been reduced, still remain. 1.5 Can microfinance interventions reduce poverty? If poverty is understood as low levels of annual income per household, reducing poverty is about raising average income levels. If a particular level of annual income per head is used as a poverty line, poverty reduction could be measured by counting the number or proportion of people who cross that line-who are promoted out of poverty. Providers of financial services who aim to enable people to cross such a poverty line have focused on credit, in particular credit for small enterprises, including agricultural production. However, attention to annual income can obscure fluctuations in that income during any given year. Poverty can also be understood as vulner- ability to downward fluctuations in income. Such fluctuations can be relat- ively predictable, such as the seasonal decline in employment for agricultural workers, or a shortage of income and trading opportunities in the dry season or before harvest. Alternatively, fluctuations in income may result from unexpected shocks such as crop failure, illness, funeral expenses or loss of an asset such as livestock through theft or death, or a natural disaster such as a cyclone (Montgomery, 1996). Vulnerability can be heightened by the lack of saleable or pawnable assets and by debt obligations. Interventions which reduce such vulnerability and protect livelihoods also reduce poverty. 1.5.1 Poverty as powerlessness A further dimension of poverty which is often the focus of NGO interventions is powerlessness, whether in an absolute sense or in relation to others. Economic inequality between and within households is likely to be associated with concentrations of political and social power. Inequality can increase whenever better-off people are able to improve their incomes faster than others. Even if the absolute level of material well-being of the worst-off people does not change, relative poverty (Beck, 1994) may increase, and with it a sense of powerlessness among very poor people. Power relations are partly determined by norms of expected behaviour. Neither the relations nor the norms are static; they are contested and change over time. Powerlessness can be experienced in a variety of situations: within the household, as a result of differences in gender and age; and within the community, between socio-economic groups, as a result of caste, ethnicity, and wealth. Defining poverty in terms of power relations implies that assessment of the impact of microfinance interventions should focus on their 10 Current debates in microfinance influence on social relations and the circumstances which reproduce them. Even in a similar geographical and historical context, it is important to disting- uish between the ways in which specific groups of poor people (women and men, landed and landless, particular ethnic groups) are able to benefit from financial services or are excluded from doing so. 1.5.2 Credit for micro-enterprises While there are methodological difficulties involved in measuring increases in incomes brought about by the provision of credit (see further discussion in Chapter 5), studies have demonstrated that the availability of credit for micro- enterprises can have positive effects. A recent survey collected data from government, NGOs, and banks involved in providing financial services for poor people. Twelve programmes were selected from seven countries (six of these are included in Table 1, Annex 1). Households which had received credit were compared with households which had not. The results demon- strated that credit provision can enable household incomes to rise. However, taking the analysis further, Hulme and Mosley demonstrated that the better-off the borrower, the greater the increase in income from a micro- enterprise loan. Borrowers who already have assets and skills are able to make better use of credit. The poorest are less able to take risks or use credit to increase their income. Indeed, some of the poorest borrowers interviewed became worse off as a result of micro-enterprise credit, which exposed these vulnerable people to high risks. For them, business failure was more likely to provoke a livelihood crisis than it was for borrowers with a more secure asset base. Specific crises included bankruptcy, forced seizure of assets, and unofficial pledging of assets to other members of a borrowing group. There have even been reports of suicide following peer-group pressure to repay failed loans (Hulme and Mosley, 1996, pp120-122). A much smaller survey comparing micro-enterprise programmes in El Salvador and Vanuatu found that the development of successful enterprises and the improvement of the incomes of very poor people were conflicting rather than complementary objectives. By selecting those most likely to be successful for credit and training, the programmes inevitably moved away from working with the poorest people (Tomlinson, 1995). Reviews of Oxfam's experiences with income-generating projects for women raised serious questions about the profitability of such activities. Full input costings, which would have revealed many income-generating projects as loss- making, were not carried out. Omissions included depreciation on capital, the opportunity cost of labour (the earnings participants could have had through spending the time on other activities), and subsidisation of income- 11 Microfinance and Poverty Reduction generating projects with income from other sources. Market research and training in other business skills had often been inadequate (Piza Lopez and March, 1990; Mukhopadhyay and March, 1992). 1.5.3 Reaching the poorest Whether income promotion is based on loans for individual micro-enterprises or on group-based income generation projects, its appropriateness as a strategy for poverty reduction in the case of the poorest people is questionable. Other evidence suggests that self-selected groups for peer-monitoring have not been inclusive of the poorest people (Montgomery, 1995). People select those with whom they want to form a group on the basis of their own know- ledge of the likelihood that these people will make timely payment of loan and savings instalments: X will only have Y in her group if she believes Y is capable of making regular repayments and has much to lose from the social ostracism associated with default. This system might well be expected to lead to the exclusion of the poorest (Montgomery, op. cit.). Even the low asset and land-holding ceiling which the big microfinance institutions in Bangladesh have successfully used to target loans away from better-off people has not necessarily meant that the poorest, who are often landless, are included (Osmani, 1989). So while the innovations referred to earlier appear to have made loans more available to poor people, there is still debate over the design of appro- priate financial services for the poorest. Hulme and Mosley's study strongly suggests that providing credit for micro-enterprises is unlikely to help the poorest people to increase their incomes. However, detailed research with users has found that some design features of savings and credit schemes are able to meet the needs of very poor people. For example, it was found that easy access to savings and the provision of emergency loans by SANASA (see 3.4.2) enabled poor people to cope better with seasonal income fluctuations (Montgomery, 1996). Microfinance specialists increasingly, therefore, view improvements in economic security income protection rather than promotion (Dreze and Sen, 1989) as the first step in poverty reduction. ...from the perspective of poverty reduction, access to reliable, monetized savings facilities can help the poor smooth consumption over periods of cyclical or unexpected crises, thus greatly improving their economic security.' It is only when people have some economic security that 'access to credit can help them move out of poverty by improving the productivity of their enterprises or creating new sources of livelihood' (Bennet and Cuevas, 1996, authors' emphasis). Current debates in microfinance 1.6 Financial interventions and social change Interventions have an impact on social relations partly through their econ- omic effects. In many instances implementors of credit schemes have claimed that the work will lead to progressive social change, for example by empow- ering women and changing gender relations in the household and in the community (Ackerly, 1995). In five out of the six schemes summarised in Table 1 (Annex 1), over half of the borrowers were women. Much of the work that has been done in assessing the impact of credit programmes on women has been in Bangladesh. One approach was to look at the control women retained over loans extended to them by four different credit programmes: the Grameen Bank, BRAC, a large government scheme (the Rural Poor Programme RD-12), and a small NGO (Thangemara Mahila Senbuj Sengstha) (Goetz and Sen Gupta, 1996). Results suggested that women retained significant control over the use to which the loan was put in 37 per cent of cases; 63 per cent fell into the categories of partial, limited or no control over loan use. Goetz and Sen Gupta found single, divorced, and widowed women more likely to retain control than others. Control was also retained more often when loan sizes were small and when loan use was based on activities which did not challenge notions of appropriate work for women and men. The question of whether women were empowered is not answered: even when they did not control loans, they may have used the fact that the loan had been disbursed to them as women to increase their status and strengthen their position in the household. However, in some cases women reported an increase in domestic violence because of disputes over cash for repayment instalments. A second major piece of research has assessed the effect of Grameen and BRAC programmes on eight indicators of women's empowerment: mobility, economic security, ability to make small purchases, ability to make larger purchases, involvement in major household decisions, relative freedom from domination by the family, political and legal awareness, and participation in public protests and political campaigning (Hashemi et al, 1996). The study concludes that, on balance, access to credit has enabled women to negotiate within the household to improve their position. However, unlike the Goetz and Sen Gupta study, which is based on 275 detailed loan-use histories, Hashemi et al attempted to compare villages where Grameen or BRAC were present with villages where they were not. Because of difficulties inherent in finding perfect control villages (which the authors acknowledge), the conclusions of the study do not signify the end of the debate. It has also been argued that focusing on women is much more to do with financial objectives than with the aim of empowerment. According to 13 Microfinance and Poverty Reduction Rutherford (1995b) the real reasons for targeting women in Bangladesh are that they are seen as accessible (being at home during working hours); more likely to repay on time; more pliable and patient than men; and cheaper to service (as mainly female staff can be hired). Thus the process of loan supervision and recovery may be deliberately internalised inside the household (Goetz and Sen Gupta, op. cit.). Goetz and Sen Gupta do not use this as an argument against the provision of finance for women in Bangladesh, but rather suggest that to avoid aggravating gender- based conflict, loans should be given to men directly as well as to women and, at the same time, that efforts should be made to change men's attitudes to women's worth. 1.7 Treading carefully in microfinance interventions This brief summary of evidence and argument suggests that microfinance interventions may increase incomes, contribute to individual and household livelihood security, and change social relations for the better. But that they can not always be assumed to be doing so. Financial services are not always the most appropriate intervention. The poorest, in particular, often face pressing needs in terms of primary health care, education, and employment opportunities. Lipton has recently argued for anti-poverty resources to be allocated across sectors on the basis that a concentration on a single interven- tion mechanism, say credit, is much less effective in poverty reduction than simultaneous credit, primary health, and education work, even if this entails narrowing geographical focus (op. cit.). The particular combinations which will be most effective will depend on the nature of poverty in a specific context. Although microfinance provision appears to be evolving towards greater sustainability, relevance, and usefulness, there are few certainties and the search for better practice continues. Decisions on whether and how to intervene in local financial markets should not be taken without prior knowledge of the working of those markets. If the intervention is intended to reduce poverty, it is especially important to know the degree to which poor people use existing services and on what terms. Only then can an intervening agency or bank make an informed decision on whether their work is likely to augment or displace existing 'pro-poor' financial services. If the terms of informal financial trans- actions are likely to work against the interests of poor people (cases in which the stereotype of 'the wicked money-lender' corresponds to reality) the inter- vention may attempt to compete with and possibly replace part of the informal system. However, making such an informed assessment is not straight- forward, as one study of the power relations between informal financial 14 Current debates in microfinance service providers and agricultural producers in Tamil Nadu demonstrated. Grain merchants based in the market town of Dindigul were found to dictate the terms of product sale when lending working capital to very small-scale farmers, but to be much the weaker party when lending to larger-scale farmers (Rogaly, 1985). The structure of a credit market can change, partly under the influence of outside intervention. Rutherford has studied the changing market in financial services for poor people in Bangladesh. Competition between NGOs is leading to users being less subservient to NGO staff and protesting about unpopular financial obligations, such as the 5 per cent deducted from loans by Grameen for a 'group fund'. Private individuals have set up offices imitating the Grameen style but charging higher interest rates on loans than the big NGOS, and also offering higher rates on savings deposits. Private urban finance companies have expanded. Despite the tendency for NGOs to become more like banks, other formal-sector lenders are still reluctant to lend to poor people (see also McGregor, 1994). The expansion of NGO credit in Bangladesh has been made possible by the flood of donor money to that country. One study of BRAC showed that loan disbursal and recovery had become more important than group forma- tion (Montgomery, 1996). In 1992, Grameen Bank and BRAC employees were found to be offering 'immediate loans' to women in villages where smaller NGOs had been attempting longer-term group-based finance (Ebdon, 1995). Ebdon attributed this behaviour to fairly strict targets for loan disbursal in the case of BRAC, and in both cases to an imperative for job security for staff and a desire on the part of the organisations to expand their influence and strengthen their reputations (p52). This anxiety to increase the number of users can undercut the very basis of the new model: the creation of sustainable financial institutions. Studies of credit schemes have consistently demonstrated that unless borrowers and savers believed they would benefit from the long-term survival of the institution, and have a sense of ownership, repayment rates would decline (Rogaly, 1991; Copestake, 1996a). The sense of ownership is weakened by attempts by large microfinance institutions in Bangladesh to claim territory by encroachment. In India, in the absence of equivalent flows of external finance, thrift and credit co-operatives based much more on borrowers' requirements have emerged (Rutherford, 1995b, p136). An understanding of the way in which the institutions themselves change and respond to incentives is therefore necessary for the design of relevant anti-poverty interventions, including financial services. 15 2 Informal financial services 2.1 Introduction In recent years research into informal financial services and systems has significantly deepened understanding of the way they operate and their strengths and weaknesses. A simplistic belief that local money-lenders charged extortionate interest rates lay behind the provision of subsidised finance in the past. More thorough investigation has highlighted a range of savings, credit, and insurance facilities accessible to poor people. The appar- ently usurious interest charges reportedly made by private money-lenders may be explainable in terms of transaction costs, lack of information, and high risk. Informal financial services may be well-equipped, because of local 'insider' knowledge, and lower overheads, to respond to the requirements of poor people; they may also be exploitative. This chapter starts with a brief overview of the types of informal services that have been found to exist in a wide variety of countries and social contexts. Some of the broad characteristics of these services are identified, and lessons drawn for the design of NGO or semi-formal systems. In describ- ing informal financial services it is useful to distinguish between those which are owned by their users and those which are offered by an individual, usually on a profit-making basis. The distinction can be a helpful one in analysing the ways in which financial services enable or exploit poor people. NGOs considering microfinance interventions need first to find out what informal financial services are available, and how they operate. Such services are capable of supporting poor people's livelihoods as well as perpetuating 1 This chapter draws heavily on a background paper commissioned for the purposes of this book: A Critical Typology of Financial Services for the Poor, Stuart Rutherford, November 1996. Examples are drawn from Rutherford's own experience unless otherwise stated. 16 Informal financial services structures which undermine them. It is necessary, therefore, to understand under what circumstances and to what degree these services are enabling or exploitative for poor people. On the whole, user-owned services are likely to be more enabling than services provided for profit. Investigating the scope and nature of existing services is an essential pre- liminary before considering whether an intervention is necessary. However, NGOs themselves may not have the right skills to become direct providers of financial services. Furthermore, financial services are needed by poor people on a permanent basis to enable them to plan and manage their finances; NGO programmes which might be here today and gone tomorrow may be an inap- propriate means through which to provide them. Therefore NGOs should seriously consider whether direct intervention is in fact the best response for them to make. The chapter closes by discussing alternative strategies NGOs might employ. 2.2 User-owned informal financial services Systems which facilitate financial transactions and are owned by their users are many and varied, and range from simple reciprocal arrangements between neighbours, savings clubs and rotating savings and credit associa- tions (ROSCAS), to forms of insurance, building societies, and systems of co- operative business finance. An example of each of these types is described below. All of these systems can be found in a variety of country settings. Rotating savings and credit associations (ROSCAS) in particular, are an extremely common phenomenon. They exist in almost every country (for example, 'partners' in Jamaica and Britain, bui in Vietnam, and njangi in Cameroon). (See Bouman, 1995; Ardener and Burman, 1995 for detailed and extensive surveys of ROSCA operations in a range of settings.) The principle is very simple: a number of people agree to save a fixed amount of money at regular intervals; at each meeting, for example weekly, each member contri- butes an agreed amount, resulting in a single lump sum becoming available, which is then allocated to one of the members. There are three basic varia- tions in the way in which this lump sum or 'prize' is allocated. First, it can be allocated on the basis of strict rotation between members of the group; second, on the basis of a lottery of members; third, it may be auctioned to the member who is willing to accept the biggest discount. The group will usually meet (but does not always need to) and undertake this transaction on as many occasions as there are members of the group, thus ensuring that each member gets the 'prize' once. The ROSCA demonstrates the basic principle of financial intermediation: collecting many small savings from many people, turning this into a lump sum for one person, and repeating this procedure over time. 17 Microfinance and Poverty Reduction ROSCA finance is used for many purposes. Some ROSCAS operate to enable an asset to be purchased, such as a rickshaw or fishing equipment for each member, and may have been set up specifically for the purpose. 'Merry- go-rounds', as ROSCAS are called among Kikuyu women in Kenya, are sometimes used by women as a means of accumulating enough money to buy new household utensils or clothes. The technology of the ROSCA is not unique to poor communities but is also used by salaried professionals to purchase major consumption items or assets such as refrigerators or cars. A further example of a user-owned device is the insurance fund which makes pay-outs conditional on certain circumstances occurring. These are int- ended to cover large expenses such as those connected with marriage or death. 2.2.1 Some examples of user-owned financial services Neighbourhood reciprocity in Southern India Reciprocal lending may be extended to involve several or even all the members of a community. Among Moslems in Kerala State in southern India kuri kalyanam are invitations to a feast to which the guest is expected to bring a cash gift. When the host in his turn is invited to a feast by one of the guests he is expected to return double the amount (less if he is perceived as poor). In Vietnam one kind of hui (a generic name for various financial devices) involves a similar pooling of resources for one person on one occasion to be reciprocated later by others, at different times. Rickshaw ROSCAS in Bangladesh Very poor men driven by poverty from their home villages to the Bangladesh capital, Dhaka, often earn a living there by driving bired rickshaws. In the last ten years they have begun to run ROSCAS. A group of drivers forms, and each driver saves a set amount from his daily takings. When the fund is large enough (this usually takes about 15 days) a rickshaw is bought and distributed by lottery to one of the members. In between prizes' the cash is held by a trustworthy outsider, usually a local shopkeeper from whom the members buy their tea or cigarettes. In a further adaptation, those who have already received their rickshaw double their daily contribution. This progressively reduces the time-gap between prizes, and is seen as a fair way of rewarding those members who win the lottery late in the cycle, because their gross contribution is smaller than earlier winners. The extra payment made by the winners is roughly equivalent to what they save by no longer having to hire a rickshaw. 18 An accumulating savings club in Mexico Informal financial services In towns and villages in Mexico neighbours place frequent but irregular savings with trusted shopkeepers. Just before Christmas, the cash is returned to the saver. No interest is paid, but the saver has a lump sum to spend, and the shopkeeper has had the use of the money over the year and can now look forward to a good sales season. Building societies for the middle classes in Bangladesh In a lower-middle-class area of Dhaka, 165 employees in the Public Works Department belong to their own building society' which was started over 16 years ago. Each saves 200 taka ($5) a month out of his wages. As the cash accumulates it is lent out to members, who buy land and building materials. Interest rates are high and interest on the out- standing balance has to be paid each month, to encourage modest loans and rapid repayment. But loan sizes are generous and such workers would have few or no alternative sources for loans of this kind. Popular insurance: funeral funds (iddir) in Ethiopia Originally burial societies, iddir have extended to provide a wide range of insurance services in urban Ethiopia. Aredo (1993), study- ing these in Addis Ababa, estimated that 50 per cent of urban house- holds were members of some kind of iddir. Groups of people come together on the basis of location, occupation, friendship or family ties. Each iddir sets its own rules and regulations but usually pays out for funeral expenses or financial assistance to families of the deceased, and sometimes to cover other costs, such as medical expenses and losses due to fire or theft. 2.3 Informal financial services for profit Those offering informal financial services for profit fall into two groups: deposit takers (often also called money-guards) and lenders. What is most interesting about the situation of deposit takers is that, as in the Nigerian example below, savers usually pay for the service by obtaining a negative interest rate on their funds. This demonstrates the pressing need that people have for places to put their savings which are safe and secure not only from physical risks such as theft, fire or flood, but also from the demands of their family. For women, in particular, the ability to save small amounts in places to which their husbands and families cannot gain access (although they might know about them) has been shown to be particularly important. It may enable them to meet obligations in the family or household, such as the payment of children's school fees, for which they have particular responsibility. 19 Microfinance and Poverty Reduction Forms of lending also operate in a variety of ways, such as money-lenders; pawnbrokers, who take collateral in the form of physical assets; and forms of trade credit and hire purchase. The term 'money-lender' can cause confusion because it conjures up the image of a class of people whose main source of income is usury. In reality, many small farmers, for example, obtain credit from employers, landlords, traders, relatives, and other people who combine a number of economic activities. In some places money-lenders may be a more professionalised class, such as the Tamilians' in Cochin described below, but even in this case it is not necessarily their main source of income. Lending money can be exploitative of, as well as enabling for, poor people. People facing seasonal shortages may have only one source of credit, for example, an employer. The employer may agree to provide a loan, but only if the borrower promises to work when required at below the going wage-rate. As described below for Indonesia, crop traders may provide producers with seasonal credit on the understanding that the crop is sold through the same trader at low post-harvest prices. Tied credit of this type, whether in cash or kind, may be the only means of survival for poor people. But arrangements such as these can maintain and even exacerbate inequalities in power and position. In contrast, user-owned devices are likely to be more supportive and enabling, because the profits made are pooled, and shared or fed back into the system, and ownership and control of the funds are in the hands of the users. Such devices are unlikely to be exploitative of those involved, although they may widen inequalities between users and non-users. The comparison with services for profit is clear. However, loans from private lenders after harvest may enable small traders to make the most of the increased liquidity in the local economy. This emphasises the need for interveners to understand the workings of real markets and to question untested assumptions. It is essential to find out for which groups of poor people-women, men, landless labourers, subsistence farmers, migrant workers and under what circumstances these arrange- ments may be no more than a means of survival, while supporting wealth creation for others. 2.3.1 Some examples of informal financial services provided for profit Deposit takers: a mobile alajo in Nigeria One consequence of Nigeria's current political difficulties is a drop in public confidence in formal banks, according to Gemini News. This has allowed an old tradition to flourish again- alajos, or peripatetic deposit takers. Idowu Alakpere uses a bicycle to go 20 Informal financial services door-to-door round the outer suburb of Lagos where he lives. He has 500 customers who each save about 10 or 15 naira with him (about 50 to 75 cents US) at each daily visit. Customers withdraw money whenever they like, and Idowu charges them one day's savings per month, which he deducts from the withdrawal. Since deposits are made evenly over the month, the negative interest rate for one-month deposits is 1/15, or 6.6 per cent a month, an Annual Percentage Rate (APR) of 80 per cent. Some alajos, including Idowu, store the cash in a reliable bank, others use it to make loans. The Gemini News reporter was told by many local people that they trusted these alajos more than banks. When it was pointed out that some alajos are dishonest, they retorted that so are many banks. Professional money-lenders in Cochin, India 'Tamilians' provide a money-lending service to poor slum dwellers on a daily basis. They have set terms, which are well-known all over Cochin. For each 100 rupees lent, 3 rupees are deducted at source as a fee. Thereafter, 12.50 rupees per week must be repaid for ten weeks. This works out at an APR of 300 per cent (28 rupees paid on an average size loan of 48.50 rupees [97/2) for 10/52 of a year). Most non-poor observers regard this rate as outrageously exploitative. However, poor users of the service tend to take a favourable view of it. The 'Tamilians' do not needlessly harass their clients over repay- ment but take an 'understanding' view which includes a willingness to accept loan losses. These money-lenders know their clients well and (out of self-interest) will not lend more than they think the client can repay out of normal income over the next ten weeks. Lending against collateral: pawnbrokers in Western India Residents of the slums of Vijayawada use their local pawnbroker when they need money quickly. He is reliably available at his gold- smithing shop and he charges 3 per cent a month for loans pledged against gold, 5 per cent for silver and 9 per cent for brass. The inclu- sion of brass means that even the very poor can get a small advance by pawning kitchen pots and pans. He lends up to two-thirds the value of the pawn. He gives a receipt, and because the borrower can be sure of getting her pawn back when she repays the loan, she can risk pawning objects of sentimental value. Unlike those who lend without collateral the broker does not need to know his clients well: the unambiguous collateral provided by the pawn means that the broker can lend to more or less anyone at any time. 21 Microfinance and Poverty Reduction Advance crop sales in Indonesia A practice common in many countries is known as ijon in some areas of Indonesia. Farmers often need cash to get them through the 'bungry' season when their main crop is in the ground and there is not much else to do except sit and wait. They are forced to make an advance sale of the crop, usually to a grain buyer or his agent. Ijon transactions of this sort, if seen as loans, show an interest rate of anything from 10 to 40 per cent a month. (Source: Bouman and Moll in Adams and Fitchett, 1992.) Two examples of trade credit In many markets it is common to see poor people squatting on the ground with a small amount of fertiliser spread out on a mat. The fertiliser doesn't necessarily belong to the man or woman (or, often, child). Lacking capital themselves to buy stock, such people obtain the fertiliser on credit from a nearby shop. At the close of the market they return the money from sales and any balance of the stock to the shopkeeper, retaining a small proportion of the money. The system allows people to trade (safely if not profitably) without capital, and gives the shopkeeper a cheap extra outlet. The dadon credit system used to finance prawn cultivation in Bangladesh is an example of a trading system in which credit is passed on through a chain of intermediaries between the prawn farmer and exporters to Europe. The prawn market is a highly com- petitive business in which everyone in the chain is short of capital. The 'commission agent' at the port buys prawns on behalf of the exporters in the capital. To ensure their share of the market they provide credit early in the season which finds its way through a number of intermediaries before reaching the hands of the farmer. The intermediaries are 'depot' owners, then farias', or merchants, and finally local traders, who in turn lend to the farmers. In accepting the credit the farmer commits himself to selling exclusively to this particular trader. 2.4 Turning the informal into the formal In some countries such informal systems have evolved into formal systems which have had a major impact on their users. In the UK, for example, 'mutual' or friendly societies which began as small thrift groups in the nineteenth century turned into building societies in the first half of the twentieth, and have been the main source of housing finance for 50 years. Informal financial services There are further examples of such informal systems becoming increas- ingly formalised. Aredo (1993) reports that the iddir in Addis Ababa run by the Ethiopia Teachers' Association is of the scale of a medium-size insurance business. In Cameroon some of the traditional ROSCAS known as njangi have evolved into small banks offering finance for small businesses which have difficulty using formal banks (Haggblade, 1978). ROSCAS may thus be a transitional phenomenon. Chit funds in India are a formalised version of a ROSCA, for which govern- ment legislation exists. In contrast to the ROSCA, members of the chit fund do not normally know each other and are merely customers of the chit companies. The company advertises for and selects members, makes arrange- ments for collection of subscriptions, and holds auctions for the prizes. However, such funds are of limited use to poor people, who lack both the income to pay subscriptions and the social position to gain the confidence of the company. The transition to formalised services is not inevitable. Informal and formal arrangements continue to exist side-by-side even in industrialised countries. In Oxford, UK, ROSCAS have enabled people with very limited capital of their own to increase their chances of obtaining a small business loan (Srinivasan, 1995). A detailed comparative study of credit use among low-income Pakistani, Bangladeshi, and Carribean immigrants in the UK revealed enormous differ- ences in their use of financial services. In all cases sources of credit were class- ified into high-street credit, local commercial credit, mail order, social fund, community-based credit, and 'miscellaneous' (including friends, family, and employer). Unlike the Bangladeshis, the Pakistani and Carribean respond- ents reported community-based, ROSCA-like arrangements. Bangladeshi respondents made much more use of formal bank credit than the others, although they had at least as high a proportion of applications rejected, apparently on racial grounds (Herbert and Kempson, 1996). Abugre (1994) points out that transition and change can be rapid, discon- tinuous, and turbulent rather than smooth and linear. There is therefore likely to be a multiplicity of arrangements, some of which become formalised, while others die out, and yet others are initiated. The implication for those interested in providing financial services is that such a role must be carefully thought through, and be flexible and responsive to changing circumstances. 2.5 What can be learned from informal finance? Having briefly explored the range of financial services which may exist, it is clear that informal finance is a regular feature of poor people's lives. What can be learned from this? The continuation of a large number of different forms suggest the following points (partly adapted from Adams, 1992). 23 Microfinance and Poverty Reduction There is clearly a demand for financial services The range of informal financial services available partly reflects the varied requirements which people, both rich and poor, have for financial services. They may also be explained in terms of the actions of people with excess cash seeking to earn income from lending. In some cases, especially where there is a monopoly, or collusion among providers, this can be exploitative for the borrower. Informal services available include savings facilities, provision of credit for consumption, and funding for predictable but expensive events such as marriages and funerals. This is in significant contrast to the services that NGOs have generally offered, which have usually been limited to the provision of credit for production. Transaction costs are low. Transaction costs are the costs, other than interest payments, which are incurred in making a deposit or taking a loan. They include travel, time away from other activities, related 'gifts' which might have to be offered to bank or government officials, costs in obtaining documenta- tion required, such as land certificates, and so on. Compared to formal services, local informal services generally require very little form-filling or travel. However, the advantage to the borrower of low transaction costs may be more than counterbalanced by their lack of power in setting the terms of a loan, which may be exploitative. Informal services impose their own discipline. The flow of information locally and the small number of providers of informal finance often act as powerful incentives to users to repay loans or save in a disciplined way. A ROSCA member failing to pay their instalment risks social ostracism from neighbours, friends, and relatives; they may be less likely to receive help from these people in times of severe difficulty in future. Poor people are capable of saving The evidence of informal systems disproves the assumption that poor people cannot save. Saving 'in kind' has long been a recognised part of people's livelihood management: saving in cash is a necessity of interaction with the cash economy. Indeed it is often the poorest, who are landless or for other reasons dependent on casual, poorly-paid jobs, who gain a large proportion of their incomes in cash and therefore have most need of savings facilities. The evidence shows that poor people are not only willing to save but at present often pay highly for savings facilities. 24 Informal systems are adaptable. Informal financial services The variety of forms and functions of informal finance demonstrates the adaptability of these systems to different economic conditions and changing circumstances. This contrasts with formal systems which often have to be based on a uniform delivery model. There is thus much to be learned from informal financial systems. Indeed aspects of these systems have found their way into the design of NGO and semi-formal financial services programmes. In particular, both group-based and individual-based schemes have made use of the 'insider knowledge' of other local people: individual-based schemes, such as BRI, through personal references from local representatives, and group- based schemes, such as Grameen, through self-selecting groups of borrowers (see Chapter 1). This brief overview has not identified for whom these services exist - women and men, poor or poorest. The poorest people may find it difficult to save the amount that a ROSCA requires and hence find participation a burden or are excluded. Even if there are a number of people in similar situations, they are often marginalised or isolated and lack the social networks to create their own ROSCA with a lower fee. Indebtedness may also make it difficult for the poorest to save and build up a small asset base - a situation that will be illustrated in the case of low-income and unemployed members of the Ladywood Credit Union in the UK, a case-study scheme described in Chapter 6. There are therefore limitations to the extent to which savings-based user- owned facilities can be of use to very poor people. However, systems that allow flexible amounts to be deposited are more likely to be appropriate. 2.6 Deciding when and how to intervene Before going on to discuss ways of intervening which are useful and relevant to poor people (see Chapter 3), it is necessary to issue some warnings. Several commentators, among them NGO practitioners, have questioned the appropri- ateness of NGOs acting as providers of financial services. Abugre (1992) identifies a range of dangers, and points to the dire consequences of the job being done badly: ⚫ NGOs remain averse to charging positive real interest rates and may, consciously or otherwise, undermine traditional financial systems. ⚫ NGOs do not submit themselves to the discipline required for the provision of sustainable financial services. 25 Microfinance and Poverty Reduction ⚫ Schemes are managed by entirely unprofessional and untrained staff and are often carelessly conceived, designed, and implemented. . There are cases where NGOs have flooded the market with credit, resulting in indebtedness on the part of borrowers, and potentially regressive effects on income and wealth distribution. By extending loans which poor people are unable to pay due to factors beyond their control, or which may have simply been inappropriate in the first place, NGOs can cause a level of indebtedness which may result in the borrower having to liquidate assets in order to repay. Abugre therefore warns against the hasty introduction of new financial services by NGOs and concludes that they should concentrate on what they do well, such as providing social services and acting as confidence brokers in coinmunities. Direct provision may be a risky and problematic strategy for an NGO, particularly as the NGO may not have the range of skills required to develop microfinance interventions, nor experience of the financial skills and respon- sibility required to ensure funds are properly safeguarded and accounted for. A further range of managerial skills are also necessary in managing a portfolio of financial assets such as loans and deposits. NGOS with experience of welfare and relief have more experience of channelling funds than managing them (Bouman, 1995). An NGO must ask itself whether it has the skills to become a banker.. An organisation lacking the relevant skills may consider acquiring them either through recruitment or staff development. Such a strategy itself has important consequences. These skills may be in short supply and recruit- ment prove difficult; they take time to develop and are acquired through experience as well as training. There is often a strong impetus to start work even if the skills of staff are still weak. This can endanger the intervention itself since it is at this early stage that users gain an impression of the nature of the operation, and inexperienced staff are likely to make mistakes. Embarking on direct intervention also raises questions about the long-term sustainability of the service on offer. Financial services should not be provided on a transient or temporary basis. There needs to be a degree of permanence to enable people to plan for their future finan- cial needs. Consideration of the long-term future for a system of finan- cial service provision is therefore important at the outset. Direct provision by an NGO which expects to move away from the area would seldom be appropriate. 26 Informal financial services There is a further range of issues at the level of the macro-economy which should also be considered when deciding whether to intervene. Macro- economic stability is an important pre-requisite for getting a scheme off the ground. Hyper-inflation and economic instability do not encourage individuals to save, and loans under such circumstances are difficult to manage. (However, in Mexico, while formal-sector banks were reeling from massive default caused by the high interest rates and high inflation of 1995, URAC, one of the case-study institutions discussed in Chapter 6, continued to thrive.) Political stability is also needed, since without it there is unlikely to be much confidence in the long-term future of new financial institutions. Before considering scheme design an NGO must also investigate the formal legal regulatory requirements for organisations involved in financial service provision, especially for savings (see Chapter 3). 2.6.1 Research questions on existing informal financial services In carrying out research into the services available, and how they are used, an intervener should try to find answers to a wide range of questions, such as: How do people manage their savings deposits? Are there savings banks, or deposit takers, insurance salesmen, or savings clubs? Do poor people have access to them? If not, how do they save (for example, gold, livestock). Who among the poor uses them (men, women, landless labourers, subsistence farmers etc)? (Extensive use of expensive deposit takers might indicate that the NGO should look first at the reasons why alternatives are not in place: and second at whether there is any possibility for the NGO to get involved, either as promoter or as provider, in savings collection.) How do people temporarily realise the value of assets they hold? Are there pawnbrokers or are there schemes that allow them to pawn land or other major assets (eg jewellery) safely? Who uses these services? (If such devices exist, are they exploitative or enabling? If they are clearly exploitative, there might be a case for an NGO to try to provide or promote an alternative.) How do people get access to the current value of future savings? Are there money-lenders willing to advance small loans against future savings? Are there ROSCAS or managed or commercial chits, or co-operative 2 In a background paper commissioned for the purposes of this book, Shahin Yaqub examined the 'Macroeconomic Conditions for Successful Microfinance for Poor People'. The paper is available from the Policy Department, Oxfam (UK and Ireland). 27 banks? Do poor people have access? Which poor people use them? (If money-lenders appear to be exploiting users, for example by imposing very high interest rates or linking loans to disadvantageous deals over land, labour or commodities, then there might be a case for the NGO to introduce ROSCAS or annual savings clubs, or work as a promoter of self-help groups or credit unions.) How do people make provision for known life-cycle expenses? Do they provide for daughters' marriages, their own old age and funeral, for their heirs? Are there clubs that satisfy these needs, or general savings services or insurance companies that will do as well? Are there government or employer-run schemes? Are there particular expenses for which women have responsibility? How do people cope with emergencies? What happens when a breadwinner is ill, or when a flood or drought occurs? Does the government have schemes that reach poor people in these circumstances? If not, what local provision do people make? How do small-scale entrepreneurs get access to business finance? If so, in what amounts and at what cost? Do women entrepreneurs have access? During the exploratory work done to answer these questions another set of information will come to light-the absolute quantities of cash involved in local financial intermediation. This can be of immense value to scheme designers in cases where a decision is made to intervene. For example, information about amounts repaid regularly to money-lenders will be useful in setting loan sizes and repayment schedules for loan schemes. (Source: Rutherford, 1996.) Much can be learned from the way in which people are already managing their finances. A further aspect is the social relations involved-the groups of people who get together to form ROSCAS, those from whom loans are taken, and those with whom deposits are lodged. Tierney's work on the Oxfam- funded Youth Employment Groups in Tabora Region of Tanzania demon- strates that the design of the intervention, which was based around groups of people with the same occupational background, did not correspond to the pattern of existing financial intermediation, which was organised around small kin-based groups, each including diverse enterprises. Tierney argues that 'the formation of development groups can, ironically, divert people's energy away from improving their lives, because forming the kind of groups which are eligible for financial assistance is a time-consuming activity involving skill 28 Informal financial services in manipulating and maintaining public relations' (Tierneyforthcoming). This illustrates the value of understanding how indigenous financial systems operate, before designing a new microfinance initiative. 2.7 Filling the gaps As well as alerting people to the potential pitfalls of intervention, research to answer the kind of questions suggested above is likely to identify gaps in existing services. There are many ways in which such gaps can be filled and below are some examples of financial service interventions in insurance and hire purchase which can be of use to poor people. For those agencies whose motivation is poverty reduction it is important to link the identification of gaps with a poverty analysis to determine who is excluded from existing services and how such exclusion perpetuates poverty. 2.7.1 Some examples of innovative services Hire-then-purchase for the poor in Bangladesh ACTIONAID found, through the experience of running a group- based lending programme similar to that of the Grameen Bank, that many very poor people were nervous of taking a large loan — the 5,000 taka ($125) needed to buy a rickshaw, for example — in case they were not able to repay it. AA therefore devised a bire-then- purchase scheme for such people. AA bought its own rickshaws and bired them out to group members. A rickshaw driver could hire a rickshaw from AA instead of hiring one from a local 'mohajan'. If he then decided to convert bis contract with AA from hiring to buying, a proportion of the total hiring fees he had already paid was denoted as his down-payment, and be took a regular (smaller) AA loan to pay off the rest. Door-step insurance agents, Cuttack, Orissa In Cuttack, insurance agents from the Peerless company visit house- bolds in low-income areas. They offer simple endowment schemes, which from the point of view of the customers are like accumulating fixed deposit schemes: the customer puts in a fixed amount regularly and then on maturity gets it back plus profits. Life insurance cover is included in the contract. 'Bankassurance: group-based insurance for the rural poor In Bangladesh, one insurance company is pioneering an attempt to match, in the field of insurance, Grameen Bank's success in lending. 29 Delta Life Insurance has been experimenting since 1988 with cut- price basic life-insurance for rural people. Customers are arranged in groups, there is no medical examination and no age-bar, and premiums are tiny and collected weekly. Agents are also involved in Grameen-Bank-style lending and earn an extra commission for the insurance work. In fact the insurance premiums are invested directly in lending (on which healthy interest may be earned). In 1996 Delta was looking for a big NGO partner which could offer the two services- lending and insurance- side by side. Experience so far has shown that demand for such a service is high. Delta is exploring how it can extend this initiative beyond life insurance. 2.8 Promotion: an alternative strategy for NGOS Having identified the gaps in existing financial service provision, an NGO might involve itself in promotion rather than provision. The main alternatives to direct provision of financial services are ones which involve the NGO in a transitional or support role whereby activities such as mobilisation, training, and making links to other organisations are provided. A range of possible approaches are outlined. 2.8.1 Formation of savings groups and development of internal credit facilities Where ROSCAS do not exist or have limited coverage, the NGO might act as a facilitator of their formation or enable them to develop slightly more sophisti- cated systems of internal on-lending which allows savings and loans to take on more flexible formats. This approach has been used by Friends of Women's World Banking in India. In this case the NGO is mainly involved in training and organising the groups. Self-help groups (SHGs) are NGO-led attempts to promote savings clubs, or simple forms of credit union. Those initiated by Friends of Women's World Banking in India are aimed at poor rural women. FWWB (or its partner NGOs) persuades women from the same neigh- bourhood and from similar backgrounds to form small groups of 12 to 15 members. NGO workers encourage the women to meet regularly and frequently and during these meetings the women discuss their financial problems and ways of solving them. The solution they are steered towards involves regular small savings and the immediate conversion of those savings into small loans taken by one or two members at each meeting. Care is taken to Informal financial services involve all group members in the discussion and formulation of rules (how often to meet, the interest to be charged on loans, and repayment arrangements) and then to ensure that every member experiences for herself the activities of saving and of taking and repaying a loan. The group is asked to choose leaders who are trained to manage the group's affairs: if illiteracy or very poor educational levels are a problem then rules are kept deliberately simple (fixed equal savings, and annual dividends rather than monthly interest on savings, for example). These preparations are intended to equip the group for independent survival after the NGO stops sending workers regularly to the meetings. Groups which perform well over several months are able to obtain small bulk loans made by FWWB to the group as a collective. Where there are a number of groups in an area, FWWB may help them form a federation' (apex body') to help with liquidity problems: groups with excess savings deposit them with the federa- tion which on-lends to groups with a strong demand for loans. (Source: WWB, 1993.) However, although this type of intervention can succeed with agency help, it has yet to be proved whether savings and credit groups which are promoted by outsiders can achieve long-term independence (Rutherford, 1996). A range of questions remain: can they save sufficient funds among themselves to satisfy their own demand for loans? Can external funds be introduced into these groups without destroying their independence? 2.8.2 Promotion of small-scale formalised approaches National legislation may allow for credit unions (the World Council of Credit Unions has national and regional affiliates all over the world) or thrift and credit co-operatives (as in Sri Lanka, see 3.4.2). Another approach an NGO might adopt could be the linking up of people interested in establishing such services for themselves with other credit unions or umbrella and apex bodies that are able to promote and advise on particular financial services. Oxfam Hyderabad worked with the Federation of Thrift and Credit Associations in Andhra Pradesh, encouraging exposure visits to flourishing thrift and credit societies by potential members from other areas. The members now have a source of consumption credit based on their own savings. Oxfam Hyderabad saw its support for linking potential groups with an existing thrift and credit structure as a move away from direct funding of NGOs to provide credit. (Source: Oxfam (India) Trust, 1993.) 31 2.8.3 Linking groups to the formal system Existing savings groups or ROSCAS may already have bank savings accounts but are unable to take loans because the bank does not understand their operations or believe them to be creditworthy. The NGO might work with groups to encourage them to build up savings and deposit them in formal institutions. The NGO may then be able to work with a local bank to encour- age it to extend its services to groups. In Ghana, rural banking legislation was designed to create semi- autonomous local banks which would serve people cut off from financial services. However, the banks have experienced a range of problems which led to only 23 out of a total of 123 being classified as operating satisfactorily in 1992 (Onumah, 1995). In 1991 the Garu Bank, a small rural bank set up in 1983 in Ghana, was near to collapse as a result of embezzlement and bad loans. The people of Garu persuaded a member of their own community who was working in Accra to come back to the area and become theman- ager. The Bank is a unit bank and operates relatively autonomously. Share capital of the Bank is owned by the local community, the Catholic Mission, the local Agricultural Station and a Disabled Rehabilitation Centre. Helped by an additional capital injection of $30,000 received from overseas donors via the Catholic Mission the manager trans- formed the situation, and expected to report a profit for the first time. The bank has a range of clients, including local salaried workers such as teachers and government employees. These people are good customers because they take loans which are easily recoverable in the form of deductions made from their salaries at source. Alongside these customers, the Bank provides services to some 300 farmers' groups. Some of these groups were originally formed by the local Agricultural Station and the Catholic Mission and bought shares in the Bank when it was first set up. The manager went to meet the groups to discuss their needs with them. He has developed his own approach to the groups, and stresses that they should be concerned with working together rather than just obtaining credit. He has set up his own criteria for lending to the groups: savings balances of at least 10 per cent of the loan amount; regularity of savings as an indicator of group cohesion; and that the group should have been operating for at least six months. Repayment of the loan on time results in almost automatic qualification for a new loan the following year (although be bad refused loans to a number of groups the previous year due to poor performance). (Source: Abugre, Johnson et al, 1995.)
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Answer the following question using only information from the text included below. You must not utilize any other sources or your own reasoning in your response. What are some examples of informal financial services? Current debates in microfinance 1 1.1 Subsidised credit provision From the 1950s, governments and international aid donors subsidised credit delivery to small farmers in rural areas of many developing countries. It was assumed that poor people found great difficulty in obtaining adequate volumes of credit and were charged high rates of interest by monopolistic money-lenders. Development finance institutions, such as Agricultural Development Banks, were responsible for the delivery of cheap credit to poor farmers. These institutions attempted to supervise the uses to which loans were put, and repayment schedules were based on the expected income flow from the investment. Returns were often overestimated. For example, calculations would be based on agricultural yields for good years (Adams and Von Pischke, 1992). As a result, loans were often not repaid. The credibility and financial viability of these subsidised credit schemes were further weakened by the use of public money to waive outstanding and overdue loans at election time (Adams and Von Pischke, 1992; Lipton, 1996; Wiggins and Rogaly, 1989). A dependence on the fluctuating whims of governments and donors, together with poor investment decisions and low repayment rates made many of these development finance institutions unable to sustain their lend- ing programmes. Credit provision for poor people was transitory and limited. 1.2 The move to market-based solutions This model of subsidised credit was subjected to steady criticism from the mid-1970s as donors and other resource allocators switched attention from state intervention to market-based solutions. Policy-makers were reminded 5 Microfinance and Poverty Reduction that credit could also be described as debt and that the over-supply of subsidised credit without realistic assessment of people's ability to repay could result in impoverishment for borrowers. At the same time the concept of 'transaction costs', and the notion that full information about borrowers was not available to lenders, were used by the opponents of subsidised credit to justify the high interest-rates charged by money-lenders. Lending money carries with it the risk of non-repayment. In order to know who is creditworthy and who is not, and so reduce this risk, the lender screens potential borrowers. This involves gathering information on the circumstances of individuals, which may not be easy to obtain. Then enforcement costs are incurred to ensure repayment. Through this process risks are reduced, though not eliminated. Where a loan is disbursed on condition that it is used for a particular purpose, supervision costs also arise. Using these tools of analysis it was argued that private money-lenders charged interest rates which were higher than formal bank-rates because of the high costs they faced in terms of risk, particularly when lending without physical collateral. At the same time, it was argued that money-lenders were an efficient source of credit because their greater knowledge of the people to whom they were lending lowered screening costs. Moreover, potential borrowers faced high transaction costs when they sought loans from formal-sector finance institutions. These costs included the time, travel, and paperwork involved in obtaining credit, and were often pro- hibitive for poor clients, especially those most geographically isolated. On the basis of this analysis, a group of economists based at Ohio State University (USA), notably Dale Adams and J D Von Pischke, put forward the view that the provision of credit should be left almost entirely to the private sector. In concentrating on the problems of publicly subsidised credit, these economists ignored the social ties, power relations, and coercion associated with the activities of money-lenders. However, detailed micro-level research has demonstrated the widespread use of interlocked' contracts to force exchange to the disadvantage of poor people (Bhaduri, 1981). Powerful local people, including landlords, employers, and traders, are able to influence the terms of loans made to tenants, workers, and small producers via conditions set in transactions involving land, labour, or crops. For example, traders frequently lend working capital to small farmers on condition that their crops are sold to that trader at a pre-determined price. Similarly, loans are made to workers against the promise of labour to be provided at below the going rate at a set future date (Rogaly, 1996b). Against the background of these debates, recent developments in the design of microfinance schemes have generated an understandably high degree of excitement. This is because innovative features in design have 6 Current debates in microfinance reduced the costs and risks of making loans to poor and isolated people, and made financial services available to people who were previously excluded. 1.3 Making use of social collateral There was little knowledge among formal-sector financial intermediaries of alternatives to physical collateral, until the 1970s, when the Grameen Bank in Bangladesh began using 'peer-group monitoring' to reduce lending risk. The model for credit delivery in the Grameen Bank is as follows: • Groups of five self-select themselves; men's and women's group are kept separate but the members of a single group should have a similar economic background. • Membership is restricted to those with assets worth less than half an acre of land. ⚫ Activities begin with savings of Taka 1 per week per person and these savings remain compulsory throughout membership. • Loans are made to two members at a time and must be repaid in equal instalments over 50 weeks. . Each time a loan is taken the borrower must pay 5 per cent of the loan amount into a group fund. • The group is ultimately responsible for repayment if the individual defaults. • Between five and eight groups form a 'development centre' led by a chair- person and secretary and assisted by a Grameen Bank staff member. • Attendance at weekly group and centre meetings is compulsory. • All transactions are openly conducted at centre meetings. • Each member may purchase a share in the Bank worth Taka 100 Through this system the Grameen Bank has provided credit to over 2 million people in Bangladesh (94 per cent women) with a very low default rate. (Source: Khandker, Khalily and Khan, 1995.) However, peer-group monitoring has not proved necessary to other instit- utions seeking to do away with physical collateral. In Indonesia, government- sponsored banks have successfully used character references and locally- recruited lending agents (Chaves and Gonzales Vega, 1996). The peer-group 7 Microfinance and Poverty Reduction method of Grameen and the individual-user approach of the Bank Rakyat Indonesia (see 1.4) can both be seen as attempts to lower screening costs by using local 'insider' information about the creditworthiness of borrowers. The degree to which Grameen Bank employees themselves implement peer-group monitoring has recently been questioned. It is argued that the reason for the Grameen Bank's high repayment rates is the practice of weekly public meetings at which attendance is compulsory, for the payment of loan instalments and the collection of savings. The meetings reinforce a culture of discipline, routine payments, and staff accountability (Jain, 1996). Another means of improving loan recovery is to insist on regularity of repayment. This is likely to reflect the actual income-flow of the borrower much better than a lump-sum demand at the end of the loan period. Borrowers can make repayments out of their normal income rather than relying on the returns from a new-often untested-mini-business. Neverthe- less, where seasonal agriculture is the main source of income, and borrowers face seasonal hardship, regular repayment scheduling may cause problems. Microfinance specialists have argued that the prospects for scheme's stability are improved by innovations such as social collateral and regular repayments instalments. Indeed, financial sustainability has become an important goal in itself. To achieve sustainability, microfinance institutions, be they NGOs, government agencies, or commercial banks, need to ensure that the costs of providing the service are kept low and are covered by income earned through interest and fees on loans (see Havers, 1996). As microfinance deals, by definition, with small loans, the income generated through interest payments is also small in comparison with administration costs. To generate profits, therefore, it is necessary to increase scale - in other words, to lend to a large number of people (Otero and Rhyne, 1994). 1.4 Savings The regular repayments on loans required by large non-governmental micro- finance institutions in Bangladesh (including BRAC, ASA and Grameen) provide evidence that poor people can save in cash (Rutherford, 1995a). These intensive repayment regimes are very similar to those of rotating savings and credit associations: steady weekly payments, enforced by social collateral, in return for a lump sum. Loans made are, in reality, advances against this stream of savings. By insisting on regular savings, microfinance institutions can screen out some potential defaulters, build up the financial security of individuals, increase funds available for lending, and develop among members a degree of identification with the financial health of the institution. People involved in 8 Current debates in microfinance such schemes may previously have been unable to reach formal-sector banks, complete their procedures, qualify for loans or open savings accounts. 'A savings facility is an extremely valuable service in its own right, which often attracts many more clients than a credit programme, particularly from among the poorest' (Hulme and Mosley, 1996, p147). This evidence that poor people can save in cash has opened up further debate. A distinction is made between schemes in which borrowers must save small and regular amounts in order to obtain loans (termed 'compulsory' saving) and those which offer flexible savings facilities. In the latter case people can deposit and withdraw cash in whatever amounts, and as often, as they wish. This distinction is made especially strongly by Robinson (1995) in her account of the Bank Rakyat Indonesia. The BRI local banking system has about six times as many deposit accounts as loans. On 31 December 1993, BRI's local banking system had $2.1 billion in deposits. These were all voluntary savings. By 31 December 1995, there were 14.5 million savings accounts. Savers with BRI bave access to savings whenever they want. BRI deals with individuals rather than groups. Its savings programme was designed specifically to meet local demand for security, convenience of location, and choice of savings instruments offering different mixtures of liquidity and returns. BRI's local banking system has a loan limit of about $11,000. The idea is that good borrowers should not be forced to leave until they can qualify for the loans provided by ordinary commercial banks. In addition, BRI has a system which gives its borrowers an incentive to repay on time. An additional 25 per cent of the interest rate is added to the monthly payment. This amount is paid back to borrowers at the end of the loan period if they have made every payment in full and on time. There is a corresponding in-built penalty for those who have not. (Source: Robinson, 1994.) Robinson argues that there is an enormous unmet demand for flexible savings services. However, she also warns that managing a savings system of this type is much more complex than running a simple credit programme. Schemes which operate under these 'new' savings and credit technologies are an improvement on the old model of subsidised agricultural and micro- enterprise finance. The story of how they have succeeded in reaching poor people is now the subject of a large literature (for example, Rutherford, 1995b; Hulme and Mosley, 1996; Mansell-Carstens, 1995). That many more poor people can now obtain financial services is a major achievement of these 9 Microfinance and Poverty Reduction schemes. However, the questions of which poor people have been reached, and of whether poverty has been reduced, still remain. 1.5 Can microfinance interventions reduce poverty? If poverty is understood as low levels of annual income per household, reducing poverty is about raising average income levels. If a particular level of annual income per head is used as a poverty line, poverty reduction could be measured by counting the number or proportion of people who cross that line-who are promoted out of poverty. Providers of financial services who aim to enable people to cross such a poverty line have focused on credit, in particular credit for small enterprises, including agricultural production. However, attention to annual income can obscure fluctuations in that income during any given year. Poverty can also be understood as vulner- ability to downward fluctuations in income. Such fluctuations can be relat- ively predictable, such as the seasonal decline in employment for agricultural workers, or a shortage of income and trading opportunities in the dry season or before harvest. Alternatively, fluctuations in income may result from unexpected shocks such as crop failure, illness, funeral expenses or loss of an asset such as livestock through theft or death, or a natural disaster such as a cyclone (Montgomery, 1996). Vulnerability can be heightened by the lack of saleable or pawnable assets and by debt obligations. Interventions which reduce such vulnerability and protect livelihoods also reduce poverty. 1.5.1 Poverty as powerlessness A further dimension of poverty which is often the focus of NGO interventions is powerlessness, whether in an absolute sense or in relation to others. Economic inequality between and within households is likely to be associated with concentrations of political and social power. Inequality can increase whenever better-off people are able to improve their incomes faster than others. Even if the absolute level of material well-being of the worst-off people does not change, relative poverty (Beck, 1994) may increase, and with it a sense of powerlessness among very poor people. Power relations are partly determined by norms of expected behaviour. Neither the relations nor the norms are static; they are contested and change over time. Powerlessness can be experienced in a variety of situations: within the household, as a result of differences in gender and age; and within the community, between socio-economic groups, as a result of caste, ethnicity, and wealth. Defining poverty in terms of power relations implies that assessment of the impact of microfinance interventions should focus on their 10 Current debates in microfinance influence on social relations and the circumstances which reproduce them. Even in a similar geographical and historical context, it is important to disting- uish between the ways in which specific groups of poor people (women and men, landed and landless, particular ethnic groups) are able to benefit from financial services or are excluded from doing so. 1.5.2 Credit for micro-enterprises While there are methodological difficulties involved in measuring increases in incomes brought about by the provision of credit (see further discussion in Chapter 5), studies have demonstrated that the availability of credit for micro- enterprises can have positive effects. A recent survey collected data from government, NGOs, and banks involved in providing financial services for poor people. Twelve programmes were selected from seven countries (six of these are included in Table 1, Annex 1). Households which had received credit were compared with households which had not. The results demon- strated that credit provision can enable household incomes to rise. However, taking the analysis further, Hulme and Mosley demonstrated that the better-off the borrower, the greater the increase in income from a micro- enterprise loan. Borrowers who already have assets and skills are able to make better use of credit. The poorest are less able to take risks or use credit to increase their income. Indeed, some of the poorest borrowers interviewed became worse off as a result of micro-enterprise credit, which exposed these vulnerable people to high risks. For them, business failure was more likely to provoke a livelihood crisis than it was for borrowers with a more secure asset base. Specific crises included bankruptcy, forced seizure of assets, and unofficial pledging of assets to other members of a borrowing group. There have even been reports of suicide following peer-group pressure to repay failed loans (Hulme and Mosley, 1996, pp120-122). A much smaller survey comparing micro-enterprise programmes in El Salvador and Vanuatu found that the development of successful enterprises and the improvement of the incomes of very poor people were conflicting rather than complementary objectives. By selecting those most likely to be successful for credit and training, the programmes inevitably moved away from working with the poorest people (Tomlinson, 1995). Reviews of Oxfam's experiences with income-generating projects for women raised serious questions about the profitability of such activities. Full input costings, which would have revealed many income-generating projects as loss- making, were not carried out. Omissions included depreciation on capital, the opportunity cost of labour (the earnings participants could have had through spending the time on other activities), and subsidisation of income- 11 Microfinance and Poverty Reduction generating projects with income from other sources. Market research and training in other business skills had often been inadequate (Piza Lopez and March, 1990; Mukhopadhyay and March, 1992). 1.5.3 Reaching the poorest Whether income promotion is based on loans for individual micro-enterprises or on group-based income generation projects, its appropriateness as a strategy for poverty reduction in the case of the poorest people is questionable. Other evidence suggests that self-selected groups for peer-monitoring have not been inclusive of the poorest people (Montgomery, 1995). People select those with whom they want to form a group on the basis of their own know- ledge of the likelihood that these people will make timely payment of loan and savings instalments: X will only have Y in her group if she believes Y is capable of making regular repayments and has much to lose from the social ostracism associated with default. This system might well be expected to lead to the exclusion of the poorest (Montgomery, op. cit.). Even the low asset and land-holding ceiling which the big microfinance institutions in Bangladesh have successfully used to target loans away from better-off people has not necessarily meant that the poorest, who are often landless, are included (Osmani, 1989). So while the innovations referred to earlier appear to have made loans more available to poor people, there is still debate over the design of appro- priate financial services for the poorest. Hulme and Mosley's study strongly suggests that providing credit for micro-enterprises is unlikely to help the poorest people to increase their incomes. However, detailed research with users has found that some design features of savings and credit schemes are able to meet the needs of very poor people. For example, it was found that easy access to savings and the provision of emergency loans by SANASA (see 3.4.2) enabled poor people to cope better with seasonal income fluctuations (Montgomery, 1996). Microfinance specialists increasingly, therefore, view improvements in economic security income protection rather than promotion (Dreze and Sen, 1989) as the first step in poverty reduction. ...from the perspective of poverty reduction, access to reliable, monetized savings facilities can help the poor smooth consumption over periods of cyclical or unexpected crises, thus greatly improving their economic security.' It is only when people have some economic security that 'access to credit can help them move out of poverty by improving the productivity of their enterprises or creating new sources of livelihood' (Bennet and Cuevas, 1996, authors' emphasis). Current debates in microfinance 1.6 Financial interventions and social change Interventions have an impact on social relations partly through their econ- omic effects. In many instances implementors of credit schemes have claimed that the work will lead to progressive social change, for example by empow- ering women and changing gender relations in the household and in the community (Ackerly, 1995). In five out of the six schemes summarised in Table 1 (Annex 1), over half of the borrowers were women. Much of the work that has been done in assessing the impact of credit programmes on women has been in Bangladesh. One approach was to look at the control women retained over loans extended to them by four different credit programmes: the Grameen Bank, BRAC, a large government scheme (the Rural Poor Programme RD-12), and a small NGO (Thangemara Mahila Senbuj Sengstha) (Goetz and Sen Gupta, 1996). Results suggested that women retained significant control over the use to which the loan was put in 37 per cent of cases; 63 per cent fell into the categories of partial, limited or no control over loan use. Goetz and Sen Gupta found single, divorced, and widowed women more likely to retain control than others. Control was also retained more often when loan sizes were small and when loan use was based on activities which did not challenge notions of appropriate work for women and men. The question of whether women were empowered is not answered: even when they did not control loans, they may have used the fact that the loan had been disbursed to them as women to increase their status and strengthen their position in the household. However, in some cases women reported an increase in domestic violence because of disputes over cash for repayment instalments. A second major piece of research has assessed the effect of Grameen and BRAC programmes on eight indicators of women's empowerment: mobility, economic security, ability to make small purchases, ability to make larger purchases, involvement in major household decisions, relative freedom from domination by the family, political and legal awareness, and participation in public protests and political campaigning (Hashemi et al, 1996). The study concludes that, on balance, access to credit has enabled women to negotiate within the household to improve their position. However, unlike the Goetz and Sen Gupta study, which is based on 275 detailed loan-use histories, Hashemi et al attempted to compare villages where Grameen or BRAC were present with villages where they were not. Because of difficulties inherent in finding perfect control villages (which the authors acknowledge), the conclusions of the study do not signify the end of the debate. It has also been argued that focusing on women is much more to do with financial objectives than with the aim of empowerment. According to 13 Microfinance and Poverty Reduction Rutherford (1995b) the real reasons for targeting women in Bangladesh are that they are seen as accessible (being at home during working hours); more likely to repay on time; more pliable and patient than men; and cheaper to service (as mainly female staff can be hired). Thus the process of loan supervision and recovery may be deliberately internalised inside the household (Goetz and Sen Gupta, op. cit.). Goetz and Sen Gupta do not use this as an argument against the provision of finance for women in Bangladesh, but rather suggest that to avoid aggravating gender- based conflict, loans should be given to men directly as well as to women and, at the same time, that efforts should be made to change men's attitudes to women's worth. 1.7 Treading carefully in microfinance interventions This brief summary of evidence and argument suggests that microfinance interventions may increase incomes, contribute to individual and household livelihood security, and change social relations for the better. But that they can not always be assumed to be doing so. Financial services are not always the most appropriate intervention. The poorest, in particular, often face pressing needs in terms of primary health care, education, and employment opportunities. Lipton has recently argued for anti-poverty resources to be allocated across sectors on the basis that a concentration on a single interven- tion mechanism, say credit, is much less effective in poverty reduction than simultaneous credit, primary health, and education work, even if this entails narrowing geographical focus (op. cit.). The particular combinations which will be most effective will depend on the nature of poverty in a specific context. Although microfinance provision appears to be evolving towards greater sustainability, relevance, and usefulness, there are few certainties and the search for better practice continues. Decisions on whether and how to intervene in local financial markets should not be taken without prior knowledge of the working of those markets. If the intervention is intended to reduce poverty, it is especially important to know the degree to which poor people use existing services and on what terms. Only then can an intervening agency or bank make an informed decision on whether their work is likely to augment or displace existing 'pro-poor' financial services. If the terms of informal financial trans- actions are likely to work against the interests of poor people (cases in which the stereotype of 'the wicked money-lender' corresponds to reality) the inter- vention may attempt to compete with and possibly replace part of the informal system. However, making such an informed assessment is not straight- forward, as one study of the power relations between informal financial 14 Current debates in microfinance service providers and agricultural producers in Tamil Nadu demonstrated. Grain merchants based in the market town of Dindigul were found to dictate the terms of product sale when lending working capital to very small-scale farmers, but to be much the weaker party when lending to larger-scale farmers (Rogaly, 1985). The structure of a credit market can change, partly under the influence of outside intervention. Rutherford has studied the changing market in financial services for poor people in Bangladesh. Competition between NGOs is leading to users being less subservient to NGO staff and protesting about unpopular financial obligations, such as the 5 per cent deducted from loans by Grameen for a 'group fund'. Private individuals have set up offices imitating the Grameen style but charging higher interest rates on loans than the big NGOS, and also offering higher rates on savings deposits. Private urban finance companies have expanded. Despite the tendency for NGOs to become more like banks, other formal-sector lenders are still reluctant to lend to poor people (see also McGregor, 1994). The expansion of NGO credit in Bangladesh has been made possible by the flood of donor money to that country. One study of BRAC showed that loan disbursal and recovery had become more important than group forma- tion (Montgomery, 1996). In 1992, Grameen Bank and BRAC employees were found to be offering 'immediate loans' to women in villages where smaller NGOs had been attempting longer-term group-based finance (Ebdon, 1995). Ebdon attributed this behaviour to fairly strict targets for loan disbursal in the case of BRAC, and in both cases to an imperative for job security for staff and a desire on the part of the organisations to expand their influence and strengthen their reputations (p52). This anxiety to increase the number of users can undercut the very basis of the new model: the creation of sustainable financial institutions. Studies of credit schemes have consistently demonstrated that unless borrowers and savers believed they would benefit from the long-term survival of the institution, and have a sense of ownership, repayment rates would decline (Rogaly, 1991; Copestake, 1996a). The sense of ownership is weakened by attempts by large microfinance institutions in Bangladesh to claim territory by encroachment. In India, in the absence of equivalent flows of external finance, thrift and credit co-operatives based much more on borrowers' requirements have emerged (Rutherford, 1995b, p136). An understanding of the way in which the institutions themselves change and respond to incentives is therefore necessary for the design of relevant anti-poverty interventions, including financial services. 15 2 Informal financial services 2.1 Introduction In recent years research into informal financial services and systems has significantly deepened understanding of the way they operate and their strengths and weaknesses. A simplistic belief that local money-lenders charged extortionate interest rates lay behind the provision of subsidised finance in the past. More thorough investigation has highlighted a range of savings, credit, and insurance facilities accessible to poor people. The appar- ently usurious interest charges reportedly made by private money-lenders may be explainable in terms of transaction costs, lack of information, and high risk. Informal financial services may be well-equipped, because of local 'insider' knowledge, and lower overheads, to respond to the requirements of poor people; they may also be exploitative. This chapter starts with a brief overview of the types of informal services that have been found to exist in a wide variety of countries and social contexts. Some of the broad characteristics of these services are identified, and lessons drawn for the design of NGO or semi-formal systems. In describ- ing informal financial services it is useful to distinguish between those which are owned by their users and those which are offered by an individual, usually on a profit-making basis. The distinction can be a helpful one in analysing the ways in which financial services enable or exploit poor people. NGOs considering microfinance interventions need first to find out what informal financial services are available, and how they operate. Such services are capable of supporting poor people's livelihoods as well as perpetuating 1 This chapter draws heavily on a background paper commissioned for the purposes of this book: A Critical Typology of Financial Services for the Poor, Stuart Rutherford, November 1996. Examples are drawn from Rutherford's own experience unless otherwise stated. 16 Informal financial services structures which undermine them. It is necessary, therefore, to understand under what circumstances and to what degree these services are enabling or exploitative for poor people. On the whole, user-owned services are likely to be more enabling than services provided for profit. Investigating the scope and nature of existing services is an essential pre- liminary before considering whether an intervention is necessary. However, NGOs themselves may not have the right skills to become direct providers of financial services. Furthermore, financial services are needed by poor people on a permanent basis to enable them to plan and manage their finances; NGO programmes which might be here today and gone tomorrow may be an inap- propriate means through which to provide them. Therefore NGOs should seriously consider whether direct intervention is in fact the best response for them to make. The chapter closes by discussing alternative strategies NGOs might employ. 2.2 User-owned informal financial services Systems which facilitate financial transactions and are owned by their users are many and varied, and range from simple reciprocal arrangements between neighbours, savings clubs and rotating savings and credit associa- tions (ROSCAS), to forms of insurance, building societies, and systems of co- operative business finance. An example of each of these types is described below. All of these systems can be found in a variety of country settings. Rotating savings and credit associations (ROSCAS) in particular, are an extremely common phenomenon. They exist in almost every country (for example, 'partners' in Jamaica and Britain, bui in Vietnam, and njangi in Cameroon). (See Bouman, 1995; Ardener and Burman, 1995 for detailed and extensive surveys of ROSCA operations in a range of settings.) The principle is very simple: a number of people agree to save a fixed amount of money at regular intervals; at each meeting, for example weekly, each member contri- butes an agreed amount, resulting in a single lump sum becoming available, which is then allocated to one of the members. There are three basic varia- tions in the way in which this lump sum or 'prize' is allocated. First, it can be allocated on the basis of strict rotation between members of the group; second, on the basis of a lottery of members; third, it may be auctioned to the member who is willing to accept the biggest discount. The group will usually meet (but does not always need to) and undertake this transaction on as many occasions as there are members of the group, thus ensuring that each member gets the 'prize' once. The ROSCA demonstrates the basic principle of financial intermediation: collecting many small savings from many people, turning this into a lump sum for one person, and repeating this procedure over time. 17 Microfinance and Poverty Reduction ROSCA finance is used for many purposes. Some ROSCAS operate to enable an asset to be purchased, such as a rickshaw or fishing equipment for each member, and may have been set up specifically for the purpose. 'Merry- go-rounds', as ROSCAS are called among Kikuyu women in Kenya, are sometimes used by women as a means of accumulating enough money to buy new household utensils or clothes. The technology of the ROSCA is not unique to poor communities but is also used by salaried professionals to purchase major consumption items or assets such as refrigerators or cars. A further example of a user-owned device is the insurance fund which makes pay-outs conditional on certain circumstances occurring. These are int- ended to cover large expenses such as those connected with marriage or death. 2.2.1 Some examples of user-owned financial services Neighbourhood reciprocity in Southern India Reciprocal lending may be extended to involve several or even all the members of a community. Among Moslems in Kerala State in southern India kuri kalyanam are invitations to a feast to which the guest is expected to bring a cash gift. When the host in his turn is invited to a feast by one of the guests he is expected to return double the amount (less if he is perceived as poor). In Vietnam one kind of hui (a generic name for various financial devices) involves a similar pooling of resources for one person on one occasion to be reciprocated later by others, at different times. Rickshaw ROSCAS in Bangladesh Very poor men driven by poverty from their home villages to the Bangladesh capital, Dhaka, often earn a living there by driving bired rickshaws. In the last ten years they have begun to run ROSCAS. A group of drivers forms, and each driver saves a set amount from his daily takings. When the fund is large enough (this usually takes about 15 days) a rickshaw is bought and distributed by lottery to one of the members. In between prizes' the cash is held by a trustworthy outsider, usually a local shopkeeper from whom the members buy their tea or cigarettes. In a further adaptation, those who have already received their rickshaw double their daily contribution. This progressively reduces the time-gap between prizes, and is seen as a fair way of rewarding those members who win the lottery late in the cycle, because their gross contribution is smaller than earlier winners. The extra payment made by the winners is roughly equivalent to what they save by no longer having to hire a rickshaw. 18 An accumulating savings club in Mexico Informal financial services In towns and villages in Mexico neighbours place frequent but irregular savings with trusted shopkeepers. Just before Christmas, the cash is returned to the saver. No interest is paid, but the saver has a lump sum to spend, and the shopkeeper has had the use of the money over the year and can now look forward to a good sales season. Building societies for the middle classes in Bangladesh In a lower-middle-class area of Dhaka, 165 employees in the Public Works Department belong to their own building society' which was started over 16 years ago. Each saves 200 taka ($5) a month out of his wages. As the cash accumulates it is lent out to members, who buy land and building materials. Interest rates are high and interest on the out- standing balance has to be paid each month, to encourage modest loans and rapid repayment. But loan sizes are generous and such workers would have few or no alternative sources for loans of this kind. Popular insurance: funeral funds (iddir) in Ethiopia Originally burial societies, iddir have extended to provide a wide range of insurance services in urban Ethiopia. Aredo (1993), study- ing these in Addis Ababa, estimated that 50 per cent of urban house- holds were members of some kind of iddir. Groups of people come together on the basis of location, occupation, friendship or family ties. Each iddir sets its own rules and regulations but usually pays out for funeral expenses or financial assistance to families of the deceased, and sometimes to cover other costs, such as medical expenses and losses due to fire or theft. 2.3 Informal financial services for profit Those offering informal financial services for profit fall into two groups: deposit takers (often also called money-guards) and lenders. What is most interesting about the situation of deposit takers is that, as in the Nigerian example below, savers usually pay for the service by obtaining a negative interest rate on their funds. This demonstrates the pressing need that people have for places to put their savings which are safe and secure not only from physical risks such as theft, fire or flood, but also from the demands of their family. For women, in particular, the ability to save small amounts in places to which their husbands and families cannot gain access (although they might know about them) has been shown to be particularly important. It may enable them to meet obligations in the family or household, such as the payment of children's school fees, for which they have particular responsibility. 19 Microfinance and Poverty Reduction Forms of lending also operate in a variety of ways, such as money-lenders; pawnbrokers, who take collateral in the form of physical assets; and forms of trade credit and hire purchase. The term 'money-lender' can cause confusion because it conjures up the image of a class of people whose main source of income is usury. In reality, many small farmers, for example, obtain credit from employers, landlords, traders, relatives, and other people who combine a number of economic activities. In some places money-lenders may be a more professionalised class, such as the Tamilians' in Cochin described below, but even in this case it is not necessarily their main source of income. Lending money can be exploitative of, as well as enabling for, poor people. People facing seasonal shortages may have only one source of credit, for example, an employer. The employer may agree to provide a loan, but only if the borrower promises to work when required at below the going wage-rate. As described below for Indonesia, crop traders may provide producers with seasonal credit on the understanding that the crop is sold through the same trader at low post-harvest prices. Tied credit of this type, whether in cash or kind, may be the only means of survival for poor people. But arrangements such as these can maintain and even exacerbate inequalities in power and position. In contrast, user-owned devices are likely to be more supportive and enabling, because the profits made are pooled, and shared or fed back into the system, and ownership and control of the funds are in the hands of the users. Such devices are unlikely to be exploitative of those involved, although they may widen inequalities between users and non-users. The comparison with services for profit is clear. However, loans from private lenders after harvest may enable small traders to make the most of the increased liquidity in the local economy. This emphasises the need for interveners to understand the workings of real markets and to question untested assumptions. It is essential to find out for which groups of poor people-women, men, landless labourers, subsistence farmers, migrant workers and under what circumstances these arrange- ments may be no more than a means of survival, while supporting wealth creation for others. 2.3.1 Some examples of informal financial services provided for profit Deposit takers: a mobile alajo in Nigeria One consequence of Nigeria's current political difficulties is a drop in public confidence in formal banks, according to Gemini News. This has allowed an old tradition to flourish again- alajos, or peripatetic deposit takers. Idowu Alakpere uses a bicycle to go 20 Informal financial services door-to-door round the outer suburb of Lagos where he lives. He has 500 customers who each save about 10 or 15 naira with him (about 50 to 75 cents US) at each daily visit. Customers withdraw money whenever they like, and Idowu charges them one day's savings per month, which he deducts from the withdrawal. Since deposits are made evenly over the month, the negative interest rate for one-month deposits is 1/15, or 6.6 per cent a month, an Annual Percentage Rate (APR) of 80 per cent. Some alajos, including Idowu, store the cash in a reliable bank, others use it to make loans. The Gemini News reporter was told by many local people that they trusted these alajos more than banks. When it was pointed out that some alajos are dishonest, they retorted that so are many banks. Professional money-lenders in Cochin, India 'Tamilians' provide a money-lending service to poor slum dwellers on a daily basis. They have set terms, which are well-known all over Cochin. For each 100 rupees lent, 3 rupees are deducted at source as a fee. Thereafter, 12.50 rupees per week must be repaid for ten weeks. This works out at an APR of 300 per cent (28 rupees paid on an average size loan of 48.50 rupees [97/2) for 10/52 of a year). Most non-poor observers regard this rate as outrageously exploitative. However, poor users of the service tend to take a favourable view of it. The 'Tamilians' do not needlessly harass their clients over repay- ment but take an 'understanding' view which includes a willingness to accept loan losses. These money-lenders know their clients well and (out of self-interest) will not lend more than they think the client can repay out of normal income over the next ten weeks. Lending against collateral: pawnbrokers in Western India Residents of the slums of Vijayawada use their local pawnbroker when they need money quickly. He is reliably available at his gold- smithing shop and he charges 3 per cent a month for loans pledged against gold, 5 per cent for silver and 9 per cent for brass. The inclu- sion of brass means that even the very poor can get a small advance by pawning kitchen pots and pans. He lends up to two-thirds the value of the pawn. He gives a receipt, and because the borrower can be sure of getting her pawn back when she repays the loan, she can risk pawning objects of sentimental value. Unlike those who lend without collateral the broker does not need to know his clients well: the unambiguous collateral provided by the pawn means that the broker can lend to more or less anyone at any time. 21 Microfinance and Poverty Reduction Advance crop sales in Indonesia A practice common in many countries is known as ijon in some areas of Indonesia. Farmers often need cash to get them through the 'bungry' season when their main crop is in the ground and there is not much else to do except sit and wait. They are forced to make an advance sale of the crop, usually to a grain buyer or his agent. Ijon transactions of this sort, if seen as loans, show an interest rate of anything from 10 to 40 per cent a month. (Source: Bouman and Moll in Adams and Fitchett, 1992.) Two examples of trade credit In many markets it is common to see poor people squatting on the ground with a small amount of fertiliser spread out on a mat. The fertiliser doesn't necessarily belong to the man or woman (or, often, child). Lacking capital themselves to buy stock, such people obtain the fertiliser on credit from a nearby shop. At the close of the market they return the money from sales and any balance of the stock to the shopkeeper, retaining a small proportion of the money. The system allows people to trade (safely if not profitably) without capital, and gives the shopkeeper a cheap extra outlet. The dadon credit system used to finance prawn cultivation in Bangladesh is an example of a trading system in which credit is passed on through a chain of intermediaries between the prawn farmer and exporters to Europe. The prawn market is a highly com- petitive business in which everyone in the chain is short of capital. The 'commission agent' at the port buys prawns on behalf of the exporters in the capital. To ensure their share of the market they provide credit early in the season which finds its way through a number of intermediaries before reaching the hands of the farmer. The intermediaries are 'depot' owners, then farias', or merchants, and finally local traders, who in turn lend to the farmers. In accepting the credit the farmer commits himself to selling exclusively to this particular trader. 2.4 Turning the informal into the formal In some countries such informal systems have evolved into formal systems which have had a major impact on their users. In the UK, for example, 'mutual' or friendly societies which began as small thrift groups in the nineteenth century turned into building societies in the first half of the twentieth, and have been the main source of housing finance for 50 years. Informal financial services There are further examples of such informal systems becoming increas- ingly formalised. Aredo (1993) reports that the iddir in Addis Ababa run by the Ethiopia Teachers' Association is of the scale of a medium-size insurance business. In Cameroon some of the traditional ROSCAS known as njangi have evolved into small banks offering finance for small businesses which have difficulty using formal banks (Haggblade, 1978). ROSCAS may thus be a transitional phenomenon. Chit funds in India are a formalised version of a ROSCA, for which govern- ment legislation exists. In contrast to the ROSCA, members of the chit fund do not normally know each other and are merely customers of the chit companies. The company advertises for and selects members, makes arrange- ments for collection of subscriptions, and holds auctions for the prizes. However, such funds are of limited use to poor people, who lack both the income to pay subscriptions and the social position to gain the confidence of the company. The transition to formalised services is not inevitable. Informal and formal arrangements continue to exist side-by-side even in industrialised countries. In Oxford, UK, ROSCAS have enabled people with very limited capital of their own to increase their chances of obtaining a small business loan (Srinivasan, 1995). A detailed comparative study of credit use among low-income Pakistani, Bangladeshi, and Carribean immigrants in the UK revealed enormous differ- ences in their use of financial services. In all cases sources of credit were class- ified into high-street credit, local commercial credit, mail order, social fund, community-based credit, and 'miscellaneous' (including friends, family, and employer). Unlike the Bangladeshis, the Pakistani and Carribean respond- ents reported community-based, ROSCA-like arrangements. Bangladeshi respondents made much more use of formal bank credit than the others, although they had at least as high a proportion of applications rejected, apparently on racial grounds (Herbert and Kempson, 1996). Abugre (1994) points out that transition and change can be rapid, discon- tinuous, and turbulent rather than smooth and linear. There is therefore likely to be a multiplicity of arrangements, some of which become formalised, while others die out, and yet others are initiated. The implication for those interested in providing financial services is that such a role must be carefully thought through, and be flexible and responsive to changing circumstances. 2.5 What can be learned from informal finance? Having briefly explored the range of financial services which may exist, it is clear that informal finance is a regular feature of poor people's lives. What can be learned from this? The continuation of a large number of different forms suggest the following points (partly adapted from Adams, 1992). 23 Microfinance and Poverty Reduction There is clearly a demand for financial services The range of informal financial services available partly reflects the varied requirements which people, both rich and poor, have for financial services. They may also be explained in terms of the actions of people with excess cash seeking to earn income from lending. In some cases, especially where there is a monopoly, or collusion among providers, this can be exploitative for the borrower. Informal services available include savings facilities, provision of credit for consumption, and funding for predictable but expensive events such as marriages and funerals. This is in significant contrast to the services that NGOs have generally offered, which have usually been limited to the provision of credit for production. Transaction costs are low. Transaction costs are the costs, other than interest payments, which are incurred in making a deposit or taking a loan. They include travel, time away from other activities, related 'gifts' which might have to be offered to bank or government officials, costs in obtaining documenta- tion required, such as land certificates, and so on. Compared to formal services, local informal services generally require very little form-filling or travel. However, the advantage to the borrower of low transaction costs may be more than counterbalanced by their lack of power in setting the terms of a loan, which may be exploitative. Informal services impose their own discipline. The flow of information locally and the small number of providers of informal finance often act as powerful incentives to users to repay loans or save in a disciplined way. A ROSCA member failing to pay their instalment risks social ostracism from neighbours, friends, and relatives; they may be less likely to receive help from these people in times of severe difficulty in future. Poor people are capable of saving The evidence of informal systems disproves the assumption that poor people cannot save. Saving 'in kind' has long been a recognised part of people's livelihood management: saving in cash is a necessity of interaction with the cash economy. Indeed it is often the poorest, who are landless or for other reasons dependent on casual, poorly-paid jobs, who gain a large proportion of their incomes in cash and therefore have most need of savings facilities. The evidence shows that poor people are not only willing to save but at present often pay highly for savings facilities. 24 Informal systems are adaptable. Informal financial services The variety of forms and functions of informal finance demonstrates the adaptability of these systems to different economic conditions and changing circumstances. This contrasts with formal systems which often have to be based on a uniform delivery model. There is thus much to be learned from informal financial systems. Indeed aspects of these systems have found their way into the design of NGO and semi-formal financial services programmes. In particular, both group-based and individual-based schemes have made use of the 'insider knowledge' of other local people: individual-based schemes, such as BRI, through personal references from local representatives, and group- based schemes, such as Grameen, through self-selecting groups of borrowers (see Chapter 1). This brief overview has not identified for whom these services exist - women and men, poor or poorest. The poorest people may find it difficult to save the amount that a ROSCA requires and hence find participation a burden or are excluded. Even if there are a number of people in similar situations, they are often marginalised or isolated and lack the social networks to create their own ROSCA with a lower fee. Indebtedness may also make it difficult for the poorest to save and build up a small asset base - a situation that will be illustrated in the case of low-income and unemployed members of the Ladywood Credit Union in the UK, a case-study scheme described in Chapter 6. There are therefore limitations to the extent to which savings-based user- owned facilities can be of use to very poor people. However, systems that allow flexible amounts to be deposited are more likely to be appropriate. 2.6 Deciding when and how to intervene Before going on to discuss ways of intervening which are useful and relevant to poor people (see Chapter 3), it is necessary to issue some warnings. Several commentators, among them NGO practitioners, have questioned the appropri- ateness of NGOs acting as providers of financial services. Abugre (1992) identifies a range of dangers, and points to the dire consequences of the job being done badly: ⚫ NGOs remain averse to charging positive real interest rates and may, consciously or otherwise, undermine traditional financial systems. ⚫ NGOs do not submit themselves to the discipline required for the provision of sustainable financial services. 25 Microfinance and Poverty Reduction ⚫ Schemes are managed by entirely unprofessional and untrained staff and are often carelessly conceived, designed, and implemented. . There are cases where NGOs have flooded the market with credit, resulting in indebtedness on the part of borrowers, and potentially regressive effects on income and wealth distribution. By extending loans which poor people are unable to pay due to factors beyond their control, or which may have simply been inappropriate in the first place, NGOs can cause a level of indebtedness which may result in the borrower having to liquidate assets in order to repay. Abugre therefore warns against the hasty introduction of new financial services by NGOs and concludes that they should concentrate on what they do well, such as providing social services and acting as confidence brokers in coinmunities. Direct provision may be a risky and problematic strategy for an NGO, particularly as the NGO may not have the range of skills required to develop microfinance interventions, nor experience of the financial skills and respon- sibility required to ensure funds are properly safeguarded and accounted for. A further range of managerial skills are also necessary in managing a portfolio of financial assets such as loans and deposits. NGOS with experience of welfare and relief have more experience of channelling funds than managing them (Bouman, 1995). An NGO must ask itself whether it has the skills to become a banker.. An organisation lacking the relevant skills may consider acquiring them either through recruitment or staff development. Such a strategy itself has important consequences. These skills may be in short supply and recruit- ment prove difficult; they take time to develop and are acquired through experience as well as training. There is often a strong impetus to start work even if the skills of staff are still weak. This can endanger the intervention itself since it is at this early stage that users gain an impression of the nature of the operation, and inexperienced staff are likely to make mistakes. Embarking on direct intervention also raises questions about the long-term sustainability of the service on offer. Financial services should not be provided on a transient or temporary basis. There needs to be a degree of permanence to enable people to plan for their future finan- cial needs. Consideration of the long-term future for a system of finan- cial service provision is therefore important at the outset. Direct provision by an NGO which expects to move away from the area would seldom be appropriate. 26 Informal financial services There is a further range of issues at the level of the macro-economy which should also be considered when deciding whether to intervene. Macro- economic stability is an important pre-requisite for getting a scheme off the ground. Hyper-inflation and economic instability do not encourage individuals to save, and loans under such circumstances are difficult to manage. (However, in Mexico, while formal-sector banks were reeling from massive default caused by the high interest rates and high inflation of 1995, URAC, one of the case-study institutions discussed in Chapter 6, continued to thrive.) Political stability is also needed, since without it there is unlikely to be much confidence in the long-term future of new financial institutions. Before considering scheme design an NGO must also investigate the formal legal regulatory requirements for organisations involved in financial service provision, especially for savings (see Chapter 3). 2.6.1 Research questions on existing informal financial services In carrying out research into the services available, and how they are used, an intervener should try to find answers to a wide range of questions, such as: How do people manage their savings deposits? Are there savings banks, or deposit takers, insurance salesmen, or savings clubs? Do poor people have access to them? If not, how do they save (for example, gold, livestock). Who among the poor uses them (men, women, landless labourers, subsistence farmers etc)? (Extensive use of expensive deposit takers might indicate that the NGO should look first at the reasons why alternatives are not in place: and second at whether there is any possibility for the NGO to get involved, either as promoter or as provider, in savings collection.) How do people temporarily realise the value of assets they hold? Are there pawnbrokers or are there schemes that allow them to pawn land or other major assets (eg jewellery) safely? Who uses these services? (If such devices exist, are they exploitative or enabling? If they are clearly exploitative, there might be a case for an NGO to try to provide or promote an alternative.) How do people get access to the current value of future savings? Are there money-lenders willing to advance small loans against future savings? Are there ROSCAS or managed or commercial chits, or co-operative 2 In a background paper commissioned for the purposes of this book, Shahin Yaqub examined the 'Macroeconomic Conditions for Successful Microfinance for Poor People'. The paper is available from the Policy Department, Oxfam (UK and Ireland). 27 banks? Do poor people have access? Which poor people use them? (If money-lenders appear to be exploiting users, for example by imposing very high interest rates or linking loans to disadvantageous deals over land, labour or commodities, then there might be a case for the NGO to introduce ROSCAS or annual savings clubs, or work as a promoter of self-help groups or credit unions.) How do people make provision for known life-cycle expenses? Do they provide for daughters' marriages, their own old age and funeral, for their heirs? Are there clubs that satisfy these needs, or general savings services or insurance companies that will do as well? Are there government or employer-run schemes? Are there particular expenses for which women have responsibility? How do people cope with emergencies? What happens when a breadwinner is ill, or when a flood or drought occurs? Does the government have schemes that reach poor people in these circumstances? If not, what local provision do people make? How do small-scale entrepreneurs get access to business finance? If so, in what amounts and at what cost? Do women entrepreneurs have access? During the exploratory work done to answer these questions another set of information will come to light-the absolute quantities of cash involved in local financial intermediation. This can be of immense value to scheme designers in cases where a decision is made to intervene. For example, information about amounts repaid regularly to money-lenders will be useful in setting loan sizes and repayment schedules for loan schemes. (Source: Rutherford, 1996.) Much can be learned from the way in which people are already managing their finances. A further aspect is the social relations involved-the groups of people who get together to form ROSCAS, those from whom loans are taken, and those with whom deposits are lodged. Tierney's work on the Oxfam- funded Youth Employment Groups in Tabora Region of Tanzania demon- strates that the design of the intervention, which was based around groups of people with the same occupational background, did not correspond to the pattern of existing financial intermediation, which was organised around small kin-based groups, each including diverse enterprises. Tierney argues that 'the formation of development groups can, ironically, divert people's energy away from improving their lives, because forming the kind of groups which are eligible for financial assistance is a time-consuming activity involving skill 28 Informal financial services in manipulating and maintaining public relations' (Tierneyforthcoming). This illustrates the value of understanding how indigenous financial systems operate, before designing a new microfinance initiative. 2.7 Filling the gaps As well as alerting people to the potential pitfalls of intervention, research to answer the kind of questions suggested above is likely to identify gaps in existing services. There are many ways in which such gaps can be filled and below are some examples of financial service interventions in insurance and hire purchase which can be of use to poor people. For those agencies whose motivation is poverty reduction it is important to link the identification of gaps with a poverty analysis to determine who is excluded from existing services and how such exclusion perpetuates poverty. 2.7.1 Some examples of innovative services Hire-then-purchase for the poor in Bangladesh ACTIONAID found, through the experience of running a group- based lending programme similar to that of the Grameen Bank, that many very poor people were nervous of taking a large loan — the 5,000 taka ($125) needed to buy a rickshaw, for example — in case they were not able to repay it. AA therefore devised a bire-then- purchase scheme for such people. AA bought its own rickshaws and bired them out to group members. A rickshaw driver could hire a rickshaw from AA instead of hiring one from a local 'mohajan'. If he then decided to convert bis contract with AA from hiring to buying, a proportion of the total hiring fees he had already paid was denoted as his down-payment, and be took a regular (smaller) AA loan to pay off the rest. Door-step insurance agents, Cuttack, Orissa In Cuttack, insurance agents from the Peerless company visit house- bolds in low-income areas. They offer simple endowment schemes, which from the point of view of the customers are like accumulating fixed deposit schemes: the customer puts in a fixed amount regularly and then on maturity gets it back plus profits. Life insurance cover is included in the contract. 'Bankassurance: group-based insurance for the rural poor In Bangladesh, one insurance company is pioneering an attempt to match, in the field of insurance, Grameen Bank's success in lending. 29 Delta Life Insurance has been experimenting since 1988 with cut- price basic life-insurance for rural people. Customers are arranged in groups, there is no medical examination and no age-bar, and premiums are tiny and collected weekly. Agents are also involved in Grameen-Bank-style lending and earn an extra commission for the insurance work. In fact the insurance premiums are invested directly in lending (on which healthy interest may be earned). In 1996 Delta was looking for a big NGO partner which could offer the two services- lending and insurance- side by side. Experience so far has shown that demand for such a service is high. Delta is exploring how it can extend this initiative beyond life insurance. 2.8 Promotion: an alternative strategy for NGOS Having identified the gaps in existing financial service provision, an NGO might involve itself in promotion rather than provision. The main alternatives to direct provision of financial services are ones which involve the NGO in a transitional or support role whereby activities such as mobilisation, training, and making links to other organisations are provided. A range of possible approaches are outlined. 2.8.1 Formation of savings groups and development of internal credit facilities Where ROSCAS do not exist or have limited coverage, the NGO might act as a facilitator of their formation or enable them to develop slightly more sophisti- cated systems of internal on-lending which allows savings and loans to take on more flexible formats. This approach has been used by Friends of Women's World Banking in India. In this case the NGO is mainly involved in training and organising the groups. Self-help groups (SHGs) are NGO-led attempts to promote savings clubs, or simple forms of credit union. Those initiated by Friends of Women's World Banking in India are aimed at poor rural women. FWWB (or its partner NGOs) persuades women from the same neigh- bourhood and from similar backgrounds to form small groups of 12 to 15 members. NGO workers encourage the women to meet regularly and frequently and during these meetings the women discuss their financial problems and ways of solving them. The solution they are steered towards involves regular small savings and the immediate conversion of those savings into small loans taken by one or two members at each meeting. Care is taken to Informal financial services involve all group members in the discussion and formulation of rules (how often to meet, the interest to be charged on loans, and repayment arrangements) and then to ensure that every member experiences for herself the activities of saving and of taking and repaying a loan. The group is asked to choose leaders who are trained to manage the group's affairs: if illiteracy or very poor educational levels are a problem then rules are kept deliberately simple (fixed equal savings, and annual dividends rather than monthly interest on savings, for example). These preparations are intended to equip the group for independent survival after the NGO stops sending workers regularly to the meetings. Groups which perform well over several months are able to obtain small bulk loans made by FWWB to the group as a collective. Where there are a number of groups in an area, FWWB may help them form a federation' (apex body') to help with liquidity problems: groups with excess savings deposit them with the federa- tion which on-lends to groups with a strong demand for loans. (Source: WWB, 1993.) However, although this type of intervention can succeed with agency help, it has yet to be proved whether savings and credit groups which are promoted by outsiders can achieve long-term independence (Rutherford, 1996). A range of questions remain: can they save sufficient funds among themselves to satisfy their own demand for loans? Can external funds be introduced into these groups without destroying their independence? 2.8.2 Promotion of small-scale formalised approaches National legislation may allow for credit unions (the World Council of Credit Unions has national and regional affiliates all over the world) or thrift and credit co-operatives (as in Sri Lanka, see 3.4.2). Another approach an NGO might adopt could be the linking up of people interested in establishing such services for themselves with other credit unions or umbrella and apex bodies that are able to promote and advise on particular financial services. Oxfam Hyderabad worked with the Federation of Thrift and Credit Associations in Andhra Pradesh, encouraging exposure visits to flourishing thrift and credit societies by potential members from other areas. The members now have a source of consumption credit based on their own savings. Oxfam Hyderabad saw its support for linking potential groups with an existing thrift and credit structure as a move away from direct funding of NGOs to provide credit. (Source: Oxfam (India) Trust, 1993.) 31 2.8.3 Linking groups to the formal system Existing savings groups or ROSCAS may already have bank savings accounts but are unable to take loans because the bank does not understand their operations or believe them to be creditworthy. The NGO might work with groups to encourage them to build up savings and deposit them in formal institutions. The NGO may then be able to work with a local bank to encour- age it to extend its services to groups. In Ghana, rural banking legislation was designed to create semi- autonomous local banks which would serve people cut off from financial services. However, the banks have experienced a range of problems which led to only 23 out of a total of 123 being classified as operating satisfactorily in 1992 (Onumah, 1995). In 1991 the Garu Bank, a small rural bank set up in 1983 in Ghana, was near to collapse as a result of embezzlement and bad loans. The people of Garu persuaded a member of their own community who was working in Accra to come back to the area and become theman- ager. The Bank is a unit bank and operates relatively autonomously. Share capital of the Bank is owned by the local community, the Catholic Mission, the local Agricultural Station and a Disabled Rehabilitation Centre. Helped by an additional capital injection of $30,000 received from overseas donors via the Catholic Mission the manager trans- formed the situation, and expected to report a profit for the first time. The bank has a range of clients, including local salaried workers such as teachers and government employees. These people are good customers because they take loans which are easily recoverable in the form of deductions made from their salaries at source. Alongside these customers, the Bank provides services to some 300 farmers' groups. Some of these groups were originally formed by the local Agricultural Station and the Catholic Mission and bought shares in the Bank when it was first set up. The manager went to meet the groups to discuss their needs with them. He has developed his own approach to the groups, and stresses that they should be concerned with working together rather than just obtaining credit. He has set up his own criteria for lending to the groups: savings balances of at least 10 per cent of the loan amount; regularity of savings as an indicator of group cohesion; and that the group should have been operating for at least six months. Repayment of the loan on time results in almost automatic qualification for a new loan the following year (although be bad refused loans to a number of groups the previous year due to poor performance). (Source: Abugre, Johnson et al, 1995.)
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Answer the following question using only information from the text included below. You must not utilize any other sources or your own reasoning in your response.
EVIDENCE:
Current debates in microfinance 1 1.1 Subsidised credit provision From the 1950s, governments and international aid donors subsidised credit delivery to small farmers in rural areas of many developing countries. It was assumed that poor people found great difficulty in obtaining adequate volumes of credit and were charged high rates of interest by monopolistic money-lenders. Development finance institutions, such as Agricultural Development Banks, were responsible for the delivery of cheap credit to poor farmers. These institutions attempted to supervise the uses to which loans were put, and repayment schedules were based on the expected income flow from the investment. Returns were often overestimated. For example, calculations would be based on agricultural yields for good years (Adams and Von Pischke, 1992). As a result, loans were often not repaid. The credibility and financial viability of these subsidised credit schemes were further weakened by the use of public money to waive outstanding and overdue loans at election time (Adams and Von Pischke, 1992; Lipton, 1996; Wiggins and Rogaly, 1989). A dependence on the fluctuating whims of governments and donors, together with poor investment decisions and low repayment rates made many of these development finance institutions unable to sustain their lend- ing programmes. Credit provision for poor people was transitory and limited. 1.2 The move to market-based solutions This model of subsidised credit was subjected to steady criticism from the mid-1970s as donors and other resource allocators switched attention from state intervention to market-based solutions. Policy-makers were reminded 5 Microfinance and Poverty Reduction that credit could also be described as debt and that the over-supply of subsidised credit without realistic assessment of people's ability to repay could result in impoverishment for borrowers. At the same time the concept of 'transaction costs', and the notion that full information about borrowers was not available to lenders, were used by the opponents of subsidised credit to justify the high interest-rates charged by money-lenders. Lending money carries with it the risk of non-repayment. In order to know who is creditworthy and who is not, and so reduce this risk, the lender screens potential borrowers. This involves gathering information on the circumstances of individuals, which may not be easy to obtain. Then enforcement costs are incurred to ensure repayment. Through this process risks are reduced, though not eliminated. Where a loan is disbursed on condition that it is used for a particular purpose, supervision costs also arise. Using these tools of analysis it was argued that private money-lenders charged interest rates which were higher than formal bank-rates because of the high costs they faced in terms of risk, particularly when lending without physical collateral. At the same time, it was argued that money-lenders were an efficient source of credit because their greater knowledge of the people to whom they were lending lowered screening costs. Moreover, potential borrowers faced high transaction costs when they sought loans from formal-sector finance institutions. These costs included the time, travel, and paperwork involved in obtaining credit, and were often pro- hibitive for poor clients, especially those most geographically isolated. On the basis of this analysis, a group of economists based at Ohio State University (USA), notably Dale Adams and J D Von Pischke, put forward the view that the provision of credit should be left almost entirely to the private sector. In concentrating on the problems of publicly subsidised credit, these economists ignored the social ties, power relations, and coercion associated with the activities of money-lenders. However, detailed micro-level research has demonstrated the widespread use of interlocked' contracts to force exchange to the disadvantage of poor people (Bhaduri, 1981). Powerful local people, including landlords, employers, and traders, are able to influence the terms of loans made to tenants, workers, and small producers via conditions set in transactions involving land, labour, or crops. For example, traders frequently lend working capital to small farmers on condition that their crops are sold to that trader at a pre-determined price. Similarly, loans are made to workers against the promise of labour to be provided at below the going rate at a set future date (Rogaly, 1996b). Against the background of these debates, recent developments in the design of microfinance schemes have generated an understandably high degree of excitement. This is because innovative features in design have 6 Current debates in microfinance reduced the costs and risks of making loans to poor and isolated people, and made financial services available to people who were previously excluded. 1.3 Making use of social collateral There was little knowledge among formal-sector financial intermediaries of alternatives to physical collateral, until the 1970s, when the Grameen Bank in Bangladesh began using 'peer-group monitoring' to reduce lending risk. The model for credit delivery in the Grameen Bank is as follows: • Groups of five self-select themselves; men's and women's group are kept separate but the members of a single group should have a similar economic background. • Membership is restricted to those with assets worth less than half an acre of land. ⚫ Activities begin with savings of Taka 1 per week per person and these savings remain compulsory throughout membership. • Loans are made to two members at a time and must be repaid in equal instalments over 50 weeks. . Each time a loan is taken the borrower must pay 5 per cent of the loan amount into a group fund. • The group is ultimately responsible for repayment if the individual defaults. • Between five and eight groups form a 'development centre' led by a chair- person and secretary and assisted by a Grameen Bank staff member. • Attendance at weekly group and centre meetings is compulsory. • All transactions are openly conducted at centre meetings. • Each member may purchase a share in the Bank worth Taka 100 Through this system the Grameen Bank has provided credit to over 2 million people in Bangladesh (94 per cent women) with a very low default rate. (Source: Khandker, Khalily and Khan, 1995.) However, peer-group monitoring has not proved necessary to other instit- utions seeking to do away with physical collateral. In Indonesia, government- sponsored banks have successfully used character references and locally- recruited lending agents (Chaves and Gonzales Vega, 1996). The peer-group 7 Microfinance and Poverty Reduction method of Grameen and the individual-user approach of the Bank Rakyat Indonesia (see 1.4) can both be seen as attempts to lower screening costs by using local 'insider' information about the creditworthiness of borrowers. The degree to which Grameen Bank employees themselves implement peer-group monitoring has recently been questioned. It is argued that the reason for the Grameen Bank's high repayment rates is the practice of weekly public meetings at which attendance is compulsory, for the payment of loan instalments and the collection of savings. The meetings reinforce a culture of discipline, routine payments, and staff accountability (Jain, 1996). Another means of improving loan recovery is to insist on regularity of repayment. This is likely to reflect the actual income-flow of the borrower much better than a lump-sum demand at the end of the loan period. Borrowers can make repayments out of their normal income rather than relying on the returns from a new-often untested-mini-business. Neverthe- less, where seasonal agriculture is the main source of income, and borrowers face seasonal hardship, regular repayment scheduling may cause problems. Microfinance specialists have argued that the prospects for scheme's stability are improved by innovations such as social collateral and regular repayments instalments. Indeed, financial sustainability has become an important goal in itself. To achieve sustainability, microfinance institutions, be they NGOs, government agencies, or commercial banks, need to ensure that the costs of providing the service are kept low and are covered by income earned through interest and fees on loans (see Havers, 1996). As microfinance deals, by definition, with small loans, the income generated through interest payments is also small in comparison with administration costs. To generate profits, therefore, it is necessary to increase scale - in other words, to lend to a large number of people (Otero and Rhyne, 1994). 1.4 Savings The regular repayments on loans required by large non-governmental micro- finance institutions in Bangladesh (including BRAC, ASA and Grameen) provide evidence that poor people can save in cash (Rutherford, 1995a). These intensive repayment regimes are very similar to those of rotating savings and credit associations: steady weekly payments, enforced by social collateral, in return for a lump sum. Loans made are, in reality, advances against this stream of savings. By insisting on regular savings, microfinance institutions can screen out some potential defaulters, build up the financial security of individuals, increase funds available for lending, and develop among members a degree of identification with the financial health of the institution. People involved in 8 Current debates in microfinance such schemes may previously have been unable to reach formal-sector banks, complete their procedures, qualify for loans or open savings accounts. 'A savings facility is an extremely valuable service in its own right, which often attracts many more clients than a credit programme, particularly from among the poorest' (Hulme and Mosley, 1996, p147). This evidence that poor people can save in cash has opened up further debate. A distinction is made between schemes in which borrowers must save small and regular amounts in order to obtain loans (termed 'compulsory' saving) and those which offer flexible savings facilities. In the latter case people can deposit and withdraw cash in whatever amounts, and as often, as they wish. This distinction is made especially strongly by Robinson (1995) in her account of the Bank Rakyat Indonesia. The BRI local banking system has about six times as many deposit accounts as loans. On 31 December 1993, BRI's local banking system had $2.1 billion in deposits. These were all voluntary savings. By 31 December 1995, there were 14.5 million savings accounts. Savers with BRI bave access to savings whenever they want. BRI deals with individuals rather than groups. Its savings programme was designed specifically to meet local demand for security, convenience of location, and choice of savings instruments offering different mixtures of liquidity and returns. BRI's local banking system has a loan limit of about $11,000. The idea is that good borrowers should not be forced to leave until they can qualify for the loans provided by ordinary commercial banks. In addition, BRI has a system which gives its borrowers an incentive to repay on time. An additional 25 per cent of the interest rate is added to the monthly payment. This amount is paid back to borrowers at the end of the loan period if they have made every payment in full and on time. There is a corresponding in-built penalty for those who have not. (Source: Robinson, 1994.) Robinson argues that there is an enormous unmet demand for flexible savings services. However, she also warns that managing a savings system of this type is much more complex than running a simple credit programme. Schemes which operate under these 'new' savings and credit technologies are an improvement on the old model of subsidised agricultural and micro- enterprise finance. The story of how they have succeeded in reaching poor people is now the subject of a large literature (for example, Rutherford, 1995b; Hulme and Mosley, 1996; Mansell-Carstens, 1995). That many more poor people can now obtain financial services is a major achievement of these 9 Microfinance and Poverty Reduction schemes. However, the questions of which poor people have been reached, and of whether poverty has been reduced, still remain. 1.5 Can microfinance interventions reduce poverty? If poverty is understood as low levels of annual income per household, reducing poverty is about raising average income levels. If a particular level of annual income per head is used as a poverty line, poverty reduction could be measured by counting the number or proportion of people who cross that line-who are promoted out of poverty. Providers of financial services who aim to enable people to cross such a poverty line have focused on credit, in particular credit for small enterprises, including agricultural production. However, attention to annual income can obscure fluctuations in that income during any given year. Poverty can also be understood as vulner- ability to downward fluctuations in income. Such fluctuations can be relat- ively predictable, such as the seasonal decline in employment for agricultural workers, or a shortage of income and trading opportunities in the dry season or before harvest. Alternatively, fluctuations in income may result from unexpected shocks such as crop failure, illness, funeral expenses or loss of an asset such as livestock through theft or death, or a natural disaster such as a cyclone (Montgomery, 1996). Vulnerability can be heightened by the lack of saleable or pawnable assets and by debt obligations. Interventions which reduce such vulnerability and protect livelihoods also reduce poverty. 1.5.1 Poverty as powerlessness A further dimension of poverty which is often the focus of NGO interventions is powerlessness, whether in an absolute sense or in relation to others. Economic inequality between and within households is likely to be associated with concentrations of political and social power. Inequality can increase whenever better-off people are able to improve their incomes faster than others. Even if the absolute level of material well-being of the worst-off people does not change, relative poverty (Beck, 1994) may increase, and with it a sense of powerlessness among very poor people. Power relations are partly determined by norms of expected behaviour. Neither the relations nor the norms are static; they are contested and change over time. Powerlessness can be experienced in a variety of situations: within the household, as a result of differences in gender and age; and within the community, between socio-economic groups, as a result of caste, ethnicity, and wealth. Defining poverty in terms of power relations implies that assessment of the impact of microfinance interventions should focus on their 10 Current debates in microfinance influence on social relations and the circumstances which reproduce them. Even in a similar geographical and historical context, it is important to disting- uish between the ways in which specific groups of poor people (women and men, landed and landless, particular ethnic groups) are able to benefit from financial services or are excluded from doing so. 1.5.2 Credit for micro-enterprises While there are methodological difficulties involved in measuring increases in incomes brought about by the provision of credit (see further discussion in Chapter 5), studies have demonstrated that the availability of credit for micro- enterprises can have positive effects. A recent survey collected data from government, NGOs, and banks involved in providing financial services for poor people. Twelve programmes were selected from seven countries (six of these are included in Table 1, Annex 1). Households which had received credit were compared with households which had not. The results demon- strated that credit provision can enable household incomes to rise. However, taking the analysis further, Hulme and Mosley demonstrated that the better-off the borrower, the greater the increase in income from a micro- enterprise loan. Borrowers who already have assets and skills are able to make better use of credit. The poorest are less able to take risks or use credit to increase their income. Indeed, some of the poorest borrowers interviewed became worse off as a result of micro-enterprise credit, which exposed these vulnerable people to high risks. For them, business failure was more likely to provoke a livelihood crisis than it was for borrowers with a more secure asset base. Specific crises included bankruptcy, forced seizure of assets, and unofficial pledging of assets to other members of a borrowing group. There have even been reports of suicide following peer-group pressure to repay failed loans (Hulme and Mosley, 1996, pp120-122). A much smaller survey comparing micro-enterprise programmes in El Salvador and Vanuatu found that the development of successful enterprises and the improvement of the incomes of very poor people were conflicting rather than complementary objectives. By selecting those most likely to be successful for credit and training, the programmes inevitably moved away from working with the poorest people (Tomlinson, 1995). Reviews of Oxfam's experiences with income-generating projects for women raised serious questions about the profitability of such activities. Full input costings, which would have revealed many income-generating projects as loss- making, were not carried out. Omissions included depreciation on capital, the opportunity cost of labour (the earnings participants could have had through spending the time on other activities), and subsidisation of income- 11 Microfinance and Poverty Reduction generating projects with income from other sources. Market research and training in other business skills had often been inadequate (Piza Lopez and March, 1990; Mukhopadhyay and March, 1992). 1.5.3 Reaching the poorest Whether income promotion is based on loans for individual micro-enterprises or on group-based income generation projects, its appropriateness as a strategy for poverty reduction in the case of the poorest people is questionable. Other evidence suggests that self-selected groups for peer-monitoring have not been inclusive of the poorest people (Montgomery, 1995). People select those with whom they want to form a group on the basis of their own know- ledge of the likelihood that these people will make timely payment of loan and savings instalments: X will only have Y in her group if she believes Y is capable of making regular repayments and has much to lose from the social ostracism associated with default. This system might well be expected to lead to the exclusion of the poorest (Montgomery, op. cit.). Even the low asset and land-holding ceiling which the big microfinance institutions in Bangladesh have successfully used to target loans away from better-off people has not necessarily meant that the poorest, who are often landless, are included (Osmani, 1989). So while the innovations referred to earlier appear to have made loans more available to poor people, there is still debate over the design of appro- priate financial services for the poorest. Hulme and Mosley's study strongly suggests that providing credit for micro-enterprises is unlikely to help the poorest people to increase their incomes. However, detailed research with users has found that some design features of savings and credit schemes are able to meet the needs of very poor people. For example, it was found that easy access to savings and the provision of emergency loans by SANASA (see 3.4.2) enabled poor people to cope better with seasonal income fluctuations (Montgomery, 1996). Microfinance specialists increasingly, therefore, view improvements in economic security income protection rather than promotion (Dreze and Sen, 1989) as the first step in poverty reduction. ...from the perspective of poverty reduction, access to reliable, monetized savings facilities can help the poor smooth consumption over periods of cyclical or unexpected crises, thus greatly improving their economic security.' It is only when people have some economic security that 'access to credit can help them move out of poverty by improving the productivity of their enterprises or creating new sources of livelihood' (Bennet and Cuevas, 1996, authors' emphasis). Current debates in microfinance 1.6 Financial interventions and social change Interventions have an impact on social relations partly through their econ- omic effects. In many instances implementors of credit schemes have claimed that the work will lead to progressive social change, for example by empow- ering women and changing gender relations in the household and in the community (Ackerly, 1995). In five out of the six schemes summarised in Table 1 (Annex 1), over half of the borrowers were women. Much of the work that has been done in assessing the impact of credit programmes on women has been in Bangladesh. One approach was to look at the control women retained over loans extended to them by four different credit programmes: the Grameen Bank, BRAC, a large government scheme (the Rural Poor Programme RD-12), and a small NGO (Thangemara Mahila Senbuj Sengstha) (Goetz and Sen Gupta, 1996). Results suggested that women retained significant control over the use to which the loan was put in 37 per cent of cases; 63 per cent fell into the categories of partial, limited or no control over loan use. Goetz and Sen Gupta found single, divorced, and widowed women more likely to retain control than others. Control was also retained more often when loan sizes were small and when loan use was based on activities which did not challenge notions of appropriate work for women and men. The question of whether women were empowered is not answered: even when they did not control loans, they may have used the fact that the loan had been disbursed to them as women to increase their status and strengthen their position in the household. However, in some cases women reported an increase in domestic violence because of disputes over cash for repayment instalments. A second major piece of research has assessed the effect of Grameen and BRAC programmes on eight indicators of women's empowerment: mobility, economic security, ability to make small purchases, ability to make larger purchases, involvement in major household decisions, relative freedom from domination by the family, political and legal awareness, and participation in public protests and political campaigning (Hashemi et al, 1996). The study concludes that, on balance, access to credit has enabled women to negotiate within the household to improve their position. However, unlike the Goetz and Sen Gupta study, which is based on 275 detailed loan-use histories, Hashemi et al attempted to compare villages where Grameen or BRAC were present with villages where they were not. Because of difficulties inherent in finding perfect control villages (which the authors acknowledge), the conclusions of the study do not signify the end of the debate. It has also been argued that focusing on women is much more to do with financial objectives than with the aim of empowerment. According to 13 Microfinance and Poverty Reduction Rutherford (1995b) the real reasons for targeting women in Bangladesh are that they are seen as accessible (being at home during working hours); more likely to repay on time; more pliable and patient than men; and cheaper to service (as mainly female staff can be hired). Thus the process of loan supervision and recovery may be deliberately internalised inside the household (Goetz and Sen Gupta, op. cit.). Goetz and Sen Gupta do not use this as an argument against the provision of finance for women in Bangladesh, but rather suggest that to avoid aggravating gender- based conflict, loans should be given to men directly as well as to women and, at the same time, that efforts should be made to change men's attitudes to women's worth. 1.7 Treading carefully in microfinance interventions This brief summary of evidence and argument suggests that microfinance interventions may increase incomes, contribute to individual and household livelihood security, and change social relations for the better. But that they can not always be assumed to be doing so. Financial services are not always the most appropriate intervention. The poorest, in particular, often face pressing needs in terms of primary health care, education, and employment opportunities. Lipton has recently argued for anti-poverty resources to be allocated across sectors on the basis that a concentration on a single interven- tion mechanism, say credit, is much less effective in poverty reduction than simultaneous credit, primary health, and education work, even if this entails narrowing geographical focus (op. cit.). The particular combinations which will be most effective will depend on the nature of poverty in a specific context. Although microfinance provision appears to be evolving towards greater sustainability, relevance, and usefulness, there are few certainties and the search for better practice continues. Decisions on whether and how to intervene in local financial markets should not be taken without prior knowledge of the working of those markets. If the intervention is intended to reduce poverty, it is especially important to know the degree to which poor people use existing services and on what terms. Only then can an intervening agency or bank make an informed decision on whether their work is likely to augment or displace existing 'pro-poor' financial services. If the terms of informal financial trans- actions are likely to work against the interests of poor people (cases in which the stereotype of 'the wicked money-lender' corresponds to reality) the inter- vention may attempt to compete with and possibly replace part of the informal system. However, making such an informed assessment is not straight- forward, as one study of the power relations between informal financial 14 Current debates in microfinance service providers and agricultural producers in Tamil Nadu demonstrated. Grain merchants based in the market town of Dindigul were found to dictate the terms of product sale when lending working capital to very small-scale farmers, but to be much the weaker party when lending to larger-scale farmers (Rogaly, 1985). The structure of a credit market can change, partly under the influence of outside intervention. Rutherford has studied the changing market in financial services for poor people in Bangladesh. Competition between NGOs is leading to users being less subservient to NGO staff and protesting about unpopular financial obligations, such as the 5 per cent deducted from loans by Grameen for a 'group fund'. Private individuals have set up offices imitating the Grameen style but charging higher interest rates on loans than the big NGOS, and also offering higher rates on savings deposits. Private urban finance companies have expanded. Despite the tendency for NGOs to become more like banks, other formal-sector lenders are still reluctant to lend to poor people (see also McGregor, 1994). The expansion of NGO credit in Bangladesh has been made possible by the flood of donor money to that country. One study of BRAC showed that loan disbursal and recovery had become more important than group forma- tion (Montgomery, 1996). In 1992, Grameen Bank and BRAC employees were found to be offering 'immediate loans' to women in villages where smaller NGOs had been attempting longer-term group-based finance (Ebdon, 1995). Ebdon attributed this behaviour to fairly strict targets for loan disbursal in the case of BRAC, and in both cases to an imperative for job security for staff and a desire on the part of the organisations to expand their influence and strengthen their reputations (p52). This anxiety to increase the number of users can undercut the very basis of the new model: the creation of sustainable financial institutions. Studies of credit schemes have consistently demonstrated that unless borrowers and savers believed they would benefit from the long-term survival of the institution, and have a sense of ownership, repayment rates would decline (Rogaly, 1991; Copestake, 1996a). The sense of ownership is weakened by attempts by large microfinance institutions in Bangladesh to claim territory by encroachment. In India, in the absence of equivalent flows of external finance, thrift and credit co-operatives based much more on borrowers' requirements have emerged (Rutherford, 1995b, p136). An understanding of the way in which the institutions themselves change and respond to incentives is therefore necessary for the design of relevant anti-poverty interventions, including financial services. 15 2 Informal financial services 2.1 Introduction In recent years research into informal financial services and systems has significantly deepened understanding of the way they operate and their strengths and weaknesses. A simplistic belief that local money-lenders charged extortionate interest rates lay behind the provision of subsidised finance in the past. More thorough investigation has highlighted a range of savings, credit, and insurance facilities accessible to poor people. The appar- ently usurious interest charges reportedly made by private money-lenders may be explainable in terms of transaction costs, lack of information, and high risk. Informal financial services may be well-equipped, because of local 'insider' knowledge, and lower overheads, to respond to the requirements of poor people; they may also be exploitative. This chapter starts with a brief overview of the types of informal services that have been found to exist in a wide variety of countries and social contexts. Some of the broad characteristics of these services are identified, and lessons drawn for the design of NGO or semi-formal systems. In describ- ing informal financial services it is useful to distinguish between those which are owned by their users and those which are offered by an individual, usually on a profit-making basis. The distinction can be a helpful one in analysing the ways in which financial services enable or exploit poor people. NGOs considering microfinance interventions need first to find out what informal financial services are available, and how they operate. Such services are capable of supporting poor people's livelihoods as well as perpetuating 1 This chapter draws heavily on a background paper commissioned for the purposes of this book: A Critical Typology of Financial Services for the Poor, Stuart Rutherford, November 1996. Examples are drawn from Rutherford's own experience unless otherwise stated. 16 Informal financial services structures which undermine them. It is necessary, therefore, to understand under what circumstances and to what degree these services are enabling or exploitative for poor people. On the whole, user-owned services are likely to be more enabling than services provided for profit. Investigating the scope and nature of existing services is an essential pre- liminary before considering whether an intervention is necessary. However, NGOs themselves may not have the right skills to become direct providers of financial services. Furthermore, financial services are needed by poor people on a permanent basis to enable them to plan and manage their finances; NGO programmes which might be here today and gone tomorrow may be an inap- propriate means through which to provide them. Therefore NGOs should seriously consider whether direct intervention is in fact the best response for them to make. The chapter closes by discussing alternative strategies NGOs might employ. 2.2 User-owned informal financial services Systems which facilitate financial transactions and are owned by their users are many and varied, and range from simple reciprocal arrangements between neighbours, savings clubs and rotating savings and credit associa- tions (ROSCAS), to forms of insurance, building societies, and systems of co- operative business finance. An example of each of these types is described below. All of these systems can be found in a variety of country settings. Rotating savings and credit associations (ROSCAS) in particular, are an extremely common phenomenon. They exist in almost every country (for example, 'partners' in Jamaica and Britain, bui in Vietnam, and njangi in Cameroon). (See Bouman, 1995; Ardener and Burman, 1995 for detailed and extensive surveys of ROSCA operations in a range of settings.) The principle is very simple: a number of people agree to save a fixed amount of money at regular intervals; at each meeting, for example weekly, each member contri- butes an agreed amount, resulting in a single lump sum becoming available, which is then allocated to one of the members. There are three basic varia- tions in the way in which this lump sum or 'prize' is allocated. First, it can be allocated on the basis of strict rotation between members of the group; second, on the basis of a lottery of members; third, it may be auctioned to the member who is willing to accept the biggest discount. The group will usually meet (but does not always need to) and undertake this transaction on as many occasions as there are members of the group, thus ensuring that each member gets the 'prize' once. The ROSCA demonstrates the basic principle of financial intermediation: collecting many small savings from many people, turning this into a lump sum for one person, and repeating this procedure over time. 17 Microfinance and Poverty Reduction ROSCA finance is used for many purposes. Some ROSCAS operate to enable an asset to be purchased, such as a rickshaw or fishing equipment for each member, and may have been set up specifically for the purpose. 'Merry- go-rounds', as ROSCAS are called among Kikuyu women in Kenya, are sometimes used by women as a means of accumulating enough money to buy new household utensils or clothes. The technology of the ROSCA is not unique to poor communities but is also used by salaried professionals to purchase major consumption items or assets such as refrigerators or cars. A further example of a user-owned device is the insurance fund which makes pay-outs conditional on certain circumstances occurring. These are int- ended to cover large expenses such as those connected with marriage or death. 2.2.1 Some examples of user-owned financial services Neighbourhood reciprocity in Southern India Reciprocal lending may be extended to involve several or even all the members of a community. Among Moslems in Kerala State in southern India kuri kalyanam are invitations to a feast to which the guest is expected to bring a cash gift. When the host in his turn is invited to a feast by one of the guests he is expected to return double the amount (less if he is perceived as poor). In Vietnam one kind of hui (a generic name for various financial devices) involves a similar pooling of resources for one person on one occasion to be reciprocated later by others, at different times. Rickshaw ROSCAS in Bangladesh Very poor men driven by poverty from their home villages to the Bangladesh capital, Dhaka, often earn a living there by driving bired rickshaws. In the last ten years they have begun to run ROSCAS. A group of drivers forms, and each driver saves a set amount from his daily takings. When the fund is large enough (this usually takes about 15 days) a rickshaw is bought and distributed by lottery to one of the members. In between prizes' the cash is held by a trustworthy outsider, usually a local shopkeeper from whom the members buy their tea or cigarettes. In a further adaptation, those who have already received their rickshaw double their daily contribution. This progressively reduces the time-gap between prizes, and is seen as a fair way of rewarding those members who win the lottery late in the cycle, because their gross contribution is smaller than earlier winners. The extra payment made by the winners is roughly equivalent to what they save by no longer having to hire a rickshaw. 18 An accumulating savings club in Mexico Informal financial services In towns and villages in Mexico neighbours place frequent but irregular savings with trusted shopkeepers. Just before Christmas, the cash is returned to the saver. No interest is paid, but the saver has a lump sum to spend, and the shopkeeper has had the use of the money over the year and can now look forward to a good sales season. Building societies for the middle classes in Bangladesh In a lower-middle-class area of Dhaka, 165 employees in the Public Works Department belong to their own building society' which was started over 16 years ago. Each saves 200 taka ($5) a month out of his wages. As the cash accumulates it is lent out to members, who buy land and building materials. Interest rates are high and interest on the out- standing balance has to be paid each month, to encourage modest loans and rapid repayment. But loan sizes are generous and such workers would have few or no alternative sources for loans of this kind. Popular insurance: funeral funds (iddir) in Ethiopia Originally burial societies, iddir have extended to provide a wide range of insurance services in urban Ethiopia. Aredo (1993), study- ing these in Addis Ababa, estimated that 50 per cent of urban house- holds were members of some kind of iddir. Groups of people come together on the basis of location, occupation, friendship or family ties. Each iddir sets its own rules and regulations but usually pays out for funeral expenses or financial assistance to families of the deceased, and sometimes to cover other costs, such as medical expenses and losses due to fire or theft. 2.3 Informal financial services for profit Those offering informal financial services for profit fall into two groups: deposit takers (often also called money-guards) and lenders. What is most interesting about the situation of deposit takers is that, as in the Nigerian example below, savers usually pay for the service by obtaining a negative interest rate on their funds. This demonstrates the pressing need that people have for places to put their savings which are safe and secure not only from physical risks such as theft, fire or flood, but also from the demands of their family. For women, in particular, the ability to save small amounts in places to which their husbands and families cannot gain access (although they might know about them) has been shown to be particularly important. It may enable them to meet obligations in the family or household, such as the payment of children's school fees, for which they have particular responsibility. 19 Microfinance and Poverty Reduction Forms of lending also operate in a variety of ways, such as money-lenders; pawnbrokers, who take collateral in the form of physical assets; and forms of trade credit and hire purchase. The term 'money-lender' can cause confusion because it conjures up the image of a class of people whose main source of income is usury. In reality, many small farmers, for example, obtain credit from employers, landlords, traders, relatives, and other people who combine a number of economic activities. In some places money-lenders may be a more professionalised class, such as the Tamilians' in Cochin described below, but even in this case it is not necessarily their main source of income. Lending money can be exploitative of, as well as enabling for, poor people. People facing seasonal shortages may have only one source of credit, for example, an employer. The employer may agree to provide a loan, but only if the borrower promises to work when required at below the going wage-rate. As described below for Indonesia, crop traders may provide producers with seasonal credit on the understanding that the crop is sold through the same trader at low post-harvest prices. Tied credit of this type, whether in cash or kind, may be the only means of survival for poor people. But arrangements such as these can maintain and even exacerbate inequalities in power and position. In contrast, user-owned devices are likely to be more supportive and enabling, because the profits made are pooled, and shared or fed back into the system, and ownership and control of the funds are in the hands of the users. Such devices are unlikely to be exploitative of those involved, although they may widen inequalities between users and non-users. The comparison with services for profit is clear. However, loans from private lenders after harvest may enable small traders to make the most of the increased liquidity in the local economy. This emphasises the need for interveners to understand the workings of real markets and to question untested assumptions. It is essential to find out for which groups of poor people-women, men, landless labourers, subsistence farmers, migrant workers and under what circumstances these arrange- ments may be no more than a means of survival, while supporting wealth creation for others. 2.3.1 Some examples of informal financial services provided for profit Deposit takers: a mobile alajo in Nigeria One consequence of Nigeria's current political difficulties is a drop in public confidence in formal banks, according to Gemini News. This has allowed an old tradition to flourish again- alajos, or peripatetic deposit takers. Idowu Alakpere uses a bicycle to go 20 Informal financial services door-to-door round the outer suburb of Lagos where he lives. He has 500 customers who each save about 10 or 15 naira with him (about 50 to 75 cents US) at each daily visit. Customers withdraw money whenever they like, and Idowu charges them one day's savings per month, which he deducts from the withdrawal. Since deposits are made evenly over the month, the negative interest rate for one-month deposits is 1/15, or 6.6 per cent a month, an Annual Percentage Rate (APR) of 80 per cent. Some alajos, including Idowu, store the cash in a reliable bank, others use it to make loans. The Gemini News reporter was told by many local people that they trusted these alajos more than banks. When it was pointed out that some alajos are dishonest, they retorted that so are many banks. Professional money-lenders in Cochin, India 'Tamilians' provide a money-lending service to poor slum dwellers on a daily basis. They have set terms, which are well-known all over Cochin. For each 100 rupees lent, 3 rupees are deducted at source as a fee. Thereafter, 12.50 rupees per week must be repaid for ten weeks. This works out at an APR of 300 per cent (28 rupees paid on an average size loan of 48.50 rupees [97/2) for 10/52 of a year). Most non-poor observers regard this rate as outrageously exploitative. However, poor users of the service tend to take a favourable view of it. The 'Tamilians' do not needlessly harass their clients over repay- ment but take an 'understanding' view which includes a willingness to accept loan losses. These money-lenders know their clients well and (out of self-interest) will not lend more than they think the client can repay out of normal income over the next ten weeks. Lending against collateral: pawnbrokers in Western India Residents of the slums of Vijayawada use their local pawnbroker when they need money quickly. He is reliably available at his gold- smithing shop and he charges 3 per cent a month for loans pledged against gold, 5 per cent for silver and 9 per cent for brass. The inclu- sion of brass means that even the very poor can get a small advance by pawning kitchen pots and pans. He lends up to two-thirds the value of the pawn. He gives a receipt, and because the borrower can be sure of getting her pawn back when she repays the loan, she can risk pawning objects of sentimental value. Unlike those who lend without collateral the broker does not need to know his clients well: the unambiguous collateral provided by the pawn means that the broker can lend to more or less anyone at any time. 21 Microfinance and Poverty Reduction Advance crop sales in Indonesia A practice common in many countries is known as ijon in some areas of Indonesia. Farmers often need cash to get them through the 'bungry' season when their main crop is in the ground and there is not much else to do except sit and wait. They are forced to make an advance sale of the crop, usually to a grain buyer or his agent. Ijon transactions of this sort, if seen as loans, show an interest rate of anything from 10 to 40 per cent a month. (Source: Bouman and Moll in Adams and Fitchett, 1992.) Two examples of trade credit In many markets it is common to see poor people squatting on the ground with a small amount of fertiliser spread out on a mat. The fertiliser doesn't necessarily belong to the man or woman (or, often, child). Lacking capital themselves to buy stock, such people obtain the fertiliser on credit from a nearby shop. At the close of the market they return the money from sales and any balance of the stock to the shopkeeper, retaining a small proportion of the money. The system allows people to trade (safely if not profitably) without capital, and gives the shopkeeper a cheap extra outlet. The dadon credit system used to finance prawn cultivation in Bangladesh is an example of a trading system in which credit is passed on through a chain of intermediaries between the prawn farmer and exporters to Europe. The prawn market is a highly com- petitive business in which everyone in the chain is short of capital. The 'commission agent' at the port buys prawns on behalf of the exporters in the capital. To ensure their share of the market they provide credit early in the season which finds its way through a number of intermediaries before reaching the hands of the farmer. The intermediaries are 'depot' owners, then farias', or merchants, and finally local traders, who in turn lend to the farmers. In accepting the credit the farmer commits himself to selling exclusively to this particular trader. 2.4 Turning the informal into the formal In some countries such informal systems have evolved into formal systems which have had a major impact on their users. In the UK, for example, 'mutual' or friendly societies which began as small thrift groups in the nineteenth century turned into building societies in the first half of the twentieth, and have been the main source of housing finance for 50 years. Informal financial services There are further examples of such informal systems becoming increas- ingly formalised. Aredo (1993) reports that the iddir in Addis Ababa run by the Ethiopia Teachers' Association is of the scale of a medium-size insurance business. In Cameroon some of the traditional ROSCAS known as njangi have evolved into small banks offering finance for small businesses which have difficulty using formal banks (Haggblade, 1978). ROSCAS may thus be a transitional phenomenon. Chit funds in India are a formalised version of a ROSCA, for which govern- ment legislation exists. In contrast to the ROSCA, members of the chit fund do not normally know each other and are merely customers of the chit companies. The company advertises for and selects members, makes arrange- ments for collection of subscriptions, and holds auctions for the prizes. However, such funds are of limited use to poor people, who lack both the income to pay subscriptions and the social position to gain the confidence of the company. The transition to formalised services is not inevitable. Informal and formal arrangements continue to exist side-by-side even in industrialised countries. In Oxford, UK, ROSCAS have enabled people with very limited capital of their own to increase their chances of obtaining a small business loan (Srinivasan, 1995). A detailed comparative study of credit use among low-income Pakistani, Bangladeshi, and Carribean immigrants in the UK revealed enormous differ- ences in their use of financial services. In all cases sources of credit were class- ified into high-street credit, local commercial credit, mail order, social fund, community-based credit, and 'miscellaneous' (including friends, family, and employer). Unlike the Bangladeshis, the Pakistani and Carribean respond- ents reported community-based, ROSCA-like arrangements. Bangladeshi respondents made much more use of formal bank credit than the others, although they had at least as high a proportion of applications rejected, apparently on racial grounds (Herbert and Kempson, 1996). Abugre (1994) points out that transition and change can be rapid, discon- tinuous, and turbulent rather than smooth and linear. There is therefore likely to be a multiplicity of arrangements, some of which become formalised, while others die out, and yet others are initiated. The implication for those interested in providing financial services is that such a role must be carefully thought through, and be flexible and responsive to changing circumstances. 2.5 What can be learned from informal finance? Having briefly explored the range of financial services which may exist, it is clear that informal finance is a regular feature of poor people's lives. What can be learned from this? The continuation of a large number of different forms suggest the following points (partly adapted from Adams, 1992). 23 Microfinance and Poverty Reduction There is clearly a demand for financial services The range of informal financial services available partly reflects the varied requirements which people, both rich and poor, have for financial services. They may also be explained in terms of the actions of people with excess cash seeking to earn income from lending. In some cases, especially where there is a monopoly, or collusion among providers, this can be exploitative for the borrower. Informal services available include savings facilities, provision of credit for consumption, and funding for predictable but expensive events such as marriages and funerals. This is in significant contrast to the services that NGOs have generally offered, which have usually been limited to the provision of credit for production. Transaction costs are low. Transaction costs are the costs, other than interest payments, which are incurred in making a deposit or taking a loan. They include travel, time away from other activities, related 'gifts' which might have to be offered to bank or government officials, costs in obtaining documenta- tion required, such as land certificates, and so on. Compared to formal services, local informal services generally require very little form-filling or travel. However, the advantage to the borrower of low transaction costs may be more than counterbalanced by their lack of power in setting the terms of a loan, which may be exploitative. Informal services impose their own discipline. The flow of information locally and the small number of providers of informal finance often act as powerful incentives to users to repay loans or save in a disciplined way. A ROSCA member failing to pay their instalment risks social ostracism from neighbours, friends, and relatives; they may be less likely to receive help from these people in times of severe difficulty in future. Poor people are capable of saving The evidence of informal systems disproves the assumption that poor people cannot save. Saving 'in kind' has long been a recognised part of people's livelihood management: saving in cash is a necessity of interaction with the cash economy. Indeed it is often the poorest, who are landless or for other reasons dependent on casual, poorly-paid jobs, who gain a large proportion of their incomes in cash and therefore have most need of savings facilities. The evidence shows that poor people are not only willing to save but at present often pay highly for savings facilities. 24 Informal systems are adaptable. Informal financial services The variety of forms and functions of informal finance demonstrates the adaptability of these systems to different economic conditions and changing circumstances. This contrasts with formal systems which often have to be based on a uniform delivery model. There is thus much to be learned from informal financial systems. Indeed aspects of these systems have found their way into the design of NGO and semi-formal financial services programmes. In particular, both group-based and individual-based schemes have made use of the 'insider knowledge' of other local people: individual-based schemes, such as BRI, through personal references from local representatives, and group- based schemes, such as Grameen, through self-selecting groups of borrowers (see Chapter 1). This brief overview has not identified for whom these services exist - women and men, poor or poorest. The poorest people may find it difficult to save the amount that a ROSCA requires and hence find participation a burden or are excluded. Even if there are a number of people in similar situations, they are often marginalised or isolated and lack the social networks to create their own ROSCA with a lower fee. Indebtedness may also make it difficult for the poorest to save and build up a small asset base - a situation that will be illustrated in the case of low-income and unemployed members of the Ladywood Credit Union in the UK, a case-study scheme described in Chapter 6. There are therefore limitations to the extent to which savings-based user- owned facilities can be of use to very poor people. However, systems that allow flexible amounts to be deposited are more likely to be appropriate. 2.6 Deciding when and how to intervene Before going on to discuss ways of intervening which are useful and relevant to poor people (see Chapter 3), it is necessary to issue some warnings. Several commentators, among them NGO practitioners, have questioned the appropri- ateness of NGOs acting as providers of financial services. Abugre (1992) identifies a range of dangers, and points to the dire consequences of the job being done badly: ⚫ NGOs remain averse to charging positive real interest rates and may, consciously or otherwise, undermine traditional financial systems. ⚫ NGOs do not submit themselves to the discipline required for the provision of sustainable financial services. 25 Microfinance and Poverty Reduction ⚫ Schemes are managed by entirely unprofessional and untrained staff and are often carelessly conceived, designed, and implemented. . There are cases where NGOs have flooded the market with credit, resulting in indebtedness on the part of borrowers, and potentially regressive effects on income and wealth distribution. By extending loans which poor people are unable to pay due to factors beyond their control, or which may have simply been inappropriate in the first place, NGOs can cause a level of indebtedness which may result in the borrower having to liquidate assets in order to repay. Abugre therefore warns against the hasty introduction of new financial services by NGOs and concludes that they should concentrate on what they do well, such as providing social services and acting as confidence brokers in coinmunities. Direct provision may be a risky and problematic strategy for an NGO, particularly as the NGO may not have the range of skills required to develop microfinance interventions, nor experience of the financial skills and respon- sibility required to ensure funds are properly safeguarded and accounted for. A further range of managerial skills are also necessary in managing a portfolio of financial assets such as loans and deposits. NGOS with experience of welfare and relief have more experience of channelling funds than managing them (Bouman, 1995). An NGO must ask itself whether it has the skills to become a banker.. An organisation lacking the relevant skills may consider acquiring them either through recruitment or staff development. Such a strategy itself has important consequences. These skills may be in short supply and recruit- ment prove difficult; they take time to develop and are acquired through experience as well as training. There is often a strong impetus to start work even if the skills of staff are still weak. This can endanger the intervention itself since it is at this early stage that users gain an impression of the nature of the operation, and inexperienced staff are likely to make mistakes. Embarking on direct intervention also raises questions about the long-term sustainability of the service on offer. Financial services should not be provided on a transient or temporary basis. There needs to be a degree of permanence to enable people to plan for their future finan- cial needs. Consideration of the long-term future for a system of finan- cial service provision is therefore important at the outset. Direct provision by an NGO which expects to move away from the area would seldom be appropriate. 26 Informal financial services There is a further range of issues at the level of the macro-economy which should also be considered when deciding whether to intervene. Macro- economic stability is an important pre-requisite for getting a scheme off the ground. Hyper-inflation and economic instability do not encourage individuals to save, and loans under such circumstances are difficult to manage. (However, in Mexico, while formal-sector banks were reeling from massive default caused by the high interest rates and high inflation of 1995, URAC, one of the case-study institutions discussed in Chapter 6, continued to thrive.) Political stability is also needed, since without it there is unlikely to be much confidence in the long-term future of new financial institutions. Before considering scheme design an NGO must also investigate the formal legal regulatory requirements for organisations involved in financial service provision, especially for savings (see Chapter 3). 2.6.1 Research questions on existing informal financial services In carrying out research into the services available, and how they are used, an intervener should try to find answers to a wide range of questions, such as: How do people manage their savings deposits? Are there savings banks, or deposit takers, insurance salesmen, or savings clubs? Do poor people have access to them? If not, how do they save (for example, gold, livestock). Who among the poor uses them (men, women, landless labourers, subsistence farmers etc)? (Extensive use of expensive deposit takers might indicate that the NGO should look first at the reasons why alternatives are not in place: and second at whether there is any possibility for the NGO to get involved, either as promoter or as provider, in savings collection.) How do people temporarily realise the value of assets they hold? Are there pawnbrokers or are there schemes that allow them to pawn land or other major assets (eg jewellery) safely? Who uses these services? (If such devices exist, are they exploitative or enabling? If they are clearly exploitative, there might be a case for an NGO to try to provide or promote an alternative.) How do people get access to the current value of future savings? Are there money-lenders willing to advance small loans against future savings? Are there ROSCAS or managed or commercial chits, or co-operative 2 In a background paper commissioned for the purposes of this book, Shahin Yaqub examined the 'Macroeconomic Conditions for Successful Microfinance for Poor People'. The paper is available from the Policy Department, Oxfam (UK and Ireland). 27 banks? Do poor people have access? Which poor people use them? (If money-lenders appear to be exploiting users, for example by imposing very high interest rates or linking loans to disadvantageous deals over land, labour or commodities, then there might be a case for the NGO to introduce ROSCAS or annual savings clubs, or work as a promoter of self-help groups or credit unions.) How do people make provision for known life-cycle expenses? Do they provide for daughters' marriages, their own old age and funeral, for their heirs? Are there clubs that satisfy these needs, or general savings services or insurance companies that will do as well? Are there government or employer-run schemes? Are there particular expenses for which women have responsibility? How do people cope with emergencies? What happens when a breadwinner is ill, or when a flood or drought occurs? Does the government have schemes that reach poor people in these circumstances? If not, what local provision do people make? How do small-scale entrepreneurs get access to business finance? If so, in what amounts and at what cost? Do women entrepreneurs have access? During the exploratory work done to answer these questions another set of information will come to light-the absolute quantities of cash involved in local financial intermediation. This can be of immense value to scheme designers in cases where a decision is made to intervene. For example, information about amounts repaid regularly to money-lenders will be useful in setting loan sizes and repayment schedules for loan schemes. (Source: Rutherford, 1996.) Much can be learned from the way in which people are already managing their finances. A further aspect is the social relations involved-the groups of people who get together to form ROSCAS, those from whom loans are taken, and those with whom deposits are lodged. Tierney's work on the Oxfam- funded Youth Employment Groups in Tabora Region of Tanzania demon- strates that the design of the intervention, which was based around groups of people with the same occupational background, did not correspond to the pattern of existing financial intermediation, which was organised around small kin-based groups, each including diverse enterprises. Tierney argues that 'the formation of development groups can, ironically, divert people's energy away from improving their lives, because forming the kind of groups which are eligible for financial assistance is a time-consuming activity involving skill 28 Informal financial services in manipulating and maintaining public relations' (Tierneyforthcoming). This illustrates the value of understanding how indigenous financial systems operate, before designing a new microfinance initiative. 2.7 Filling the gaps As well as alerting people to the potential pitfalls of intervention, research to answer the kind of questions suggested above is likely to identify gaps in existing services. There are many ways in which such gaps can be filled and below are some examples of financial service interventions in insurance and hire purchase which can be of use to poor people. For those agencies whose motivation is poverty reduction it is important to link the identification of gaps with a poverty analysis to determine who is excluded from existing services and how such exclusion perpetuates poverty. 2.7.1 Some examples of innovative services Hire-then-purchase for the poor in Bangladesh ACTIONAID found, through the experience of running a group- based lending programme similar to that of the Grameen Bank, that many very poor people were nervous of taking a large loan — the 5,000 taka ($125) needed to buy a rickshaw, for example — in case they were not able to repay it. AA therefore devised a bire-then- purchase scheme for such people. AA bought its own rickshaws and bired them out to group members. A rickshaw driver could hire a rickshaw from AA instead of hiring one from a local 'mohajan'. If he then decided to convert bis contract with AA from hiring to buying, a proportion of the total hiring fees he had already paid was denoted as his down-payment, and be took a regular (smaller) AA loan to pay off the rest. Door-step insurance agents, Cuttack, Orissa In Cuttack, insurance agents from the Peerless company visit house- bolds in low-income areas. They offer simple endowment schemes, which from the point of view of the customers are like accumulating fixed deposit schemes: the customer puts in a fixed amount regularly and then on maturity gets it back plus profits. Life insurance cover is included in the contract. 'Bankassurance: group-based insurance for the rural poor In Bangladesh, one insurance company is pioneering an attempt to match, in the field of insurance, Grameen Bank's success in lending. 29 Delta Life Insurance has been experimenting since 1988 with cut- price basic life-insurance for rural people. Customers are arranged in groups, there is no medical examination and no age-bar, and premiums are tiny and collected weekly. Agents are also involved in Grameen-Bank-style lending and earn an extra commission for the insurance work. In fact the insurance premiums are invested directly in lending (on which healthy interest may be earned). In 1996 Delta was looking for a big NGO partner which could offer the two services- lending and insurance- side by side. Experience so far has shown that demand for such a service is high. Delta is exploring how it can extend this initiative beyond life insurance. 2.8 Promotion: an alternative strategy for NGOS Having identified the gaps in existing financial service provision, an NGO might involve itself in promotion rather than provision. The main alternatives to direct provision of financial services are ones which involve the NGO in a transitional or support role whereby activities such as mobilisation, training, and making links to other organisations are provided. A range of possible approaches are outlined. 2.8.1 Formation of savings groups and development of internal credit facilities Where ROSCAS do not exist or have limited coverage, the NGO might act as a facilitator of their formation or enable them to develop slightly more sophisti- cated systems of internal on-lending which allows savings and loans to take on more flexible formats. This approach has been used by Friends of Women's World Banking in India. In this case the NGO is mainly involved in training and organising the groups. Self-help groups (SHGs) are NGO-led attempts to promote savings clubs, or simple forms of credit union. Those initiated by Friends of Women's World Banking in India are aimed at poor rural women. FWWB (or its partner NGOs) persuades women from the same neigh- bourhood and from similar backgrounds to form small groups of 12 to 15 members. NGO workers encourage the women to meet regularly and frequently and during these meetings the women discuss their financial problems and ways of solving them. The solution they are steered towards involves regular small savings and the immediate conversion of those savings into small loans taken by one or two members at each meeting. Care is taken to Informal financial services involve all group members in the discussion and formulation of rules (how often to meet, the interest to be charged on loans, and repayment arrangements) and then to ensure that every member experiences for herself the activities of saving and of taking and repaying a loan. The group is asked to choose leaders who are trained to manage the group's affairs: if illiteracy or very poor educational levels are a problem then rules are kept deliberately simple (fixed equal savings, and annual dividends rather than monthly interest on savings, for example). These preparations are intended to equip the group for independent survival after the NGO stops sending workers regularly to the meetings. Groups which perform well over several months are able to obtain small bulk loans made by FWWB to the group as a collective. Where there are a number of groups in an area, FWWB may help them form a federation' (apex body') to help with liquidity problems: groups with excess savings deposit them with the federa- tion which on-lends to groups with a strong demand for loans. (Source: WWB, 1993.) However, although this type of intervention can succeed with agency help, it has yet to be proved whether savings and credit groups which are promoted by outsiders can achieve long-term independence (Rutherford, 1996). A range of questions remain: can they save sufficient funds among themselves to satisfy their own demand for loans? Can external funds be introduced into these groups without destroying their independence? 2.8.2 Promotion of small-scale formalised approaches National legislation may allow for credit unions (the World Council of Credit Unions has national and regional affiliates all over the world) or thrift and credit co-operatives (as in Sri Lanka, see 3.4.2). Another approach an NGO might adopt could be the linking up of people interested in establishing such services for themselves with other credit unions or umbrella and apex bodies that are able to promote and advise on particular financial services. Oxfam Hyderabad worked with the Federation of Thrift and Credit Associations in Andhra Pradesh, encouraging exposure visits to flourishing thrift and credit societies by potential members from other areas. The members now have a source of consumption credit based on their own savings. Oxfam Hyderabad saw its support for linking potential groups with an existing thrift and credit structure as a move away from direct funding of NGOs to provide credit. (Source: Oxfam (India) Trust, 1993.) 31 2.8.3 Linking groups to the formal system Existing savings groups or ROSCAS may already have bank savings accounts but are unable to take loans because the bank does not understand their operations or believe them to be creditworthy. The NGO might work with groups to encourage them to build up savings and deposit them in formal institutions. The NGO may then be able to work with a local bank to encour- age it to extend its services to groups. In Ghana, rural banking legislation was designed to create semi- autonomous local banks which would serve people cut off from financial services. However, the banks have experienced a range of problems which led to only 23 out of a total of 123 being classified as operating satisfactorily in 1992 (Onumah, 1995). In 1991 the Garu Bank, a small rural bank set up in 1983 in Ghana, was near to collapse as a result of embezzlement and bad loans. The people of Garu persuaded a member of their own community who was working in Accra to come back to the area and become theman- ager. The Bank is a unit bank and operates relatively autonomously. Share capital of the Bank is owned by the local community, the Catholic Mission, the local Agricultural Station and a Disabled Rehabilitation Centre. Helped by an additional capital injection of $30,000 received from overseas donors via the Catholic Mission the manager trans- formed the situation, and expected to report a profit for the first time. The bank has a range of clients, including local salaried workers such as teachers and government employees. These people are good customers because they take loans which are easily recoverable in the form of deductions made from their salaries at source. Alongside these customers, the Bank provides services to some 300 farmers' groups. Some of these groups were originally formed by the local Agricultural Station and the Catholic Mission and bought shares in the Bank when it was first set up. The manager went to meet the groups to discuss their needs with them. He has developed his own approach to the groups, and stresses that they should be concerned with working together rather than just obtaining credit. He has set up his own criteria for lending to the groups: savings balances of at least 10 per cent of the loan amount; regularity of savings as an indicator of group cohesion; and that the group should have been operating for at least six months. Repayment of the loan on time results in almost automatic qualification for a new loan the following year (although be bad refused loans to a number of groups the previous year due to poor performance). (Source: Abugre, Johnson et al, 1995.)
USER:
What are some examples of informal financial services?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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"================ <TEXT PASSAGE> ======= [context document] ================ <QUESTION> ======= [user request] ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
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How are big pharmaceutical companies doing revenue-wise this year? I'm particularly interested in how this relates to their profits. Please keep your response under 200 words.
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Key takeaways Macro worries meet AI wonderwall. Stocks have managed to climb a wall of macro worries, thanks to largely solid earnings that we believe can expand beyond AI beneficiaries and continue to support prices. As Q3 begins, we look for: Greater dispersion as earnings growth broadens Alpha capacity in stocks chosen ― and avoided Fresh reason for an active bent in U.S. large caps U.S. stocks held onto gains in the second quarter, even as concerns over stubborn inflation, strong economic data and reduced expectations for Fed rate cuts sprinkled cold water on the Q1 hot streak. Markets found support in relatively strong Q1 earnings, led primarily by a small group of high-flying mega-cap stocks. We see the earnings-growth gap between these leaders and the rest closing later this year, as shown below. This presents a compelling opportunity for stock selection, as earnings feed valuations. While the “Magnificent 7” mega-caps were priced at roughly 34x earnings as of late May, the other 493 stocks in the S&P 500 traded at a much less demanding 17x. Yet a still-strong earnings profile means many of the top stocks aren’t necessarily expensive relative to their growth prospects. In all cases, individual analysis is key to ensuring share prices are well aligned to company fundamentals. A narrowing gap and widening opportunity set Consensus analyst expectations for year-over-year earnings growth, 2023-2024 Taking stock equity market outlook: Chart showing S&P 500 earnings estimates for 2024. Source: BlackRock Fundamental Equities, with data from FactSet as of May 30, 2024. Chart shows consensus analyst estimates for year-over-year earnings per share (EPS) growth of the “Magnificent 7” mega-cap stocks in the S&P 500 Index and the remaining constituents. Past performance is not indicative of current or future results. Indexes are unmanaged. It is not possible to invest directly in an index. Parsing a ‘stock picker’s paradise’ Macro factors (inflation, interest rates, etc.) still hold sway over daily moves at the broad index level, but we see company earnings growth as the catalyst for increased stock-level dispersion that could create mean reversion between the market’s leaders and laggards. Notably, while we see the broad S&P 500 catching up to the Mag 7 toward the fourth quarter of this year, earnings growth looks particularly interesting for value stocks once you remove the index’s AI-supercharged top stock, which has heavily skewed the averages. Under this analysis, earnings growth for the Russell 1000 Value Index takes the lead by the third quarter. This is not to suggest an outright preference for value stocks, though the valuation gap between value and growth is quite wide today. It does, however, indicate there is some stored upside in value stocks that investors can look to exploit. Doing so may require looking to a style-pure value manager given that the indexes today are growth dominated. As shown below, the broad market is comprised of only 21% value names. The Russell 1000 Value Index belies its label at 57% core and growth, having experienced a 36% decline in value exposure over the past 25 years. True value is hard to find U.S. stock market style exposures, 2024 Taking stock equity market outlook: Chart showing the style exposures of three major U.S. market indexes. Source: BlackRock Fundamental Equities, with data Morningstar as of April 30, 2024. Chart shows the composition, by style, of three major U.S. stock indices. Indexes are unmanaged. It is not possible to invest directly in an index. “ A market in which earnings growth broadens beyond the prevailing leaders ― creating dispersion in the process ― is a stock picker’s paradise. ” Alpha potential in opting out … We often note the merits of skilled stock selection in the pursuit of alpha. And avoiding underperformers can be as important as choosing outperformers in this pursuit of benchmark-beating returns. What are we avoiding today? Despite an overall preference for healthcare, we are skirting the big U.S. drug makers. Large-cap pharmaceutical companies face an inherent dilemma ― in other industries, products are evergreen once deployed, but pharmaceuticals have the life of a patent cycle. When those patents expire and cheaper generics come to market, revenues inevitably decline. We see several major U.S. pharma companies losing patent protection on up to 70% of their revenue by 2030. Estimates suggest the industry could face a $100 billion drop in revenue as a result. Profits are also at risk of disproportionate decline, as it’s typically the oldest and highest-margin products that are losing patent protection. At the same time, U.S. pharma is confronted with price pressure related to the Inflation Reduction Act (IRA), which gives Medicare the authority to begin negotiating prices on select drugs. That process is underway, with results (and potential price reductions) due in September. The notable exception to our U.S. pharma aversion is the manufacturers of the newer GLP-1 “diabesity” drugs, which we believe are just beginning their success journey. Several of our teams within BlackRock Fundamental Equities are also trimming positions in financials, as interest rate cuts tend to affect bank margins, and parts of the consumer sectors, where the end of pandemic-era excess savings and high inflation are beginning to show up in greater spending discipline. Credit card data reveals an uptick in delinquency rates at lower income levels, increasing loss rates for financials. In technology, we see reductions in software and services offset by buying in semiconductors, where generative AI needs are crowding out other technology spending. … and leaning in Beyond the buying in semiconductors, we see a platform-level bullishness around AI that is manifesting in new ways to tap into the megatrend. Our investors are finding opportunities outside of the accepted AI winners. Examples include companies that own data and those that provide memory for storing it; power companies and industrials that supply into AI infrastructure needs, including those that equip data center cooling systems; and, more recently, opportunities in AI-ready PCs that are set to be introduced this year. Several of our active stock pickers are adding to positions in healthcare, with a preference for healthcare equipment and services. We have also been adding to communication services, including media and entertainment. Others are eyeing value in defensive areas of the market that were left behind in the cyclical rally since 2023. Utilities is one of these sectors. It is priced at a discount to the broad market and, we believe, poised for re-rating. The transition to renewable forms of energy will compel upgrades to existing power grids and push up private market electricity rates in the process, while the power required by a growing field of AI data centers is set to fuel a meaningful spike in energy demand. Underappreciated alpha potential in U.S. large caps In our full quarterly outlook, we challenge a long-held portfolio construction “truism” that asserts exposure to large-cap U.S. stocks is best achieved via passive index-tracking products. The argument suggests the U.S. stock market is so efficient and transparent that there is little alpha to be captured via active stock selection. We disagree and offer analysis showing that a combination of decent excess returns from top managers plus a large U.S. representation in global indexes makes the total alpha opportunity in U.S. large caps the greatest on the global stage. And even as median managers may underperform, we see growing opportunity for skilled managers to add alpha given our outlook for greater earnings and valuation dispersion in what we have described as a new era for equity investing.
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"================ <TEXT PASSAGE> ======= Key takeaways Macro worries meet AI wonderwall. Stocks have managed to climb a wall of macro worries, thanks to largely solid earnings that we believe can expand beyond AI beneficiaries and continue to support prices. As Q3 begins, we look for: Greater dispersion as earnings growth broadens Alpha capacity in stocks chosen ― and avoided Fresh reason for an active bent in U.S. large caps U.S. stocks held onto gains in the second quarter, even as concerns over stubborn inflation, strong economic data and reduced expectations for Fed rate cuts sprinkled cold water on the Q1 hot streak. Markets found support in relatively strong Q1 earnings, led primarily by a small group of high-flying mega-cap stocks. We see the earnings-growth gap between these leaders and the rest closing later this year, as shown below. This presents a compelling opportunity for stock selection, as earnings feed valuations. While the “Magnificent 7” mega-caps were priced at roughly 34x earnings as of late May, the other 493 stocks in the S&P 500 traded at a much less demanding 17x. Yet a still-strong earnings profile means many of the top stocks aren’t necessarily expensive relative to their growth prospects. In all cases, individual analysis is key to ensuring share prices are well aligned to company fundamentals. A narrowing gap and widening opportunity set Consensus analyst expectations for year-over-year earnings growth, 2023-2024 Taking stock equity market outlook: Chart showing S&P 500 earnings estimates for 2024. Source: BlackRock Fundamental Equities, with data from FactSet as of May 30, 2024. Chart shows consensus analyst estimates for year-over-year earnings per share (EPS) growth of the “Magnificent 7” mega-cap stocks in the S&P 500 Index and the remaining constituents. Past performance is not indicative of current or future results. Indexes are unmanaged. It is not possible to invest directly in an index. Parsing a ‘stock picker’s paradise’ Macro factors (inflation, interest rates, etc.) still hold sway over daily moves at the broad index level, but we see company earnings growth as the catalyst for increased stock-level dispersion that could create mean reversion between the market’s leaders and laggards. Notably, while we see the broad S&P 500 catching up to the Mag 7 toward the fourth quarter of this year, earnings growth looks particularly interesting for value stocks once you remove the index’s AI-supercharged top stock, which has heavily skewed the averages. Under this analysis, earnings growth for the Russell 1000 Value Index takes the lead by the third quarter. This is not to suggest an outright preference for value stocks, though the valuation gap between value and growth is quite wide today. It does, however, indicate there is some stored upside in value stocks that investors can look to exploit. Doing so may require looking to a style-pure value manager given that the indexes today are growth dominated. As shown below, the broad market is comprised of only 21% value names. The Russell 1000 Value Index belies its label at 57% core and growth, having experienced a 36% decline in value exposure over the past 25 years. True value is hard to find U.S. stock market style exposures, 2024 Taking stock equity market outlook: Chart showing the style exposures of three major U.S. market indexes. Source: BlackRock Fundamental Equities, with data Morningstar as of April 30, 2024. Chart shows the composition, by style, of three major U.S. stock indices. Indexes are unmanaged. It is not possible to invest directly in an index. “ A market in which earnings growth broadens beyond the prevailing leaders ― creating dispersion in the process ― is a stock picker’s paradise. ” Alpha potential in opting out … We often note the merits of skilled stock selection in the pursuit of alpha. And avoiding underperformers can be as important as choosing outperformers in this pursuit of benchmark-beating returns. What are we avoiding today? Despite an overall preference for healthcare, we are skirting the big U.S. drug makers. Large-cap pharmaceutical companies face an inherent dilemma ― in other industries, products are evergreen once deployed, but pharmaceuticals have the life of a patent cycle. When those patents expire and cheaper generics come to market, revenues inevitably decline. We see several major U.S. pharma companies losing patent protection on up to 70% of their revenue by 2030. Estimates suggest the industry could face a $100 billion drop in revenue as a result. Profits are also at risk of disproportionate decline, as it’s typically the oldest and highest-margin products that are losing patent protection. At the same time, U.S. pharma is confronted with price pressure related to the Inflation Reduction Act (IRA), which gives Medicare the authority to begin negotiating prices on select drugs. That process is underway, with results (and potential price reductions) due in September. The notable exception to our U.S. pharma aversion is the manufacturers of the newer GLP-1 “diabesity” drugs, which we believe are just beginning their success journey. Several of our teams within BlackRock Fundamental Equities are also trimming positions in financials, as interest rate cuts tend to affect bank margins, and parts of the consumer sectors, where the end of pandemic-era excess savings and high inflation are beginning to show up in greater spending discipline. Credit card data reveals an uptick in delinquency rates at lower income levels, increasing loss rates for financials. In technology, we see reductions in software and services offset by buying in semiconductors, where generative AI needs are crowding out other technology spending. … and leaning in Beyond the buying in semiconductors, we see a platform-level bullishness around AI that is manifesting in new ways to tap into the megatrend. Our investors are finding opportunities outside of the accepted AI winners. Examples include companies that own data and those that provide memory for storing it; power companies and industrials that supply into AI infrastructure needs, including those that equip data center cooling systems; and, more recently, opportunities in AI-ready PCs that are set to be introduced this year. Several of our active stock pickers are adding to positions in healthcare, with a preference for healthcare equipment and services. We have also been adding to communication services, including media and entertainment. Others are eyeing value in defensive areas of the market that were left behind in the cyclical rally since 2023. Utilities is one of these sectors. It is priced at a discount to the broad market and, we believe, poised for re-rating. The transition to renewable forms of energy will compel upgrades to existing power grids and push up private market electricity rates in the process, while the power required by a growing field of AI data centers is set to fuel a meaningful spike in energy demand. Underappreciated alpha potential in U.S. large caps In our full quarterly outlook, we challenge a long-held portfolio construction “truism” that asserts exposure to large-cap U.S. stocks is best achieved via passive index-tracking products. The argument suggests the U.S. stock market is so efficient and transparent that there is little alpha to be captured via active stock selection. We disagree and offer analysis showing that a combination of decent excess returns from top managers plus a large U.S. representation in global indexes makes the total alpha opportunity in U.S. large caps the greatest on the global stage. And even as median managers may underperform, we see growing opportunity for skilled managers to add alpha given our outlook for greater earnings and valuation dispersion in what we have described as a new era for equity investing. https://www.blackrock.com/us/individual/insights/taking-stock-quarterly-outlook ================ <QUESTION> ======= How are big pharmaceutical companies doing revenue-wise this year? I'm particularly interested in how this relates to their profits. Please keep your response under 200 words. ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
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"================ <TEXT PASSAGE> ======= [context document] ================ <QUESTION> ======= [user request] ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
EVIDENCE:
Key takeaways Macro worries meet AI wonderwall. Stocks have managed to climb a wall of macro worries, thanks to largely solid earnings that we believe can expand beyond AI beneficiaries and continue to support prices. As Q3 begins, we look for: Greater dispersion as earnings growth broadens Alpha capacity in stocks chosen ― and avoided Fresh reason for an active bent in U.S. large caps U.S. stocks held onto gains in the second quarter, even as concerns over stubborn inflation, strong economic data and reduced expectations for Fed rate cuts sprinkled cold water on the Q1 hot streak. Markets found support in relatively strong Q1 earnings, led primarily by a small group of high-flying mega-cap stocks. We see the earnings-growth gap between these leaders and the rest closing later this year, as shown below. This presents a compelling opportunity for stock selection, as earnings feed valuations. While the “Magnificent 7” mega-caps were priced at roughly 34x earnings as of late May, the other 493 stocks in the S&P 500 traded at a much less demanding 17x. Yet a still-strong earnings profile means many of the top stocks aren’t necessarily expensive relative to their growth prospects. In all cases, individual analysis is key to ensuring share prices are well aligned to company fundamentals. A narrowing gap and widening opportunity set Consensus analyst expectations for year-over-year earnings growth, 2023-2024 Taking stock equity market outlook: Chart showing S&P 500 earnings estimates for 2024. Source: BlackRock Fundamental Equities, with data from FactSet as of May 30, 2024. Chart shows consensus analyst estimates for year-over-year earnings per share (EPS) growth of the “Magnificent 7” mega-cap stocks in the S&P 500 Index and the remaining constituents. Past performance is not indicative of current or future results. Indexes are unmanaged. It is not possible to invest directly in an index. Parsing a ‘stock picker’s paradise’ Macro factors (inflation, interest rates, etc.) still hold sway over daily moves at the broad index level, but we see company earnings growth as the catalyst for increased stock-level dispersion that could create mean reversion between the market’s leaders and laggards. Notably, while we see the broad S&P 500 catching up to the Mag 7 toward the fourth quarter of this year, earnings growth looks particularly interesting for value stocks once you remove the index’s AI-supercharged top stock, which has heavily skewed the averages. Under this analysis, earnings growth for the Russell 1000 Value Index takes the lead by the third quarter. This is not to suggest an outright preference for value stocks, though the valuation gap between value and growth is quite wide today. It does, however, indicate there is some stored upside in value stocks that investors can look to exploit. Doing so may require looking to a style-pure value manager given that the indexes today are growth dominated. As shown below, the broad market is comprised of only 21% value names. The Russell 1000 Value Index belies its label at 57% core and growth, having experienced a 36% decline in value exposure over the past 25 years. True value is hard to find U.S. stock market style exposures, 2024 Taking stock equity market outlook: Chart showing the style exposures of three major U.S. market indexes. Source: BlackRock Fundamental Equities, with data Morningstar as of April 30, 2024. Chart shows the composition, by style, of three major U.S. stock indices. Indexes are unmanaged. It is not possible to invest directly in an index. “ A market in which earnings growth broadens beyond the prevailing leaders ― creating dispersion in the process ― is a stock picker’s paradise. ” Alpha potential in opting out … We often note the merits of skilled stock selection in the pursuit of alpha. And avoiding underperformers can be as important as choosing outperformers in this pursuit of benchmark-beating returns. What are we avoiding today? Despite an overall preference for healthcare, we are skirting the big U.S. drug makers. Large-cap pharmaceutical companies face an inherent dilemma ― in other industries, products are evergreen once deployed, but pharmaceuticals have the life of a patent cycle. When those patents expire and cheaper generics come to market, revenues inevitably decline. We see several major U.S. pharma companies losing patent protection on up to 70% of their revenue by 2030. Estimates suggest the industry could face a $100 billion drop in revenue as a result. Profits are also at risk of disproportionate decline, as it’s typically the oldest and highest-margin products that are losing patent protection. At the same time, U.S. pharma is confronted with price pressure related to the Inflation Reduction Act (IRA), which gives Medicare the authority to begin negotiating prices on select drugs. That process is underway, with results (and potential price reductions) due in September. The notable exception to our U.S. pharma aversion is the manufacturers of the newer GLP-1 “diabesity” drugs, which we believe are just beginning their success journey. Several of our teams within BlackRock Fundamental Equities are also trimming positions in financials, as interest rate cuts tend to affect bank margins, and parts of the consumer sectors, where the end of pandemic-era excess savings and high inflation are beginning to show up in greater spending discipline. Credit card data reveals an uptick in delinquency rates at lower income levels, increasing loss rates for financials. In technology, we see reductions in software and services offset by buying in semiconductors, where generative AI needs are crowding out other technology spending. … and leaning in Beyond the buying in semiconductors, we see a platform-level bullishness around AI that is manifesting in new ways to tap into the megatrend. Our investors are finding opportunities outside of the accepted AI winners. Examples include companies that own data and those that provide memory for storing it; power companies and industrials that supply into AI infrastructure needs, including those that equip data center cooling systems; and, more recently, opportunities in AI-ready PCs that are set to be introduced this year. Several of our active stock pickers are adding to positions in healthcare, with a preference for healthcare equipment and services. We have also been adding to communication services, including media and entertainment. Others are eyeing value in defensive areas of the market that were left behind in the cyclical rally since 2023. Utilities is one of these sectors. It is priced at a discount to the broad market and, we believe, poised for re-rating. The transition to renewable forms of energy will compel upgrades to existing power grids and push up private market electricity rates in the process, while the power required by a growing field of AI data centers is set to fuel a meaningful spike in energy demand. Underappreciated alpha potential in U.S. large caps In our full quarterly outlook, we challenge a long-held portfolio construction “truism” that asserts exposure to large-cap U.S. stocks is best achieved via passive index-tracking products. The argument suggests the U.S. stock market is so efficient and transparent that there is little alpha to be captured via active stock selection. We disagree and offer analysis showing that a combination of decent excess returns from top managers plus a large U.S. representation in global indexes makes the total alpha opportunity in U.S. large caps the greatest on the global stage. And even as median managers may underperform, we see growing opportunity for skilled managers to add alpha given our outlook for greater earnings and valuation dispersion in what we have described as a new era for equity investing.
USER:
How are big pharmaceutical companies doing revenue-wise this year? I'm particularly interested in how this relates to their profits. Please keep your response under 200 words.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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I'm providing you with your source material. You will not be using any outside material. Your job is to answer questions about the material.
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What are the main takeaways?
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Low Interest Rates: Causes and Consequences∗ Robert E. Hall Hoover Institution and Department of Economics, Stanford University National Bureau of Economic Research World interest rates have been declining for several decades. In a general equilibrium setting, the interest rate is determined by the interaction of a number of types of behavior: the policy of the central bank, investment in productive assets, the choice between current and future consumption, and the responses of wealth holders to risk. Central banks devote consider effort to determining equilibrium real rates, around which they set their policy rates, though measuring the equilibrium rate is challenging. The real interest rate is also connected to the marginal product of capital, though the connection is loose. Similarly, the real interest rate is connected to consumption growth through a Euler equation, but again many other influ- ences enter the relationship between the two variables. Finally, the idea of the “global saving glut” suggests that the rise of income in countries with high propensities to save may be a factor in the decline in real rates. That idea receives support in a simple model of global financial equilibrium between coun- tries with risk tolerance (the United States) and ones with high risk aversion (China). JEL Codes: E21, E22, E43, E52. Low world interest rates have stimulated new interest in the determination of the safe real rate. As a threshold matter, Rachel and Smith’s figure 1 (this issue) and Juselius et al.’s figure 1 (this issue) document the pronounced downward trend of world real inter- est rates since the 1980s. For the purposes of this commentary, I take ∗ This research was supported by the Hoover Institution. Complete backup for all of the calculations is available from my website, http://www.stanford. edu/∼rehall. Author contact: [email protected]; stanford.edu/∼rehall. 103 104 International Journal of Central Banking September 2017 the real rate to be the yield net of inflation of safe government debt of maturity around one to two years. Thus I abstract from liquidity effects at the short end of the yield curve and from issues related to the slope of the yield curve. Structural relations governing the real interest rate include its relation to • the central bank’s payment on reserves and the extent of sat- uration of the financial system in reserves • the marginal product of capital • the rate of consumption growth (through the Euler equation) • the terms of trade between risk-tolerant and risk-averse investors In a complete macro model one or more equations would describe each of these structural relations. It would not be possible to divide up responsibility among them for the overall decline in the real rate. One can fashion a set of highly simplified models, each containing only one or two of the structural relations. For example, Krugman (1998) considers an economy with no capital and no uncertainty to focus on monetary policy and consumption growth and illuminate issues of the zero lower bound. But a set of models along those lines would not result in an additive breakdown of the sources of the decline in the real interest rate. 1. Monetary Policy and the Real Interest Rate Traditional monetary policy kept the interest paid on reserves at zero nominal and manipulated the quantity of reserves. Explaining how the central bank influenced interest rates involved consideration of the liquidity value of scarce reserves. Today, all major central banks have saturated their financial systems with reserves, so the liquid- ity value is zero, and the central banks execute monetary policy exclusively by manipulation of the payment made to reserve hold- ers (in the United States, a new kind of reserves, reverse repurchase agreements, play this role). Powerful forces of arbitrage link the central bank’s policy rate paid on reserves to similar short-term government obligations. The Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 105 central bank thus controls short rates directly. But the fact of central bank control does not mean that we need look no further to under- stand the movements of short rates. For one thing, it is the behavior of real rates that matters and all central banks set nominal rates, though there would be no obstacle to direct setting of real rates. Hall and Reis (2016) discusses these topics in detail. Thus the behavior of inflation needs to be brought into the picture. More important, however, is that changing the policy rate has effects on output and employment relatively quickly and on inflation, with a longer lag, according to most views. As a result of the influence of the central bank’s policy rate on the other key macro variables, the other structural relations listed above come into play in the central bank’s choice of the policy rate. Only the most naive observer thinks that the central bank can pick its policy rate by unilateral whim. Friedman (1968), following Wick- sell, set forth a framework that remains influential fifty years later: There is a level of the real interest rate, r∗ , the natural rate, with the property that it is infeasible for the central bank to run a mon- etary policy that results in a real rate permanently above or below the natural rate. Thus many discussions of the behavior of the real rate focus on quantifying r∗ , generally as a quantity that varies over time. Since 1980, it has had a downward trend. The foundations of the hypothesis that rt∗ is a cognizable fea- ture of the economy are weak, in my opinion—see Hall (2005). It takes an economic or statistical model to extract rt∗ from data on rt and other variables. The results are model specific. Laubach and Williams (2003) is the canon of this literature. Notwithstand- ing my doubts about the foundations, these authors’ results seem completely reasonable. Juselius et al. (this issue) refine the canon. The middle of their figure 6 shows the real rate, which is volatile and cyclical. The Laubach-Williams natural rate is a plausibly smoothed version of the actual real rate. As Friedman’s analysis predicted, the actual real rate exceeds its natural level in booms and falls below in busts. The natural rate of Juselius et al. has higher volatility and, surprisingly, a higher level. Friedman’s analysis suggested fairly per- suasively that the real rate should deviate above about as much as below the natural rate, but the new construction has almost all of the deviations below. 106 International Journal of Central Banking September 2017 Figure 1. Spread between the Return to Capital and the Safe Real Interest Rate 2. The Marginal Product of Capital and the Return to Capital In an economy without uncertainty, the return to capital is linked to the marginal product by the rental price of capital. Provided the rental price includes the fluctuations in Tobin’s q—the ratio of the value of installed capital to the acquisition price of capital— arbitrage should equate the marginal product of capital to the rental price. To put it differently, if the rate of return is calculated from data that accounts for q, the rate of return will track the inter- est rate (measured over the same interval) period by period. With uncertainty, the rate of return will include a risk premium, which may vary over time. The recent macro literature has studied finan- cial frictions that interpose between wealth holders and businesses seeking to attract wealth to form business capital. Figure 1 shows the spread between the calculated return to cap- ital and the one-year safe real interest rate, from Hall (2015). Note that the spread is remarkably volatile, upward trending, and high except in recessions. Gomme, Ravikumar, and Rupert (2015) have made similar calculations. The notion that there is a tight connec- tion between the safe interest rate and the return to capital receives Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 107 Figure 2. U.S. Real Rate and Consumption Growth little support from this evidence. Rather, there is apparently large scope for variations over time in risk premiums, financial frictions, and other sources of the wedge between the earnings of capital and the risk-free cost of borrowing. These variations are almost certainly endogenous. 3. Consumption Growth and the Interest Rate Many macro models, including the New Keynesian models that have proliferated at central banks, contain an upward-sloping structural relation between expected consumption growth and the real interest rate—Rachel and Smith’s equation (1) describes the Euler equation reflecting this relation. The logic is that a higher real interest rate makes future consumption cheaper than current consumption, so households consume less currently and more in the future. To put it another way, higher growth rates should have correspondingly higher real interest rates. Figure 2 shows that this proposition is somewhat true in U.S. data averaged over decades. The proposition encounters some serious obstacles. First, Carroll and Summers (1991) observed that across countries that can trade goods and financial claims, all countries should have the same rate of growth of consumption, in accord with the worldwide real interest 108 International Journal of Central Banking September 2017 rate, irrespective of their rates of growth of income. Countries with high expected income growth should borrow from slower-growing countries and gradually pay the debt off as growth occurs. In fact, the evidence shows that consumption growth is tightly linked to income growth across countries. And growth rates differ markedly across countries, with the highest growth in recent decades in east and south Asia. Second, a household does not have a single Euler equation, but rather a different one for each asset. Hansen and Singleton (1983) is the classic citation on this point. There is nothing special about the safe real interest rate. Their paper showed that the data rejected the hypothesis that households satisfied all of the Euler equations. Third, data on household financial holdings make it clear that households with collectively an important fraction of total income face binding constraints on borrowing. They would like to obey the Euler-equation model but cannot commit to repaying the debt that they would incur if they did. They obey a related model where a shadow borrowing rate, higher than the measured one, tracks con- sumption growth. I conclude that research on consumption choices has a far richer view than the one expressed in the simple interest-only Euler equation. 4. The Role of the Interest Rate in an Economy where Risk-Tolerant Investors Insure Risk-Averse Ones by Borrowing from Them Hall (2016) demonstrates the theoretical and practical importance of trade among heterogeneous investors. In effect, the risk-tolerant investors insure the risk-averse ones. Debt has a key role in this risk- motivated trade. By borrowing from the risk averse, the risk-tolerant investors provide the risk averse with protection against future ran- dom shocks, because the payoff of the debt is unaffected by the shocks (provided no default occurs). The interest rate on the debt describes the terms of the risk trade. If the risk tolerant have high resources relative to the risk averse, collectively, the risk averse com- mand a good deal—they receive a high rate of interest on the funds they loan to the risk tolerant. But if there is an upward trend in the resources of the risk averse, the deal shifts disadvantageously away Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 109 from the risk averse—they earn less and less interest on the funds they lend. The paper shows that China behaves risk aversely, lending large volumes of funds to western Europe and the United States. But the Chinese resource base—measured by GDP—is growing faster than the resource base of the risk-tolerant borrowers. Hence the world real interest rate is declining on account of the differential growth. The model backing up this analysis is rigged to avoid the other issues discussed earlier in this commentary. There is no central bank intervening in the world financial market. There is no capital, so no issue of the relation of the marginal product of capital to the interest rate. Resources are growing at the rate of zero among the risk averse and the risk tolerant, so there are no issues of growth affecting the interest rate. The model embodies standard ideas from financial markets, including the hypothesis that investors attribute a small but positive probability that a truly bad event will occur and the hypothesis that the risk-averse investors place a somewhat higher probability on that event. My paper pursues the ideas in Bernanke et al. (2011) that there is a “global savings glut” and in Gourinchas, Rey, and Govillot (2010) and Caballero and Farhi (2016) that low real interest rates are the result of a “shortage” of safe assets. The paper derives results along those lines from the equilibrium of an Arrow-Debreu economy with complete capital markets. In place of gluts and shortages, the model hypothesizes changes over time in the resources held by the risk tolerant in relation to those held by the risk averse. Figure 3 shows how the safe real interest rate in the model declines as the fraction of resources held by the risk tolerant declines. The decline is similar to the decline that actually occurred from 1990 to the present, with real rates at or below zero. The risk-tolerant investors in the model have modestly lower coefficients of relative risk aversion and believe that the probability of bad conditions is modestly lower, compared with the risk-averse investors. The conclusion of the model is that heterogeneity coupled with a shift in relative resources toward the risk-averse investors can explain observed changes in the real interest rate without bringing in the declining growth rate or rising financial frictions. The paper makes no claim that the other forces are not actually influential, however. Fundamental to the success of the model is its hypothesis that both 110 International Journal of Central Banking September 2017 Figure 3. As the Fraction of Resources in the Hands of the Risk Tolerant Declines, the Interest Rate Falls types of investors behave as if they assigned small but important probabilities to a substantial negative shock, worse than has actu- ally occurred since the Great Depression. In this respect, the model follows the trend in recent financial economics, which finds, for exam- ple, that such beliefs about rare disasters are the most plausible way to explain the equity premium. One of the manifestations of heterogeneity in investors’ risk aver- sion is across countries. Investors in some countries, notably the United States, collectively take on risk from other parts of the world by maintaining positive net positions in foreign equity and negative net positions in debt—in effect, these countries borrow from the risk- averse countries and use the proceeds to buy foreign equity. Thus the United States is like a leveraged hedge fund. Countries can be divided into three groups: (i) those that absorb risk by borrowing in the global debt market and buying foreign equity, (ii) those that shed risk by lending to the risk absorbers and letting those countries take on the risk of their own equity, and (iii) those whose risk preferences are in the middle and choose not to absorb or shed risk and those whose financial markets are undeveloped and do not participate in global financial markets. Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 111 Figure 4. Countries that Absorb Risk by Holding Positive Amounts of Net Foreign Equity or by Borrowing from Foreign Lenders Note: Risk-absorbing countries are shown by dark shading. Created with mapchart.net. Figure 4 shows the countries that absorb risk. They are the advanced countries of western Europe and the countries scattered around the globe that fell under the influence of those countries and became advanced themselves. There appears to be a negative cor- relation between risk aversion and income per person, as the risk absorbers are all high-income countries. By far the largest absorber of risk is the United States. Figure 5 shows the countries that shed risk. Most are lower income. China is by far the largest of the shedders. China holds large amounts of dollar debt claims on the United States, with recent growth in its euro debt claims on western Europe. One high-income country, Japan, is a major risk shedder. The United States and other risk absorbers hold positive net amounts of foreign equity. Figure 6 shows the growth of risk absorption by the United States. The upper line shows U.S. net borrowing in the debt market and the lower line net U.S. holdings of foreign equity. The upward path in debt began in the mid-1980s and the upward path of equity in the 1990s. Debt continued to rise through 2011 (the last year for which I have data) while equity fell slightly after the 2008 financial 112 International Journal of Central Banking September 2017 Figure 5. Countries that Shed Risk by Holding Negative Amounts of Net Foreign Equity or by Lending Positive Amounts to Foreign Borrowers Note: Risk-shedding countries are shown by dark shading. Created with mapchart.net. Figure 6. Risk Absorption by the United States, 1970–2011 Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 113 Figure 7. Risk Shedding by China, 1981–2011 crisis. The average of the two measures—taken as an overall measure of risk absorption—rose from the 1980s and reached a plateau of 0.3 years of GDP. Figure 7 shows similar data for China starting in 1981—in ear- lier years, China was effectively walled off from the global economy. Starting in the early 1990s, China shed risk aggressively, reaching the point just before the crisis of the average of foreign debt owned and net foreign holdings of Chinese equity claims equal to 0.4 years of GDP. Following the crisis, Chinese risk shedding has remained at that level but has not grown. Risk splitting occurs within the United States in large volumes as well. Table 1 shows decade averages of a variety of financial institutions that hold risky financial positions funded in part by debt—held by risk-averse investors such as pension funds—and by correspondingly riskier equity held by risk-tolerant investors such as high-wealth households. Government debt is a prominent part of the risk splitting. In the case of government, the taxpayers make up the risk-tolerant side—the marginal taxpayer with substantially higher than average wealth takes on magnified risk by insuring the holders of government debt. On the private side, numerous types of financial institutions and securities have the effect of splitting risk between a tranche of low-risk debt and high-risk residual equity claims. 114 Table 1. Examples of the Scale of Risk-Splitting Institutions Government Private Consolidated GSE Private Non-mortgage Government GSE Guaranteed Equity Securiti- Non-financial Household Decade Debt Debt Debt Funds zations Corporate Debt Repos Debt 1980s 0.469 0.061 0.091 — 0.012 0.163 0.103 0.186 1990s 0.611 0.101 0.204 — 0.086 0.211 0.166 0.204 2000s 0.574 0.203 0.293 0.058 0.233 0.238 0.237 0.239 2010s 0.936 0.126 0.347 0.140 0.109 0.275 0.221 0.251 International Journal of Central Banking September 2017 Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 115 Figure 8. Scale of Risk-Splitting Institutions Relative to GDP Private equity is a rapidly growing example of this type of financial arrangement. Securitizations with overcollateralized debtlike securi- ties held by or on behalf of risk-averse investors and residual equity claims held by risk-tolerant investors grew rapidly until the crisis but have shrunk since then. Repurchase agreements split risk by overcollateralization to the extent of the repo haircut. These too have shrunk relative to GDP since the crisis. Figure 8 shows the generally upward trend of the volume of risk splitting in the United States, stated relative to GDP. Both gov- ernment and non-government contributions have risen, with some moderation after the crisis. 5. Concluding Remarks Prior to the financial crisis in 2008, risk splitting grew steadily, as revealed in data on both international and domestic financial posi- tions. Safe real interest rates declined in parallel. The crisis resulted in a downward jump in real rates corresponding to the fall in nom- inal short rates to essentially zero soon after the crisis struck. The corresponding real rate was between –1 percent and –2 percent. Real rates have risen in the United States recently, as nominal rates have 116 International Journal of Central Banking September 2017 become positive and inflation has risen close to the Federal Reserve’s target of 2 percent, but real rates in other markets remain as nega- tive as ever in the eight years since the crisis. Because the crisis hit GDP and asset value harder in advanced countries than in others, especially China, the influence studied in my analysis may explain some part of the drop in the global safe real short rate. In addition, the crisis may have raised investors’ beliefs about the probability of adverse events in the future, as in Kozlowski, Veldkamp, and Venkateswaran (2015). According to the principles considered here, the safe real rate would fall if the disaster probability rose more for the risk-averse investors than for the risk tolerant. I emphasize again that heterogeneity in risk aversion is only one of the factors entering a full explanation of the behavior of real rates over recent decades. Expansionary monetary policy, rising financial frictions, and slowing consumption growth need to be brought into a full analysis. References Bernanke, B. S., C. Bertaut, L. Pounder DeMarco, and S. Kamin. 2011. “International Capital Flows and the Returns to Safe Assets in the United States, 2003–2007.” International Finance Discussion Paper No. 1014, Board of Governors of the Federal Reserve System (February). Caballero, R. J., and E. Farhi. 2016. “The Safety Trap.” March. Harvard University, Department of Economics. Carroll, C. D., and L. H. Summers. 1991. “Consumption Growth Parallels Income Growth: Some New Evidence.” In National Sav- ing and Economic Performance, ed. B. D. Bernheim and J. B. Shovin, 305–48 (chapter 10). University of Chicago Press. Friedman, M. 1968. “The Role of Monetary Policy.” Presidential address delivered at the 80th Annual Meeting of the American Economics Association, Washington, DC, December 29, 1967. American Economic Review 58 (1): 1–15. Gomme, P., B. Ravikumar, and P. Rupert. 2015. “Secular Stagnation and Returns on Capital.” Economic Synopses (Federal Reserve Bank of St. Louis) (19): 1–3. Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 117 Gourinchas, P.-O., H. Rey, and N. Govillot. 2010. “Exorbitant Priv- ilege and Exorbitant Duty.” Discussion Paper No. 10-E-20, Insti- tute for Monetary and Economic Studies, Bank of Japan. Hall, R. E. 2005. “Separating the Business Cycle from Other Eco- nomic Fluctuations.” In The Greenspan Era: Lessons for the Future, 133–79. Proceedings of a symposium sponsored by the Federal Reserve Bank of Kansas City, August 25–27. ———. 2015. “Quantifying the Lasting Harm to the U.S. Economy from the Financial Crisis.” NBER Macroeconomics Annual 2014, Vol. 29, ed. J. A. Parker and M. Woodford, 71–128. University of Chicago Press. ———. 2016. “The Role of the Growth of Risk-Averse Wealth in the Decline of the Safe Real Interest Rate.” Hoover Institution (November). Hall, R. E., and R. Reis. 2016. “Achieving Price Stability by Manipu- lating the Central Bank’s Payment on Reserves.” NBER Working Paper No. 22761 (October). Hansen, L. P., and K. J. Singleton. 1983. “Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns.” Journal of Political Economy 91 (2): 249–65. Kozlowski, J., L. Veldkamp, and V. Venkateswaran. 2015. “The Tail that Wags the Economy: Beliefs and Persistent Stagnation.” NBER Working Paper No. 21719 (November). Krugman, P. R. 1998. “It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap.” Brookings Papers on Economic Activity (2): 137–205. Laubach, T., and J. C Williams. 2003. “Measuring the Natural Rate of Interest.” Review of Economics and Statistics 85 (4): 1063–70.
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I'm providing you with your source material. You will not be using any outside material. Your job is to answer questions about the material. What are the main takeaways? Low Interest Rates: Causes and Consequences∗ Robert E. Hall Hoover Institution and Department of Economics, Stanford University National Bureau of Economic Research World interest rates have been declining for several decades. In a general equilibrium setting, the interest rate is determined by the interaction of a number of types of behavior: the policy of the central bank, investment in productive assets, the choice between current and future consumption, and the responses of wealth holders to risk. Central banks devote consider effort to determining equilibrium real rates, around which they set their policy rates, though measuring the equilibrium rate is challenging. The real interest rate is also connected to the marginal product of capital, though the connection is loose. Similarly, the real interest rate is connected to consumption growth through a Euler equation, but again many other influ- ences enter the relationship between the two variables. Finally, the idea of the “global saving glut” suggests that the rise of income in countries with high propensities to save may be a factor in the decline in real rates. That idea receives support in a simple model of global financial equilibrium between coun- tries with risk tolerance (the United States) and ones with high risk aversion (China). JEL Codes: E21, E22, E43, E52. Low world interest rates have stimulated new interest in the determination of the safe real rate. As a threshold matter, Rachel and Smith’s figure 1 (this issue) and Juselius et al.’s figure 1 (this issue) document the pronounced downward trend of world real inter- est rates since the 1980s. For the purposes of this commentary, I take ∗ This research was supported by the Hoover Institution. Complete backup for all of the calculations is available from my website, http://www.stanford. edu/∼rehall. Author contact: [email protected]; stanford.edu/∼rehall. 103 104 International Journal of Central Banking September 2017 the real rate to be the yield net of inflation of safe government debt of maturity around one to two years. Thus I abstract from liquidity effects at the short end of the yield curve and from issues related to the slope of the yield curve. Structural relations governing the real interest rate include its relation to • the central bank’s payment on reserves and the extent of sat- uration of the financial system in reserves • the marginal product of capital • the rate of consumption growth (through the Euler equation) • the terms of trade between risk-tolerant and risk-averse investors In a complete macro model one or more equations would describe each of these structural relations. It would not be possible to divide up responsibility among them for the overall decline in the real rate. One can fashion a set of highly simplified models, each containing only one or two of the structural relations. For example, Krugman (1998) considers an economy with no capital and no uncertainty to focus on monetary policy and consumption growth and illuminate issues of the zero lower bound. But a set of models along those lines would not result in an additive breakdown of the sources of the decline in the real interest rate. 1. Monetary Policy and the Real Interest Rate Traditional monetary policy kept the interest paid on reserves at zero nominal and manipulated the quantity of reserves. Explaining how the central bank influenced interest rates involved consideration of the liquidity value of scarce reserves. Today, all major central banks have saturated their financial systems with reserves, so the liquid- ity value is zero, and the central banks execute monetary policy exclusively by manipulation of the payment made to reserve hold- ers (in the United States, a new kind of reserves, reverse repurchase agreements, play this role). Powerful forces of arbitrage link the central bank’s policy rate paid on reserves to similar short-term government obligations. The Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 105 central bank thus controls short rates directly. But the fact of central bank control does not mean that we need look no further to under- stand the movements of short rates. For one thing, it is the behavior of real rates that matters and all central banks set nominal rates, though there would be no obstacle to direct setting of real rates. Hall and Reis (2016) discusses these topics in detail. Thus the behavior of inflation needs to be brought into the picture. More important, however, is that changing the policy rate has effects on output and employment relatively quickly and on inflation, with a longer lag, according to most views. As a result of the influence of the central bank’s policy rate on the other key macro variables, the other structural relations listed above come into play in the central bank’s choice of the policy rate. Only the most naive observer thinks that the central bank can pick its policy rate by unilateral whim. Friedman (1968), following Wick- sell, set forth a framework that remains influential fifty years later: There is a level of the real interest rate, r∗ , the natural rate, with the property that it is infeasible for the central bank to run a mon- etary policy that results in a real rate permanently above or below the natural rate. Thus many discussions of the behavior of the real rate focus on quantifying r∗ , generally as a quantity that varies over time. Since 1980, it has had a downward trend. The foundations of the hypothesis that rt∗ is a cognizable fea- ture of the economy are weak, in my opinion—see Hall (2005). It takes an economic or statistical model to extract rt∗ from data on rt and other variables. The results are model specific. Laubach and Williams (2003) is the canon of this literature. Notwithstand- ing my doubts about the foundations, these authors’ results seem completely reasonable. Juselius et al. (this issue) refine the canon. The middle of their figure 6 shows the real rate, which is volatile and cyclical. The Laubach-Williams natural rate is a plausibly smoothed version of the actual real rate. As Friedman’s analysis predicted, the actual real rate exceeds its natural level in booms and falls below in busts. The natural rate of Juselius et al. has higher volatility and, surprisingly, a higher level. Friedman’s analysis suggested fairly per- suasively that the real rate should deviate above about as much as below the natural rate, but the new construction has almost all of the deviations below. 106 International Journal of Central Banking September 2017 Figure 1. Spread between the Return to Capital and the Safe Real Interest Rate 2. The Marginal Product of Capital and the Return to Capital In an economy without uncertainty, the return to capital is linked to the marginal product by the rental price of capital. Provided the rental price includes the fluctuations in Tobin’s q—the ratio of the value of installed capital to the acquisition price of capital— arbitrage should equate the marginal product of capital to the rental price. To put it differently, if the rate of return is calculated from data that accounts for q, the rate of return will track the inter- est rate (measured over the same interval) period by period. With uncertainty, the rate of return will include a risk premium, which may vary over time. The recent macro literature has studied finan- cial frictions that interpose between wealth holders and businesses seeking to attract wealth to form business capital. Figure 1 shows the spread between the calculated return to cap- ital and the one-year safe real interest rate, from Hall (2015). Note that the spread is remarkably volatile, upward trending, and high except in recessions. Gomme, Ravikumar, and Rupert (2015) have made similar calculations. The notion that there is a tight connec- tion between the safe interest rate and the return to capital receives Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 107 Figure 2. U.S. Real Rate and Consumption Growth little support from this evidence. Rather, there is apparently large scope for variations over time in risk premiums, financial frictions, and other sources of the wedge between the earnings of capital and the risk-free cost of borrowing. These variations are almost certainly endogenous. 3. Consumption Growth and the Interest Rate Many macro models, including the New Keynesian models that have proliferated at central banks, contain an upward-sloping structural relation between expected consumption growth and the real interest rate—Rachel and Smith’s equation (1) describes the Euler equation reflecting this relation. The logic is that a higher real interest rate makes future consumption cheaper than current consumption, so households consume less currently and more in the future. To put it another way, higher growth rates should have correspondingly higher real interest rates. Figure 2 shows that this proposition is somewhat true in U.S. data averaged over decades. The proposition encounters some serious obstacles. First, Carroll and Summers (1991) observed that across countries that can trade goods and financial claims, all countries should have the same rate of growth of consumption, in accord with the worldwide real interest 108 International Journal of Central Banking September 2017 rate, irrespective of their rates of growth of income. Countries with high expected income growth should borrow from slower-growing countries and gradually pay the debt off as growth occurs. In fact, the evidence shows that consumption growth is tightly linked to income growth across countries. And growth rates differ markedly across countries, with the highest growth in recent decades in east and south Asia. Second, a household does not have a single Euler equation, but rather a different one for each asset. Hansen and Singleton (1983) is the classic citation on this point. There is nothing special about the safe real interest rate. Their paper showed that the data rejected the hypothesis that households satisfied all of the Euler equations. Third, data on household financial holdings make it clear that households with collectively an important fraction of total income face binding constraints on borrowing. They would like to obey the Euler-equation model but cannot commit to repaying the debt that they would incur if they did. They obey a related model where a shadow borrowing rate, higher than the measured one, tracks con- sumption growth. I conclude that research on consumption choices has a far richer view than the one expressed in the simple interest-only Euler equation. 4. The Role of the Interest Rate in an Economy where Risk-Tolerant Investors Insure Risk-Averse Ones by Borrowing from Them Hall (2016) demonstrates the theoretical and practical importance of trade among heterogeneous investors. In effect, the risk-tolerant investors insure the risk-averse ones. Debt has a key role in this risk- motivated trade. By borrowing from the risk averse, the risk-tolerant investors provide the risk averse with protection against future ran- dom shocks, because the payoff of the debt is unaffected by the shocks (provided no default occurs). The interest rate on the debt describes the terms of the risk trade. If the risk tolerant have high resources relative to the risk averse, collectively, the risk averse com- mand a good deal—they receive a high rate of interest on the funds they loan to the risk tolerant. But if there is an upward trend in the resources of the risk averse, the deal shifts disadvantageously away Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 109 from the risk averse—they earn less and less interest on the funds they lend. The paper shows that China behaves risk aversely, lending large volumes of funds to western Europe and the United States. But the Chinese resource base—measured by GDP—is growing faster than the resource base of the risk-tolerant borrowers. Hence the world real interest rate is declining on account of the differential growth. The model backing up this analysis is rigged to avoid the other issues discussed earlier in this commentary. There is no central bank intervening in the world financial market. There is no capital, so no issue of the relation of the marginal product of capital to the interest rate. Resources are growing at the rate of zero among the risk averse and the risk tolerant, so there are no issues of growth affecting the interest rate. The model embodies standard ideas from financial markets, including the hypothesis that investors attribute a small but positive probability that a truly bad event will occur and the hypothesis that the risk-averse investors place a somewhat higher probability on that event. My paper pursues the ideas in Bernanke et al. (2011) that there is a “global savings glut” and in Gourinchas, Rey, and Govillot (2010) and Caballero and Farhi (2016) that low real interest rates are the result of a “shortage” of safe assets. The paper derives results along those lines from the equilibrium of an Arrow-Debreu economy with complete capital markets. In place of gluts and shortages, the model hypothesizes changes over time in the resources held by the risk tolerant in relation to those held by the risk averse. Figure 3 shows how the safe real interest rate in the model declines as the fraction of resources held by the risk tolerant declines. The decline is similar to the decline that actually occurred from 1990 to the present, with real rates at or below zero. The risk-tolerant investors in the model have modestly lower coefficients of relative risk aversion and believe that the probability of bad conditions is modestly lower, compared with the risk-averse investors. The conclusion of the model is that heterogeneity coupled with a shift in relative resources toward the risk-averse investors can explain observed changes in the real interest rate without bringing in the declining growth rate or rising financial frictions. The paper makes no claim that the other forces are not actually influential, however. Fundamental to the success of the model is its hypothesis that both 110 International Journal of Central Banking September 2017 Figure 3. As the Fraction of Resources in the Hands of the Risk Tolerant Declines, the Interest Rate Falls types of investors behave as if they assigned small but important probabilities to a substantial negative shock, worse than has actu- ally occurred since the Great Depression. In this respect, the model follows the trend in recent financial economics, which finds, for exam- ple, that such beliefs about rare disasters are the most plausible way to explain the equity premium. One of the manifestations of heterogeneity in investors’ risk aver- sion is across countries. Investors in some countries, notably the United States, collectively take on risk from other parts of the world by maintaining positive net positions in foreign equity and negative net positions in debt—in effect, these countries borrow from the risk- averse countries and use the proceeds to buy foreign equity. Thus the United States is like a leveraged hedge fund. Countries can be divided into three groups: (i) those that absorb risk by borrowing in the global debt market and buying foreign equity, (ii) those that shed risk by lending to the risk absorbers and letting those countries take on the risk of their own equity, and (iii) those whose risk preferences are in the middle and choose not to absorb or shed risk and those whose financial markets are undeveloped and do not participate in global financial markets. Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 111 Figure 4. Countries that Absorb Risk by Holding Positive Amounts of Net Foreign Equity or by Borrowing from Foreign Lenders Note: Risk-absorbing countries are shown by dark shading. Created with mapchart.net. Figure 4 shows the countries that absorb risk. They are the advanced countries of western Europe and the countries scattered around the globe that fell under the influence of those countries and became advanced themselves. There appears to be a negative cor- relation between risk aversion and income per person, as the risk absorbers are all high-income countries. By far the largest absorber of risk is the United States. Figure 5 shows the countries that shed risk. Most are lower income. China is by far the largest of the shedders. China holds large amounts of dollar debt claims on the United States, with recent growth in its euro debt claims on western Europe. One high-income country, Japan, is a major risk shedder. The United States and other risk absorbers hold positive net amounts of foreign equity. Figure 6 shows the growth of risk absorption by the United States. The upper line shows U.S. net borrowing in the debt market and the lower line net U.S. holdings of foreign equity. The upward path in debt began in the mid-1980s and the upward path of equity in the 1990s. Debt continued to rise through 2011 (the last year for which I have data) while equity fell slightly after the 2008 financial 112 International Journal of Central Banking September 2017 Figure 5. Countries that Shed Risk by Holding Negative Amounts of Net Foreign Equity or by Lending Positive Amounts to Foreign Borrowers Note: Risk-shedding countries are shown by dark shading. Created with mapchart.net. Figure 6. Risk Absorption by the United States, 1970–2011 Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 113 Figure 7. Risk Shedding by China, 1981–2011 crisis. The average of the two measures—taken as an overall measure of risk absorption—rose from the 1980s and reached a plateau of 0.3 years of GDP. Figure 7 shows similar data for China starting in 1981—in ear- lier years, China was effectively walled off from the global economy. Starting in the early 1990s, China shed risk aggressively, reaching the point just before the crisis of the average of foreign debt owned and net foreign holdings of Chinese equity claims equal to 0.4 years of GDP. Following the crisis, Chinese risk shedding has remained at that level but has not grown. Risk splitting occurs within the United States in large volumes as well. Table 1 shows decade averages of a variety of financial institutions that hold risky financial positions funded in part by debt—held by risk-averse investors such as pension funds—and by correspondingly riskier equity held by risk-tolerant investors such as high-wealth households. Government debt is a prominent part of the risk splitting. In the case of government, the taxpayers make up the risk-tolerant side—the marginal taxpayer with substantially higher than average wealth takes on magnified risk by insuring the holders of government debt. On the private side, numerous types of financial institutions and securities have the effect of splitting risk between a tranche of low-risk debt and high-risk residual equity claims. 114 Table 1. Examples of the Scale of Risk-Splitting Institutions Government Private Consolidated GSE Private Non-mortgage Government GSE Guaranteed Equity Securiti- Non-financial Household Decade Debt Debt Debt Funds zations Corporate Debt Repos Debt 1980s 0.469 0.061 0.091 — 0.012 0.163 0.103 0.186 1990s 0.611 0.101 0.204 — 0.086 0.211 0.166 0.204 2000s 0.574 0.203 0.293 0.058 0.233 0.238 0.237 0.239 2010s 0.936 0.126 0.347 0.140 0.109 0.275 0.221 0.251 International Journal of Central Banking September 2017 Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 115 Figure 8. Scale of Risk-Splitting Institutions Relative to GDP Private equity is a rapidly growing example of this type of financial arrangement. Securitizations with overcollateralized debtlike securi- ties held by or on behalf of risk-averse investors and residual equity claims held by risk-tolerant investors grew rapidly until the crisis but have shrunk since then. Repurchase agreements split risk by overcollateralization to the extent of the repo haircut. These too have shrunk relative to GDP since the crisis. Figure 8 shows the generally upward trend of the volume of risk splitting in the United States, stated relative to GDP. Both gov- ernment and non-government contributions have risen, with some moderation after the crisis. 5. Concluding Remarks Prior to the financial crisis in 2008, risk splitting grew steadily, as revealed in data on both international and domestic financial posi- tions. Safe real interest rates declined in parallel. The crisis resulted in a downward jump in real rates corresponding to the fall in nom- inal short rates to essentially zero soon after the crisis struck. The corresponding real rate was between –1 percent and –2 percent. Real rates have risen in the United States recently, as nominal rates have 116 International Journal of Central Banking September 2017 become positive and inflation has risen close to the Federal Reserve’s target of 2 percent, but real rates in other markets remain as nega- tive as ever in the eight years since the crisis. Because the crisis hit GDP and asset value harder in advanced countries than in others, especially China, the influence studied in my analysis may explain some part of the drop in the global safe real short rate. In addition, the crisis may have raised investors’ beliefs about the probability of adverse events in the future, as in Kozlowski, Veldkamp, and Venkateswaran (2015). According to the principles considered here, the safe real rate would fall if the disaster probability rose more for the risk-averse investors than for the risk tolerant. I emphasize again that heterogeneity in risk aversion is only one of the factors entering a full explanation of the behavior of real rates over recent decades. Expansionary monetary policy, rising financial frictions, and slowing consumption growth need to be brought into a full analysis. References Bernanke, B. S., C. Bertaut, L. Pounder DeMarco, and S. Kamin. 2011. “International Capital Flows and the Returns to Safe Assets in the United States, 2003–2007.” International Finance Discussion Paper No. 1014, Board of Governors of the Federal Reserve System (February). Caballero, R. J., and E. Farhi. 2016. “The Safety Trap.” March. Harvard University, Department of Economics. Carroll, C. D., and L. H. Summers. 1991. “Consumption Growth Parallels Income Growth: Some New Evidence.” In National Sav- ing and Economic Performance, ed. B. D. Bernheim and J. B. Shovin, 305–48 (chapter 10). University of Chicago Press. Friedman, M. 1968. “The Role of Monetary Policy.” Presidential address delivered at the 80th Annual Meeting of the American Economics Association, Washington, DC, December 29, 1967. American Economic Review 58 (1): 1–15. Gomme, P., B. Ravikumar, and P. Rupert. 2015. “Secular Stagnation and Returns on Capital.” Economic Synopses (Federal Reserve Bank of St. Louis) (19): 1–3. Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 117 Gourinchas, P.-O., H. Rey, and N. Govillot. 2010. “Exorbitant Priv- ilege and Exorbitant Duty.” Discussion Paper No. 10-E-20, Insti- tute for Monetary and Economic Studies, Bank of Japan. Hall, R. E. 2005. “Separating the Business Cycle from Other Eco- nomic Fluctuations.” In The Greenspan Era: Lessons for the Future, 133–79. Proceedings of a symposium sponsored by the Federal Reserve Bank of Kansas City, August 25–27. ———. 2015. “Quantifying the Lasting Harm to the U.S. Economy from the Financial Crisis.” NBER Macroeconomics Annual 2014, Vol. 29, ed. J. A. Parker and M. Woodford, 71–128. University of Chicago Press. ———. 2016. “The Role of the Growth of Risk-Averse Wealth in the Decline of the Safe Real Interest Rate.” Hoover Institution (November). Hall, R. E., and R. Reis. 2016. “Achieving Price Stability by Manipu- lating the Central Bank’s Payment on Reserves.” NBER Working Paper No. 22761 (October). Hansen, L. P., and K. J. Singleton. 1983. “Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns.” Journal of Political Economy 91 (2): 249–65. Kozlowski, J., L. Veldkamp, and V. Venkateswaran. 2015. “The Tail that Wags the Economy: Beliefs and Persistent Stagnation.” NBER Working Paper No. 21719 (November). Krugman, P. R. 1998. “It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap.” Brookings Papers on Economic Activity (2): 137–205. Laubach, T., and J. C Williams. 2003. “Measuring the Natural Rate of Interest.” Review of Economics and Statistics 85 (4): 1063–70.
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EVIDENCE:
Low Interest Rates: Causes and Consequences∗ Robert E. Hall Hoover Institution and Department of Economics, Stanford University National Bureau of Economic Research World interest rates have been declining for several decades. In a general equilibrium setting, the interest rate is determined by the interaction of a number of types of behavior: the policy of the central bank, investment in productive assets, the choice between current and future consumption, and the responses of wealth holders to risk. Central banks devote consider effort to determining equilibrium real rates, around which they set their policy rates, though measuring the equilibrium rate is challenging. The real interest rate is also connected to the marginal product of capital, though the connection is loose. Similarly, the real interest rate is connected to consumption growth through a Euler equation, but again many other influ- ences enter the relationship between the two variables. Finally, the idea of the “global saving glut” suggests that the rise of income in countries with high propensities to save may be a factor in the decline in real rates. That idea receives support in a simple model of global financial equilibrium between coun- tries with risk tolerance (the United States) and ones with high risk aversion (China). JEL Codes: E21, E22, E43, E52. Low world interest rates have stimulated new interest in the determination of the safe real rate. As a threshold matter, Rachel and Smith’s figure 1 (this issue) and Juselius et al.’s figure 1 (this issue) document the pronounced downward trend of world real inter- est rates since the 1980s. For the purposes of this commentary, I take ∗ This research was supported by the Hoover Institution. Complete backup for all of the calculations is available from my website, http://www.stanford. edu/∼rehall. Author contact: [email protected]; stanford.edu/∼rehall. 103 104 International Journal of Central Banking September 2017 the real rate to be the yield net of inflation of safe government debt of maturity around one to two years. Thus I abstract from liquidity effects at the short end of the yield curve and from issues related to the slope of the yield curve. Structural relations governing the real interest rate include its relation to • the central bank’s payment on reserves and the extent of sat- uration of the financial system in reserves • the marginal product of capital • the rate of consumption growth (through the Euler equation) • the terms of trade between risk-tolerant and risk-averse investors In a complete macro model one or more equations would describe each of these structural relations. It would not be possible to divide up responsibility among them for the overall decline in the real rate. One can fashion a set of highly simplified models, each containing only one or two of the structural relations. For example, Krugman (1998) considers an economy with no capital and no uncertainty to focus on monetary policy and consumption growth and illuminate issues of the zero lower bound. But a set of models along those lines would not result in an additive breakdown of the sources of the decline in the real interest rate. 1. Monetary Policy and the Real Interest Rate Traditional monetary policy kept the interest paid on reserves at zero nominal and manipulated the quantity of reserves. Explaining how the central bank influenced interest rates involved consideration of the liquidity value of scarce reserves. Today, all major central banks have saturated their financial systems with reserves, so the liquid- ity value is zero, and the central banks execute monetary policy exclusively by manipulation of the payment made to reserve hold- ers (in the United States, a new kind of reserves, reverse repurchase agreements, play this role). Powerful forces of arbitrage link the central bank’s policy rate paid on reserves to similar short-term government obligations. The Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 105 central bank thus controls short rates directly. But the fact of central bank control does not mean that we need look no further to under- stand the movements of short rates. For one thing, it is the behavior of real rates that matters and all central banks set nominal rates, though there would be no obstacle to direct setting of real rates. Hall and Reis (2016) discusses these topics in detail. Thus the behavior of inflation needs to be brought into the picture. More important, however, is that changing the policy rate has effects on output and employment relatively quickly and on inflation, with a longer lag, according to most views. As a result of the influence of the central bank’s policy rate on the other key macro variables, the other structural relations listed above come into play in the central bank’s choice of the policy rate. Only the most naive observer thinks that the central bank can pick its policy rate by unilateral whim. Friedman (1968), following Wick- sell, set forth a framework that remains influential fifty years later: There is a level of the real interest rate, r∗ , the natural rate, with the property that it is infeasible for the central bank to run a mon- etary policy that results in a real rate permanently above or below the natural rate. Thus many discussions of the behavior of the real rate focus on quantifying r∗ , generally as a quantity that varies over time. Since 1980, it has had a downward trend. The foundations of the hypothesis that rt∗ is a cognizable fea- ture of the economy are weak, in my opinion—see Hall (2005). It takes an economic or statistical model to extract rt∗ from data on rt and other variables. The results are model specific. Laubach and Williams (2003) is the canon of this literature. Notwithstand- ing my doubts about the foundations, these authors’ results seem completely reasonable. Juselius et al. (this issue) refine the canon. The middle of their figure 6 shows the real rate, which is volatile and cyclical. The Laubach-Williams natural rate is a plausibly smoothed version of the actual real rate. As Friedman’s analysis predicted, the actual real rate exceeds its natural level in booms and falls below in busts. The natural rate of Juselius et al. has higher volatility and, surprisingly, a higher level. Friedman’s analysis suggested fairly per- suasively that the real rate should deviate above about as much as below the natural rate, but the new construction has almost all of the deviations below. 106 International Journal of Central Banking September 2017 Figure 1. Spread between the Return to Capital and the Safe Real Interest Rate 2. The Marginal Product of Capital and the Return to Capital In an economy without uncertainty, the return to capital is linked to the marginal product by the rental price of capital. Provided the rental price includes the fluctuations in Tobin’s q—the ratio of the value of installed capital to the acquisition price of capital— arbitrage should equate the marginal product of capital to the rental price. To put it differently, if the rate of return is calculated from data that accounts for q, the rate of return will track the inter- est rate (measured over the same interval) period by period. With uncertainty, the rate of return will include a risk premium, which may vary over time. The recent macro literature has studied finan- cial frictions that interpose between wealth holders and businesses seeking to attract wealth to form business capital. Figure 1 shows the spread between the calculated return to cap- ital and the one-year safe real interest rate, from Hall (2015). Note that the spread is remarkably volatile, upward trending, and high except in recessions. Gomme, Ravikumar, and Rupert (2015) have made similar calculations. The notion that there is a tight connec- tion between the safe interest rate and the return to capital receives Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 107 Figure 2. U.S. Real Rate and Consumption Growth little support from this evidence. Rather, there is apparently large scope for variations over time in risk premiums, financial frictions, and other sources of the wedge between the earnings of capital and the risk-free cost of borrowing. These variations are almost certainly endogenous. 3. Consumption Growth and the Interest Rate Many macro models, including the New Keynesian models that have proliferated at central banks, contain an upward-sloping structural relation between expected consumption growth and the real interest rate—Rachel and Smith’s equation (1) describes the Euler equation reflecting this relation. The logic is that a higher real interest rate makes future consumption cheaper than current consumption, so households consume less currently and more in the future. To put it another way, higher growth rates should have correspondingly higher real interest rates. Figure 2 shows that this proposition is somewhat true in U.S. data averaged over decades. The proposition encounters some serious obstacles. First, Carroll and Summers (1991) observed that across countries that can trade goods and financial claims, all countries should have the same rate of growth of consumption, in accord with the worldwide real interest 108 International Journal of Central Banking September 2017 rate, irrespective of their rates of growth of income. Countries with high expected income growth should borrow from slower-growing countries and gradually pay the debt off as growth occurs. In fact, the evidence shows that consumption growth is tightly linked to income growth across countries. And growth rates differ markedly across countries, with the highest growth in recent decades in east and south Asia. Second, a household does not have a single Euler equation, but rather a different one for each asset. Hansen and Singleton (1983) is the classic citation on this point. There is nothing special about the safe real interest rate. Their paper showed that the data rejected the hypothesis that households satisfied all of the Euler equations. Third, data on household financial holdings make it clear that households with collectively an important fraction of total income face binding constraints on borrowing. They would like to obey the Euler-equation model but cannot commit to repaying the debt that they would incur if they did. They obey a related model where a shadow borrowing rate, higher than the measured one, tracks con- sumption growth. I conclude that research on consumption choices has a far richer view than the one expressed in the simple interest-only Euler equation. 4. The Role of the Interest Rate in an Economy where Risk-Tolerant Investors Insure Risk-Averse Ones by Borrowing from Them Hall (2016) demonstrates the theoretical and practical importance of trade among heterogeneous investors. In effect, the risk-tolerant investors insure the risk-averse ones. Debt has a key role in this risk- motivated trade. By borrowing from the risk averse, the risk-tolerant investors provide the risk averse with protection against future ran- dom shocks, because the payoff of the debt is unaffected by the shocks (provided no default occurs). The interest rate on the debt describes the terms of the risk trade. If the risk tolerant have high resources relative to the risk averse, collectively, the risk averse com- mand a good deal—they receive a high rate of interest on the funds they loan to the risk tolerant. But if there is an upward trend in the resources of the risk averse, the deal shifts disadvantageously away Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 109 from the risk averse—they earn less and less interest on the funds they lend. The paper shows that China behaves risk aversely, lending large volumes of funds to western Europe and the United States. But the Chinese resource base—measured by GDP—is growing faster than the resource base of the risk-tolerant borrowers. Hence the world real interest rate is declining on account of the differential growth. The model backing up this analysis is rigged to avoid the other issues discussed earlier in this commentary. There is no central bank intervening in the world financial market. There is no capital, so no issue of the relation of the marginal product of capital to the interest rate. Resources are growing at the rate of zero among the risk averse and the risk tolerant, so there are no issues of growth affecting the interest rate. The model embodies standard ideas from financial markets, including the hypothesis that investors attribute a small but positive probability that a truly bad event will occur and the hypothesis that the risk-averse investors place a somewhat higher probability on that event. My paper pursues the ideas in Bernanke et al. (2011) that there is a “global savings glut” and in Gourinchas, Rey, and Govillot (2010) and Caballero and Farhi (2016) that low real interest rates are the result of a “shortage” of safe assets. The paper derives results along those lines from the equilibrium of an Arrow-Debreu economy with complete capital markets. In place of gluts and shortages, the model hypothesizes changes over time in the resources held by the risk tolerant in relation to those held by the risk averse. Figure 3 shows how the safe real interest rate in the model declines as the fraction of resources held by the risk tolerant declines. The decline is similar to the decline that actually occurred from 1990 to the present, with real rates at or below zero. The risk-tolerant investors in the model have modestly lower coefficients of relative risk aversion and believe that the probability of bad conditions is modestly lower, compared with the risk-averse investors. The conclusion of the model is that heterogeneity coupled with a shift in relative resources toward the risk-averse investors can explain observed changes in the real interest rate without bringing in the declining growth rate or rising financial frictions. The paper makes no claim that the other forces are not actually influential, however. Fundamental to the success of the model is its hypothesis that both 110 International Journal of Central Banking September 2017 Figure 3. As the Fraction of Resources in the Hands of the Risk Tolerant Declines, the Interest Rate Falls types of investors behave as if they assigned small but important probabilities to a substantial negative shock, worse than has actu- ally occurred since the Great Depression. In this respect, the model follows the trend in recent financial economics, which finds, for exam- ple, that such beliefs about rare disasters are the most plausible way to explain the equity premium. One of the manifestations of heterogeneity in investors’ risk aver- sion is across countries. Investors in some countries, notably the United States, collectively take on risk from other parts of the world by maintaining positive net positions in foreign equity and negative net positions in debt—in effect, these countries borrow from the risk- averse countries and use the proceeds to buy foreign equity. Thus the United States is like a leveraged hedge fund. Countries can be divided into three groups: (i) those that absorb risk by borrowing in the global debt market and buying foreign equity, (ii) those that shed risk by lending to the risk absorbers and letting those countries take on the risk of their own equity, and (iii) those whose risk preferences are in the middle and choose not to absorb or shed risk and those whose financial markets are undeveloped and do not participate in global financial markets. Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 111 Figure 4. Countries that Absorb Risk by Holding Positive Amounts of Net Foreign Equity or by Borrowing from Foreign Lenders Note: Risk-absorbing countries are shown by dark shading. Created with mapchart.net. Figure 4 shows the countries that absorb risk. They are the advanced countries of western Europe and the countries scattered around the globe that fell under the influence of those countries and became advanced themselves. There appears to be a negative cor- relation between risk aversion and income per person, as the risk absorbers are all high-income countries. By far the largest absorber of risk is the United States. Figure 5 shows the countries that shed risk. Most are lower income. China is by far the largest of the shedders. China holds large amounts of dollar debt claims on the United States, with recent growth in its euro debt claims on western Europe. One high-income country, Japan, is a major risk shedder. The United States and other risk absorbers hold positive net amounts of foreign equity. Figure 6 shows the growth of risk absorption by the United States. The upper line shows U.S. net borrowing in the debt market and the lower line net U.S. holdings of foreign equity. The upward path in debt began in the mid-1980s and the upward path of equity in the 1990s. Debt continued to rise through 2011 (the last year for which I have data) while equity fell slightly after the 2008 financial 112 International Journal of Central Banking September 2017 Figure 5. Countries that Shed Risk by Holding Negative Amounts of Net Foreign Equity or by Lending Positive Amounts to Foreign Borrowers Note: Risk-shedding countries are shown by dark shading. Created with mapchart.net. Figure 6. Risk Absorption by the United States, 1970–2011 Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 113 Figure 7. Risk Shedding by China, 1981–2011 crisis. The average of the two measures—taken as an overall measure of risk absorption—rose from the 1980s and reached a plateau of 0.3 years of GDP. Figure 7 shows similar data for China starting in 1981—in ear- lier years, China was effectively walled off from the global economy. Starting in the early 1990s, China shed risk aggressively, reaching the point just before the crisis of the average of foreign debt owned and net foreign holdings of Chinese equity claims equal to 0.4 years of GDP. Following the crisis, Chinese risk shedding has remained at that level but has not grown. Risk splitting occurs within the United States in large volumes as well. Table 1 shows decade averages of a variety of financial institutions that hold risky financial positions funded in part by debt—held by risk-averse investors such as pension funds—and by correspondingly riskier equity held by risk-tolerant investors such as high-wealth households. Government debt is a prominent part of the risk splitting. In the case of government, the taxpayers make up the risk-tolerant side—the marginal taxpayer with substantially higher than average wealth takes on magnified risk by insuring the holders of government debt. On the private side, numerous types of financial institutions and securities have the effect of splitting risk between a tranche of low-risk debt and high-risk residual equity claims. 114 Table 1. Examples of the Scale of Risk-Splitting Institutions Government Private Consolidated GSE Private Non-mortgage Government GSE Guaranteed Equity Securiti- Non-financial Household Decade Debt Debt Debt Funds zations Corporate Debt Repos Debt 1980s 0.469 0.061 0.091 — 0.012 0.163 0.103 0.186 1990s 0.611 0.101 0.204 — 0.086 0.211 0.166 0.204 2000s 0.574 0.203 0.293 0.058 0.233 0.238 0.237 0.239 2010s 0.936 0.126 0.347 0.140 0.109 0.275 0.221 0.251 International Journal of Central Banking September 2017 Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 115 Figure 8. Scale of Risk-Splitting Institutions Relative to GDP Private equity is a rapidly growing example of this type of financial arrangement. Securitizations with overcollateralized debtlike securi- ties held by or on behalf of risk-averse investors and residual equity claims held by risk-tolerant investors grew rapidly until the crisis but have shrunk since then. Repurchase agreements split risk by overcollateralization to the extent of the repo haircut. These too have shrunk relative to GDP since the crisis. Figure 8 shows the generally upward trend of the volume of risk splitting in the United States, stated relative to GDP. Both gov- ernment and non-government contributions have risen, with some moderation after the crisis. 5. Concluding Remarks Prior to the financial crisis in 2008, risk splitting grew steadily, as revealed in data on both international and domestic financial posi- tions. Safe real interest rates declined in parallel. The crisis resulted in a downward jump in real rates corresponding to the fall in nom- inal short rates to essentially zero soon after the crisis struck. The corresponding real rate was between –1 percent and –2 percent. Real rates have risen in the United States recently, as nominal rates have 116 International Journal of Central Banking September 2017 become positive and inflation has risen close to the Federal Reserve’s target of 2 percent, but real rates in other markets remain as nega- tive as ever in the eight years since the crisis. Because the crisis hit GDP and asset value harder in advanced countries than in others, especially China, the influence studied in my analysis may explain some part of the drop in the global safe real short rate. In addition, the crisis may have raised investors’ beliefs about the probability of adverse events in the future, as in Kozlowski, Veldkamp, and Venkateswaran (2015). According to the principles considered here, the safe real rate would fall if the disaster probability rose more for the risk-averse investors than for the risk tolerant. I emphasize again that heterogeneity in risk aversion is only one of the factors entering a full explanation of the behavior of real rates over recent decades. Expansionary monetary policy, rising financial frictions, and slowing consumption growth need to be brought into a full analysis. References Bernanke, B. S., C. Bertaut, L. Pounder DeMarco, and S. Kamin. 2011. “International Capital Flows and the Returns to Safe Assets in the United States, 2003–2007.” International Finance Discussion Paper No. 1014, Board of Governors of the Federal Reserve System (February). Caballero, R. J., and E. Farhi. 2016. “The Safety Trap.” March. Harvard University, Department of Economics. Carroll, C. D., and L. H. Summers. 1991. “Consumption Growth Parallels Income Growth: Some New Evidence.” In National Sav- ing and Economic Performance, ed. B. D. Bernheim and J. B. Shovin, 305–48 (chapter 10). University of Chicago Press. Friedman, M. 1968. “The Role of Monetary Policy.” Presidential address delivered at the 80th Annual Meeting of the American Economics Association, Washington, DC, December 29, 1967. American Economic Review 58 (1): 1–15. Gomme, P., B. Ravikumar, and P. Rupert. 2015. “Secular Stagnation and Returns on Capital.” Economic Synopses (Federal Reserve Bank of St. Louis) (19): 1–3. Vol. 13 No. 3 Low Interest Rates: Causes and Consequences 117 Gourinchas, P.-O., H. Rey, and N. Govillot. 2010. “Exorbitant Priv- ilege and Exorbitant Duty.” Discussion Paper No. 10-E-20, Insti- tute for Monetary and Economic Studies, Bank of Japan. Hall, R. E. 2005. “Separating the Business Cycle from Other Eco- nomic Fluctuations.” In The Greenspan Era: Lessons for the Future, 133–79. Proceedings of a symposium sponsored by the Federal Reserve Bank of Kansas City, August 25–27. ———. 2015. “Quantifying the Lasting Harm to the U.S. Economy from the Financial Crisis.” NBER Macroeconomics Annual 2014, Vol. 29, ed. J. A. Parker and M. Woodford, 71–128. University of Chicago Press. ———. 2016. “The Role of the Growth of Risk-Averse Wealth in the Decline of the Safe Real Interest Rate.” Hoover Institution (November). Hall, R. E., and R. Reis. 2016. “Achieving Price Stability by Manipu- lating the Central Bank’s Payment on Reserves.” NBER Working Paper No. 22761 (October). Hansen, L. P., and K. J. Singleton. 1983. “Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns.” Journal of Political Economy 91 (2): 249–65. Kozlowski, J., L. Veldkamp, and V. Venkateswaran. 2015. “The Tail that Wags the Economy: Beliefs and Persistent Stagnation.” NBER Working Paper No. 21719 (November). Krugman, P. R. 1998. “It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap.” Brookings Papers on Economic Activity (2): 137–205. Laubach, T., and J. C Williams. 2003. “Measuring the Natural Rate of Interest.” Review of Economics and Statistics 85 (4): 1063–70.
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What are the main takeaways?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Use information from the article only to explain your answer. Do not rely on outside knowledge.
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What are three advantages of Trusts when planning your estate?
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Raymond James & Associates, Inc. Tandy G. Lewis, CFP®, WMS Managing Director, Investments 333 Texas Street, Suite 175 Shreveport, LA 71101 318-677-5518 866-297-6576 [email protected] https://bowenlewis.com Estate Planning Basics April 26, 2016 Estate Planning--An Introduction By definition, estate planning is a process designed to help you manage and preserve your assets while you are alive, and to conserve and control their distribution after your death according to your goals and objectives. But what estate planning means to you specifically depends on who you are. Your age, health, wealth, lifestyle, life stage, goals, and many other factors determine your particular estate planning needs. For example, you may have a small estate and may be concerned only that certain people receive particular things. A simple will is probably all you'll need. Or, you may have a large estate, and minimizing any potential estate tax impact is your foremost goal. Here, you'll need to use more sophisticated techniques in your estate plan, such as a trust. To help you understand what estate planning means to you, the following sections address some estate planning needs that are common among some very broad groups of individuals. Think of these suggestions as simply a point in the right direction, and then seek professional advice to implement the right plan for you. Over 18 Since incapacity can strike anyone at anytime, all adults over 18 should consider having: • A durable power of attorney: This document lets you name someone to manage your property for you in case you become incapacitated and cannot do so. • An advanced medical directive: The three main types of advanced medical directives are (1) a living will, (2) a durable power of attorney for health care (also known as a health-care proxy), and (3) a Do Not Resuscitate order. Be aware that not all states allow each kind of medical directive, so make sure you execute one that will be effective for you. Young and single If you're young and single, you may not need much estate planning. But if you have some material possessions, you should at least write a will. If you don't, the wealth you leave behind if you die will likely go to your parents, and that might not be what you would want. A will lets you leave your possessions to anyone you choose (e.g., your significant other, siblings, other relatives, or favorite charity). Unmarried couples You've committed to a life partner but aren't legally married. For you, a will is essential if you want your property to pass to your partner at your death. Without a will, state law directs that only your closest relatives will inherit your property, and your partner may get nothing. If you share certain property, such as a house or car, you might consider owning the property as joint tenants with rights of survivorship. That way, when one of you dies, the jointly held property will pass to the surviving partner automatically. Married couples For many years, married couples had to do careful estate planning, such as the creation of a credit shelter trust, in order to take advantage of their combined federal estate tax exclusions. A new law passed in 2010 allows the executor of a deceased spouse's estate to transfer any unused estate tax exclusion amount to the surviving spouse without such planning. This provision is effective for estates of decedents dying in 2011 and later years. You may be inclined to rely on these portability rules for estate tax avoidance, using outright bequests to your spouse instead of traditional trust planning. However, portability should not be relied upon solely for utilization of the first to die's estate tax exemption, and a credit shelter trust created at the first spouse's death may still be advantageous for several reasons: • Portability may be lost if the surviving spouse remarries and is later widowed again • The trust can protect any appreciation of assets from estate tax at the second spouse's death • The trust can provide protection of assets from the reach of the surviving spouse's creditors • Portability does not apply to the generation-skipping transfer (GST) tax, so the trust may be needed to fully leverage the GST exemptions of both spouses Married couples where one spouse is not a U.S. citizen have special planning concerns. The marital deduction is not allowed if the recipient spouse is a non-citizen spouse, but a $148,000 (in 2016, $147,000 in 2015) annual exclusion is allowed. If certain requirements By definition, estate planning is a process designed to help you manage and preserve your assets while you are alive, and to conserve and control their distribution after your death according to your goals and objectives. Page 2 of 7, see disclaimer on final page are met, however, a transfer to a qualified domestic trust (QDOT) will qualify for the marital deduction. Married with children If you're married and have children, you and your spouse should each have your own will. For you, wills are vital because you can name a guardian for your minor children in case both of you die simultaneously. If you fail to name a guardian in your will, a court may appoint someone you might not have chosen. Furthermore, without a will, some states dictate that at your death some of your property goes to your children and not to your spouse. If minor children inherit directly, the surviving parent will need court permission to manage the money for them. You may also want to consult an attorney about establishing a trust to manage your children's assets. You may also need life insurance. Your surviving spouse may not be able to support the family on his or her own and may need to replace your earnings to maintain the family. Comfortable and looking forward to retirement You've accumulated some wealth and you're thinking about retirement. Here's where estate planning overlaps with retirement planning. It's just as important to plan to care for yourself during your retirement as it is to plan to provide for your beneficiaries after your death. You should keep in mind that even though Social Security may be around when you retire, those benefits alone may not provide enough income for your retirement years. Wealthy and worried Depending on the size of your estate, you may need to be concerned about estate taxes. Estates of $5,450,000 (in 2016, $5,430,000 in 2015) are effectively exempt from the federal gift and estate tax. Estates over that amount may be subject to the tax at a top rate of 40 percent. Similarly, there is another tax, called the generation-skipping transfer (GST) tax, that is imposed on transfers of wealth that are made to grandchildren (and lower generations). The GST tax exemption is $5,450,000 (in 2016, $5,430,000 in 2015) and the GST tax rate is 40 percent. Whether your estate will be subject to state death taxes depends on the size of your estate and the tax laws in effect in the state in which you are domiciled. Elderly or ill If you're elderly or ill, you'll want to write a will or update your existing one, consider a revocable living trust, and make sure you have a durable power of attorney and a health-care directive. Talk with your family about your wishes, and make sure they have copies of your important papers or know where to locate them. Consider saving some of your accumulated wealth using other retirement and deferred vehicles, such as an individual retirement account (IRA). Page 3 of 7, see disclaimer on final page Steps to Estate Planning Success Estate Planning Pyramid Page 4 of 7, see disclaimer on final page Advantages of Trusts Why you might consider discussing trusts with your attorney • Trusts may be used to minimize estate taxes for married individuals with substantial assets. • Trusts provide management assistance for your heirs.* • Contingent trusts for minors (which take effect in the event that both parents die) may be used to avoid the costs of having a court-appointed guardian to manage your children's assets. • Properly funded trusts avoid many of the administrative costs of probate (e.g., attorney fees, document filing fees). • Generally, revocable living trusts will keep the distribution of your estate private. • Trusts can be used to dispense income to • Trusts can ensure that assets go to your intended beneficiaries. For example, if you have children from a prior marriage you can make sure that they, as well as a current spouse, are provided for. • Trusts can minimize income taxes by allowing the shifting of income among beneficiaries. • Properly structured irrevocable life insurance trusts can provide liquidity for estate settlement needs while removing the policy proceeds from estate taxation at the death of the insured. *This is particularly important for minors and incapacitated adults who may need support, maintenance, and/or education over a long period of time, or for adults who have difficulty managing money. intermediate beneficiaries (e.g., children, elderly parents) before final property distribution. Conducting a Periodic Review of Your Estate Plan With your estate plan successfully implemented, one final but critical step remains: carrying out a periodic review and update. Imagine this: since you implemented your estate plan five years ago, you got divorced and remarried, sold your house and bought a boat to live on, sold your legal practice and invested the money that provides you with enough income so you no longer have to work, and reconciled with your estranged daughter. This scenario may look more like fantasy than reality, but imagine how these major changes over a five-year period may affect your estate. And that's without considering changes in tax laws, the stock market, the economic climate, or other external factors. After all, if the only constant is change, it isn't unreasonable to speculate that your wishes have changed, the advantages you sought have eroded or vanished, or even that new opportunities now exist that could offer a better value for your estate. A periodic review can give you peace of mind. When should you conduct a review of your estate plan? Every year for large estates Those of you with large estates (i.e., more than the federal or your state's exemption amount, whichever is smaller) should review your plan annually or at certain life events that are suggested in the following paragraphs. Not a year goes by without significant changes in the tax laws. You need to stay on top of these to get the best results. Every five years for small estates Those of you with smaller estates (under the applicable exclusion amount) need only review every five years or following changes in your life events. Your estate will not be as affected by economic factors and changes in the tax laws as a larger estate might be. However, your personal situation is bound to change, and reviewing every five years will bring your plan up to date with your current situation. Upon changes in estate valuation If the value of your estate has changed more than 20 percent over the last two years, you may need to update your estate plan. Upon economic changes You need to review your estate plan if there has been a change in the value of your assets or your income level or requirements, or if you are retiring. What is a trust? A trust is a legal entity that is created for the purpose of transferring property to a trustee for the benefit of a third person (beneficiary). The trustee manages the property for the beneficiary according to the terms specified in the trust With your estate plan successfully implemented, one final but critical step remains: carrying out a periodic review and update. Page 5 of 7, see disclaimer on final page Upon changes in occupation or employment If you or your spouse changed jobs, you may need to make revisions in your estate plan. Upon changes in family situations You need to update your plan if: (1) your (or your children's or grandchildren's) marital status has changed, (2) a child (or grandchild) has been born or adopted, (3) your spouse, child, or grandchild has died, (4) you or a close family member has become ill or incapacitated, or (5) other individuals (e.g., your parents) have become dependent on you. Upon changes in your closely held business interest A review is in order if you have: (1) formed, purchased, or sold a closely held business, (2) reorganized or liquidated a closely held business, (3) instituted a pension plan, (4) executed a buy-sell agreement, (5) deferred compensation, or (6) changed employee benefits. Upon changes in the estate plan Of course, if you make a change in part of your estate plan (e.g., create a trust, execute a codicil, etc.), you should review the estate plan as a whole to ensure that it remains cohesive and effective. Upon major transactions Be sure to check your plan if you have: (1) Upon changes in insurance coverage Making changes in your insurance coverage may change your estate planning needs or may make changes necessary. Therefore, inform your estate planning advisor if you make any change to life insurance, health insurance, disability insurance, medical insurance, liability insurance, or beneficiary designations. Upon death of trustee/executor/guardian If a designated trustee, executor, or guardian dies or changes his or her mind about serving, you need to revise the parts of your estate plan affected (e.g., the trust agreement and your will) to replace that individual. Upon other important changes None of us has a crystal ball. We can't think of all the conditions that should prompt us to review and revise our estate plans. Use your common sense. Have your feelings about charity changed? Has your son finally become financially responsible? Has your spouse's health been declining? Are your children through college now? All you need to do is give it a little thought from time to time, and take action when necessary. received a sizable inheritance, bequest, or similar disposition, (2) made or received substantial gifts, (3) borrowed or lent substantial amounts of money, (4) purchased, leased, or sold material assets or investments, (5) changed residences, (6) changed significant property ownership, or (7) become involved in a lawsuit. Page 6 of 7, see disclaimer on final page Raymond James & Associates, Inc. Tandy G. Lewis, CFP®, WMS Managing Director, Investments 333 Texas Street, Suite 175 Shreveport, LA 71101 318-677-5518 866-297-6576 [email protected] https://bowenlewis.com April 26, 2016 Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016 This information was developed by Broadridge, an independent third party. It is general in nature, is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Investments and strategies mentioned may not be suitable for all investors. Past performance may not be indicative of future results. Raymond James & Associates, Inc. member New York Stock Exchange/SIPC does not provide advice on tax, legal or mortgage issues. These matters should be discussed with an appropriate professional. Page 7 of 7
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Use information from the article only to explain your answer. Do not rely on outside knowledge. What are three advantages of Trusts when planning your estate? Raymond James & Associates, Inc. Tandy G. Lewis, CFP®, WMS Managing Director, Investments 333 Texas Street, Suite 175 Shreveport, LA 71101 318-677-5518 866-297-6576 [email protected] https://bowenlewis.com Estate Planning Basics April 26, 2016 Estate Planning--An Introduction By definition, estate planning is a process designed to help you manage and preserve your assets while you are alive, and to conserve and control their distribution after your death according to your goals and objectives. But what estate planning means to you specifically depends on who you are. Your age, health, wealth, lifestyle, life stage, goals, and many other factors determine your particular estate planning needs. For example, you may have a small estate and may be concerned only that certain people receive particular things. A simple will is probably all you'll need. Or, you may have a large estate, and minimizing any potential estate tax impact is your foremost goal. Here, you'll need to use more sophisticated techniques in your estate plan, such as a trust. To help you understand what estate planning means to you, the following sections address some estate planning needs that are common among some very broad groups of individuals. Think of these suggestions as simply a point in the right direction, and then seek professional advice to implement the right plan for you. Over 18 Since incapacity can strike anyone at anytime, all adults over 18 should consider having: • A durable power of attorney: This document lets you name someone to manage your property for you in case you become incapacitated and cannot do so. • An advanced medical directive: The three main types of advanced medical directives are (1) a living will, (2) a durable power of attorney for health care (also known as a health-care proxy), and (3) a Do Not Resuscitate order. Be aware that not all states allow each kind of medical directive, so make sure you execute one that will be effective for you. Young and single If you're young and single, you may not need much estate planning. But if you have some material possessions, you should at least write a will. If you don't, the wealth you leave behind if you die will likely go to your parents, and that might not be what you would want. A will lets you leave your possessions to anyone you choose (e.g., your significant other, siblings, other relatives, or favorite charity). Unmarried couples You've committed to a life partner but aren't legally married. For you, a will is essential if you want your property to pass to your partner at your death. Without a will, state law directs that only your closest relatives will inherit your property, and your partner may get nothing. If you share certain property, such as a house or car, you might consider owning the property as joint tenants with rights of survivorship. That way, when one of you dies, the jointly held property will pass to the surviving partner automatically. Married couples For many years, married couples had to do careful estate planning, such as the creation of a credit shelter trust, in order to take advantage of their combined federal estate tax exclusions. A new law passed in 2010 allows the executor of a deceased spouse's estate to transfer any unused estate tax exclusion amount to the surviving spouse without such planning. This provision is effective for estates of decedents dying in 2011 and later years. You may be inclined to rely on these portability rules for estate tax avoidance, using outright bequests to your spouse instead of traditional trust planning. However, portability should not be relied upon solely for utilization of the first to die's estate tax exemption, and a credit shelter trust created at the first spouse's death may still be advantageous for several reasons: • Portability may be lost if the surviving spouse remarries and is later widowed again • The trust can protect any appreciation of assets from estate tax at the second spouse's death • The trust can provide protection of assets from the reach of the surviving spouse's creditors • Portability does not apply to the generation-skipping transfer (GST) tax, so the trust may be needed to fully leverage the GST exemptions of both spouses Married couples where one spouse is not a U.S. citizen have special planning concerns. The marital deduction is not allowed if the recipient spouse is a non-citizen spouse, but a $148,000 (in 2016, $147,000 in 2015) annual exclusion is allowed. If certain requirements By definition, estate planning is a process designed to help you manage and preserve your assets while you are alive, and to conserve and control their distribution after your death according to your goals and objectives. Page 2 of 7, see disclaimer on final page are met, however, a transfer to a qualified domestic trust (QDOT) will qualify for the marital deduction. Married with children If you're married and have children, you and your spouse should each have your own will. For you, wills are vital because you can name a guardian for your minor children in case both of you die simultaneously. If you fail to name a guardian in your will, a court may appoint someone you might not have chosen. Furthermore, without a will, some states dictate that at your death some of your property goes to your children and not to your spouse. If minor children inherit directly, the surviving parent will need court permission to manage the money for them. You may also want to consult an attorney about establishing a trust to manage your children's assets. You may also need life insurance. Your surviving spouse may not be able to support the family on his or her own and may need to replace your earnings to maintain the family. Comfortable and looking forward to retirement You've accumulated some wealth and you're thinking about retirement. Here's where estate planning overlaps with retirement planning. It's just as important to plan to care for yourself during your retirement as it is to plan to provide for your beneficiaries after your death. You should keep in mind that even though Social Security may be around when you retire, those benefits alone may not provide enough income for your retirement years. Wealthy and worried Depending on the size of your estate, you may need to be concerned about estate taxes. Estates of $5,450,000 (in 2016, $5,430,000 in 2015) are effectively exempt from the federal gift and estate tax. Estates over that amount may be subject to the tax at a top rate of 40 percent. Similarly, there is another tax, called the generation-skipping transfer (GST) tax, that is imposed on transfers of wealth that are made to grandchildren (and lower generations). The GST tax exemption is $5,450,000 (in 2016, $5,430,000 in 2015) and the GST tax rate is 40 percent. Whether your estate will be subject to state death taxes depends on the size of your estate and the tax laws in effect in the state in which you are domiciled. Elderly or ill If you're elderly or ill, you'll want to write a will or update your existing one, consider a revocable living trust, and make sure you have a durable power of attorney and a health-care directive. Talk with your family about your wishes, and make sure they have copies of your important papers or know where to locate them. Consider saving some of your accumulated wealth using other retirement and deferred vehicles, such as an individual retirement account (IRA). Page 3 of 7, see disclaimer on final page Steps to Estate Planning Success Estate Planning Pyramid Page 4 of 7, see disclaimer on final page Advantages of Trusts Why you might consider discussing trusts with your attorney • Trusts may be used to minimize estate taxes for married individuals with substantial assets. • Trusts provide management assistance for your heirs.* • Contingent trusts for minors (which take effect in the event that both parents die) may be used to avoid the costs of having a court-appointed guardian to manage your children's assets. • Properly funded trusts avoid many of the administrative costs of probate (e.g., attorney fees, document filing fees). • Generally, revocable living trusts will keep the distribution of your estate private. • Trusts can be used to dispense income to • Trusts can ensure that assets go to your intended beneficiaries. For example, if you have children from a prior marriage you can make sure that they, as well as a current spouse, are provided for. • Trusts can minimize income taxes by allowing the shifting of income among beneficiaries. • Properly structured irrevocable life insurance trusts can provide liquidity for estate settlement needs while removing the policy proceeds from estate taxation at the death of the insured. *This is particularly important for minors and incapacitated adults who may need support, maintenance, and/or education over a long period of time, or for adults who have difficulty managing money. intermediate beneficiaries (e.g., children, elderly parents) before final property distribution. Conducting a Periodic Review of Your Estate Plan With your estate plan successfully implemented, one final but critical step remains: carrying out a periodic review and update. Imagine this: since you implemented your estate plan five years ago, you got divorced and remarried, sold your house and bought a boat to live on, sold your legal practice and invested the money that provides you with enough income so you no longer have to work, and reconciled with your estranged daughter. This scenario may look more like fantasy than reality, but imagine how these major changes over a five-year period may affect your estate. And that's without considering changes in tax laws, the stock market, the economic climate, or other external factors. After all, if the only constant is change, it isn't unreasonable to speculate that your wishes have changed, the advantages you sought have eroded or vanished, or even that new opportunities now exist that could offer a better value for your estate. A periodic review can give you peace of mind. When should you conduct a review of your estate plan? Every year for large estates Those of you with large estates (i.e., more than the federal or your state's exemption amount, whichever is smaller) should review your plan annually or at certain life events that are suggested in the following paragraphs. Not a year goes by without significant changes in the tax laws. You need to stay on top of these to get the best results. Every five years for small estates Those of you with smaller estates (under the applicable exclusion amount) need only review every five years or following changes in your life events. Your estate will not be as affected by economic factors and changes in the tax laws as a larger estate might be. However, your personal situation is bound to change, and reviewing every five years will bring your plan up to date with your current situation. Upon changes in estate valuation If the value of your estate has changed more than 20 percent over the last two years, you may need to update your estate plan. Upon economic changes You need to review your estate plan if there has been a change in the value of your assets or your income level or requirements, or if you are retiring. What is a trust? A trust is a legal entity that is created for the purpose of transferring property to a trustee for the benefit of a third person (beneficiary). The trustee manages the property for the beneficiary according to the terms specified in the trust With your estate plan successfully implemented, one final but critical step remains: carrying out a periodic review and update. Page 5 of 7, see disclaimer on final page Upon changes in occupation or employment If you or your spouse changed jobs, you may need to make revisions in your estate plan. Upon changes in family situations You need to update your plan if: (1) your (or your children's or grandchildren's) marital status has changed, (2) a child (or grandchild) has been born or adopted, (3) your spouse, child, or grandchild has died, (4) you or a close family member has become ill or incapacitated, or (5) other individuals (e.g., your parents) have become dependent on you. Upon changes in your closely held business interest A review is in order if you have: (1) formed, purchased, or sold a closely held business, (2) reorganized or liquidated a closely held business, (3) instituted a pension plan, (4) executed a buy-sell agreement, (5) deferred compensation, or (6) changed employee benefits. Upon changes in the estate plan Of course, if you make a change in part of your estate plan (e.g., create a trust, execute a codicil, etc.), you should review the estate plan as a whole to ensure that it remains cohesive and effective. Upon major transactions Be sure to check your plan if you have: (1) Upon changes in insurance coverage Making changes in your insurance coverage may change your estate planning needs or may make changes necessary. Therefore, inform your estate planning advisor if you make any change to life insurance, health insurance, disability insurance, medical insurance, liability insurance, or beneficiary designations. Upon death of trustee/executor/guardian If a designated trustee, executor, or guardian dies or changes his or her mind about serving, you need to revise the parts of your estate plan affected (e.g., the trust agreement and your will) to replace that individual. Upon other important changes None of us has a crystal ball. We can't think of all the conditions that should prompt us to review and revise our estate plans. Use your common sense. Have your feelings about charity changed? Has your son finally become financially responsible? Has your spouse's health been declining? Are your children through college now? All you need to do is give it a little thought from time to time, and take action when necessary. received a sizable inheritance, bequest, or similar disposition, (2) made or received substantial gifts, (3) borrowed or lent substantial amounts of money, (4) purchased, leased, or sold material assets or investments, (5) changed residences, (6) changed significant property ownership, or (7) become involved in a lawsuit. Page 6 of 7, see disclaimer on final page Raymond James & Associates, Inc. Tandy G. Lewis, CFP®, WMS Managing Director, Investments 333 Texas Street, Suite 175 Shreveport, LA 71101 318-677-5518 866-297-6576 [email protected] https://bowenlewis.com April 26, 2016 Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016 This information was developed by Broadridge, an independent third party. It is general in nature, is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Investments and strategies mentioned may not be suitable for all investors. Past performance may not be indicative of future results. Raymond James & Associates, Inc. member New York Stock Exchange/SIPC does not provide advice on tax, legal or mortgage issues. These matters should be discussed with an appropriate professional. Page 7 of 7
|
Use information from the article only to explain your answer. Do not rely on outside knowledge.
EVIDENCE:
Raymond James & Associates, Inc. Tandy G. Lewis, CFP®, WMS Managing Director, Investments 333 Texas Street, Suite 175 Shreveport, LA 71101 318-677-5518 866-297-6576 [email protected] https://bowenlewis.com Estate Planning Basics April 26, 2016 Estate Planning--An Introduction By definition, estate planning is a process designed to help you manage and preserve your assets while you are alive, and to conserve and control their distribution after your death according to your goals and objectives. But what estate planning means to you specifically depends on who you are. Your age, health, wealth, lifestyle, life stage, goals, and many other factors determine your particular estate planning needs. For example, you may have a small estate and may be concerned only that certain people receive particular things. A simple will is probably all you'll need. Or, you may have a large estate, and minimizing any potential estate tax impact is your foremost goal. Here, you'll need to use more sophisticated techniques in your estate plan, such as a trust. To help you understand what estate planning means to you, the following sections address some estate planning needs that are common among some very broad groups of individuals. Think of these suggestions as simply a point in the right direction, and then seek professional advice to implement the right plan for you. Over 18 Since incapacity can strike anyone at anytime, all adults over 18 should consider having: • A durable power of attorney: This document lets you name someone to manage your property for you in case you become incapacitated and cannot do so. • An advanced medical directive: The three main types of advanced medical directives are (1) a living will, (2) a durable power of attorney for health care (also known as a health-care proxy), and (3) a Do Not Resuscitate order. Be aware that not all states allow each kind of medical directive, so make sure you execute one that will be effective for you. Young and single If you're young and single, you may not need much estate planning. But if you have some material possessions, you should at least write a will. If you don't, the wealth you leave behind if you die will likely go to your parents, and that might not be what you would want. A will lets you leave your possessions to anyone you choose (e.g., your significant other, siblings, other relatives, or favorite charity). Unmarried couples You've committed to a life partner but aren't legally married. For you, a will is essential if you want your property to pass to your partner at your death. Without a will, state law directs that only your closest relatives will inherit your property, and your partner may get nothing. If you share certain property, such as a house or car, you might consider owning the property as joint tenants with rights of survivorship. That way, when one of you dies, the jointly held property will pass to the surviving partner automatically. Married couples For many years, married couples had to do careful estate planning, such as the creation of a credit shelter trust, in order to take advantage of their combined federal estate tax exclusions. A new law passed in 2010 allows the executor of a deceased spouse's estate to transfer any unused estate tax exclusion amount to the surviving spouse without such planning. This provision is effective for estates of decedents dying in 2011 and later years. You may be inclined to rely on these portability rules for estate tax avoidance, using outright bequests to your spouse instead of traditional trust planning. However, portability should not be relied upon solely for utilization of the first to die's estate tax exemption, and a credit shelter trust created at the first spouse's death may still be advantageous for several reasons: • Portability may be lost if the surviving spouse remarries and is later widowed again • The trust can protect any appreciation of assets from estate tax at the second spouse's death • The trust can provide protection of assets from the reach of the surviving spouse's creditors • Portability does not apply to the generation-skipping transfer (GST) tax, so the trust may be needed to fully leverage the GST exemptions of both spouses Married couples where one spouse is not a U.S. citizen have special planning concerns. The marital deduction is not allowed if the recipient spouse is a non-citizen spouse, but a $148,000 (in 2016, $147,000 in 2015) annual exclusion is allowed. If certain requirements By definition, estate planning is a process designed to help you manage and preserve your assets while you are alive, and to conserve and control their distribution after your death according to your goals and objectives. Page 2 of 7, see disclaimer on final page are met, however, a transfer to a qualified domestic trust (QDOT) will qualify for the marital deduction. Married with children If you're married and have children, you and your spouse should each have your own will. For you, wills are vital because you can name a guardian for your minor children in case both of you die simultaneously. If you fail to name a guardian in your will, a court may appoint someone you might not have chosen. Furthermore, without a will, some states dictate that at your death some of your property goes to your children and not to your spouse. If minor children inherit directly, the surviving parent will need court permission to manage the money for them. You may also want to consult an attorney about establishing a trust to manage your children's assets. You may also need life insurance. Your surviving spouse may not be able to support the family on his or her own and may need to replace your earnings to maintain the family. Comfortable and looking forward to retirement You've accumulated some wealth and you're thinking about retirement. Here's where estate planning overlaps with retirement planning. It's just as important to plan to care for yourself during your retirement as it is to plan to provide for your beneficiaries after your death. You should keep in mind that even though Social Security may be around when you retire, those benefits alone may not provide enough income for your retirement years. Wealthy and worried Depending on the size of your estate, you may need to be concerned about estate taxes. Estates of $5,450,000 (in 2016, $5,430,000 in 2015) are effectively exempt from the federal gift and estate tax. Estates over that amount may be subject to the tax at a top rate of 40 percent. Similarly, there is another tax, called the generation-skipping transfer (GST) tax, that is imposed on transfers of wealth that are made to grandchildren (and lower generations). The GST tax exemption is $5,450,000 (in 2016, $5,430,000 in 2015) and the GST tax rate is 40 percent. Whether your estate will be subject to state death taxes depends on the size of your estate and the tax laws in effect in the state in which you are domiciled. Elderly or ill If you're elderly or ill, you'll want to write a will or update your existing one, consider a revocable living trust, and make sure you have a durable power of attorney and a health-care directive. Talk with your family about your wishes, and make sure they have copies of your important papers or know where to locate them. Consider saving some of your accumulated wealth using other retirement and deferred vehicles, such as an individual retirement account (IRA). Page 3 of 7, see disclaimer on final page Steps to Estate Planning Success Estate Planning Pyramid Page 4 of 7, see disclaimer on final page Advantages of Trusts Why you might consider discussing trusts with your attorney • Trusts may be used to minimize estate taxes for married individuals with substantial assets. • Trusts provide management assistance for your heirs.* • Contingent trusts for minors (which take effect in the event that both parents die) may be used to avoid the costs of having a court-appointed guardian to manage your children's assets. • Properly funded trusts avoid many of the administrative costs of probate (e.g., attorney fees, document filing fees). • Generally, revocable living trusts will keep the distribution of your estate private. • Trusts can be used to dispense income to • Trusts can ensure that assets go to your intended beneficiaries. For example, if you have children from a prior marriage you can make sure that they, as well as a current spouse, are provided for. • Trusts can minimize income taxes by allowing the shifting of income among beneficiaries. • Properly structured irrevocable life insurance trusts can provide liquidity for estate settlement needs while removing the policy proceeds from estate taxation at the death of the insured. *This is particularly important for minors and incapacitated adults who may need support, maintenance, and/or education over a long period of time, or for adults who have difficulty managing money. intermediate beneficiaries (e.g., children, elderly parents) before final property distribution. Conducting a Periodic Review of Your Estate Plan With your estate plan successfully implemented, one final but critical step remains: carrying out a periodic review and update. Imagine this: since you implemented your estate plan five years ago, you got divorced and remarried, sold your house and bought a boat to live on, sold your legal practice and invested the money that provides you with enough income so you no longer have to work, and reconciled with your estranged daughter. This scenario may look more like fantasy than reality, but imagine how these major changes over a five-year period may affect your estate. And that's without considering changes in tax laws, the stock market, the economic climate, or other external factors. After all, if the only constant is change, it isn't unreasonable to speculate that your wishes have changed, the advantages you sought have eroded or vanished, or even that new opportunities now exist that could offer a better value for your estate. A periodic review can give you peace of mind. When should you conduct a review of your estate plan? Every year for large estates Those of you with large estates (i.e., more than the federal or your state's exemption amount, whichever is smaller) should review your plan annually or at certain life events that are suggested in the following paragraphs. Not a year goes by without significant changes in the tax laws. You need to stay on top of these to get the best results. Every five years for small estates Those of you with smaller estates (under the applicable exclusion amount) need only review every five years or following changes in your life events. Your estate will not be as affected by economic factors and changes in the tax laws as a larger estate might be. However, your personal situation is bound to change, and reviewing every five years will bring your plan up to date with your current situation. Upon changes in estate valuation If the value of your estate has changed more than 20 percent over the last two years, you may need to update your estate plan. Upon economic changes You need to review your estate plan if there has been a change in the value of your assets or your income level or requirements, or if you are retiring. What is a trust? A trust is a legal entity that is created for the purpose of transferring property to a trustee for the benefit of a third person (beneficiary). The trustee manages the property for the beneficiary according to the terms specified in the trust With your estate plan successfully implemented, one final but critical step remains: carrying out a periodic review and update. Page 5 of 7, see disclaimer on final page Upon changes in occupation or employment If you or your spouse changed jobs, you may need to make revisions in your estate plan. Upon changes in family situations You need to update your plan if: (1) your (or your children's or grandchildren's) marital status has changed, (2) a child (or grandchild) has been born or adopted, (3) your spouse, child, or grandchild has died, (4) you or a close family member has become ill or incapacitated, or (5) other individuals (e.g., your parents) have become dependent on you. Upon changes in your closely held business interest A review is in order if you have: (1) formed, purchased, or sold a closely held business, (2) reorganized or liquidated a closely held business, (3) instituted a pension plan, (4) executed a buy-sell agreement, (5) deferred compensation, or (6) changed employee benefits. Upon changes in the estate plan Of course, if you make a change in part of your estate plan (e.g., create a trust, execute a codicil, etc.), you should review the estate plan as a whole to ensure that it remains cohesive and effective. Upon major transactions Be sure to check your plan if you have: (1) Upon changes in insurance coverage Making changes in your insurance coverage may change your estate planning needs or may make changes necessary. Therefore, inform your estate planning advisor if you make any change to life insurance, health insurance, disability insurance, medical insurance, liability insurance, or beneficiary designations. Upon death of trustee/executor/guardian If a designated trustee, executor, or guardian dies or changes his or her mind about serving, you need to revise the parts of your estate plan affected (e.g., the trust agreement and your will) to replace that individual. Upon other important changes None of us has a crystal ball. We can't think of all the conditions that should prompt us to review and revise our estate plans. Use your common sense. Have your feelings about charity changed? Has your son finally become financially responsible? Has your spouse's health been declining? Are your children through college now? All you need to do is give it a little thought from time to time, and take action when necessary. received a sizable inheritance, bequest, or similar disposition, (2) made or received substantial gifts, (3) borrowed or lent substantial amounts of money, (4) purchased, leased, or sold material assets or investments, (5) changed residences, (6) changed significant property ownership, or (7) become involved in a lawsuit. Page 6 of 7, see disclaimer on final page Raymond James & Associates, Inc. Tandy G. Lewis, CFP®, WMS Managing Director, Investments 333 Texas Street, Suite 175 Shreveport, LA 71101 318-677-5518 866-297-6576 [email protected] https://bowenlewis.com April 26, 2016 Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016 This information was developed by Broadridge, an independent third party. It is general in nature, is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Investments and strategies mentioned may not be suitable for all investors. Past performance may not be indicative of future results. Raymond James & Associates, Inc. member New York Stock Exchange/SIPC does not provide advice on tax, legal or mortgage issues. These matters should be discussed with an appropriate professional. Page 7 of 7
USER:
What are three advantages of Trusts when planning your estate?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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You can only respond to the prompt using information in the context block and no other sources.
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Explain how COLAs are considered in determining Medicaid eligibility.
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Recipients of Social Security COLAs After April 1977 (“Pickle Amendment”) Section 503 of P.L. 94-566 generally requires states to provide Medicaid coverage for individuals who would continue to be eligible for SSI/SSP if not for increases in their Social Security benefits due to COLAs.64 Individuals qualify under this pathway it they • are receiving Social Security benefits, • lost SSI/SSP but would still be eligible for those benefits if Social Security COLAs received since losing SSI/SSP were deducted from their income, and • were eligible for and receiving SSI/SSP concurrently with Social Security for at least one month after April 1, 1977. 209(b) states may exclude all, some, or none of the Social Security benefit increases that caused ineligibility for SSI/SSP. This pathway is often known as the “Pickle Amendment” after the late Representative J.J. Pickle. Disabled Widow(er)s Receiving Benefit Increases Under P.L. 98-21 (“ARF Widow[er]s”) (This pathway is closed to new enrollment and applies to relatively few people.) Social Security provides widow(er)’s benefits starting at age 60, or at age 50 if the individual is disabled and meets certain other criteria. The amount of the aged or disabled widow(er)’s benefit is based on the deceased insured worker’s past earnings from covered employment, subject to a permanent reduction for each month of entitlement before the widow(er)’s full retirement age (65- 67, depending on year of birth). Under P.L. 98-21, lawmakers eliminated the additional reduction factor (ARF) for disabled widow(er)s aged 50-59, meaning their reduction penalty for claiming benefits before their full retirement age was capped at the percentage applicable to aged widow(er)s who first claim at age 60. All states (including 209[b] states) are required to provide Medicaid coverage for individuals who would continue to be eligible for SSI/SSP if not for increases in their widow(er)’s benefits due to the elimination of the ARF (known as “ARF Widow[er]s”).65 Individuals qualify under this pathway if they • were entitled to Social Security benefits in December 1983 and received disabled widow(er)’s benefits and SSI/SSP in January 1984, • lost SSI/SSP eligibility because of the elimination of the ARF, • have been continuously entitled to widow(er)’s benefits since January 1984, • filed for Medicaid continuation before July 1, 1988 (or a slightly later date in some cases), and • would continue to be eligible for SSI/SSP if the value of the increase in disabled widow(er)’s benefits under P.L. 98-21 and any subsequent COLAs were deducted from their countable income. Disabled Adult Children Disabled adult children of retired, disabled, or deceased insured workers typically qualify for Social Security disabled adult child’s (DAC) benefits if they are at least age 18 and became disabled before they attained age 22. States are generally required to provide Medicaid coverage for individuals who lose eligibility for SSI/SSP due to entitlement to or an increase in DAC benefits. 66 Individuals qualify under this pathway if they • lose eligibility for SSI/SSP due to receipt of DAC benefits on or after July 1, 1987, and • would continue to be eligible for SSI/SSP if not for their entitlement to or an increase in DAC benefits. 209(b) states may exclude all, some, or none of the DAC benefit or increases in that benefit that caused ineligibility for SSI/SSP. Widow(er)s Not Entitled to Medicare Part A (“Early Widow[er]s”) States are generally required to provide Medicaid coverage for individuals aged 50 to 64 who lose eligibility for SSI/SSP due to entitlement to Social Security widow(er)’s benefits but who are not yet entitled to Medicare Part A (Hospital Insurance).67 Individuals qualify under this pathway if they • are at least age 50 but have not yet attained age 65, • received SSI/SSP in the month before their widow(er)’s benefits began, • are not entitled to Medicare Part A,68 and • would continue to be eligible for SSI/SSP if not for their entitlement widow(er)’s benefits.69 Eligibility for Medicaid under this pathway continues until the individual becomes entitled to Medicare Part A. 209(b) states may exclude all, some, or none of the widow(er)’s benefit that caused ineligibility for SSP/SSI. Recipients of a 1972 Social Security COLA (This pathway is closed to new enrollment and applies to relatively few people.) Section 249E of P.L. 92-603 requires states to provide Medicaid coverage for individuals who would be eligible for SSI/SSP in the absence of a Social Security COLA enacted in 1972 under P.L. 92-336.70 Individuals qualify under this provision if they • were entitled to Social Security benefits in August 1972, • were receiving cash assistance under the former adult assistance programs in August 1972 (or would have been eligible for such assistance in certain instances), and • would be eligible for SSI/SSP had the COLA under P.L. 92-336 not been applied to their Social Security benefits.
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You can only respond to the prompt using information in the context block and no other sources. Explain how COLAs are considered in determining Medicaid eligibility. Recipients of Social Security COLAs After April 1977 (“Pickle Amendment”) Section 503 of P.L. 94-566 generally requires states to provide Medicaid coverage for individuals who would continue to be eligible for SSI/SSP if not for increases in their Social Security benefits due to COLAs.64 Individuals qualify under this pathway it they • are receiving Social Security benefits, • lost SSI/SSP but would still be eligible for those benefits if Social Security COLAs received since losing SSI/SSP were deducted from their income, and • were eligible for and receiving SSI/SSP concurrently with Social Security for at least one month after April 1, 1977. 209(b) states may exclude all, some, or none of the Social Security benefit increases that caused ineligibility for SSI/SSP. This pathway is often known as the “Pickle Amendment” after the late Representative J.J. Pickle. Disabled Widow(er)s Receiving Benefit Increases Under P.L. 98-21 (“ARF Widow[er]s”) (This pathway is closed to new enrollment and applies to relatively few people.) Social Security provides widow(er)’s benefits starting at age 60, or at age 50 if the individual is disabled and meets certain other criteria. The amount of the aged or disabled widow(er)’s benefit is based on the deceased insured worker’s past earnings from covered employment, subject to a permanent reduction for each month of entitlement before the widow(er)’s full retirement age (65- 67, depending on year of birth). Under P.L. 98-21, lawmakers eliminated the additional reduction factor (ARF) for disabled widow(er)s aged 50-59, meaning their reduction penalty for claiming benefits before their full retirement age was capped at the percentage applicable to aged widow(er)s who first claim at age 60. All states (including 209[b] states) are required to provide Medicaid coverage for individuals who would continue to be eligible for SSI/SSP if not for increases in their widow(er)’s benefits due to the elimination of the ARF (known as “ARF Widow[er]s”).65 Individuals qualify under this pathway if they • were entitled to Social Security benefits in December 1983 and received disabled widow(er)’s benefits and SSI/SSP in January 1984, • lost SSI/SSP eligibility because of the elimination of the ARF, • have been continuously entitled to widow(er)’s benefits since January 1984, • filed for Medicaid continuation before July 1, 1988 (or a slightly later date in some cases), and • would continue to be eligible for SSI/SSP if the value of the increase in disabled widow(er)’s benefits under P.L. 98-21 and any subsequent COLAs were deducted from their countable income. Disabled Adult Children Disabled adult children of retired, disabled, or deceased insured workers typically qualify for Social Security disabled adult child’s (DAC) benefits if they are at least age 18 and became disabled before they attained age 22. States are generally required to provide Medicaid coverage for individuals who lose eligibility for SSI/SSP due to entitlement to or an increase in DAC benefits. 66 Individuals qualify under this pathway if they • lose eligibility for SSI/SSP due to receipt of DAC benefits on or after July 1, 1987, and • would continue to be eligible for SSI/SSP if not for their entitlement to or an increase in DAC benefits. 209(b) states may exclude all, some, or none of the DAC benefit or increases in that benefit that caused ineligibility for SSI/SSP. Widow(er)s Not Entitled to Medicare Part A (“Early Widow[er]s”) States are generally required to provide Medicaid coverage for individuals aged 50 to 64 who lose eligibility for SSI/SSP due to entitlement to Social Security widow(er)’s benefits but who are not yet entitled to Medicare Part A (Hospital Insurance).67 Individuals qualify under this pathway if they • are at least age 50 but have not yet attained age 65, • received SSI/SSP in the month before their widow(er)’s benefits began, • are not entitled to Medicare Part A,68 and • would continue to be eligible for SSI/SSP if not for their entitlement widow(er)’s benefits.69 Eligibility for Medicaid under this pathway continues until the individual becomes entitled to Medicare Part A. 209(b) states may exclude all, some, or none of the widow(er)’s benefit that caused ineligibility for SSP/SSI. Recipients of a 1972 Social Security COLA (This pathway is closed to new enrollment and applies to relatively few people.) Section 249E of P.L. 92-603 requires states to provide Medicaid coverage for individuals who would be eligible for SSI/SSP in the absence of a Social Security COLA enacted in 1972 under P.L. 92-336.70 Individuals qualify under this provision if they • were entitled to Social Security benefits in August 1972, • were receiving cash assistance under the former adult assistance programs in August 1972 (or would have been eligible for such assistance in certain instances), and • would be eligible for SSI/SSP had the COLA under P.L. 92-336 not been applied to their Social Security benefits.
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You can only respond to the prompt using information in the context block and no other sources.
EVIDENCE:
Recipients of Social Security COLAs After April 1977 (“Pickle Amendment”) Section 503 of P.L. 94-566 generally requires states to provide Medicaid coverage for individuals who would continue to be eligible for SSI/SSP if not for increases in their Social Security benefits due to COLAs.64 Individuals qualify under this pathway it they • are receiving Social Security benefits, • lost SSI/SSP but would still be eligible for those benefits if Social Security COLAs received since losing SSI/SSP were deducted from their income, and • were eligible for and receiving SSI/SSP concurrently with Social Security for at least one month after April 1, 1977. 209(b) states may exclude all, some, or none of the Social Security benefit increases that caused ineligibility for SSI/SSP. This pathway is often known as the “Pickle Amendment” after the late Representative J.J. Pickle. Disabled Widow(er)s Receiving Benefit Increases Under P.L. 98-21 (“ARF Widow[er]s”) (This pathway is closed to new enrollment and applies to relatively few people.) Social Security provides widow(er)’s benefits starting at age 60, or at age 50 if the individual is disabled and meets certain other criteria. The amount of the aged or disabled widow(er)’s benefit is based on the deceased insured worker’s past earnings from covered employment, subject to a permanent reduction for each month of entitlement before the widow(er)’s full retirement age (65- 67, depending on year of birth). Under P.L. 98-21, lawmakers eliminated the additional reduction factor (ARF) for disabled widow(er)s aged 50-59, meaning their reduction penalty for claiming benefits before their full retirement age was capped at the percentage applicable to aged widow(er)s who first claim at age 60. All states (including 209[b] states) are required to provide Medicaid coverage for individuals who would continue to be eligible for SSI/SSP if not for increases in their widow(er)’s benefits due to the elimination of the ARF (known as “ARF Widow[er]s”).65 Individuals qualify under this pathway if they • were entitled to Social Security benefits in December 1983 and received disabled widow(er)’s benefits and SSI/SSP in January 1984, • lost SSI/SSP eligibility because of the elimination of the ARF, • have been continuously entitled to widow(er)’s benefits since January 1984, • filed for Medicaid continuation before July 1, 1988 (or a slightly later date in some cases), and • would continue to be eligible for SSI/SSP if the value of the increase in disabled widow(er)’s benefits under P.L. 98-21 and any subsequent COLAs were deducted from their countable income. Disabled Adult Children Disabled adult children of retired, disabled, or deceased insured workers typically qualify for Social Security disabled adult child’s (DAC) benefits if they are at least age 18 and became disabled before they attained age 22. States are generally required to provide Medicaid coverage for individuals who lose eligibility for SSI/SSP due to entitlement to or an increase in DAC benefits. 66 Individuals qualify under this pathway if they • lose eligibility for SSI/SSP due to receipt of DAC benefits on or after July 1, 1987, and • would continue to be eligible for SSI/SSP if not for their entitlement to or an increase in DAC benefits. 209(b) states may exclude all, some, or none of the DAC benefit or increases in that benefit that caused ineligibility for SSI/SSP. Widow(er)s Not Entitled to Medicare Part A (“Early Widow[er]s”) States are generally required to provide Medicaid coverage for individuals aged 50 to 64 who lose eligibility for SSI/SSP due to entitlement to Social Security widow(er)’s benefits but who are not yet entitled to Medicare Part A (Hospital Insurance).67 Individuals qualify under this pathway if they • are at least age 50 but have not yet attained age 65, • received SSI/SSP in the month before their widow(er)’s benefits began, • are not entitled to Medicare Part A,68 and • would continue to be eligible for SSI/SSP if not for their entitlement widow(er)’s benefits.69 Eligibility for Medicaid under this pathway continues until the individual becomes entitled to Medicare Part A. 209(b) states may exclude all, some, or none of the widow(er)’s benefit that caused ineligibility for SSP/SSI. Recipients of a 1972 Social Security COLA (This pathway is closed to new enrollment and applies to relatively few people.) Section 249E of P.L. 92-603 requires states to provide Medicaid coverage for individuals who would be eligible for SSI/SSP in the absence of a Social Security COLA enacted in 1972 under P.L. 92-336.70 Individuals qualify under this provision if they • were entitled to Social Security benefits in August 1972, • were receiving cash assistance under the former adult assistance programs in August 1972 (or would have been eligible for such assistance in certain instances), and • would be eligible for SSI/SSP had the COLA under P.L. 92-336 not been applied to their Social Security benefits.
USER:
Explain how COLAs are considered in determining Medicaid eligibility.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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ONLY USE THE DATA I PROVIDE Limit your response to 250 words If you cannot answer using the contexts alone, say "I cannot determine the answer to that due to lack of context"
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According to the context document, what states could exceed $100 billion in health benefits from implementation of of zero-emission transportation and electricity resources?
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**Zeroing in on Healthy Air** Executive Summary Zeroing in on Healthy Air is a report by the American Lung Association illustrating the public health urgency of policies and investments for transitioning to zero-emission transportation and electricity generation in the coming decades. These sectors are leading sources of unhealthy air in the United States. Today, over four in ten Americans — more than 135 million people — live in communities impacted by unhealthy levels of air pollution. Research demonstrates that the burdens of unhealthy air include increased asthma attacks, heart attacks and strokes, lung cancer and premature death. These poor health outcomes are not shared equitably, with many communities of color and lower income communities at greater risk due to increased exposure to transportation pollution. The transportation sector is also the largest source of greenhouse gas emissions that drive climate change, which threatens clean air progress and amplifies a wide range of health risks and disparities. This report finds that a national shift to 100 percent sales of zero-emission passenger vehicles (by 2035) and medium- and heavy-duty trucks (by 2040), coupled with renewable electricity would generate over $1.2 trillion in public health benefits between 2020 and 2050. These benefits would take the form of avoiding up to 110,000 premature deaths, along with nearly 3 million asthma attacks and over 13 million workdays lost due to cleaner air. This report calculates the emission reductions possible from shifting to vehicles without tailpipes, as well as eliminating fuel combustion from the electricity generation sector so that neither those living near roads or near electricity generation would be subjected to unacceptable doses of toxic air pollution. The report also highlights the fact that the shift to zeroemission transportation and electricity generation in the United States will yield avoided global climate damages over $1.7 trillion. By expediting investments and policies at the local, state and federal levels to reduce harmful pollution, all communities stand to experience cleaner air. Policies and investments must prioritize low-income communities and communities of color that bear a disproportionate pollution burden. State and local jurisdictions should act to implement policies as soon as possible, including in advance of the benchmarks used in this report’s methodology. These actions are needed to achieve clean air, reduce health disparities and avoid even more dire consequences of climate change. The Public Health Need for Zero Emissions Air Pollution Remains a Major Threat to Americans’ Health Despite decades of progress to clean the air, more than 4 in 10 of all Americans — 135 million — still live in a community impacted by unhealthy levels of air pollution.ii Those impacted by polluted air face increased risk of a wide range of poor health outcomes as the result of increased ozone and/or particle pollution.iii The adverse impacts of pollution from the transportation and electricity generation sectors are clear, and must be recognized as a threat to local community health, health equity and a driver of major climate change-related health risks. Even with certification to meet existing standards, it is clear that combustion technologies often generate far greater levels of pollution in the real world than on paper. Location Matters: Disparities in Exposure Burden Exposure to pollution with its associated negative health consequences is dictated by where someone lives, attends school or works. In general, the higher the exposure, the greater the risk of harm. Many communities face disproportionate burdens due to pollution generated from production, transportation, refining and combustion of fuels along the transportation and electricity generating systems. Lower income communities and communities of color are often the most over-burdened by pollution sources today due to decades of inequitable land use decisions and systemic racism. The American Lung Association’s State of the Air 2021 report illustrated the disparities in pollution burdens across the United States, noting that a person of color in the United States is up to three times more likely to be breathing the most polluted air than white people.v All sources of harmful air and climate pollution must shift rapidly away from combustion and toward zero-emission technologies to ensure all Americans have access to the benefits of less polluting technologies. Estimated Benefits of Zero-Emission Transportation and Electricity Generation The combustion of fuels in the electricity generation and transportation sectors is a major contributor to the health and climate burdens facing all Americans. These sources of pollution also create significant disparities in pollution burdens and poor health, especially in lower-income communities and communities of color. The transition to non-combustion technologies is underway and must continue to accelerate to protect the health of communities today and across the coming decades. Key findings are presented below: Pollution Reduction Benefits from Zero-Emission Transportation Accelerating the shift to zero-emission transportation and non-combustion electricity generation will generate major reductions in harmful pollutants. Key pollutants included in this research are described below along with projected onroad pollution reductions with the shift to zero-emission technologies when compared with a modeled “Business As Usual” case for the on-road fleet. Benefits of Moving All Vehicle Classes to Zero-Emissions All vehicles must move to zero-emission technologies to ensure the most robust public health benefits occur. The 2020 passenger vehicle fleet represents approximately 94 percent of the nation’s on-road vehicle fleet and generates over 1 million tons of ozone- and particle-forming NOx emissions, and over 33,400 tons of fine particles annually. Heavy-duty vehicles represent approximately six percent of the on-road fleet in 2020, but generate 59 percent of ozone- and particle-forming NOx emissions and 55 percent of the particle pollution (including brake and tire particles). Differentiating the relative impacts of fleet segments is particularly important when considering the concentrations of heavy-duty vehicles in environmental justice areas near highways, ports, railyards and warehouse settings. For greenhouse gases (GHG), the 2020 light duty vehicle fleet generates approximately 69 percent of GHG emissions, while the heavy-duty fleet produces 31 percent. The table below illustrates the relative emission reduction benefits of on-road transportation electrification for each the light-duty fleet and the medium- and heavy-duty segments compared with the “Business-As-Usual” case. It is important to note that these on-road reductions could yield major benefits within each class, with light-duty vehicles reducing nearly twice the GHGs as heavy-duty, while heavy-duty engines could yield approximately eight times the smog- and particle-forming NOx emissions when compared with the light-duty fleet. Ultimately, all segments produce harmful pollutants and must move quickly to zero-emissions to protect health and reduce climate pollution. National Results: Public Health and Climate Benefits The shift to zero-emission transportation and non-combustion electricity generation could yield major health benefits throughout the nation in the coming decades. Cumulatively, the national benefits of transitioning away from combustion in the transportation sector toward 100 percent zero-emission sales and a non-combustion electricity generation sector could generate over $1.2 trillion in health benefits across the United States between 2020 and 2050. These benefits include approximately 110,000 lives saved, over 2.7 million asthma attacks avoided (among those aged 6-18 years), 13.4 million lost works days and a wider range of other negative health impacts avoided due to cleaner air.1,2 In addition to these health benefits, this analysis found that over $1.7 trillion in global climate benefits could be achieved with a reduction of over 24 billion metric tons of GHGs by mid-century. Near-Term Health Benefits While the benefits noted above are cumulative between 2020 and 2050, this analysis also finds that annual health benefits could reach into the tens of billions by the end of this decade – nearly $28 billion in 2030 alone. Health benefits increase significantly as deployments of zero-emission technologies in the transportation and electricity generating sectors expand. State Results: Public Health Benefits Across the United States Every state in the U.S. stands to experience significant public health benefits from the widespread implementation of zero-emission transportation and electricity resources over the coming decades. As shown below, more than half of the states could experience more than $10 billion in cumulative public health benefits. Two states (California and Texas) could exceed $100 billion in health benefits, and six more states (Pennsylvania, Florida, Ohio, New York, Illinois, and Michigan) could see benefits exceeding $50 billion by 2050. These benefits cover a wide range of avoided health impacts, three of which (premature deaths, asthma attacks, lost workdays) are shown in the table below. Local Results: Public Health Benefits Across America Communities across the United States stand to benefit from the widespread transition to zero-emission transportation and electricity generation. As transportation emissions are a dominant source of local exposures in many communities, a carefully and equitably designed shift to non-combustion transportation can mean cleaner air for all, and especially those most burdened by pollution from these sources today. Similarly, a shift away from fossil-fueled electricity generation is critical to improving the health of those most impacted by emissions from power plants, including in lower-income, rural communities across the United States. This analysis found that the 100 U.S. counties (roughly 3 percent of all counties assessed) with the highest percent populations of People of Color could experience approximately 13 percent of the cumulative health benefits of this transition ($155 billion, between 2020-2050). Expanding this further, the 500 U.S. Counties (16 percent of counties assessed) with the highest percent populations of People of Color could experience 40 percent of the benefits, or $487 billion cumulatively between 2020 and 2050. It is also clear that the presence of benefits within these counties does not directly translate to benefits to individual neighborhoods or residents, however. This is an indicator of the urgent need to center equity in policies and investments to ensure access to the benefits of pollution-free mobility and power. Additional analysis of the benefits in rural communities, lower-income communities, and neighborhood exposure levels could provide deeper insights into more equitable policy and investment designs. At a broader scale, this analysis shows a leveling of benefits across the country as the locations of power plants and transportation hubs are often impacting communities with varying socioeconomic characteristics. As shown in the table on the next page, communities across the United States could experience billions in public health benefits, and significantly reduce premature deaths, asthma attacks and other negative health consequences of polluted air through 2050. The table includes the 25 Metropolitan Areas across the United States showing the largest cumulative health benefits by 2050 considering the shift to non-combustion electricity generation and zero emission transportation.
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{Text Passage} **Zeroing in on Healthy Air** Executive Summary Zeroing in on Healthy Air is a report by the American Lung Association illustrating the public health urgency of policies and investments for transitioning to zero-emission transportation and electricity generation in the coming decades. These sectors are leading sources of unhealthy air in the United States. Today, over four in ten Americans — more than 135 million people — live in communities impacted by unhealthy levels of air pollution. Research demonstrates that the burdens of unhealthy air include increased asthma attacks, heart attacks and strokes, lung cancer and premature death. These poor health outcomes are not shared equitably, with many communities of color and lower income communities at greater risk due to increased exposure to transportation pollution. The transportation sector is also the largest source of greenhouse gas emissions that drive climate change, which threatens clean air progress and amplifies a wide range of health risks and disparities. This report finds that a national shift to 100 percent sales of zero-emission passenger vehicles (by 2035) and medium- and heavy-duty trucks (by 2040), coupled with renewable electricity would generate over $1.2 trillion in public health benefits between 2020 and 2050. These benefits would take the form of avoiding up to 110,000 premature deaths, along with nearly 3 million asthma attacks and over 13 million workdays lost due to cleaner air. This report calculates the emission reductions possible from shifting to vehicles without tailpipes, as well as eliminating fuel combustion from the electricity generation sector so that neither those living near roads or near electricity generation would be subjected to unacceptable doses of toxic air pollution. The report also highlights the fact that the shift to zeroemission transportation and electricity generation in the United States will yield avoided global climate damages over $1.7 trillion. By expediting investments and policies at the local, state and federal levels to reduce harmful pollution, all communities stand to experience cleaner air. Policies and investments must prioritize low-income communities and communities of color that bear a disproportionate pollution burden. State and local jurisdictions should act to implement policies as soon as possible, including in advance of the benchmarks used in this report’s methodology. These actions are needed to achieve clean air, reduce health disparities and avoid even more dire consequences of climate change. The Public Health Need for Zero Emissions Air Pollution Remains a Major Threat to Americans’ Health Despite decades of progress to clean the air, more than 4 in 10 of all Americans — 135 million — still live in a community impacted by unhealthy levels of air pollution.ii Those impacted by polluted air face increased risk of a wide range of poor health outcomes as the result of increased ozone and/or particle pollution.iii The adverse impacts of pollution from the transportation and electricity generation sectors are clear, and must be recognized as a threat to local community health, health equity and a driver of major climate change-related health risks. Even with certification to meet existing standards, it is clear that combustion technologies often generate far greater levels of pollution in the real world than on paper. Location Matters: Disparities in Exposure Burden Exposure to pollution with its associated negative health consequences is dictated by where someone lives, attends school or works. In general, the higher the exposure, the greater the risk of harm. Many communities face disproportionate burdens due to pollution generated from production, transportation, refining and combustion of fuels along the transportation and electricity generating systems. Lower income communities and communities of color are often the most over-burdened by pollution sources today due to decades of inequitable land use decisions and systemic racism. The American Lung Association’s State of the Air 2021 report illustrated the disparities in pollution burdens across the United States, noting that a person of color in the United States is up to three times more likely to be breathing the most polluted air than white people.v All sources of harmful air and climate pollution must shift rapidly away from combustion and toward zero-emission technologies to ensure all Americans have access to the benefits of less polluting technologies. Estimated Benefits of Zero-Emission Transportation and Electricity Generation The combustion of fuels in the electricity generation and transportation sectors is a major contributor to the health and climate burdens facing all Americans. These sources of pollution also create significant disparities in pollution burdens and poor health, especially in lower-income communities and communities of color. The transition to non-combustion technologies is underway and must continue to accelerate to protect the health of communities today and across the coming decades. Key findings are presented below: Pollution Reduction Benefits from Zero-Emission Transportation Accelerating the shift to zero-emission transportation and non-combustion electricity generation will generate major reductions in harmful pollutants. Key pollutants included in this research are described below along with projected onroad pollution reductions with the shift to zero-emission technologies when compared with a modeled “Business As Usual” case for the on-road fleet. Benefits of Moving All Vehicle Classes to Zero-Emissions All vehicles must move to zero-emission technologies to ensure the most robust public health benefits occur. The 2020 passenger vehicle fleet represents approximately 94 percent of the nation’s on-road vehicle fleet and generates over 1 million tons of ozone- and particle-forming NOx emissions, and over 33,400 tons of fine particles annually. Heavy-duty vehicles represent approximately six percent of the on-road fleet in 2020, but generate 59 percent of ozone- and particle-forming NOx emissions and 55 percent of the particle pollution (including brake and tire particles). Differentiating the relative impacts of fleet segments is particularly important when considering the concentrations of heavy-duty vehicles in environmental justice areas near highways, ports, railyards and warehouse settings. For greenhouse gases (GHG), the 2020 light duty vehicle fleet generates approximately 69 percent of GHG emissions, while the heavy-duty fleet produces 31 percent. The table below illustrates the relative emission reduction benefits of on-road transportation electrification for each the light-duty fleet and the medium- and heavy-duty segments compared with the “Business-As-Usual” case. It is important to note that these on-road reductions could yield major benefits within each class, with light-duty vehicles reducing nearly twice the GHGs as heavy-duty, while heavy-duty engines could yield approximately eight times the smog- and particle-forming NOx emissions when compared with the light-duty fleet. Ultimately, all segments produce harmful pollutants and must move quickly to zero-emissions to protect health and reduce climate pollution. National Results: Public Health and Climate Benefits The shift to zero-emission transportation and non-combustion electricity generation could yield major health benefits throughout the nation in the coming decades. Cumulatively, the national benefits of transitioning away from combustion in the transportation sector toward 100 percent zero-emission sales and a non-combustion electricity generation sector could generate over $1.2 trillion in health benefits across the United States between 2020 and 2050. These benefits include approximately 110,000 lives saved, over 2.7 million asthma attacks avoided (among those aged 6-18 years), 13.4 million lost works days and a wider range of other negative health impacts avoided due to cleaner air.1,2 In addition to these health benefits, this analysis found that over $1.7 trillion in global climate benefits could be achieved with a reduction of over 24 billion metric tons of GHGs by mid-century. Near-Term Health Benefits While the benefits noted above are cumulative between 2020 and 2050, this analysis also finds that annual health benefits could reach into the tens of billions by the end of this decade – nearly $28 billion in 2030 alone. Health benefits increase significantly as deployments of zero-emission technologies in the transportation and electricity generating sectors expand. State Results: Public Health Benefits Across the United States Every state in the U.S. stands to experience significant public health benefits from the widespread implementation of zero-emission transportation and electricity resources over the coming decades. As shown below, more than half of the states could experience more than $10 billion in cumulative public health benefits. Two states (California and Texas) could exceed $100 billion in health benefits, and six more states (Pennsylvania, Florida, Ohio, New York, Illinois, and Michigan) could see benefits exceeding $50 billion by 2050. These benefits cover a wide range of avoided health impacts, three of which (premature deaths, asthma attacks, lost workdays) are shown in the table below. Local Results: Public Health Benefits Across America Communities across the United States stand to benefit from the widespread transition to zero-emission transportation and electricity generation. As transportation emissions are a dominant source of local exposures in many communities, a carefully and equitably designed shift to non-combustion transportation can mean cleaner air for all, and especially those most burdened by pollution from these sources today. Similarly, a shift away from fossil-fueled electricity generation is critical to improving the health of those most impacted by emissions from power plants, including in lower-income, rural communities across the United States. This analysis found that the 100 U.S. counties (roughly 3 percent of all counties assessed) with the highest percent populations of People of Color could experience approximately 13 percent of the cumulative health benefits of this transition ($155 billion, between 2020-2050). Expanding this further, the 500 U.S. Counties (16 percent of counties assessed) with the highest percent populations of People of Color could experience 40 percent of the benefits, or $487 billion cumulatively between 2020 and 2050. It is also clear that the presence of benefits within these counties does not directly translate to benefits to individual neighborhoods or residents, however. This is an indicator of the urgent need to center equity in policies and investments to ensure access to the benefits of pollution-free mobility and power. Additional analysis of the benefits in rural communities, lower-income communities, and neighborhood exposure levels could provide deeper insights into more equitable policy and investment designs. At a broader scale, this analysis shows a leveling of benefits across the country as the locations of power plants and transportation hubs are often impacting communities with varying socioeconomic characteristics. As shown in the table on the next page, communities across the United States could experience billions in public health benefits, and significantly reduce premature deaths, asthma attacks and other negative health consequences of polluted air through 2050. The table includes the 25 Metropolitan Areas across the United States showing the largest cumulative health benefits by 2050 considering the shift to non-combustion electricity generation and zero emission transportation. ---------------- {Task Instructions} ONLY USE THE DATA I PROVIDE Limit your response to 250 words If you cannot answer using the contexts alone, say "I cannot determine the answer to that due to lack of context" ---------------- {Query} According to the context document, what states could exceed $100 billion in health benefits from implementation of of zero-emission transportation and electricity resources?
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ONLY USE THE DATA I PROVIDE Limit your response to 250 words If you cannot answer using the contexts alone, say "I cannot determine the answer to that due to lack of context"
EVIDENCE:
**Zeroing in on Healthy Air** Executive Summary Zeroing in on Healthy Air is a report by the American Lung Association illustrating the public health urgency of policies and investments for transitioning to zero-emission transportation and electricity generation in the coming decades. These sectors are leading sources of unhealthy air in the United States. Today, over four in ten Americans — more than 135 million people — live in communities impacted by unhealthy levels of air pollution. Research demonstrates that the burdens of unhealthy air include increased asthma attacks, heart attacks and strokes, lung cancer and premature death. These poor health outcomes are not shared equitably, with many communities of color and lower income communities at greater risk due to increased exposure to transportation pollution. The transportation sector is also the largest source of greenhouse gas emissions that drive climate change, which threatens clean air progress and amplifies a wide range of health risks and disparities. This report finds that a national shift to 100 percent sales of zero-emission passenger vehicles (by 2035) and medium- and heavy-duty trucks (by 2040), coupled with renewable electricity would generate over $1.2 trillion in public health benefits between 2020 and 2050. These benefits would take the form of avoiding up to 110,000 premature deaths, along with nearly 3 million asthma attacks and over 13 million workdays lost due to cleaner air. This report calculates the emission reductions possible from shifting to vehicles without tailpipes, as well as eliminating fuel combustion from the electricity generation sector so that neither those living near roads or near electricity generation would be subjected to unacceptable doses of toxic air pollution. The report also highlights the fact that the shift to zeroemission transportation and electricity generation in the United States will yield avoided global climate damages over $1.7 trillion. By expediting investments and policies at the local, state and federal levels to reduce harmful pollution, all communities stand to experience cleaner air. Policies and investments must prioritize low-income communities and communities of color that bear a disproportionate pollution burden. State and local jurisdictions should act to implement policies as soon as possible, including in advance of the benchmarks used in this report’s methodology. These actions are needed to achieve clean air, reduce health disparities and avoid even more dire consequences of climate change. The Public Health Need for Zero Emissions Air Pollution Remains a Major Threat to Americans’ Health Despite decades of progress to clean the air, more than 4 in 10 of all Americans — 135 million — still live in a community impacted by unhealthy levels of air pollution.ii Those impacted by polluted air face increased risk of a wide range of poor health outcomes as the result of increased ozone and/or particle pollution.iii The adverse impacts of pollution from the transportation and electricity generation sectors are clear, and must be recognized as a threat to local community health, health equity and a driver of major climate change-related health risks. Even with certification to meet existing standards, it is clear that combustion technologies often generate far greater levels of pollution in the real world than on paper. Location Matters: Disparities in Exposure Burden Exposure to pollution with its associated negative health consequences is dictated by where someone lives, attends school or works. In general, the higher the exposure, the greater the risk of harm. Many communities face disproportionate burdens due to pollution generated from production, transportation, refining and combustion of fuels along the transportation and electricity generating systems. Lower income communities and communities of color are often the most over-burdened by pollution sources today due to decades of inequitable land use decisions and systemic racism. The American Lung Association’s State of the Air 2021 report illustrated the disparities in pollution burdens across the United States, noting that a person of color in the United States is up to three times more likely to be breathing the most polluted air than white people.v All sources of harmful air and climate pollution must shift rapidly away from combustion and toward zero-emission technologies to ensure all Americans have access to the benefits of less polluting technologies. Estimated Benefits of Zero-Emission Transportation and Electricity Generation The combustion of fuels in the electricity generation and transportation sectors is a major contributor to the health and climate burdens facing all Americans. These sources of pollution also create significant disparities in pollution burdens and poor health, especially in lower-income communities and communities of color. The transition to non-combustion technologies is underway and must continue to accelerate to protect the health of communities today and across the coming decades. Key findings are presented below: Pollution Reduction Benefits from Zero-Emission Transportation Accelerating the shift to zero-emission transportation and non-combustion electricity generation will generate major reductions in harmful pollutants. Key pollutants included in this research are described below along with projected onroad pollution reductions with the shift to zero-emission technologies when compared with a modeled “Business As Usual” case for the on-road fleet. Benefits of Moving All Vehicle Classes to Zero-Emissions All vehicles must move to zero-emission technologies to ensure the most robust public health benefits occur. The 2020 passenger vehicle fleet represents approximately 94 percent of the nation’s on-road vehicle fleet and generates over 1 million tons of ozone- and particle-forming NOx emissions, and over 33,400 tons of fine particles annually. Heavy-duty vehicles represent approximately six percent of the on-road fleet in 2020, but generate 59 percent of ozone- and particle-forming NOx emissions and 55 percent of the particle pollution (including brake and tire particles). Differentiating the relative impacts of fleet segments is particularly important when considering the concentrations of heavy-duty vehicles in environmental justice areas near highways, ports, railyards and warehouse settings. For greenhouse gases (GHG), the 2020 light duty vehicle fleet generates approximately 69 percent of GHG emissions, while the heavy-duty fleet produces 31 percent. The table below illustrates the relative emission reduction benefits of on-road transportation electrification for each the light-duty fleet and the medium- and heavy-duty segments compared with the “Business-As-Usual” case. It is important to note that these on-road reductions could yield major benefits within each class, with light-duty vehicles reducing nearly twice the GHGs as heavy-duty, while heavy-duty engines could yield approximately eight times the smog- and particle-forming NOx emissions when compared with the light-duty fleet. Ultimately, all segments produce harmful pollutants and must move quickly to zero-emissions to protect health and reduce climate pollution. National Results: Public Health and Climate Benefits The shift to zero-emission transportation and non-combustion electricity generation could yield major health benefits throughout the nation in the coming decades. Cumulatively, the national benefits of transitioning away from combustion in the transportation sector toward 100 percent zero-emission sales and a non-combustion electricity generation sector could generate over $1.2 trillion in health benefits across the United States between 2020 and 2050. These benefits include approximately 110,000 lives saved, over 2.7 million asthma attacks avoided (among those aged 6-18 years), 13.4 million lost works days and a wider range of other negative health impacts avoided due to cleaner air.1,2 In addition to these health benefits, this analysis found that over $1.7 trillion in global climate benefits could be achieved with a reduction of over 24 billion metric tons of GHGs by mid-century. Near-Term Health Benefits While the benefits noted above are cumulative between 2020 and 2050, this analysis also finds that annual health benefits could reach into the tens of billions by the end of this decade – nearly $28 billion in 2030 alone. Health benefits increase significantly as deployments of zero-emission technologies in the transportation and electricity generating sectors expand. State Results: Public Health Benefits Across the United States Every state in the U.S. stands to experience significant public health benefits from the widespread implementation of zero-emission transportation and electricity resources over the coming decades. As shown below, more than half of the states could experience more than $10 billion in cumulative public health benefits. Two states (California and Texas) could exceed $100 billion in health benefits, and six more states (Pennsylvania, Florida, Ohio, New York, Illinois, and Michigan) could see benefits exceeding $50 billion by 2050. These benefits cover a wide range of avoided health impacts, three of which (premature deaths, asthma attacks, lost workdays) are shown in the table below. Local Results: Public Health Benefits Across America Communities across the United States stand to benefit from the widespread transition to zero-emission transportation and electricity generation. As transportation emissions are a dominant source of local exposures in many communities, a carefully and equitably designed shift to non-combustion transportation can mean cleaner air for all, and especially those most burdened by pollution from these sources today. Similarly, a shift away from fossil-fueled electricity generation is critical to improving the health of those most impacted by emissions from power plants, including in lower-income, rural communities across the United States. This analysis found that the 100 U.S. counties (roughly 3 percent of all counties assessed) with the highest percent populations of People of Color could experience approximately 13 percent of the cumulative health benefits of this transition ($155 billion, between 2020-2050). Expanding this further, the 500 U.S. Counties (16 percent of counties assessed) with the highest percent populations of People of Color could experience 40 percent of the benefits, or $487 billion cumulatively between 2020 and 2050. It is also clear that the presence of benefits within these counties does not directly translate to benefits to individual neighborhoods or residents, however. This is an indicator of the urgent need to center equity in policies and investments to ensure access to the benefits of pollution-free mobility and power. Additional analysis of the benefits in rural communities, lower-income communities, and neighborhood exposure levels could provide deeper insights into more equitable policy and investment designs. At a broader scale, this analysis shows a leveling of benefits across the country as the locations of power plants and transportation hubs are often impacting communities with varying socioeconomic characteristics. As shown in the table on the next page, communities across the United States could experience billions in public health benefits, and significantly reduce premature deaths, asthma attacks and other negative health consequences of polluted air through 2050. The table includes the 25 Metropolitan Areas across the United States showing the largest cumulative health benefits by 2050 considering the shift to non-combustion electricity generation and zero emission transportation.
USER:
According to the context document, what states could exceed $100 billion in health benefits from implementation of of zero-emission transportation and electricity resources?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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only use information from the provided context. answer in bullet points. keep it short, two sentences for each bullet point.
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summarize the complaints related to the five technologies that apple allegedly suppressed.
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The DOJ’s Complaint The DOJ’s complaint alleges that Apple has monopolized markets for “performance smartphones” and smartphones generally by impeding the development of technologies that threaten to undermine the iPhone platform. Some of the DOJ’s allegations involve Apple’s control of iPhone app distribution. Specifically, the complaint asserts that Apple wields its power over app approval to block or marginalize technologies that may reduce consumers’ dependence on the iPhone. The DOJ also contends that Apple maintains its monopoly by denying application programming interfaces (APIs) and other access points to third-party services that would reduce the costs of switching from an iPhone to another smartphone. The complaint highlights five technologies that Apple has allegedly suppressed using the tactics described above. These allegations are summarized below. • Super Apps. The DOJ argues that Apple has thwarted the development of “super apps”— programs that can serve as platforms for other apps. Super apps are popular in Asian markets, offering users a suite of services like payments, messaging, and e-commerce within a single app. The DOJ claims that, by offering a range of services that can be accessed on different types of devices, super apps threaten to disintermediate the iPhone and commoditize device hardware. The DOJ alleges that Apple strategically changed its App Store Guidelines to suppress this threat, effectively preventing apps from hosting the types of “mini programs” offered by super apps. In particular, the complaint asserts that Apple imposes restrictions that make it difficult for users to find mini programs. The DOJ also contends that Apple prevents mini programs from accessing APIs needed to Congressional Research Service https://crsreports.congress.gov LSB11154 Congressional Research Service 2 implement Apple’s in-app payment system, functionally precluding developers from monetizing such programs. • Cloud Streaming Apps. The complaint claims that Apple has also suppressed the development of cloud streaming apps, which allow users to run computationally intensive programs without storing the programs on their smartphones. By leveraging the computing power of remote servers, cloud streaming apps facilitate complex programs like gaming and artificial intelligence services, even if consumers purchase smartphones with less sophisticated hardware than an iPhone. The DOJ says that Apple is highly attuned to this threat, quoting an executive’s concern that consumers might buy an Android device “for 25 bux at a garage sale and . . . have a solid cloud computing device” that “works fine.” Apple has allegedly taken several steps to avert this outcome. The complaint contends that Apple requires developers to submit any cloud streaming game or update as a standalone app for approval by Apple. Because advanced games often require daily or hourly updates, the DOJ claims that this requirement presents developers with the untenable choice of delaying software updates for non-iOS versions of their games or making the iOS versions incompatible with non-iOS versions. The lawsuit also alleges that Apple undermines cloud gaming apps in other ways—for example, by requiring “game overhauls and payment redesigns” that effectively force developers to create iOS-specific versions of their games instead of a single cross-platform version. As a result of Apple’s conduct, the DOJ says, no developer has designed a cloud streaming app for the iPhone. • Messaging. The complaint alleges that Apple degrades cross-platform messaging in several ways, which discourages the use of other smartphones. For example, the DOJ claims that Apple prevents third-party messaging apps from accessing APIs that allow for the combination of “text to anyone” functionality and the advanced features of “over the top” (OTT) messaging protocols (e.g., encryption, typing indicators, read receipts, and the ability to share rich media). As a result, use of a third-party messaging app requires both the sender and recipient of a message to download the same third-party app. Apple Messages, by contrast, incorporates “text to anyone” functionality and advanced OTT features, allowing users to send messages with such features by typing a phone number in the messaging app’s “To:” field. The DOJ also alleges that Apple undermines the messaging quality of rival smartphones: if an iPhone user messages a non-iPhone user via Apple Messages, the text appears in a green bubble and offers limited functionality. Specifically, these conversations are not encrypted, videos are lower quality, and users cannot edit messages or see typing indicators. The complaint claims that Apple takes steps to preserve these disadvantages for competing smartphones—for example, by refusing to make Apple Messages available to other smartphones and blocking developers from providing end-to-end encryption for texts from Apple Messages to Android users. • Smartwatches. The DOJ also alleges that Apple has suppressed the development of cross-platform smartwatches, steering consumers to Apple’s smartwatch and thereby locking them into the iPhone ecosystem. The complaint contends that Apple degrades the functionality of third-party smartwatches by preventing them from responding to iPhone notifications, inhibiting them from maintaining reliable connections with iPhones, and undermining the performance of third-party smartwatches that connect directly with a cellular network. In doing so, the DOJ says, Apple bolsters its own smartwatch—Apple Watch—which does not face these disadvantages. Because Apple Watch is not Congressional Research Service 3 compatible with other smartphones, purchases of Apple Watch raise the costs of switching from an iPhone to another smartphone. Thus, by favoring Apple Watch and degrading rival smartwatches, the DOJ claims, Apple helps solidify its smartphone monopoly. • Digital Wallets. The DOJ argues that Apple has implemented a similar strategy vis-á-vis digital wallets, which allow for the storage and use of passes and credentials such as credit cards, movie tickets, and car keys. The complaint alleges that Apple’s digital wallet—Apple Wallet—is the only iPhone app that is allowed to access the technology needed for tap-to-pay functionality, which the DOJ characterizes as the “most important function for attracting users to a digital wallet.” The DOJ also claims that Apple prevents rival digital wallets from authenticating digital payment options on online checkout pages and from serving as alternatives to Apple’s in-app payment tool, further reducing the attractiveness of rival wallets to consumers. By stifling the emergence of cross-platform wallets, the lawsuit contends, Apple has suppressed the development of technology that could reduce the costs of switching from an iPhone to another smartphone. The complaint asserts that Apple’s conduct amounts to monopolization or, in the alternative, attempted monopolization of two markets: the U.S. market for “performance smartphones” and a broader U.S. market for all smartphones. The DOJ argues that “performance smartphones” represent a distinct market because “entry-level smartphones” made with lower-quality materials and performance components are not reasonable substitutes for “higher-end” smartphones like the iPhone. In support of its allegations of monopoly power, the DOJ contends that Apple occupies more than 70% of the market for “performance smartphones” and more than 65% of the market for smartphones generally, benefits from substantial barriers to entry and expansion, foregoes innovation without fear of losing customers, and achieves profit margins that significantly exceed those of rivals. In alleging anticompetitive effects, the DOJ claims that the conduct described above results in less choice for smartphone users, harms the quality of the iPhone and rival smartphones, and allows Apple to extract higher profits from iPhone users and app developers. The complaint rejects the notion that these harms can be justified on the basis of privacy, security, or other procompetitive benefits. Here, the DOJ argues that many of the technologies Apple suppresses—for example, apps that would allow Apple Messages to send encrypted texts to Android devices—would themselves enhance privacy and security. The lawsuit contends that Apple’s selective invocation of privacy and security underscores the pretextual nature of those defenses.
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only use information from the provided context. answer in bullet points. keep it short, two sentences for each bullet point. summarize the complaints related to the five technologies that apple allegedly suppressed. The DOJ’s Complaint The DOJ’s complaint alleges that Apple has monopolized markets for “performance smartphones” and smartphones generally by impeding the development of technologies that threaten to undermine the iPhone platform. Some of the DOJ’s allegations involve Apple’s control of iPhone app distribution. Specifically, the complaint asserts that Apple wields its power over app approval to block or marginalize technologies that may reduce consumers’ dependence on the iPhone. The DOJ also contends that Apple maintains its monopoly by denying application programming interfaces (APIs) and other access points to third-party services that would reduce the costs of switching from an iPhone to another smartphone. The complaint highlights five technologies that Apple has allegedly suppressed using the tactics described above. These allegations are summarized below. • Super Apps. The DOJ argues that Apple has thwarted the development of “super apps”— programs that can serve as platforms for other apps. Super apps are popular in Asian markets, offering users a suite of services like payments, messaging, and e-commerce within a single app. The DOJ claims that, by offering a range of services that can be accessed on different types of devices, super apps threaten to disintermediate the iPhone and commoditize device hardware. The DOJ alleges that Apple strategically changed its App Store Guidelines to suppress this threat, effectively preventing apps from hosting the types of “mini programs” offered by super apps. In particular, the complaint asserts that Apple imposes restrictions that make it difficult for users to find mini programs. The DOJ also contends that Apple prevents mini programs from accessing APIs needed to Congressional Research Service https://crsreports.congress.gov LSB11154 Congressional Research Service 2 implement Apple’s in-app payment system, functionally precluding developers from monetizing such programs. • Cloud Streaming Apps. The complaint claims that Apple has also suppressed the development of cloud streaming apps, which allow users to run computationally intensive programs without storing the programs on their smartphones. By leveraging the computing power of remote servers, cloud streaming apps facilitate complex programs like gaming and artificial intelligence services, even if consumers purchase smartphones with less sophisticated hardware than an iPhone. The DOJ says that Apple is highly attuned to this threat, quoting an executive’s concern that consumers might buy an Android device “for 25 bux at a garage sale and . . . have a solid cloud computing device” that “works fine.” Apple has allegedly taken several steps to avert this outcome. The complaint contends that Apple requires developers to submit any cloud streaming game or update as a standalone app for approval by Apple. Because advanced games often require daily or hourly updates, the DOJ claims that this requirement presents developers with the untenable choice of delaying software updates for non-iOS versions of their games or making the iOS versions incompatible with non-iOS versions. The lawsuit also alleges that Apple undermines cloud gaming apps in other ways—for example, by requiring “game overhauls and payment redesigns” that effectively force developers to create iOS-specific versions of their games instead of a single cross-platform version. As a result of Apple’s conduct, the DOJ says, no developer has designed a cloud streaming app for the iPhone. • Messaging. The complaint alleges that Apple degrades cross-platform messaging in several ways, which discourages the use of other smartphones. For example, the DOJ claims that Apple prevents third-party messaging apps from accessing APIs that allow for the combination of “text to anyone” functionality and the advanced features of “over the top” (OTT) messaging protocols (e.g., encryption, typing indicators, read receipts, and the ability to share rich media). As a result, use of a third-party messaging app requires both the sender and recipient of a message to download the same third-party app. Apple Messages, by contrast, incorporates “text to anyone” functionality and advanced OTT features, allowing users to send messages with such features by typing a phone number in the messaging app’s “To:” field. The DOJ also alleges that Apple undermines the messaging quality of rival smartphones: if an iPhone user messages a non-iPhone user via Apple Messages, the text appears in a green bubble and offers limited functionality. Specifically, these conversations are not encrypted, videos are lower quality, and users cannot edit messages or see typing indicators. The complaint claims that Apple takes steps to preserve these disadvantages for competing smartphones—for example, by refusing to make Apple Messages available to other smartphones and blocking developers from providing end-to-end encryption for texts from Apple Messages to Android users. • Smartwatches. The DOJ also alleges that Apple has suppressed the development of cross-platform smartwatches, steering consumers to Apple’s smartwatch and thereby locking them into the iPhone ecosystem. The complaint contends that Apple degrades the functionality of third-party smartwatches by preventing them from responding to iPhone notifications, inhibiting them from maintaining reliable connections with iPhones, and undermining the performance of third-party smartwatches that connect directly with a cellular network. In doing so, the DOJ says, Apple bolsters its own smartwatch—Apple Watch—which does not face these disadvantages. Because Apple Watch is not Congressional Research Service 3 compatible with other smartphones, purchases of Apple Watch raise the costs of switching from an iPhone to another smartphone. Thus, by favoring Apple Watch and degrading rival smartwatches, the DOJ claims, Apple helps solidify its smartphone monopoly. • Digital Wallets. The DOJ argues that Apple has implemented a similar strategy vis-á-vis digital wallets, which allow for the storage and use of passes and credentials such as credit cards, movie tickets, and car keys. The complaint alleges that Apple’s digital wallet—Apple Wallet—is the only iPhone app that is allowed to access the technology needed for tap-to-pay functionality, which the DOJ characterizes as the “most important function for attracting users to a digital wallet.” The DOJ also claims that Apple prevents rival digital wallets from authenticating digital payment options on online checkout pages and from serving as alternatives to Apple’s in-app payment tool, further reducing the attractiveness of rival wallets to consumers. By stifling the emergence of cross-platform wallets, the lawsuit contends, Apple has suppressed the development of technology that could reduce the costs of switching from an iPhone to another smartphone. The complaint asserts that Apple’s conduct amounts to monopolization or, in the alternative, attempted monopolization of two markets: the U.S. market for “performance smartphones” and a broader U.S. market for all smartphones. The DOJ argues that “performance smartphones” represent a distinct market because “entry-level smartphones” made with lower-quality materials and performance components are not reasonable substitutes for “higher-end” smartphones like the iPhone. In support of its allegations of monopoly power, the DOJ contends that Apple occupies more than 70% of the market for “performance smartphones” and more than 65% of the market for smartphones generally, benefits from substantial barriers to entry and expansion, foregoes innovation without fear of losing customers, and achieves profit margins that significantly exceed those of rivals. In alleging anticompetitive effects, the DOJ claims that the conduct described above results in less choice for smartphone users, harms the quality of the iPhone and rival smartphones, and allows Apple to extract higher profits from iPhone users and app developers. The complaint rejects the notion that these harms can be justified on the basis of privacy, security, or other procompetitive benefits. Here, the DOJ argues that many of the technologies Apple suppresses—for example, apps that would allow Apple Messages to send encrypted texts to Android devices—would themselves enhance privacy and security. The lawsuit contends that Apple’s selective invocation of privacy and security underscores the pretextual nature of those defenses.
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only use information from the provided context. answer in bullet points. keep it short, two sentences for each bullet point.
EVIDENCE:
The DOJ’s Complaint The DOJ’s complaint alleges that Apple has monopolized markets for “performance smartphones” and smartphones generally by impeding the development of technologies that threaten to undermine the iPhone platform. Some of the DOJ’s allegations involve Apple’s control of iPhone app distribution. Specifically, the complaint asserts that Apple wields its power over app approval to block or marginalize technologies that may reduce consumers’ dependence on the iPhone. The DOJ also contends that Apple maintains its monopoly by denying application programming interfaces (APIs) and other access points to third-party services that would reduce the costs of switching from an iPhone to another smartphone. The complaint highlights five technologies that Apple has allegedly suppressed using the tactics described above. These allegations are summarized below. • Super Apps. The DOJ argues that Apple has thwarted the development of “super apps”— programs that can serve as platforms for other apps. Super apps are popular in Asian markets, offering users a suite of services like payments, messaging, and e-commerce within a single app. The DOJ claims that, by offering a range of services that can be accessed on different types of devices, super apps threaten to disintermediate the iPhone and commoditize device hardware. The DOJ alleges that Apple strategically changed its App Store Guidelines to suppress this threat, effectively preventing apps from hosting the types of “mini programs” offered by super apps. In particular, the complaint asserts that Apple imposes restrictions that make it difficult for users to find mini programs. The DOJ also contends that Apple prevents mini programs from accessing APIs needed to Congressional Research Service https://crsreports.congress.gov LSB11154 Congressional Research Service 2 implement Apple’s in-app payment system, functionally precluding developers from monetizing such programs. • Cloud Streaming Apps. The complaint claims that Apple has also suppressed the development of cloud streaming apps, which allow users to run computationally intensive programs without storing the programs on their smartphones. By leveraging the computing power of remote servers, cloud streaming apps facilitate complex programs like gaming and artificial intelligence services, even if consumers purchase smartphones with less sophisticated hardware than an iPhone. The DOJ says that Apple is highly attuned to this threat, quoting an executive’s concern that consumers might buy an Android device “for 25 bux at a garage sale and . . . have a solid cloud computing device” that “works fine.” Apple has allegedly taken several steps to avert this outcome. The complaint contends that Apple requires developers to submit any cloud streaming game or update as a standalone app for approval by Apple. Because advanced games often require daily or hourly updates, the DOJ claims that this requirement presents developers with the untenable choice of delaying software updates for non-iOS versions of their games or making the iOS versions incompatible with non-iOS versions. The lawsuit also alleges that Apple undermines cloud gaming apps in other ways—for example, by requiring “game overhauls and payment redesigns” that effectively force developers to create iOS-specific versions of their games instead of a single cross-platform version. As a result of Apple’s conduct, the DOJ says, no developer has designed a cloud streaming app for the iPhone. • Messaging. The complaint alleges that Apple degrades cross-platform messaging in several ways, which discourages the use of other smartphones. For example, the DOJ claims that Apple prevents third-party messaging apps from accessing APIs that allow for the combination of “text to anyone” functionality and the advanced features of “over the top” (OTT) messaging protocols (e.g., encryption, typing indicators, read receipts, and the ability to share rich media). As a result, use of a third-party messaging app requires both the sender and recipient of a message to download the same third-party app. Apple Messages, by contrast, incorporates “text to anyone” functionality and advanced OTT features, allowing users to send messages with such features by typing a phone number in the messaging app’s “To:” field. The DOJ also alleges that Apple undermines the messaging quality of rival smartphones: if an iPhone user messages a non-iPhone user via Apple Messages, the text appears in a green bubble and offers limited functionality. Specifically, these conversations are not encrypted, videos are lower quality, and users cannot edit messages or see typing indicators. The complaint claims that Apple takes steps to preserve these disadvantages for competing smartphones—for example, by refusing to make Apple Messages available to other smartphones and blocking developers from providing end-to-end encryption for texts from Apple Messages to Android users. • Smartwatches. The DOJ also alleges that Apple has suppressed the development of cross-platform smartwatches, steering consumers to Apple’s smartwatch and thereby locking them into the iPhone ecosystem. The complaint contends that Apple degrades the functionality of third-party smartwatches by preventing them from responding to iPhone notifications, inhibiting them from maintaining reliable connections with iPhones, and undermining the performance of third-party smartwatches that connect directly with a cellular network. In doing so, the DOJ says, Apple bolsters its own smartwatch—Apple Watch—which does not face these disadvantages. Because Apple Watch is not Congressional Research Service 3 compatible with other smartphones, purchases of Apple Watch raise the costs of switching from an iPhone to another smartphone. Thus, by favoring Apple Watch and degrading rival smartwatches, the DOJ claims, Apple helps solidify its smartphone monopoly. • Digital Wallets. The DOJ argues that Apple has implemented a similar strategy vis-á-vis digital wallets, which allow for the storage and use of passes and credentials such as credit cards, movie tickets, and car keys. The complaint alleges that Apple’s digital wallet—Apple Wallet—is the only iPhone app that is allowed to access the technology needed for tap-to-pay functionality, which the DOJ characterizes as the “most important function for attracting users to a digital wallet.” The DOJ also claims that Apple prevents rival digital wallets from authenticating digital payment options on online checkout pages and from serving as alternatives to Apple’s in-app payment tool, further reducing the attractiveness of rival wallets to consumers. By stifling the emergence of cross-platform wallets, the lawsuit contends, Apple has suppressed the development of technology that could reduce the costs of switching from an iPhone to another smartphone. The complaint asserts that Apple’s conduct amounts to monopolization or, in the alternative, attempted monopolization of two markets: the U.S. market for “performance smartphones” and a broader U.S. market for all smartphones. The DOJ argues that “performance smartphones” represent a distinct market because “entry-level smartphones” made with lower-quality materials and performance components are not reasonable substitutes for “higher-end” smartphones like the iPhone. In support of its allegations of monopoly power, the DOJ contends that Apple occupies more than 70% of the market for “performance smartphones” and more than 65% of the market for smartphones generally, benefits from substantial barriers to entry and expansion, foregoes innovation without fear of losing customers, and achieves profit margins that significantly exceed those of rivals. In alleging anticompetitive effects, the DOJ claims that the conduct described above results in less choice for smartphone users, harms the quality of the iPhone and rival smartphones, and allows Apple to extract higher profits from iPhone users and app developers. The complaint rejects the notion that these harms can be justified on the basis of privacy, security, or other procompetitive benefits. Here, the DOJ argues that many of the technologies Apple suppresses—for example, apps that would allow Apple Messages to send encrypted texts to Android devices—would themselves enhance privacy and security. The lawsuit contends that Apple’s selective invocation of privacy and security underscores the pretextual nature of those defenses.
USER:
summarize the complaints related to the five technologies that apple allegedly suppressed.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Only use the information provided in the document to give your answer. Keep it to less than 50 words.
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In the context of the provided document, what is the definition of "nonexpendable equipment"?
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**Creating a budget for a grant** Although the degree of specificity of any budget will vary depending on the nature of the project and OJP agency requirements, a complete, well-thought-out budget serves to reinforce your credibility and increase the likelihood of your proposal being funded. Keep in mind the following— A well-prepared budget should be reasonable and demonstrate that the funds being asked for will be used wisely. The budget should be as concrete and specific as possible in its estimates. Make every effort to be realistic, to estimate costs accurately. The budget format should be as clear as possible. It should begin with a budget narrative, which you should write after the entire budget has been prepared. Each section of the budget should be in outline form, listing line items under major headings and subheadings. Each of the major components should be subtotaled with a grand total at the end. Your budget should justify all expenses and be consistent with the program narrative: Salaries should be comparable to those within the applicant organization. If new staff is being hired, additional space and equipment are considered, as necessary. If the budget lists an equipment purchase, it is the type allowed by the agency. If additional space is rented, the increase in insurance is supported. If an indirect cost rate applies to the proposal, the division between direct and indirect costs is not in conflict, and the aggregate budget totals refer directly to the approved formula. Indirect costs are costs that are not readily assignable to a particular project, but are necessary to the operation of the organization and the performance of the project (like the cost of operating and maintaining facilities, depreciation, and administrative salaries). If matching funds are required, the contributions to the matching fund are taken out of the budget unless otherwise specified in the application instructions. While budget adjustments are sometimes made after the grant award, this can be a lengthy process. It’s best to be certain that implementation, continuation, and phase-down costs can be met with the budget you submit with the proposal. Consider costs associated with leases, evaluation systems, hard/soft match requirements, audits, development, implementing and maintaining information and accounting systems, and other long-term financial commitments. Use OJP’s Budget Detail Worksheet as a guide when preparing your budget and budget narrative. You may submit this worksheet or your own version, but it must address all of the categories in the sample budget detail worksheet. (See a sample budget summary and narrative.) Whatever format you submit, however, must include all of the information asked for on the budget detail worksheet in the solicitation for your grant application, in addition to the budget narrative: Personnel—List each position by title and employee name, if available. Show the annual salary rate and the percentage of time to be devoted to the project. Compensation paid for employees engaged in grant activities must be consistent with that paid for similar work within your organization. List only the employees of the applicant organization; all other grant-funded positions should be listed under the consultants/contracts category. Fringe Benefits—Base fringe benefits on actual known costs or an established formula. Fringe benefits are for listed personnel and only for the percentage of time devoted to the project. Fringe benefits on overtime hours are limited to FICA, workers’ compensation, and unemployment compensation. Travel—Itemize travel expenses for project personnel by purpose (e.g., staff to training, field interviews, advisory group meetings). Show how you calculated these costs (e.g., six people to 3-day training at $X airfare, $X lodging, $X meals). In training projects, list travel and meals for trainees separately. Show the number of trainees and the unit costs involved. Identify the location of travel, if known. Indicate the source of any travel policies you have applied, and if applicant or federal travel regulations apply. The use of use federal grant funds to travel to non-DOJ-sponsored training events requires prior approval from the funding agency. Equipment—List nonexpendable items that are to be purchased. Nonexpendable equipment is tangible property having a useful life of more than 2 years and an acquisition cost of $5,000 or more per unit. (Note: An organization’s own capitalization policy may be used for items costing less than $5,000.) Include expendable items either in the "supplies" category or in the "other" category. Analyze the cost benefits of purchasing versus leasing equipment, particularly high-cost items and those subject to rapid technical advances. List rented or leased equipment costs in the "contractual" category. Explain why the equipment is needed for the project to succeed. Attach a narrative describing the method that will be used to procure the equipment. Supplies—List items by type (office supplies, postage, training materials, copying paper, and expendable equipment items costing less than $5,000, such as books and handheld tape recorders) and show how you calculated these costs. (Note: An organization’s own capitalization policy may be used for items costing less than $5,000.) Generally, supplies include any materials that are expendable or consumed during the course of the project. Construction—As a rule, construction costs are not allowable. In some cases, minor repairs or renovations may be allowable. Check the solicitation and with the program office before budgeting funds in this category. Consultants/Contracts—Indicate whether you will follow your organization’s formal, written procurement policy or the Federal Acquisition Regulations. Consultant Fees: For each consultant, enter the name, if known, service to be provided, hourly or daily fee (8-hour day), and estimated time on the project. Consultant fees in excess of $450 per day require additional justification and prior approval from OJP. Consultant Expenses: List all expenses to be paid from the grant to the individual consultants in addition to their fees (e.g., travel, meals, lodging). Contracts: Describe the product or service to be procured by contract and provide an estimate of the cost. Promote free and open competition in awarding contracts. You must provide a separate justification for sole-source contracts of $100,000 or more. Other Costs—List items (e.g., rent, reproduction, telephone, janitorial or security services, investigative or confidential funds) by major type and show how you calculated the costs. For example, for rent, provide the square footage and the cost per square foot or a monthly rental cost and how many months of rent are proposed. Indirect Costs—Indirect costs are allowed only if you have a federally approved indirect cost rate and you attach a copy of the rate approval (a fully executed, negotiated agreement). If you don’t have an approved rate, you can request one by contacting your cognizant federal agency, which will review all documentation and approve a rate. Or, if your accounting system permits, you may allocate costs in the direct costs categories. Remember to include computations that clearly show how the costs were derived, as well as documentation that explains the cost or line item. Sustaining the Project Do not anticipate that the grant income will be the sole support for your project. Consider this when developing your overall budget requirements and, in particular, when developing budget line items most subject to inflation. Exercise restraint when determining inflationary cost projections (avoid padding budget line items), but try to anticipate possible future increases. Federal funds must be used to supplement existing funds for program activities and must not replace (supplant) those funds that have been appropriated for the same purpose. SUPPLANTING IS PROHIBITED Definition: To deliberately reduce state or local funds because of the existence of federal funds. Prohibition: Federal funds must be used to supplement existing funds for program activities and must not replace those funds that have been appropriated for the same purpose. Example: When state funds are appropriated for a stated purpose and federal funds are awarded for that same purpose, the state replaces its state funds with federal funds, thereby reducing the total amount available for the stated purpose. Monitoring: Supplanting will be the subject of application review, preaward review, postaward monitoring, and audit. Most grant programs require applicants to include information that explains how they will fund and sustain the project once the grant funds have been expended. Describe a plan for continuing your project beyond the grant period, and outline all other fundraising efforts you are considering and any plans to apply for additional grants in the future. Please note that it is prohibited to use grant funds or grant-funded positions for your fundraising efforts. Also, provide projections for operating and maintaining facilities and equipment. Discuss maintenance and future program funding if program funds are for construction activity. Account for other needed expenditures if the program includes purchasing equipment.
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<Text Passage> ========== **Creating a budget for a grant** Although the degree of specificity of any budget will vary depending on the nature of the project and OJP agency requirements, a complete, well-thought-out budget serves to reinforce your credibility and increase the likelihood of your proposal being funded. Keep in mind the following— A well-prepared budget should be reasonable and demonstrate that the funds being asked for will be used wisely. The budget should be as concrete and specific as possible in its estimates. Make every effort to be realistic, to estimate costs accurately. The budget format should be as clear as possible. It should begin with a budget narrative, which you should write after the entire budget has been prepared. Each section of the budget should be in outline form, listing line items under major headings and subheadings. Each of the major components should be subtotaled with a grand total at the end. Your budget should justify all expenses and be consistent with the program narrative: Salaries should be comparable to those within the applicant organization. If new staff is being hired, additional space and equipment are considered, as necessary. If the budget lists an equipment purchase, it is the type allowed by the agency. If additional space is rented, the increase in insurance is supported. If an indirect cost rate applies to the proposal, the division between direct and indirect costs is not in conflict, and the aggregate budget totals refer directly to the approved formula. Indirect costs are costs that are not readily assignable to a particular project, but are necessary to the operation of the organization and the performance of the project (like the cost of operating and maintaining facilities, depreciation, and administrative salaries). If matching funds are required, the contributions to the matching fund are taken out of the budget unless otherwise specified in the application instructions. While budget adjustments are sometimes made after the grant award, this can be a lengthy process. It’s best to be certain that implementation, continuation, and phase-down costs can be met with the budget you submit with the proposal. Consider costs associated with leases, evaluation systems, hard/soft match requirements, audits, development, implementing and maintaining information and accounting systems, and other long-term financial commitments. Use OJP’s Budget Detail Worksheet as a guide when preparing your budget and budget narrative. You may submit this worksheet or your own version, but it must address all of the categories in the sample budget detail worksheet. (See a sample budget summary and narrative.) Whatever format you submit, however, must include all of the information asked for on the budget detail worksheet in the solicitation for your grant application, in addition to the budget narrative: Personnel—List each position by title and employee name, if available. Show the annual salary rate and the percentage of time to be devoted to the project. Compensation paid for employees engaged in grant activities must be consistent with that paid for similar work within your organization. List only the employees of the applicant organization; all other grant-funded positions should be listed under the consultants/contracts category. Fringe Benefits—Base fringe benefits on actual known costs or an established formula. Fringe benefits are for listed personnel and only for the percentage of time devoted to the project. Fringe benefits on overtime hours are limited to FICA, workers’ compensation, and unemployment compensation. Travel—Itemize travel expenses for project personnel by purpose (e.g., staff to training, field interviews, advisory group meetings). Show how you calculated these costs (e.g., six people to 3-day training at $X airfare, $X lodging, $X meals). In training projects, list travel and meals for trainees separately. Show the number of trainees and the unit costs involved. Identify the location of travel, if known. Indicate the source of any travel policies you have applied, and if applicant or federal travel regulations apply. The use of use federal grant funds to travel to non-DOJ-sponsored training events requires prior approval from the funding agency. Equipment—List nonexpendable items that are to be purchased. Nonexpendable equipment is tangible property having a useful life of more than 2 years and an acquisition cost of $5,000 or more per unit. (Note: An organization’s own capitalization policy may be used for items costing less than $5,000.) Include expendable items either in the "supplies" category or in the "other" category. Analyze the cost benefits of purchasing versus leasing equipment, particularly high-cost items and those subject to rapid technical advances. List rented or leased equipment costs in the "contractual" category. Explain why the equipment is needed for the project to succeed. Attach a narrative describing the method that will be used to procure the equipment. Supplies—List items by type (office supplies, postage, training materials, copying paper, and expendable equipment items costing less than $5,000, such as books and handheld tape recorders) and show how you calculated these costs. (Note: An organization’s own capitalization policy may be used for items costing less than $5,000.) Generally, supplies include any materials that are expendable or consumed during the course of the project. Construction—As a rule, construction costs are not allowable. In some cases, minor repairs or renovations may be allowable. Check the solicitation and with the program office before budgeting funds in this category. Consultants/Contracts—Indicate whether you will follow your organization’s formal, written procurement policy or the Federal Acquisition Regulations. Consultant Fees: For each consultant, enter the name, if known, service to be provided, hourly or daily fee (8-hour day), and estimated time on the project. Consultant fees in excess of $450 per day require additional justification and prior approval from OJP. Consultant Expenses: List all expenses to be paid from the grant to the individual consultants in addition to their fees (e.g., travel, meals, lodging). Contracts: Describe the product or service to be procured by contract and provide an estimate of the cost. Promote free and open competition in awarding contracts. You must provide a separate justification for sole-source contracts of $100,000 or more. Other Costs—List items (e.g., rent, reproduction, telephone, janitorial or security services, investigative or confidential funds) by major type and show how you calculated the costs. For example, for rent, provide the square footage and the cost per square foot or a monthly rental cost and how many months of rent are proposed. Indirect Costs—Indirect costs are allowed only if you have a federally approved indirect cost rate and you attach a copy of the rate approval (a fully executed, negotiated agreement). If you don’t have an approved rate, you can request one by contacting your cognizant federal agency, which will review all documentation and approve a rate. Or, if your accounting system permits, you may allocate costs in the direct costs categories. Remember to include computations that clearly show how the costs were derived, as well as documentation that explains the cost or line item. Sustaining the Project Do not anticipate that the grant income will be the sole support for your project. Consider this when developing your overall budget requirements and, in particular, when developing budget line items most subject to inflation. Exercise restraint when determining inflationary cost projections (avoid padding budget line items), but try to anticipate possible future increases. Federal funds must be used to supplement existing funds for program activities and must not replace (supplant) those funds that have been appropriated for the same purpose. SUPPLANTING IS PROHIBITED Definition: To deliberately reduce state or local funds because of the existence of federal funds. Prohibition: Federal funds must be used to supplement existing funds for program activities and must not replace those funds that have been appropriated for the same purpose. Example: When state funds are appropriated for a stated purpose and federal funds are awarded for that same purpose, the state replaces its state funds with federal funds, thereby reducing the total amount available for the stated purpose. Monitoring: Supplanting will be the subject of application review, preaward review, postaward monitoring, and audit. Most grant programs require applicants to include information that explains how they will fund and sustain the project once the grant funds have been expended. Describe a plan for continuing your project beyond the grant period, and outline all other fundraising efforts you are considering and any plans to apply for additional grants in the future. Please note that it is prohibited to use grant funds or grant-funded positions for your fundraising efforts. Also, provide projections for operating and maintaining facilities and equipment. Discuss maintenance and future program funding if program funds are for construction activity. Account for other needed expenditures if the program includes purchasing equipment. <Query> ========== In the context of the provided document, what is the definition of "nonexpendable equipment"? <System Instruction> ========== Only use the information provided in the document to give your answer. Keep it to less than 50 words.
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Only use the information provided in the document to give your answer. Keep it to less than 50 words.
EVIDENCE:
**Creating a budget for a grant** Although the degree of specificity of any budget will vary depending on the nature of the project and OJP agency requirements, a complete, well-thought-out budget serves to reinforce your credibility and increase the likelihood of your proposal being funded. Keep in mind the following— A well-prepared budget should be reasonable and demonstrate that the funds being asked for will be used wisely. The budget should be as concrete and specific as possible in its estimates. Make every effort to be realistic, to estimate costs accurately. The budget format should be as clear as possible. It should begin with a budget narrative, which you should write after the entire budget has been prepared. Each section of the budget should be in outline form, listing line items under major headings and subheadings. Each of the major components should be subtotaled with a grand total at the end. Your budget should justify all expenses and be consistent with the program narrative: Salaries should be comparable to those within the applicant organization. If new staff is being hired, additional space and equipment are considered, as necessary. If the budget lists an equipment purchase, it is the type allowed by the agency. If additional space is rented, the increase in insurance is supported. If an indirect cost rate applies to the proposal, the division between direct and indirect costs is not in conflict, and the aggregate budget totals refer directly to the approved formula. Indirect costs are costs that are not readily assignable to a particular project, but are necessary to the operation of the organization and the performance of the project (like the cost of operating and maintaining facilities, depreciation, and administrative salaries). If matching funds are required, the contributions to the matching fund are taken out of the budget unless otherwise specified in the application instructions. While budget adjustments are sometimes made after the grant award, this can be a lengthy process. It’s best to be certain that implementation, continuation, and phase-down costs can be met with the budget you submit with the proposal. Consider costs associated with leases, evaluation systems, hard/soft match requirements, audits, development, implementing and maintaining information and accounting systems, and other long-term financial commitments. Use OJP’s Budget Detail Worksheet as a guide when preparing your budget and budget narrative. You may submit this worksheet or your own version, but it must address all of the categories in the sample budget detail worksheet. (See a sample budget summary and narrative.) Whatever format you submit, however, must include all of the information asked for on the budget detail worksheet in the solicitation for your grant application, in addition to the budget narrative: Personnel—List each position by title and employee name, if available. Show the annual salary rate and the percentage of time to be devoted to the project. Compensation paid for employees engaged in grant activities must be consistent with that paid for similar work within your organization. List only the employees of the applicant organization; all other grant-funded positions should be listed under the consultants/contracts category. Fringe Benefits—Base fringe benefits on actual known costs or an established formula. Fringe benefits are for listed personnel and only for the percentage of time devoted to the project. Fringe benefits on overtime hours are limited to FICA, workers’ compensation, and unemployment compensation. Travel—Itemize travel expenses for project personnel by purpose (e.g., staff to training, field interviews, advisory group meetings). Show how you calculated these costs (e.g., six people to 3-day training at $X airfare, $X lodging, $X meals). In training projects, list travel and meals for trainees separately. Show the number of trainees and the unit costs involved. Identify the location of travel, if known. Indicate the source of any travel policies you have applied, and if applicant or federal travel regulations apply. The use of use federal grant funds to travel to non-DOJ-sponsored training events requires prior approval from the funding agency. Equipment—List nonexpendable items that are to be purchased. Nonexpendable equipment is tangible property having a useful life of more than 2 years and an acquisition cost of $5,000 or more per unit. (Note: An organization’s own capitalization policy may be used for items costing less than $5,000.) Include expendable items either in the "supplies" category or in the "other" category. Analyze the cost benefits of purchasing versus leasing equipment, particularly high-cost items and those subject to rapid technical advances. List rented or leased equipment costs in the "contractual" category. Explain why the equipment is needed for the project to succeed. Attach a narrative describing the method that will be used to procure the equipment. Supplies—List items by type (office supplies, postage, training materials, copying paper, and expendable equipment items costing less than $5,000, such as books and handheld tape recorders) and show how you calculated these costs. (Note: An organization’s own capitalization policy may be used for items costing less than $5,000.) Generally, supplies include any materials that are expendable or consumed during the course of the project. Construction—As a rule, construction costs are not allowable. In some cases, minor repairs or renovations may be allowable. Check the solicitation and with the program office before budgeting funds in this category. Consultants/Contracts—Indicate whether you will follow your organization’s formal, written procurement policy or the Federal Acquisition Regulations. Consultant Fees: For each consultant, enter the name, if known, service to be provided, hourly or daily fee (8-hour day), and estimated time on the project. Consultant fees in excess of $450 per day require additional justification and prior approval from OJP. Consultant Expenses: List all expenses to be paid from the grant to the individual consultants in addition to their fees (e.g., travel, meals, lodging). Contracts: Describe the product or service to be procured by contract and provide an estimate of the cost. Promote free and open competition in awarding contracts. You must provide a separate justification for sole-source contracts of $100,000 or more. Other Costs—List items (e.g., rent, reproduction, telephone, janitorial or security services, investigative or confidential funds) by major type and show how you calculated the costs. For example, for rent, provide the square footage and the cost per square foot or a monthly rental cost and how many months of rent are proposed. Indirect Costs—Indirect costs are allowed only if you have a federally approved indirect cost rate and you attach a copy of the rate approval (a fully executed, negotiated agreement). If you don’t have an approved rate, you can request one by contacting your cognizant federal agency, which will review all documentation and approve a rate. Or, if your accounting system permits, you may allocate costs in the direct costs categories. Remember to include computations that clearly show how the costs were derived, as well as documentation that explains the cost or line item. Sustaining the Project Do not anticipate that the grant income will be the sole support for your project. Consider this when developing your overall budget requirements and, in particular, when developing budget line items most subject to inflation. Exercise restraint when determining inflationary cost projections (avoid padding budget line items), but try to anticipate possible future increases. Federal funds must be used to supplement existing funds for program activities and must not replace (supplant) those funds that have been appropriated for the same purpose. SUPPLANTING IS PROHIBITED Definition: To deliberately reduce state or local funds because of the existence of federal funds. Prohibition: Federal funds must be used to supplement existing funds for program activities and must not replace those funds that have been appropriated for the same purpose. Example: When state funds are appropriated for a stated purpose and federal funds are awarded for that same purpose, the state replaces its state funds with federal funds, thereby reducing the total amount available for the stated purpose. Monitoring: Supplanting will be the subject of application review, preaward review, postaward monitoring, and audit. Most grant programs require applicants to include information that explains how they will fund and sustain the project once the grant funds have been expended. Describe a plan for continuing your project beyond the grant period, and outline all other fundraising efforts you are considering and any plans to apply for additional grants in the future. Please note that it is prohibited to use grant funds or grant-funded positions for your fundraising efforts. Also, provide projections for operating and maintaining facilities and equipment. Discuss maintenance and future program funding if program funds are for construction activity. Account for other needed expenditures if the program includes purchasing equipment.
USER:
In the context of the provided document, what is the definition of "nonexpendable equipment"?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
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Draw your answer based solely on the text provided in the prompt.
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Summarize this text about Vietnam's nonmarket economy status.
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Shortly after extending normal trade relations (NTR) status to Vietnam in 2001, the United States designated Vietnam as a “nonmarket economy” (NME) for the purposes of antidumping (AD) and countervailing duty (CVD) investigations. The government of Vietnam has long sought to remove the designation, arguing it may hinder closer bilateral ties. During President Joseph Biden’s September 2023 visit to Hanoi, where he and then-Communist Party of Vietnam (CPV) Secretary-General Nguyen Phu Trong elevated the U.S.-Vietnam relationship to a “comprehensive strategic partnership,” Biden agreed to review Vietnam’s request to review its NME status. The following month, the Department of Commerce initiated an official review. During the review period, some Members of Congress raised concerns over whether Vietnam meets the conditions to be designated as a market economy. On August 2, 2024, Commerce announced its decision to sustain Vietnam’s NME designation, citing the Vietnamese government’s involvement in the economy, despite “substantive reforms,” as a factor for not lifting the designation. U.S.-Vietnam Relations Since 2010, the United States and Vietnam have forged a strategic partnership on many regional security and economic issues, prompted in part by shared concerns about China’s increased assertiveness in the region, and by burgeoning economic links. Over the last decade, Vietnam has become a major manufacturing center and one of the United States’ top ten trading partners. Top U.S. imports from Vietnam include consumer electronics, furniture, semiconductors and parts, apparel, and footwear. Vietnam is the second-largest source of U.S. apparel imports, after China. The September 2023 upgrade in relations was accompanied by several initiatives, including U.S. pledges to support Vietnam's development of its semiconductor industry (including with $2 million in U.S. government funds) and digital infrastructure ($12 million). Additionally, agreements under the U.S.-led, 14-country Indo-Pacific Economic Framework for Prosperity (IPEF) negotiations, which includes Vietnam, may further deepen U.S.-Vietnam economic ties. Under the doi moi (renovation) economic reforms that began in 1986, the Vietnamese government abandoned many aspects of central state planning, cut subsidies to state enterprises, reformed the price system, and opened the country to foreign direct investment (FDI). In a 2022 report, the Organisation for Economic Cooperation and Development (OECD) noted that the number of state-owned enterprises (SOEs) has decreased significantly, but SOEs still account for roughly 30% of the GDP. The U.S. government also actively monitors Vietnam’s currency practices, which were subject to U.S. Congressional Research Service https://crsreports.congress.gov IN12326 CRS INSIGHT Prepared for Members and Committees of Congress Congressional Research Service 2 investigations before the countries reached a bilateral agreement in July 2021. Vietnamese authorities limit daily fluctuations in the Vietnamese dong to 5% against the dollar, adjusted from 3% in 2022. Nonmarket Economy Status under U.S. Trade Laws The Commerce Department has the authority to designate countries as NMEs for the purpose of U.S. AD/CVD laws. An NME is a country that Commerce determines “does not operate on market principles of cost or pricing structures, so that sales of merchandise in such country do not reflect the fair value of merchandise.” In designating a country as an NME, Commerce considers the extent to which (1) the country’s currency is convertible; (2) its wage rates result from free bargaining between labor and management; (3) joint ventures or other foreign investment are permitted; (4) the government owns or controls the means of production; and (5) the government controls the allocation of resources and price and output decisions. Commerce may also consider other factors that it considers appropriate. An NME designation remains in effect until revoked by Commerce. There are currently 12 countries, including Vietnam, designated as NMEs. While considering whether an NME is engaged in dumping, Commerce uses factors of production from a comparable market economy country to calculate the normal value for merchandise alleged to have been dumped in the United States. An affirmative NME designation may lead to higher tariffs. These methods have raised concerns at the WTO that a subsidy may be offset twice when both antidumping and countervailing duties are applied to NME products. After Commerce published the notice initiating the review of Vietnam’s NME status, interested parties submitted comments to Regulations.gov and Commerce held a public hearing on May 8, 2024. Some U.S. manufacturing groups urged Commerce to maintain Vietnam’s NME status, arguing that Vietnam has not met the statutory conditions (above) to lift the NME designation. Others promoted removal of the designation, citing the country’s overall reforms, including openness to foreign investment, free bargaining of wages, and currency convertibility. Considerations for Congress In conducting oversight, Congress may consider the potential implications of an NME designation on U.S.-Vietnam trade, and overall bilateral relations. According to press accounts, Vietnamese government officials have expressed regret over Commerce’s decision to sustain Vietnam’s NME status and some analysts have stated that the decision might hinder bilateral relations. Congress may consider the extent to which Vietnam’s economic reforms might be sufficient to satisfy the statutory conditions should Vietnam submit future requests for review. During the review period, some Members of Congress argued that Vietnam does not meet the conditions, including the prominence of state-owned enterprises (SOE) in Vietnam’s economy, “severe deficiencies” in Vietnam’s labor laws, and potential harm to U.S. industries and workers. The Commerce Department stated in its decision that despite Vietnam’s market-oriented reforms, the government “remains entrenched in many aspects of the Vietnamese economy,” including foreign exchange intervention, control of labor unions, and “significant state ownership and control over the means of production.” Other options for Congress might include linking the decision to other policy areas, such as Vietnam’s human rights records, which some observers say is poor and worsening, and/or foreign assistance. The Vietnam Human Rights Act (H.R. 3172), which would prohibit U.S. assistance to Vietnam's Ministry of Public Security and require the executive branch to put more emphasis on ensuring internet freedom in Vietnam, could be a potential vehicle for Members of Congress who would like to maintain the NME status irrespective of economic policy changes.
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system instruction: Draw your answer based solely on the text provided in the prompt. question: Summarize this text about Vietnam's nonmarket economy status. context block: Shortly after extending normal trade relations (NTR) status to Vietnam in 2001, the United States designated Vietnam as a “nonmarket economy” (NME) for the purposes of antidumping (AD) and countervailing duty (CVD) investigations. The government of Vietnam has long sought to remove the designation, arguing it may hinder closer bilateral ties. During President Joseph Biden’s September 2023 visit to Hanoi, where he and then-Communist Party of Vietnam (CPV) Secretary-General Nguyen Phu Trong elevated the U.S.-Vietnam relationship to a “comprehensive strategic partnership,” Biden agreed to review Vietnam’s request to review its NME status. The following month, the Department of Commerce initiated an official review. During the review period, some Members of Congress raised concerns over whether Vietnam meets the conditions to be designated as a market economy. On August 2, 2024, Commerce announced its decision to sustain Vietnam’s NME designation, citing the Vietnamese government’s involvement in the economy, despite “substantive reforms,” as a factor for not lifting the designation. U.S.-Vietnam Relations Since 2010, the United States and Vietnam have forged a strategic partnership on many regional security and economic issues, prompted in part by shared concerns about China’s increased assertiveness in the region, and by burgeoning economic links. Over the last decade, Vietnam has become a major manufacturing center and one of the United States’ top ten trading partners. Top U.S. imports from Vietnam include consumer electronics, furniture, semiconductors and parts, apparel, and footwear. Vietnam is the second-largest source of U.S. apparel imports, after China. The September 2023 upgrade in relations was accompanied by several initiatives, including U.S. pledges to support Vietnam's development of its semiconductor industry (including with $2 million in U.S. government funds) and digital infrastructure ($12 million). Additionally, agreements under the U.S.-led, 14-country Indo-Pacific Economic Framework for Prosperity (IPEF) negotiations, which includes Vietnam, may further deepen U.S.-Vietnam economic ties. Under the doi moi (renovation) economic reforms that began in 1986, the Vietnamese government abandoned many aspects of central state planning, cut subsidies to state enterprises, reformed the price system, and opened the country to foreign direct investment (FDI). In a 2022 report, the Organisation for Economic Cooperation and Development (OECD) noted that the number of state-owned enterprises (SOEs) has decreased significantly, but SOEs still account for roughly 30% of the GDP. The U.S. government also actively monitors Vietnam’s currency practices, which were subject to U.S. Congressional Research Service https://crsreports.congress.gov IN12326 CRS INSIGHT Prepared for Members and Committees of Congress Congressional Research Service 2 investigations before the countries reached a bilateral agreement in July 2021. Vietnamese authorities limit daily fluctuations in the Vietnamese dong to 5% against the dollar, adjusted from 3% in 2022. Nonmarket Economy Status under U.S. Trade Laws The Commerce Department has the authority to designate countries as NMEs for the purpose of U.S. AD/CVD laws. An NME is a country that Commerce determines “does not operate on market principles of cost or pricing structures, so that sales of merchandise in such country do not reflect the fair value of merchandise.” In designating a country as an NME, Commerce considers the extent to which (1) the country’s currency is convertible; (2) its wage rates result from free bargaining between labor and management; (3) joint ventures or other foreign investment are permitted; (4) the government owns or controls the means of production; and (5) the government controls the allocation of resources and price and output decisions. Commerce may also consider other factors that it considers appropriate. An NME designation remains in effect until revoked by Commerce. There are currently 12 countries, including Vietnam, designated as NMEs. While considering whether an NME is engaged in dumping, Commerce uses factors of production from a comparable market economy country to calculate the normal value for merchandise alleged to have been dumped in the United States. An affirmative NME designation may lead to higher tariffs. These methods have raised concerns at the WTO that a subsidy may be offset twice when both antidumping and countervailing duties are applied to NME products. After Commerce published the notice initiating the review of Vietnam’s NME status, interested parties submitted comments to Regulations.gov and Commerce held a public hearing on May 8, 2024. Some U.S. manufacturing groups urged Commerce to maintain Vietnam’s NME status, arguing that Vietnam has not met the statutory conditions (above) to lift the NME designation. Others promoted removal of the designation, citing the country’s overall reforms, including openness to foreign investment, free bargaining of wages, and currency convertibility. Considerations for Congress In conducting oversight, Congress may consider the potential implications of an NME designation on U.S.-Vietnam trade, and overall bilateral relations. According to press accounts, Vietnamese government officials have expressed regret over Commerce’s decision to sustain Vietnam’s NME status and some analysts have stated that the decision might hinder bilateral relations. Congress may consider the extent to which Vietnam’s economic reforms might be sufficient to satisfy the statutory conditions should Vietnam submit future requests for review. During the review period, some Members of Congress argued that Vietnam does not meet the conditions, including the prominence of state-owned enterprises (SOE) in Vietnam’s economy, “severe deficiencies” in Vietnam’s labor laws, and potential harm to U.S. industries and workers. The Commerce Department stated in its decision that despite Vietnam’s market-oriented reforms, the government “remains entrenched in many aspects of the Vietnamese economy,” including foreign exchange intervention, control of labor unions, and “significant state ownership and control over the means of production.” Other options for Congress might include linking the decision to other policy areas, such as Vietnam’s human rights records, which some observers say is poor and worsening, and/or foreign assistance. The Vietnam Human Rights Act (H.R. 3172), which would prohibit U.S. assistance to Vietnam's Ministry of Public Security and require the executive branch to put more emphasis on ensuring internet freedom in Vietnam, could be a potential vehicle for Members of Congress who would like to maintain the NME status irrespective of economic policy changes.
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Draw your answer based solely on the text provided in the prompt.
EVIDENCE:
Shortly after extending normal trade relations (NTR) status to Vietnam in 2001, the United States designated Vietnam as a “nonmarket economy” (NME) for the purposes of antidumping (AD) and countervailing duty (CVD) investigations. The government of Vietnam has long sought to remove the designation, arguing it may hinder closer bilateral ties. During President Joseph Biden’s September 2023 visit to Hanoi, where he and then-Communist Party of Vietnam (CPV) Secretary-General Nguyen Phu Trong elevated the U.S.-Vietnam relationship to a “comprehensive strategic partnership,” Biden agreed to review Vietnam’s request to review its NME status. The following month, the Department of Commerce initiated an official review. During the review period, some Members of Congress raised concerns over whether Vietnam meets the conditions to be designated as a market economy. On August 2, 2024, Commerce announced its decision to sustain Vietnam’s NME designation, citing the Vietnamese government’s involvement in the economy, despite “substantive reforms,” as a factor for not lifting the designation. U.S.-Vietnam Relations Since 2010, the United States and Vietnam have forged a strategic partnership on many regional security and economic issues, prompted in part by shared concerns about China’s increased assertiveness in the region, and by burgeoning economic links. Over the last decade, Vietnam has become a major manufacturing center and one of the United States’ top ten trading partners. Top U.S. imports from Vietnam include consumer electronics, furniture, semiconductors and parts, apparel, and footwear. Vietnam is the second-largest source of U.S. apparel imports, after China. The September 2023 upgrade in relations was accompanied by several initiatives, including U.S. pledges to support Vietnam's development of its semiconductor industry (including with $2 million in U.S. government funds) and digital infrastructure ($12 million). Additionally, agreements under the U.S.-led, 14-country Indo-Pacific Economic Framework for Prosperity (IPEF) negotiations, which includes Vietnam, may further deepen U.S.-Vietnam economic ties. Under the doi moi (renovation) economic reforms that began in 1986, the Vietnamese government abandoned many aspects of central state planning, cut subsidies to state enterprises, reformed the price system, and opened the country to foreign direct investment (FDI). In a 2022 report, the Organisation for Economic Cooperation and Development (OECD) noted that the number of state-owned enterprises (SOEs) has decreased significantly, but SOEs still account for roughly 30% of the GDP. The U.S. government also actively monitors Vietnam’s currency practices, which were subject to U.S. Congressional Research Service https://crsreports.congress.gov IN12326 CRS INSIGHT Prepared for Members and Committees of Congress Congressional Research Service 2 investigations before the countries reached a bilateral agreement in July 2021. Vietnamese authorities limit daily fluctuations in the Vietnamese dong to 5% against the dollar, adjusted from 3% in 2022. Nonmarket Economy Status under U.S. Trade Laws The Commerce Department has the authority to designate countries as NMEs for the purpose of U.S. AD/CVD laws. An NME is a country that Commerce determines “does not operate on market principles of cost or pricing structures, so that sales of merchandise in such country do not reflect the fair value of merchandise.” In designating a country as an NME, Commerce considers the extent to which (1) the country’s currency is convertible; (2) its wage rates result from free bargaining between labor and management; (3) joint ventures or other foreign investment are permitted; (4) the government owns or controls the means of production; and (5) the government controls the allocation of resources and price and output decisions. Commerce may also consider other factors that it considers appropriate. An NME designation remains in effect until revoked by Commerce. There are currently 12 countries, including Vietnam, designated as NMEs. While considering whether an NME is engaged in dumping, Commerce uses factors of production from a comparable market economy country to calculate the normal value for merchandise alleged to have been dumped in the United States. An affirmative NME designation may lead to higher tariffs. These methods have raised concerns at the WTO that a subsidy may be offset twice when both antidumping and countervailing duties are applied to NME products. After Commerce published the notice initiating the review of Vietnam’s NME status, interested parties submitted comments to Regulations.gov and Commerce held a public hearing on May 8, 2024. Some U.S. manufacturing groups urged Commerce to maintain Vietnam’s NME status, arguing that Vietnam has not met the statutory conditions (above) to lift the NME designation. Others promoted removal of the designation, citing the country’s overall reforms, including openness to foreign investment, free bargaining of wages, and currency convertibility. Considerations for Congress In conducting oversight, Congress may consider the potential implications of an NME designation on U.S.-Vietnam trade, and overall bilateral relations. According to press accounts, Vietnamese government officials have expressed regret over Commerce’s decision to sustain Vietnam’s NME status and some analysts have stated that the decision might hinder bilateral relations. Congress may consider the extent to which Vietnam’s economic reforms might be sufficient to satisfy the statutory conditions should Vietnam submit future requests for review. During the review period, some Members of Congress argued that Vietnam does not meet the conditions, including the prominence of state-owned enterprises (SOE) in Vietnam’s economy, “severe deficiencies” in Vietnam’s labor laws, and potential harm to U.S. industries and workers. The Commerce Department stated in its decision that despite Vietnam’s market-oriented reforms, the government “remains entrenched in many aspects of the Vietnamese economy,” including foreign exchange intervention, control of labor unions, and “significant state ownership and control over the means of production.” Other options for Congress might include linking the decision to other policy areas, such as Vietnam’s human rights records, which some observers say is poor and worsening, and/or foreign assistance. The Vietnam Human Rights Act (H.R. 3172), which would prohibit U.S. assistance to Vietnam's Ministry of Public Security and require the executive branch to put more emphasis on ensuring internet freedom in Vietnam, could be a potential vehicle for Members of Congress who would like to maintain the NME status irrespective of economic policy changes.
USER:
Summarize this text about Vietnam's nonmarket economy status.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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| 12
| 8
| 982
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[question] [user request] ===================== [text] [context document] ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
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What did researchers find to be the cause of the anti-PD-1 therapy side effects? How did testing mice help in finding the cause? Will these findings help prevent the side effects for cancer patients?
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Treatments that enhance the defenses the body already has in place have greatly advanced the fight against cancer. Such a boost is the mechanism underlying an established therapy used for solid cancers, such as melanomas and small-cell lung cancers, and trials are underway for other cancer types. The treatment blocks a protein on immune cells that can lead to cell death, which keeps the immune system in a hyperalert state that makes it better at destroying cancer cells. However, oncologists such as Robert Zeiser at the University of Freiburg in Germany began to see that some patients on this type of cancer immunotherapy experienced neurological side effects such as memory loss, which in a few cases were serious enough to lead to encephalitis or coma. In a recent study in Science Translational Medicine, Zeiser and his postdoctoral researcher Janaki Manoja Vinnakota, along with their colleagues, untangled the reasons why these side effects occur. The protein targeted by this cancer immunotherapy is called PD-1, short for programmed cell death protein-1. The therapy uses an antibody to block this protein’s receptor on T cells. Cancer cells produce markers that turn off immune cells and fool them into seeing the cancer as normal cells. The therapy keeps immune cells active so they don’t recognize these repressive markers and will kill the cancer cells. But keeping the immune system in this hyperactivated state can have negative consequences, because another type of immune cell that resides in the nervous system, called microglia, also have the same receptor. These cells have close interactions with neurons, and help control many brain activities. “Once microglia are active, they also meddle with the normal cognitive processes, which might cause neurotoxicity,” Vinnakota explains. J. M. Vinnakota, et al., 2024, Science Translational Medicine 16:eadj9672 (all 4 images) To see if microglia could be behind the neurological side effects, the team first treated a cell culture of microglia with two different clinically approved anti-PD-1 antibodies. They found an increased level of a marker associated with microglia activity. They next treated healthy mice with the anti-PD-1 therapy. Tissue samples from these mice likewise showed that microglia were activated after the therapy. “Microglia, under normal conditions, are highly branched; they tend to look around for any potential threat,” Vinnakota explains. “If there is one, they retract their processes and attain an amoeboid phenotype.” When the team then tested mice that had a knocked-out immune system, they didn’t see as much activity. One curiosity the researchers had about their findings was that the blood–brain barrier should keep the anti-PD-1 therapy out of the nervous system. But Vinnakota and her colleagues found that the therapy actually causes inflammatory damage to the barrier that allows it to pass through. The team next treated mice with tumors and found that they showed cognitive deficits similar to those seen in human patients. The mice did not favor new objects over ones that they had already been extensively exposed to, indicating that they did not have memory of objects that should have been familiar. The markers produced when the microglia are activated seem to cause the cognitive damage. These markers include a type of enzyme called a tyrosine kinase that acts as a sort of protein switch—in this case, one called Syk. Kinases are important for the function of the immune system, but they also promote inflammation. “Increased levels of Syk activation are somehow damaging the neurons in the vicinity, which is why we see cognitive deficits in the treated mice,” Vinnakota said. The good news, however, is that there are already commercially available inhibitors that work on Syk. When the team treated the cognitively impaired mice with these inhibitors, they were able to reverse the decline. Although the studies so far have been limited to mice, Vinnakota thinks that, following further research, there could one day be the option of blocking Syk in patients receiving anti-PD-1 therapy who start to show indications of cognitive decline. “The people who get cognitive decline are suffering a lot, so they have to stop this anti-PD-1 therapy, and that increases the relapse of the tumor, and then they have to look for some other treatment options,” she says. “It’s really bad for the ones who are suffering.” Optimally, Vinnakota hopes, researchers will develop early-diagnostic tools that can spot patients who are likely to have side effects from anti-PD-1 therapy, so they can be preemptively treated with blockers for Syk. “That would be really helpful to treat them better,” she says, “so that we can still have the anti-PD-1 therapy ongoing, because it is an effective therapy for many of the patients.”
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[question] What did researchers find to be the cause of the anti-PD-1 therapy side effects? How did testing mice help in finding the cause? Will these findings help prevent the side effects for cancer patients? ===================== [text] Treatments that enhance the defenses the body already has in place have greatly advanced the fight against cancer. Such a boost is the mechanism underlying an established therapy used for solid cancers, such as melanomas and small-cell lung cancers, and trials are underway for other cancer types. The treatment blocks a protein on immune cells that can lead to cell death, which keeps the immune system in a hyperalert state that makes it better at destroying cancer cells. However, oncologists such as Robert Zeiser at the University of Freiburg in Germany began to see that some patients on this type of cancer immunotherapy experienced neurological side effects such as memory loss, which in a few cases were serious enough to lead to encephalitis or coma. In a recent study in Science Translational Medicine, Zeiser and his postdoctoral researcher Janaki Manoja Vinnakota, along with their colleagues, untangled the reasons why these side effects occur. The protein targeted by this cancer immunotherapy is called PD-1, short for programmed cell death protein-1. The therapy uses an antibody to block this protein’s receptor on T cells. Cancer cells produce markers that turn off immune cells and fool them into seeing the cancer as normal cells. The therapy keeps immune cells active so they don’t recognize these repressive markers and will kill the cancer cells. But keeping the immune system in this hyperactivated state can have negative consequences, because another type of immune cell that resides in the nervous system, called microglia, also have the same receptor. These cells have close interactions with neurons, and help control many brain activities. “Once microglia are active, they also meddle with the normal cognitive processes, which might cause neurotoxicity,” Vinnakota explains. J. M. Vinnakota, et al., 2024, Science Translational Medicine 16:eadj9672 (all 4 images) To see if microglia could be behind the neurological side effects, the team first treated a cell culture of microglia with two different clinically approved anti-PD-1 antibodies. They found an increased level of a marker associated with microglia activity. They next treated healthy mice with the anti-PD-1 therapy. Tissue samples from these mice likewise showed that microglia were activated after the therapy. “Microglia, under normal conditions, are highly branched; they tend to look around for any potential threat,” Vinnakota explains. “If there is one, they retract their processes and attain an amoeboid phenotype.” When the team then tested mice that had a knocked-out immune system, they didn’t see as much activity. One curiosity the researchers had about their findings was that the blood–brain barrier should keep the anti-PD-1 therapy out of the nervous system. But Vinnakota and her colleagues found that the therapy actually causes inflammatory damage to the barrier that allows it to pass through. The team next treated mice with tumors and found that they showed cognitive deficits similar to those seen in human patients. The mice did not favor new objects over ones that they had already been extensively exposed to, indicating that they did not have memory of objects that should have been familiar. The markers produced when the microglia are activated seem to cause the cognitive damage. These markers include a type of enzyme called a tyrosine kinase that acts as a sort of protein switch—in this case, one called Syk. Kinases are important for the function of the immune system, but they also promote inflammation. “Increased levels of Syk activation are somehow damaging the neurons in the vicinity, which is why we see cognitive deficits in the treated mice,” Vinnakota said. The good news, however, is that there are already commercially available inhibitors that work on Syk. When the team treated the cognitively impaired mice with these inhibitors, they were able to reverse the decline. Although the studies so far have been limited to mice, Vinnakota thinks that, following further research, there could one day be the option of blocking Syk in patients receiving anti-PD-1 therapy who start to show indications of cognitive decline. “The people who get cognitive decline are suffering a lot, so they have to stop this anti-PD-1 therapy, and that increases the relapse of the tumor, and then they have to look for some other treatment options,” she says. “It’s really bad for the ones who are suffering.” Optimally, Vinnakota hopes, researchers will develop early-diagnostic tools that can spot patients who are likely to have side effects from anti-PD-1 therapy, so they can be preemptively treated with blockers for Syk. “That would be really helpful to treat them better,” she says, “so that we can still have the anti-PD-1 therapy ongoing, because it is an effective therapy for many of the patients.” https://www.americanscientist.org/article/treating-the-side-effects ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
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[question] [user request] ===================== [text] [context document] ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
EVIDENCE:
Treatments that enhance the defenses the body already has in place have greatly advanced the fight against cancer. Such a boost is the mechanism underlying an established therapy used for solid cancers, such as melanomas and small-cell lung cancers, and trials are underway for other cancer types. The treatment blocks a protein on immune cells that can lead to cell death, which keeps the immune system in a hyperalert state that makes it better at destroying cancer cells. However, oncologists such as Robert Zeiser at the University of Freiburg in Germany began to see that some patients on this type of cancer immunotherapy experienced neurological side effects such as memory loss, which in a few cases were serious enough to lead to encephalitis or coma. In a recent study in Science Translational Medicine, Zeiser and his postdoctoral researcher Janaki Manoja Vinnakota, along with their colleagues, untangled the reasons why these side effects occur. The protein targeted by this cancer immunotherapy is called PD-1, short for programmed cell death protein-1. The therapy uses an antibody to block this protein’s receptor on T cells. Cancer cells produce markers that turn off immune cells and fool them into seeing the cancer as normal cells. The therapy keeps immune cells active so they don’t recognize these repressive markers and will kill the cancer cells. But keeping the immune system in this hyperactivated state can have negative consequences, because another type of immune cell that resides in the nervous system, called microglia, also have the same receptor. These cells have close interactions with neurons, and help control many brain activities. “Once microglia are active, they also meddle with the normal cognitive processes, which might cause neurotoxicity,” Vinnakota explains. J. M. Vinnakota, et al., 2024, Science Translational Medicine 16:eadj9672 (all 4 images) To see if microglia could be behind the neurological side effects, the team first treated a cell culture of microglia with two different clinically approved anti-PD-1 antibodies. They found an increased level of a marker associated with microglia activity. They next treated healthy mice with the anti-PD-1 therapy. Tissue samples from these mice likewise showed that microglia were activated after the therapy. “Microglia, under normal conditions, are highly branched; they tend to look around for any potential threat,” Vinnakota explains. “If there is one, they retract their processes and attain an amoeboid phenotype.” When the team then tested mice that had a knocked-out immune system, they didn’t see as much activity. One curiosity the researchers had about their findings was that the blood–brain barrier should keep the anti-PD-1 therapy out of the nervous system. But Vinnakota and her colleagues found that the therapy actually causes inflammatory damage to the barrier that allows it to pass through. The team next treated mice with tumors and found that they showed cognitive deficits similar to those seen in human patients. The mice did not favor new objects over ones that they had already been extensively exposed to, indicating that they did not have memory of objects that should have been familiar. The markers produced when the microglia are activated seem to cause the cognitive damage. These markers include a type of enzyme called a tyrosine kinase that acts as a sort of protein switch—in this case, one called Syk. Kinases are important for the function of the immune system, but they also promote inflammation. “Increased levels of Syk activation are somehow damaging the neurons in the vicinity, which is why we see cognitive deficits in the treated mice,” Vinnakota said. The good news, however, is that there are already commercially available inhibitors that work on Syk. When the team treated the cognitively impaired mice with these inhibitors, they were able to reverse the decline. Although the studies so far have been limited to mice, Vinnakota thinks that, following further research, there could one day be the option of blocking Syk in patients receiving anti-PD-1 therapy who start to show indications of cognitive decline. “The people who get cognitive decline are suffering a lot, so they have to stop this anti-PD-1 therapy, and that increases the relapse of the tumor, and then they have to look for some other treatment options,” she says. “It’s really bad for the ones who are suffering.” Optimally, Vinnakota hopes, researchers will develop early-diagnostic tools that can spot patients who are likely to have side effects from anti-PD-1 therapy, so they can be preemptively treated with blockers for Syk. “That would be really helpful to treat them better,” she says, “so that we can still have the anti-PD-1 therapy ongoing, because it is an effective therapy for many of the patients.”
USER:
What did researchers find to be the cause of the anti-PD-1 therapy side effects? How did testing mice help in finding the cause? Will these findings help prevent the side effects for cancer patients?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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The user will provide a question. Answer based exclusively on the context block. Do not use any outside knowledge or any prior knowledge.
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What could cause the flavor of my espresso to be kind of charred?
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Thank you for choosing the Capresso Steam PRO Espresso & Cappuccino Machine. It is the perfect starter machine for espressos, cappuccinos and lattes. With a bit of practice you will be able to produce two to four cappuccinos or lattes at a time. Please read all of the instructions in this booklet before operating your new machine. Understanding and complying with these instructions is essential to ensure that the machine is utilized without risk and to ensure safety during operation and maintenance. 2. HOW TO REACH JURA-CAPRESSO Should you require further information or if particular problems occur that are not covered in this manual, please • CALL our toll free HELP LINE: 1-800-767-3554 Monday -Thursday 8AM to 9PM, Friday 8AM to 8PM and Saturday 9AM to 5PM Eastern Standard Time. Feel free to call at any time. If you are connected to our voicemail, PLEASE DO NOT HANG UP. Leave your name, telephone number and we will return your call. Please also leave the model number of your Capresso product, in this case it is #304. • FAX us at 1-201-767-9684 • E-MAIL us at [email protected] • VISIT our website at www.capresso.com • WRITE to Jura Capresso, Inc., Customer Service, P.O. Box 775, Closter, NJ 07624 3. DE-PRESSURIZING CAUTION! Never open the boiler cap and never remove the filter holder as long as there is pressure in the boiler container. In order to check if the machine is still under pressure follow these steps: 1. The machine is on, the filter holder is inserted and the boiler cap is closed. 2. Place an empty cup under the frother nozzle (fig. 10). 3. Move the coffee/steam selector to the steam symbol (fig. 8). 4. Open the steam knob (fig. 9). Wait until all steam is released. 6 5. Turn the power switch off (fig. 6). 6. Open and remove the boiler cap (see chapter 5) 7. It is now safe to remove the filter holder. 8. Move the coffee/steam selector to the cup symbol (fig. 8). Caution: Never try to remove the filter holder with the carafe in place. Pressure could force the filter holder down, smashing the carafe and causing severe injuries. Always remove the carafe first. Caution: Never leave machine unattended when it is turned on (red light in the power switch is illuminated). Always turn the machine off when finished. 5. SAFETY BOILER CAP To open the boiler cap: turn the cap a quarter turn counter clockwise. Slightly lift the cap and turn another quarter turn counter clockwise and lift the cap. To close the boiler cap: Place the cap onto the boiler neck and turn clockwise until cap sinks into the groove. Continue turning the cap until firmly locked. 6. HELPFUL HINTS • Espresso Drink: An espresso is a far richer drink with a more intense taste than regular brewed drip coffee. An espresso is normally 1 1/2 to 2 oz. of strong coffee. Espresso should be served immediately after brewing. If the espresso is too strong, you can add hot water. Add sugar to taste. • Preparing espresso is different than preparing regular drip coffee. The machine works under pressure, bringing the water to a boil and then forcing it through the ground coffee in a short period of time. • Important: The water in the boiler of the machine will get hotter during the brewing process. Towards the end of the brewing process the water will be so hot that it would burn your espresso. Therefore you never want to process all the water through the coffee as this will result in a burnt taste. • Which Coffee? Any coffee labeled "espresso" is suitable for your machine. Any coffee with at least 80% Arabica beans is ideal for espresso preparation. Check with your local coffee store • Which Grind? Steam boiler espresso machines, do not require a fine espresso grind. For maximum flavor and aroma we recommend a medium espresso grind or a fine drip grind. If you grind your own coffee we recommend using a burr or disk/burr grinder. Small blade grinders can create "coffee dust". Coffee dust can dramatically slow down the water flow during brewing resulting in bitter and overheated coffee taste. • Cappuccino: 1 1/2 to 2 oz. of espresso coffee with 3 to 4 oz. of steamed and frothed milk on top. Sprinkle chocolate shavings or cinnamon on top of 7 the milk froth. For a stronger taste increase the amount of coffee. For a milder taste increase the amount of milk. • Latte: 1 1/2 to 2 oz. of espresso coffee with 3 to 4 oz. of steamed milk (very little or no milk froth). • Frothing: Foamy layer of milk froth on top of hot milk. • Which kind of milk? Skim milk and 1% milk will produce more milk froth than 2% or regular milk. • Markings on Glass Carafe: The markings on the glass carafe help you in the preparation of brewing and frothing. Upper rim of metal band: Maximum capacity of boiler (approx. 10 oz.). For best results always fill the boiler with 10 oz. of fresh cold water. 4 cup marking: Maximum amount of espresso you should brew (approx. 8 oz.). If you brew more than 8 oz. the coffee will taste burnt. Depending on the coffee roast you might even want to brew a little less to avoid a bitter aroma. 2 cup marking: (approx. 4 oz.), guide line for a double shot of espresso. Bottom line marking: Once the coffee has reached this level there is enough pressure in the boiler for steaming and frothing. 7. PREPARING ESPRESSO Caution: Do not leave the machine alone during brewing. Keep children away during brewing. 1. Make sure the machine is plugged in and turned off. The glass carafe is removed from the drip tray. Important: The steam knob (fig. 9) must be in the closed position. The coffee/steam selector points to the cup symbol in front of the machine (stronger coffee). Moving the coffee/steam selector to the right, accelerates brewing and decreases coffee strength. 2. Fill the basket with ground coffee, using the measuring scoop (fig.1). The basket is marked on the inside indicating "2 cups" and "4 cups". Never overfill the basket. Clear any excess coffee from the rim of the filter holder. Important: it is not necessary to tamp (press down) the coffee. 3. Insert the basket into the filter holder (fig. 2), then insert the filter holder into the machine (fig. 3). 4. Turn filter holder to the right until it reaches the "locked" position (fig.1,8). 5. Fill the glass carafe to the upper rim of the metal band (approx. 10 oz.) with fresh, cold water. 6. Unscrew the boiler cap (see chapter 5). Using the glass carafe, fill the boiler with water (fig. 4) and close the boiler cap securely (see chapter 5). 7. Place the carafe lid on the carafe so that the opening on the lid points towards the pouring spout of the carafe (fig. 7). Place the carafe on the drip tray as shown in fig. 1. 8. Turn the power switch on (fig. 6). The power switch illuminates and the machine starts heating the water. 9. After approx. 2 1/2 to 3 minutes hot water will start forcing its way through the filter holder into the carafe. When you have enough espresso in the glass carafe turn the power switch off and turn the coffee/steam selector to the steam symbol on the left to stop the flow. Remove the carafe and serve. Add a bit of sugar and enjoy. Tip: To avoid a "burnt taste" never process all the water through the coffee. Once the brewing noise increases and steam develops, stop the brewing. 8 10. Important: Do not open the boiler cap. Do not remove the filter holder. First depressurize the machine. See chapter 3. 11. After de-pressurizing remove the filter holder by turning it to the left to the "open lock" symbol. Then push the thumb-guard of filter holder over the hot rim of the basket. Dump the used coffee (fig. 13) and rinse the basket and the filter holder under running water. Return the coffee/steam selector to the cup symbol.
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The user will provide a question. Answer based exclusively on the context block. Do not use any outside knowledge or any prior knowledge. Thank you for choosing the Capresso Steam PRO Espresso & Cappuccino Machine. It is the perfect starter machine for espressos, cappuccinos and lattes. With a bit of practice you will be able to produce two to four cappuccinos or lattes at a time. Please read all of the instructions in this booklet before operating your new machine. Understanding and complying with these instructions is essential to ensure that the machine is utilized without risk and to ensure safety during operation and maintenance. 2. HOW TO REACH JURA-CAPRESSO Should you require further information or if particular problems occur that are not covered in this manual, please • CALL our toll free HELP LINE: 1-800-767-3554 Monday -Thursday 8AM to 9PM, Friday 8AM to 8PM and Saturday 9AM to 5PM Eastern Standard Time. Feel free to call at any time. If you are connected to our voicemail, PLEASE DO NOT HANG UP. Leave your name, telephone number and we will return your call. Please also leave the model number of your Capresso product, in this case it is #304. • FAX us at 1-201-767-9684 • E-MAIL us at [email protected] • VISIT our website at www.capresso.com • WRITE to Jura Capresso, Inc., Customer Service, P.O. Box 775, Closter, NJ 07624 3. DE-PRESSURIZING CAUTION! Never open the boiler cap and never remove the filter holder as long as there is pressure in the boiler container. In order to check if the machine is still under pressure follow these steps: 1. The machine is on, the filter holder is inserted and the boiler cap is closed. 2. Place an empty cup under the frother nozzle (fig. 10). 3. Move the coffee/steam selector to the steam symbol (fig. 8). 4. Open the steam knob (fig. 9). Wait until all steam is released. 6 5. Turn the power switch off (fig. 6). 6. Open and remove the boiler cap (see chapter 5) 7. It is now safe to remove the filter holder. 8. Move the coffee/steam selector to the cup symbol (fig. 8). Caution: Never try to remove the filter holder with the carafe in place. Pressure could force the filter holder down, smashing the carafe and causing severe injuries. Always remove the carafe first. Caution: Never leave machine unattended when it is turned on (red light in the power switch is illuminated). Always turn the machine off when finished. 5. SAFETY BOILER CAP To open the boiler cap: turn the cap a quarter turn counter clockwise. Slightly lift the cap and turn another quarter turn counter clockwise and lift the cap. To close the boiler cap: Place the cap onto the boiler neck and turn clockwise until cap sinks into the groove. Continue turning the cap until firmly locked. 6. HELPFUL HINTS • Espresso Drink: An espresso is a far richer drink with a more intense taste than regular brewed drip coffee. An espresso is normally 1 1/2 to 2 oz. of strong coffee. Espresso should be served immediately after brewing. If the espresso is too strong, you can add hot water. Add sugar to taste. • Preparing espresso is different than preparing regular drip coffee. The machine works under pressure, bringing the water to a boil and then forcing it through the ground coffee in a short period of time. • Important: The water in the boiler of the machine will get hotter during the brewing process. Towards the end of the brewing process the water will be so hot that it would burn your espresso. Therefore you never want to process all the water through the coffee as this will result in a burnt taste. • Which Coffee? Any coffee labeled "espresso" is suitable for your machine. Any coffee with at least 80% Arabica beans is ideal for espresso preparation. Check with your local coffee store • Which Grind? Steam boiler espresso machines, do not require a fine espresso grind. For maximum flavor and aroma we recommend a medium espresso grind or a fine drip grind. If you grind your own coffee we recommend using a burr or disk/burr grinder. Small blade grinders can create "coffee dust". Coffee dust can dramatically slow down the water flow during brewing resulting in bitter and overheated coffee taste. • Cappuccino: 1 1/2 to 2 oz. of espresso coffee with 3 to 4 oz. of steamed and frothed milk on top. Sprinkle chocolate shavings or cinnamon on top of 7 the milk froth. For a stronger taste increase the amount of coffee. For a milder taste increase the amount of milk. • Latte: 1 1/2 to 2 oz. of espresso coffee with 3 to 4 oz. of steamed milk (very little or no milk froth). • Frothing: Foamy layer of milk froth on top of hot milk. • Which kind of milk? Skim milk and 1% milk will produce more milk froth than 2% or regular milk. • Markings on Glass Carafe: The markings on the glass carafe help you in the preparation of brewing and frothing. Upper rim of metal band: Maximum capacity of boiler (approx. 10 oz.). For best results always fill the boiler with 10 oz. of fresh cold water. 4 cup marking: Maximum amount of espresso you should brew (approx. 8 oz.). If you brew more than 8 oz. the coffee will taste burnt. Depending on the coffee roast you might even want to brew a little less to avoid a bitter aroma. 2 cup marking: (approx. 4 oz.), guide line for a double shot of espresso. Bottom line marking: Once the coffee has reached this level there is enough pressure in the boiler for steaming and frothing. 7. PREPARING ESPRESSO Caution: Do not leave the machine alone during brewing. Keep children away during brewing. 1. Make sure the machine is plugged in and turned off. The glass carafe is removed from the drip tray. Important: The steam knob (fig. 9) must be in the closed position. The coffee/steam selector points to the cup symbol in front of the machine (stronger coffee). Moving the coffee/steam selector to the right, accelerates brewing and decreases coffee strength. 2. Fill the basket with ground coffee, using the measuring scoop (fig.1). The basket is marked on the inside indicating "2 cups" and "4 cups". Never overfill the basket. Clear any excess coffee from the rim of the filter holder. Important: it is not necessary to tamp (press down) the coffee. 3. Insert the basket into the filter holder (fig. 2), then insert the filter holder into the machine (fig. 3). 4. Turn filter holder to the right until it reaches the "locked" position (fig.1,8). 5. Fill the glass carafe to the upper rim of the metal band (approx. 10 oz.) with fresh, cold water. 6. Unscrew the boiler cap (see chapter 5). Using the glass carafe, fill the boiler with water (fig. 4) and close the boiler cap securely (see chapter 5). 7. Place the carafe lid on the carafe so that the opening on the lid points towards the pouring spout of the carafe (fig. 7). Place the carafe on the drip tray as shown in fig. 1. 8. Turn the power switch on (fig. 6). The power switch illuminates and the machine starts heating the water. 9. After approx. 2 1/2 to 3 minutes hot water will start forcing its way through the filter holder into the carafe. When you have enough espresso in the glass carafe turn the power switch off and turn the coffee/steam selector to the steam symbol on the left to stop the flow. Remove the carafe and serve. Add a bit of sugar and enjoy. Tip: To avoid a "burnt taste" never process all the water through the coffee. Once the brewing noise increases and steam develops, stop the brewing. 8 10. Important: Do not open the boiler cap. Do not remove the filter holder. First depressurize the machine. See chapter 3. 11. After de-pressurizing remove the filter holder by turning it to the left to the "open lock" symbol. Then push the thumb-guard of filter holder over the hot rim of the basket. Dump the used coffee (fig. 13) and rinse the basket and the filter holder under running water. Return the coffee/steam selector to the cup symbol. What could cause the flavor of my espresso to be kind of charred?
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The user will provide a question. Answer based exclusively on the context block. Do not use any outside knowledge or any prior knowledge.
EVIDENCE:
Thank you for choosing the Capresso Steam PRO Espresso & Cappuccino Machine. It is the perfect starter machine for espressos, cappuccinos and lattes. With a bit of practice you will be able to produce two to four cappuccinos or lattes at a time. Please read all of the instructions in this booklet before operating your new machine. Understanding and complying with these instructions is essential to ensure that the machine is utilized without risk and to ensure safety during operation and maintenance. 2. HOW TO REACH JURA-CAPRESSO Should you require further information or if particular problems occur that are not covered in this manual, please • CALL our toll free HELP LINE: 1-800-767-3554 Monday -Thursday 8AM to 9PM, Friday 8AM to 8PM and Saturday 9AM to 5PM Eastern Standard Time. Feel free to call at any time. If you are connected to our voicemail, PLEASE DO NOT HANG UP. Leave your name, telephone number and we will return your call. Please also leave the model number of your Capresso product, in this case it is #304. • FAX us at 1-201-767-9684 • E-MAIL us at [email protected] • VISIT our website at www.capresso.com • WRITE to Jura Capresso, Inc., Customer Service, P.O. Box 775, Closter, NJ 07624 3. DE-PRESSURIZING CAUTION! Never open the boiler cap and never remove the filter holder as long as there is pressure in the boiler container. In order to check if the machine is still under pressure follow these steps: 1. The machine is on, the filter holder is inserted and the boiler cap is closed. 2. Place an empty cup under the frother nozzle (fig. 10). 3. Move the coffee/steam selector to the steam symbol (fig. 8). 4. Open the steam knob (fig. 9). Wait until all steam is released. 6 5. Turn the power switch off (fig. 6). 6. Open and remove the boiler cap (see chapter 5) 7. It is now safe to remove the filter holder. 8. Move the coffee/steam selector to the cup symbol (fig. 8). Caution: Never try to remove the filter holder with the carafe in place. Pressure could force the filter holder down, smashing the carafe and causing severe injuries. Always remove the carafe first. Caution: Never leave machine unattended when it is turned on (red light in the power switch is illuminated). Always turn the machine off when finished. 5. SAFETY BOILER CAP To open the boiler cap: turn the cap a quarter turn counter clockwise. Slightly lift the cap and turn another quarter turn counter clockwise and lift the cap. To close the boiler cap: Place the cap onto the boiler neck and turn clockwise until cap sinks into the groove. Continue turning the cap until firmly locked. 6. HELPFUL HINTS • Espresso Drink: An espresso is a far richer drink with a more intense taste than regular brewed drip coffee. An espresso is normally 1 1/2 to 2 oz. of strong coffee. Espresso should be served immediately after brewing. If the espresso is too strong, you can add hot water. Add sugar to taste. • Preparing espresso is different than preparing regular drip coffee. The machine works under pressure, bringing the water to a boil and then forcing it through the ground coffee in a short period of time. • Important: The water in the boiler of the machine will get hotter during the brewing process. Towards the end of the brewing process the water will be so hot that it would burn your espresso. Therefore you never want to process all the water through the coffee as this will result in a burnt taste. • Which Coffee? Any coffee labeled "espresso" is suitable for your machine. Any coffee with at least 80% Arabica beans is ideal for espresso preparation. Check with your local coffee store • Which Grind? Steam boiler espresso machines, do not require a fine espresso grind. For maximum flavor and aroma we recommend a medium espresso grind or a fine drip grind. If you grind your own coffee we recommend using a burr or disk/burr grinder. Small blade grinders can create "coffee dust". Coffee dust can dramatically slow down the water flow during brewing resulting in bitter and overheated coffee taste. • Cappuccino: 1 1/2 to 2 oz. of espresso coffee with 3 to 4 oz. of steamed and frothed milk on top. Sprinkle chocolate shavings or cinnamon on top of 7 the milk froth. For a stronger taste increase the amount of coffee. For a milder taste increase the amount of milk. • Latte: 1 1/2 to 2 oz. of espresso coffee with 3 to 4 oz. of steamed milk (very little or no milk froth). • Frothing: Foamy layer of milk froth on top of hot milk. • Which kind of milk? Skim milk and 1% milk will produce more milk froth than 2% or regular milk. • Markings on Glass Carafe: The markings on the glass carafe help you in the preparation of brewing and frothing. Upper rim of metal band: Maximum capacity of boiler (approx. 10 oz.). For best results always fill the boiler with 10 oz. of fresh cold water. 4 cup marking: Maximum amount of espresso you should brew (approx. 8 oz.). If you brew more than 8 oz. the coffee will taste burnt. Depending on the coffee roast you might even want to brew a little less to avoid a bitter aroma. 2 cup marking: (approx. 4 oz.), guide line for a double shot of espresso. Bottom line marking: Once the coffee has reached this level there is enough pressure in the boiler for steaming and frothing. 7. PREPARING ESPRESSO Caution: Do not leave the machine alone during brewing. Keep children away during brewing. 1. Make sure the machine is plugged in and turned off. The glass carafe is removed from the drip tray. Important: The steam knob (fig. 9) must be in the closed position. The coffee/steam selector points to the cup symbol in front of the machine (stronger coffee). Moving the coffee/steam selector to the right, accelerates brewing and decreases coffee strength. 2. Fill the basket with ground coffee, using the measuring scoop (fig.1). The basket is marked on the inside indicating "2 cups" and "4 cups". Never overfill the basket. Clear any excess coffee from the rim of the filter holder. Important: it is not necessary to tamp (press down) the coffee. 3. Insert the basket into the filter holder (fig. 2), then insert the filter holder into the machine (fig. 3). 4. Turn filter holder to the right until it reaches the "locked" position (fig.1,8). 5. Fill the glass carafe to the upper rim of the metal band (approx. 10 oz.) with fresh, cold water. 6. Unscrew the boiler cap (see chapter 5). Using the glass carafe, fill the boiler with water (fig. 4) and close the boiler cap securely (see chapter 5). 7. Place the carafe lid on the carafe so that the opening on the lid points towards the pouring spout of the carafe (fig. 7). Place the carafe on the drip tray as shown in fig. 1. 8. Turn the power switch on (fig. 6). The power switch illuminates and the machine starts heating the water. 9. After approx. 2 1/2 to 3 minutes hot water will start forcing its way through the filter holder into the carafe. When you have enough espresso in the glass carafe turn the power switch off and turn the coffee/steam selector to the steam symbol on the left to stop the flow. Remove the carafe and serve. Add a bit of sugar and enjoy. Tip: To avoid a "burnt taste" never process all the water through the coffee. Once the brewing noise increases and steam develops, stop the brewing. 8 10. Important: Do not open the boiler cap. Do not remove the filter holder. First depressurize the machine. See chapter 3. 11. After de-pressurizing remove the filter holder by turning it to the left to the "open lock" symbol. Then push the thumb-guard of filter holder over the hot rim of the basket. Dump the used coffee (fig. 13) and rinse the basket and the filter holder under running water. Return the coffee/steam selector to the cup symbol.
USER:
What could cause the flavor of my espresso to be kind of charred?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 23
| 13
| 1,367
| null | 486
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Write your response in a table containing bullet points of information. Ensure to answer the question using only the information provided in the context block. If it is not possible to fully answer the question with the text provided, say, “I’m sorry, I cannot answer that question due to lack of context”.
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Summarise and simplify how a hash works and explain how this is different from a nonce, each in two to five sentences.
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Cryptocurrency Mining There are three primary approaches to gaining ownership of Bitcoin: purchase Bitcoin directly by exchanging conventional money and a paying an exchange fee; earn Bitcoin in return for a product or service; or create Bitcoin through mining. 5 Bitcoin and other cryptocurrencies each implement their own blockchain: mining is the creation and publication of a new block in a blockchain.6 Early cryptocurrency platforms, like Bitcoin, required the use of mining to validate transactions. In blockchain platforms generally, miners—those seeking to add a block to a blockchain—are incentivized to improve their value in that blockchain through either a monetary, reputational, or stake award, for example. New blocks may be added to a blockchain through a variety of methods. For Bitcoin, new blocks are added to the blockchain through proof-of-work (PoW). Under PoW, miners are presented a difficult computational problem, or puzzle. PoW identifies a numeric value (called a nonce), which is used to generate an authenticator (hash value). Hash values are used to ensure the integrity of data, in this case, that a block of data in the blockchain has not been modified. Hashes are determined by submitting the data through an algorithm that will output a string of characters. By inserting the nonce into the algorithm, miners seek to change the hashvalue. The problem Bitcoin miners are trying to solve is the creation of a hash value for a given block which begins with a certain number of zeros. They add data to the block through changing the nonce in order to change the hash value and discover the solution. Identifying these valid nonces and hashes is computationally intensive, and the essence of mining.7 The security properties of hash algorithms are such that a miner tests nonces until a valid hash is found for a block.
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Summarise and simplify how a hash works and explain how this is different from a nonce, each in two to five sentences. Write your response in a table containing bullet points of information. Ensure to answer the question using only the information provided in the context block. If it is not possible to fully answer the question with the text provided, say, “I’m sorry, I cannot answer that question due to lack of context”. Cryptocurrency Mining There are three primary approaches to gaining ownership of Bitcoin: purchase Bitcoin directly by exchanging conventional money and a paying an exchange fee; earn Bitcoin in return for a product or service; or create Bitcoin through mining. 5 Bitcoin and other cryptocurrencies each implement their own blockchain: mining is the creation and publication of a new block in a blockchain.6 Early cryptocurrency platforms, like Bitcoin, required the use of mining to validate transactions. In blockchain platforms generally, miners—those seeking to add a block to a blockchain—are incentivized to improve their value in that blockchain through either a monetary, reputational, or stake award, for example. New blocks may be added to a blockchain through a variety of methods. For Bitcoin, new blocks are added to the blockchain through proof-of-work (PoW). Under PoW, miners are presented a difficult computational problem, or puzzle. PoW identifies a numeric value (called a nonce), which is used to generate an authenticator (hash value). Hash values are used to ensure the integrity of data, in this case, that a block of data in the blockchain has not been modified. Hashes are determined by submitting the data through an algorithm that will output a string of characters. By inserting the nonce into the algorithm, miners seek to change the hashvalue. The problem Bitcoin miners are trying to solve is the creation of a hash value for a given block which begins with a certain number of zeros. They add data to the block through changing the nonce in order to change the hash value and discover the solution. Identifying these valid nonces and hashes is computationally intensive, and the essence of mining.7 The security properties of hash algorithms are such that a miner tests nonces until a valid hash is found for a block.
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Write your response in a table containing bullet points of information. Ensure to answer the question using only the information provided in the context block. If it is not possible to fully answer the question with the text provided, say, “I’m sorry, I cannot answer that question due to lack of context”.
EVIDENCE:
Cryptocurrency Mining There are three primary approaches to gaining ownership of Bitcoin: purchase Bitcoin directly by exchanging conventional money and a paying an exchange fee; earn Bitcoin in return for a product or service; or create Bitcoin through mining. 5 Bitcoin and other cryptocurrencies each implement their own blockchain: mining is the creation and publication of a new block in a blockchain.6 Early cryptocurrency platforms, like Bitcoin, required the use of mining to validate transactions. In blockchain platforms generally, miners—those seeking to add a block to a blockchain—are incentivized to improve their value in that blockchain through either a monetary, reputational, or stake award, for example. New blocks may be added to a blockchain through a variety of methods. For Bitcoin, new blocks are added to the blockchain through proof-of-work (PoW). Under PoW, miners are presented a difficult computational problem, or puzzle. PoW identifies a numeric value (called a nonce), which is used to generate an authenticator (hash value). Hash values are used to ensure the integrity of data, in this case, that a block of data in the blockchain has not been modified. Hashes are determined by submitting the data through an algorithm that will output a string of characters. By inserting the nonce into the algorithm, miners seek to change the hashvalue. The problem Bitcoin miners are trying to solve is the creation of a hash value for a given block which begins with a certain number of zeros. They add data to the block through changing the nonce in order to change the hash value and discover the solution. Identifying these valid nonces and hashes is computationally intensive, and the essence of mining.7 The security properties of hash algorithms are such that a miner tests nonces until a valid hash is found for a block.
USER:
Summarise and simplify how a hash works and explain how this is different from a nonce, each in two to five sentences.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 52
| 22
| 298
| null | 103
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Please use only the information provided in the text. If you cannot provide an answer from the text, please say, "I cannot assess due to lack of context."
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For a pregnant person suspected to have placenta accreta spectrum, what type of doctors/consultants are needed in the operating room?
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**"Caesarean Birth"** Care for women with placenta accreta spectrum in specialist centres 1.2.9 Consider an MRI scan to complement ultrasound findings when planning ongoing surgical management of placenta accreta spectrum. Discuss the following with the woman or pregnant person: • what to expect during an MRI procedure • that MRI can help clarify the degree of invasion, particularly with a posterior placenta • that current experience suggests that MRI is safe, but that there is a lack of evidence about any long-term risks to the baby. [2024] 1.2.10 Discuss birth options (for example, timing of birth, operative interventions including possibility of hysterectomy, need for blood transfusion) with a woman or pregnant person suspected to have placenta accreta spectrum. This discussion should be carried out by a senior obstetrician. [2011, amended 2024] When planning a caesarean birth for women or pregnant people suspected to have placenta accreta spectrum, the multidisciplinary team should: • agree which other healthcare professionals need to be consulted or present (for example, specialists in gynaecological surgery, interventional radiology, colorectal surgery, urology or vascular surgery, depending on the nature of the placenta accreta spectrum) and • the responsibilities of each team member. [2011, amended 2024] 1.2.12 When performing a planned caesarean birth for a woman or pregnant person suspected to have placenta accreta spectrum, ensure that: • a consultant obstetrician, a consultant gynaecologist and a consultant anaesthetist are present in the operating theatre • a paediatric or neonatal registrar or consultant is present to provide immediate care for the baby as soon as it is born • a haematology registrar or consultant is available to contact for advice • a critical care bed is available for the woman or pregnant person, and a critical care neonatal cot is available for the baby (although emergency surgery should not be delayed while waiting for a bed) • sufficient cross-matched blood and blood products are readily available (if blood transfusions are acceptable to the woman or pregnant person). See the NICE guideline on blood transfusion. [2011, amended 2024] 1.2.13 Specialist placenta accreta spectrum centres and the local maternity units they support should develop protocols covering how placenta accreta spectrum should be diagnosed, assessed and managed across their network. The protocol should include the care and management of placenta accreta spectrum identified late in pregnancy or in labour, including how specialist units can support emergency care in local maternity units. [2024] Predicting caesarean birth for cephalopelvic disproportion in labour 1.2.14 Do not use pelvimetry for decision making about mode of birth. [2004, amended 2021] 1.2.15 Do not use the following for decision making about mode of birth, as they do not accurately predict cephalopelvic disproportion: • maternal shoe size • maternal height • estimations of fetal size (ultrasound or clinical examination). [2004, amended 2021] Mother-to-child transmission of maternal infections HIV 1.2.16 Provide women with HIV information about the benefits and risks for them and their baby of the HIV treatment options and mode of birth as early as possible in their pregnancy, so that they can make an informed decision. Obtain specialist advice about HIV in pregnancy from a sexual health specialist if necessary. [2011, amended 2021] Hepatitis B virus 1.2.17 Do not offer pregnant women with hepatitis B a planned caesarean birth for this reason alone, as mother-to-baby transmission of hepatitis B can be reduced if the baby receives immunoglobulin and vaccination. [2004, amended 2021] Hepatitis C virus 1.2.18 Do not offer women who are infected with hepatitis C a planned caesarean birth for this reason alone. [2004, amended 2021] 1.2.19 Offer pregnant women who are co-infected with hepatitis C virus and HIV a planned caesarean birth to reduce mother-to-baby transmission of hepatitis C virus and HIV. [2004, amended 2021] Herpes simplex virus 1.2.20 Offer women with primary genital herpes simplex virus (HSV) infection occurring in the third trimester of pregnancy a planned caesarean birth to decrease the risk of neonatal HSV infection. [2004] 1.2.21 Do not routinely offer pregnant women with recurrent HSV infection a planned caesarean birth outside of the context of research. [2004, amended 2021] Body mass index 1.2.22 Do not use a BMI of over 50 kg/m2 alone as an indication for planned caesarean birth. [2011] Shared decision making 1.2.23 Ask for consent for caesarean birth only after providing pregnant women with evidence-based information. Ensure the woman's dignity, privacy, views and culture are respected, while taking the woman's clinical situation into account. [2004, amended 2021] 1.2.24 Advise women that they are entitled to decline the offer of treatment such as caesarean birth, even when it would benefit their or their baby's health. [2004, amended 2021] 1.2.25 When a woman decides on or declines a caesarean birth, document the factors that that are important to the woman when making her decision. [2004, amended 2021] Maternal choice for caesarean birth 1.2.26 When a woman or pregnant person with no medical indication for a caesarean birth requests a caesarean birth: • offer to discuss and explore the reasons for the request • ensure they have balanced and accurate information • offer to discuss alternative birth options (for example, place of birth, continuity of midwifery care where available, pain relief options), which may help address concerns they have about the birth • offer discussions with a consultant midwife or senior midwife, ideally in a birth options clinic or at a birth options appointment • offer discussions with a consultant or senior obstetrician and other members of the team (for example, an anaesthetist) if necessary or requested by the woman or pregnant person • record the discussions and decisions. [2011, amended 2023] 1.2.27 If a woman or pregnant person requests a caesarean birth, discuss the overall benefits and risks of caesarean birth compared with vaginal birth (see the section on planning mode of birth) and record that this discussion has taken place. [2011] 1.2.28 If a woman or pregnant person requests a caesarean birth because they have tokophobia or other severe anxiety about childbirth (for example, following abuse or a previous traumatic event), offer referral to a healthcare professional with expertise in providing perinatal mental health support to help with their anxiety. See the NICE guideline on antenatal and postnatal mental health for more detailed advice on providing mental health services during pregnancy. [2011, amended 2021] 1.2.29 Ensure healthcare professionals providing perinatal mental health support for women or pregnant people with tokophobia or other severe anxiety about childbirth are able to access the planned place of birth with the woman or pregnant person during the antenatal period, as part of the support offered to help them overcome fears and concerns about the labour and birth. [2011, amended 2023] 1.2.30 If, after an informed discussion about the options for birth (including the offer of perinatal mental health support if appropriate; see recommendation 1.2.27), the woman or pregnant person requests a caesarean birth, support their choice. [2011, amended 2023] 1.2.31 If a woman or pregnant person requests a caesarean birth this should be offered within their obstetric unit. [2011, amended 2023]
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<Instructions> ========== Please use only the information provided in the text. If you cannot provide an answer from the text, please say, "I cannot assess due to lack of context." <Query> ========== For a pregnant person suspected to have placenta accreta spectrum, what type of doctors/consultants are needed in the operating room? <Passage> ========== **"Caesarean Birth"** Care for women with placenta accreta spectrum in specialist centres 1.2.9 Consider an MRI scan to complement ultrasound findings when planning ongoing surgical management of placenta accreta spectrum. Discuss the following with the woman or pregnant person: • what to expect during an MRI procedure • that MRI can help clarify the degree of invasion, particularly with a posterior placenta • that current experience suggests that MRI is safe, but that there is a lack of evidence about any long-term risks to the baby. [2024] 1.2.10 Discuss birth options (for example, timing of birth, operative interventions including possibility of hysterectomy, need for blood transfusion) with a woman or pregnant person suspected to have placenta accreta spectrum. This discussion should be carried out by a senior obstetrician. [2011, amended 2024] When planning a caesarean birth for women or pregnant people suspected to have placenta accreta spectrum, the multidisciplinary team should: • agree which other healthcare professionals need to be consulted or present (for example, specialists in gynaecological surgery, interventional radiology, colorectal surgery, urology or vascular surgery, depending on the nature of the placenta accreta spectrum) and • the responsibilities of each team member. [2011, amended 2024] 1.2.12 When performing a planned caesarean birth for a woman or pregnant person suspected to have placenta accreta spectrum, ensure that: • a consultant obstetrician, a consultant gynaecologist and a consultant anaesthetist are present in the operating theatre • a paediatric or neonatal registrar or consultant is present to provide immediate care for the baby as soon as it is born • a haematology registrar or consultant is available to contact for advice • a critical care bed is available for the woman or pregnant person, and a critical care neonatal cot is available for the baby (although emergency surgery should not be delayed while waiting for a bed) • sufficient cross-matched blood and blood products are readily available (if blood transfusions are acceptable to the woman or pregnant person). See the NICE guideline on blood transfusion. [2011, amended 2024] 1.2.13 Specialist placenta accreta spectrum centres and the local maternity units they support should develop protocols covering how placenta accreta spectrum should be diagnosed, assessed and managed across their network. The protocol should include the care and management of placenta accreta spectrum identified late in pregnancy or in labour, including how specialist units can support emergency care in local maternity units. [2024] Predicting caesarean birth for cephalopelvic disproportion in labour 1.2.14 Do not use pelvimetry for decision making about mode of birth. [2004, amended 2021] 1.2.15 Do not use the following for decision making about mode of birth, as they do not accurately predict cephalopelvic disproportion: • maternal shoe size • maternal height • estimations of fetal size (ultrasound or clinical examination). [2004, amended 2021] Mother-to-child transmission of maternal infections HIV 1.2.16 Provide women with HIV information about the benefits and risks for them and their baby of the HIV treatment options and mode of birth as early as possible in their pregnancy, so that they can make an informed decision. Obtain specialist advice about HIV in pregnancy from a sexual health specialist if necessary. [2011, amended 2021] Hepatitis B virus 1.2.17 Do not offer pregnant women with hepatitis B a planned caesarean birth for this reason alone, as mother-to-baby transmission of hepatitis B can be reduced if the baby receives immunoglobulin and vaccination. [2004, amended 2021] Hepatitis C virus 1.2.18 Do not offer women who are infected with hepatitis C a planned caesarean birth for this reason alone. [2004, amended 2021] 1.2.19 Offer pregnant women who are co-infected with hepatitis C virus and HIV a planned caesarean birth to reduce mother-to-baby transmission of hepatitis C virus and HIV. [2004, amended 2021] Herpes simplex virus 1.2.20 Offer women with primary genital herpes simplex virus (HSV) infection occurring in the third trimester of pregnancy a planned caesarean birth to decrease the risk of neonatal HSV infection. [2004] 1.2.21 Do not routinely offer pregnant women with recurrent HSV infection a planned caesarean birth outside of the context of research. [2004, amended 2021] Body mass index 1.2.22 Do not use a BMI of over 50 kg/m2 alone as an indication for planned caesarean birth. [2011] Shared decision making 1.2.23 Ask for consent for caesarean birth only after providing pregnant women with evidence-based information. Ensure the woman's dignity, privacy, views and culture are respected, while taking the woman's clinical situation into account. [2004, amended 2021] 1.2.24 Advise women that they are entitled to decline the offer of treatment such as caesarean birth, even when it would benefit their or their baby's health. [2004, amended 2021] 1.2.25 When a woman decides on or declines a caesarean birth, document the factors that that are important to the woman when making her decision. [2004, amended 2021] Maternal choice for caesarean birth 1.2.26 When a woman or pregnant person with no medical indication for a caesarean birth requests a caesarean birth: • offer to discuss and explore the reasons for the request • ensure they have balanced and accurate information • offer to discuss alternative birth options (for example, place of birth, continuity of midwifery care where available, pain relief options), which may help address concerns they have about the birth • offer discussions with a consultant midwife or senior midwife, ideally in a birth options clinic or at a birth options appointment • offer discussions with a consultant or senior obstetrician and other members of the team (for example, an anaesthetist) if necessary or requested by the woman or pregnant person • record the discussions and decisions. [2011, amended 2023] 1.2.27 If a woman or pregnant person requests a caesarean birth, discuss the overall benefits and risks of caesarean birth compared with vaginal birth (see the section on planning mode of birth) and record that this discussion has taken place. [2011] 1.2.28 If a woman or pregnant person requests a caesarean birth because they have tokophobia or other severe anxiety about childbirth (for example, following abuse or a previous traumatic event), offer referral to a healthcare professional with expertise in providing perinatal mental health support to help with their anxiety. See the NICE guideline on antenatal and postnatal mental health for more detailed advice on providing mental health services during pregnancy. [2011, amended 2021] 1.2.29 Ensure healthcare professionals providing perinatal mental health support for women or pregnant people with tokophobia or other severe anxiety about childbirth are able to access the planned place of birth with the woman or pregnant person during the antenatal period, as part of the support offered to help them overcome fears and concerns about the labour and birth. [2011, amended 2023] 1.2.30 If, after an informed discussion about the options for birth (including the offer of perinatal mental health support if appropriate; see recommendation 1.2.27), the woman or pregnant person requests a caesarean birth, support their choice. [2011, amended 2023] 1.2.31 If a woman or pregnant person requests a caesarean birth this should be offered within their obstetric unit. [2011, amended 2023]
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Please use only the information provided in the text. If you cannot provide an answer from the text, please say, "I cannot assess due to lack of context."
EVIDENCE:
**"Caesarean Birth"** Care for women with placenta accreta spectrum in specialist centres 1.2.9 Consider an MRI scan to complement ultrasound findings when planning ongoing surgical management of placenta accreta spectrum. Discuss the following with the woman or pregnant person: • what to expect during an MRI procedure • that MRI can help clarify the degree of invasion, particularly with a posterior placenta • that current experience suggests that MRI is safe, but that there is a lack of evidence about any long-term risks to the baby. [2024] 1.2.10 Discuss birth options (for example, timing of birth, operative interventions including possibility of hysterectomy, need for blood transfusion) with a woman or pregnant person suspected to have placenta accreta spectrum. This discussion should be carried out by a senior obstetrician. [2011, amended 2024] When planning a caesarean birth for women or pregnant people suspected to have placenta accreta spectrum, the multidisciplinary team should: • agree which other healthcare professionals need to be consulted or present (for example, specialists in gynaecological surgery, interventional radiology, colorectal surgery, urology or vascular surgery, depending on the nature of the placenta accreta spectrum) and • the responsibilities of each team member. [2011, amended 2024] 1.2.12 When performing a planned caesarean birth for a woman or pregnant person suspected to have placenta accreta spectrum, ensure that: • a consultant obstetrician, a consultant gynaecologist and a consultant anaesthetist are present in the operating theatre • a paediatric or neonatal registrar or consultant is present to provide immediate care for the baby as soon as it is born • a haematology registrar or consultant is available to contact for advice • a critical care bed is available for the woman or pregnant person, and a critical care neonatal cot is available for the baby (although emergency surgery should not be delayed while waiting for a bed) • sufficient cross-matched blood and blood products are readily available (if blood transfusions are acceptable to the woman or pregnant person). See the NICE guideline on blood transfusion. [2011, amended 2024] 1.2.13 Specialist placenta accreta spectrum centres and the local maternity units they support should develop protocols covering how placenta accreta spectrum should be diagnosed, assessed and managed across their network. The protocol should include the care and management of placenta accreta spectrum identified late in pregnancy or in labour, including how specialist units can support emergency care in local maternity units. [2024] Predicting caesarean birth for cephalopelvic disproportion in labour 1.2.14 Do not use pelvimetry for decision making about mode of birth. [2004, amended 2021] 1.2.15 Do not use the following for decision making about mode of birth, as they do not accurately predict cephalopelvic disproportion: • maternal shoe size • maternal height • estimations of fetal size (ultrasound or clinical examination). [2004, amended 2021] Mother-to-child transmission of maternal infections HIV 1.2.16 Provide women with HIV information about the benefits and risks for them and their baby of the HIV treatment options and mode of birth as early as possible in their pregnancy, so that they can make an informed decision. Obtain specialist advice about HIV in pregnancy from a sexual health specialist if necessary. [2011, amended 2021] Hepatitis B virus 1.2.17 Do not offer pregnant women with hepatitis B a planned caesarean birth for this reason alone, as mother-to-baby transmission of hepatitis B can be reduced if the baby receives immunoglobulin and vaccination. [2004, amended 2021] Hepatitis C virus 1.2.18 Do not offer women who are infected with hepatitis C a planned caesarean birth for this reason alone. [2004, amended 2021] 1.2.19 Offer pregnant women who are co-infected with hepatitis C virus and HIV a planned caesarean birth to reduce mother-to-baby transmission of hepatitis C virus and HIV. [2004, amended 2021] Herpes simplex virus 1.2.20 Offer women with primary genital herpes simplex virus (HSV) infection occurring in the third trimester of pregnancy a planned caesarean birth to decrease the risk of neonatal HSV infection. [2004] 1.2.21 Do not routinely offer pregnant women with recurrent HSV infection a planned caesarean birth outside of the context of research. [2004, amended 2021] Body mass index 1.2.22 Do not use a BMI of over 50 kg/m2 alone as an indication for planned caesarean birth. [2011] Shared decision making 1.2.23 Ask for consent for caesarean birth only after providing pregnant women with evidence-based information. Ensure the woman's dignity, privacy, views and culture are respected, while taking the woman's clinical situation into account. [2004, amended 2021] 1.2.24 Advise women that they are entitled to decline the offer of treatment such as caesarean birth, even when it would benefit their or their baby's health. [2004, amended 2021] 1.2.25 When a woman decides on or declines a caesarean birth, document the factors that that are important to the woman when making her decision. [2004, amended 2021] Maternal choice for caesarean birth 1.2.26 When a woman or pregnant person with no medical indication for a caesarean birth requests a caesarean birth: • offer to discuss and explore the reasons for the request • ensure they have balanced and accurate information • offer to discuss alternative birth options (for example, place of birth, continuity of midwifery care where available, pain relief options), which may help address concerns they have about the birth • offer discussions with a consultant midwife or senior midwife, ideally in a birth options clinic or at a birth options appointment • offer discussions with a consultant or senior obstetrician and other members of the team (for example, an anaesthetist) if necessary or requested by the woman or pregnant person • record the discussions and decisions. [2011, amended 2023] 1.2.27 If a woman or pregnant person requests a caesarean birth, discuss the overall benefits and risks of caesarean birth compared with vaginal birth (see the section on planning mode of birth) and record that this discussion has taken place. [2011] 1.2.28 If a woman or pregnant person requests a caesarean birth because they have tokophobia or other severe anxiety about childbirth (for example, following abuse or a previous traumatic event), offer referral to a healthcare professional with expertise in providing perinatal mental health support to help with their anxiety. See the NICE guideline on antenatal and postnatal mental health for more detailed advice on providing mental health services during pregnancy. [2011, amended 2021] 1.2.29 Ensure healthcare professionals providing perinatal mental health support for women or pregnant people with tokophobia or other severe anxiety about childbirth are able to access the planned place of birth with the woman or pregnant person during the antenatal period, as part of the support offered to help them overcome fears and concerns about the labour and birth. [2011, amended 2023] 1.2.30 If, after an informed discussion about the options for birth (including the offer of perinatal mental health support if appropriate; see recommendation 1.2.27), the woman or pregnant person requests a caesarean birth, support their choice. [2011, amended 2023] 1.2.31 If a woman or pregnant person requests a caesarean birth this should be offered within their obstetric unit. [2011, amended 2023]
USER:
For a pregnant person suspected to have placenta accreta spectrum, what type of doctors/consultants are needed in the operating room?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Respond with only information from the provided context.
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What should be included in my new businesses organization agreement?
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Preface A cooperative is a business. As such, it must operate in a manner compatible with all the laws that apply to a business, with cooperative principles, and with the needs and desires of its member-patrons in mind. To comply with each of these limitations on its operations, a cooperative must have a set of organizational documents that is uniquely crafted to its particular situation. Drafting new, and updating old, legal documents of cooperatives takes both time and expertise. This report is intended to assist persons organizing new cooperatives, managers and directors of existing cooperatives, and their professional advisers to develop and update the important legal documents of cooperatives. It explains issues to be considered and options that are available. It provides sample language to be used as a starting point; the wording is not to be copied without review and thought. To help distinguish sample document language from explanatory text, a straight black line has been drawn along the left-hand margin of the sample document language. Contents ORGANIZATION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Statement of Purposes ...................................................... 2 Organization Committee ................................................... 3 Patronage Commitment ..................................................... 3 Financial Commitment ...................................................... 4 Calling of Membership Meeting ....................................... 6 Accounting .......................................................................... 7 SELECTING THE PROPER STATE INCORPORATION STATUTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLES OF INCORPORATION ..*...................,..*.*.............t. 11 Heading ............................................................................ 1 1 Name ................................................................................. 1 2 Principal Place of Business ............................................. 12 Purposes ............................................................................ 1 2 Powers ............................................................................... 13 Duration ............................................................................ 15 Directors ........................................................................... 15 Capital Structure ............................................................... 16 Amendment ..................................................................... 20 Signatures ......................................................................... 20 BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Membership ...................................................................... 21 Meetings of Members ...................................................... 24 Directors and Officers ....................................................... 26 Duties of Directors ........................................................... 32 ii Duties of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Operation at Cost and Members’ Capital . . . . . . . . . . . . . . . . . . . . . . . . . 36 Equity Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..I....... 39 Consent . . . . . . . . . ..f................................................................ 4 0 Nonmember Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Nonpatronage Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2 Handling of Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Dissolution . . . . . . . . ..f............................................................ 4 5 Indemnification . . . . . . . . . ..I....................................I.............. 45 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 MARKETING AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..*................. 4 7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . ..I...........................................4 6 Sales Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..I...........................4 9 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Termination and Renewal ..****...*.**.*.........................*...... 55 Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 MEMBERSHIP APPLICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 DIRECTOR HANDBOOK . . . . . . ..a.. a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 APPENDIX A. ELECTION OF DIRECTORS BY DISTRICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 APPENDIX B. ALTERNATIVE EQUITY REDEMPTION BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 APPENDIX C. BASE CAPITAL PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 . . . 111 Sample Legal Documents for Cooperatives Donald A. Frederick, Attorney-Adviser One of the axioms of business planning is that a strong foundation is essential if an organization is to have a strong structure. An important component of a strong cooperative foundation is a set of basic legal documents that conforms to Federal, State, and local law and facilitates conducting the business affairs of the association to enhance the mutual well-being of the members. This report explains the role each document plays in building the organization and the various issues treated in each document. It discusses options available to members in handling many of the issues. It also presents sample language as an aid in preparing initial documents, or in revising existing ones, to make sure they promote the objectives of the cooperative venture. Most of the sample language in this report is suitable for virtually any type of cooperative. Where the language must be tailored to reflect specific functions of the association, wording appropriate for an agricultural marketing cooperative is used. Counsel can help make the necessary modifications to cover supply and related service organizations and nonagricultural activities. One point cannot be stressed too much! Cooperative organizers, advisers, and leaders should not just sit down and copy these, or any other set, of legal documents and declare them as their own. These foundation documents should only be adopted after review by a competent attorney, one who understands the unique characteristics of cooperatives and the industry in which the association does business. This will maximize the likelihood that the documents will conform to applicable law and meet the specific needs of the association and its members. One problem in drafting organizational papers is they can be thorough or simple, but not both. This report contains many “compromises” between these two objectives. This only reinforces the need for cooperative founders and leaders, and their professional advisers, to avoid adopting any sample set of documents verbatim and to review existing documents on a regular basis. 1 The idea of forming a cooperative is usually conceived and nurtured by a few individuals who foresee coordinated group action as a solution to a problem confronting themselves and similarly situated persons. This organizing group often has to formulate a development plan, arrange for or provide seed money, and contribute sweat equity to get the association up and running. The organization period involves considerable discussion and data collection. While these efforts provide a good forecast for the level of support the cooperative is likely to attract, before launching the venture it is a good idea to have those persons who say they want the services of the cooperative formally commit to use those services. The organization agreement secures both a patronage and a financial commitment from prospective members. It is also a vehicle for educating prospective members about the cooperative form of business and the objectives of the proposed association. Statement of Purposes This first provision in a typical organization agreement sets out the services the proposed organization will perform. The services can be described in broad terms, such as to “process” and “market” certain farm commodities and “furnish” certain farm supplies. The language should refer only to services the cooperative will provide from its inception. This minimizes member pressure to expand the scope of operations too rapidly. For example, it is usually best not to mention furnishing supplies in the organizational agreement if the new organization will limit its initial activity to marketing fresh vegetables. 1. The undersigned, a producer of agricultural products, hereinafter referred to as “Producer,” together with other signers of agreements similar hereto, propose to organize a cooperative association 2 under the laws of the State of for the purpose of . Organization Committee Although the association has not yet been incorporated, a decision making process should be formalized. The organizers will usually appoint some or all of their group to an official organization committee that will serve as the initial policy body for the association. This provision lists the committee members and sets out the committee’s authority. 2. (a) The association shall be organized with suitable articles of incorporation and bylaws as determined by an organizational committee consisting of the following persons: Name Address 2. (b) This committee may, by vote of a majority of its members, increase its membership, fill any vacancy therein, and appoint any subcommittees deemed necessary to conduct its affairs. The committee, or any subcommittee designated by it, may prescribe an organization fee to be paid by each person signing an organization agreement and may incur necessary obligations, make necessary expenditures, and take any such action as may, in its discretion, be deemed advisable to further the organization of the association. 3 Patronage Commitment Most cooperatives, especially those involved in marketing agricultural commodities, need a minimum level of product to be successful and the best possible projections of anticipated volumes to plan effectively. Their organization agreements should spell out the extent of the prospective members’ commitment: usually all production, a defined volume of product,. or production from a set number of acres. If either all production or production from a set number of acres is used, a projection of likely volume delivered should also be secured. Sample language is provided for each type of commitment: Full Production. 3. Producer agrees to sign a marketing agreement committing all (product) produced by Producer, on land owned or leased by Producer, to the cooperative for direct marketing, processing, or other disposition as the cooperative sees fit. Producer estimates such production will total (units) in (year). *********** Defined Volume. 3. Producer agrees to sign a marketing agreement to commit (units) of (product), produced by Producer, to the cooperative for direct marketing, processing, or other disposition as the cooperative sees fit. *********** Set Acreage. 3. Producer agrees to sign a marketing agreement to commit all (product) produced by Producer on acres of land, owned or leased by Producer, to the cooperative for direct marketing, processing, or other disposition as the cooperative sees fit. Producer estimates such production will total -(units) in _ (year). 4 If the cooperative is likely to have a minimum quality standard that must be met before product will be accepted, that standard should also be explained and the person or entity judging quality should be named. Financial Commitment Every new business must have equity capital. In a cooperative, the members supply that capital. In this provision the prospective member agrees to provide initial financial support for the cooperative. Each prospective member should commit to purchase one share of common voting stock (or, in a nonstock cooperative, pay a membership fee) for a fixed dollar amount, perhaps $1,000. This investment gives the member the right to vote on issues submitted to the membership. Often the initial investment tied to membership status does not raise enough equity to fund the association. Additional capital is needed. Usually the organizers have substantial leeway in collecting and recognizing this investment. Each prospective member may be asked to make an equal contribution, or the level can vary with anticipated patronage. While this investment is classified as preferred stock in this report, it can also be structured as equity credits, revolving fund credits, or any similar term satisfactory to the organizers. Organizers should avoid using any term usually associated with debt capital, such as “note” or “bond,” and should also avoid creating a second class of common stock, which is sure to be confused with regular voting common stock. The agreement should expressly state that this financial commitment is irrevocable unless the organization effort is terminated. Initial development of the cooperative is totally dependent on promised financial support being forthcoming. Leaders must have the tools to force compliance with this commitment, by legal action if necessary. I 4. Producer agrees to purchase one share of voting common stock of the association, par value $ payable on demand following a favorable vozihe signees of agreements similar hereto to 5 incorporate the association. Producer further agrees to purchase shares of nonvoting preferred stock of the association, par value $ each, and agrees to pay for same as follows: S- cash on demand following incorporation of the association, g-on or before . 19 -9 and, $--- on or before ,19_. Producer expressly understands that this stock subscription agreement is an irrevocable legally binding obligation which will be relied upon by the association, other producers who subscribe to its stock, and lending institutions from which the association will seek financing to implement its cooperative purposes. If a cooperative is organized as a nonstock corporation, the sample language might be altered to call for payment of a membership fee, rather than purchase of a share of common stock, and payment of an additional sum into an equity account, rather than purchase of nonvoting preferred stock. Calling of Membership Meeting One of the principal responsibilities of the organization committee is to determine if enough firm interest exists to justify forming the cooperative. It is advisable to put a time limit on member solicitation. An open-ended solicitation period may exceed the patience of early signees to get started or abort the effort. If the committee decides there is enough interest, the agreement usually calls for a meeting of the signees to make the final decision to complete formation and begin operation of the cooperative. While the typical agreement provides that the affirmative vote of a simple majority of signees approves formation, the committee should move cautiously if substantial resistance 6 develops. Few associations overcome internal strife during the formation period to become useful and viable cooperative enterprises. 5. If, on or before 9 19-t the organization committee is of the opinion that sufficient signup has been obtained to enable the association to operate efficiently, the committee shall set a time and place for a meeting of those persons who have signed this agreement to determine, by majority vote, whether to proceed with the formation and operation of the association, and to consider such other business as may be deemed appropriate. Not less than ten days before the meeting, notice of the time and place of the meeting shall be sent to all signees by first-class mail, and an appropriate notice shall be published in one or more newspapers of general circulation in the area in which those who signed agreements like this one reside. , Sometimes the agreement will set minimum levels of support that must be committed before the prospective members will vote to begin the venture, If the organizers decide to adopt that option, the first paragraph of this provision might begin: 5. If, on or before 9 19-t bona fide producers of agricultural products otherwise eligible to become members in the association agree to execute marketing agreements covering (units) of (product) and subscribe to provide equity to the association equal to the sum of at least I dollars, ($ ), the organization committee shall set a time and place for a meeting . . . (continue as above). Accounting There should be a clearly stated obligation placed on the organization committee to keep good records and make the 7 appropriate disposition of any funds remaining after the vote on formation of the cooperative is conducted. 6. The organization committee shall keep detailed, accurate accounts of all receipts and of all expenditures of every kind. It shall have such accounts audited and render a written report thereof to the board of directors of the association when organized. And it shall thereupon turn over to the association any balance remaining in its hands free of obligation. If the association is not organized, such unexpended balance shall be prorated among, and returned to, those who contributed to the organization fund. The agreement should conclude with spaces for the prospective member to sign the agreement, and provide his or her address, and for the chairperson of the organizing committee to sign the agreement as an acceptance. SELECTING THE PROPER STATE INCORPORATION STATUTE While no drafting is involved, and thus no sample language is provided in this section, an important step in the development of a successful cooperative is selection of the proper statutory foundation for the association. To operate effectively in today’s business world, a cooperative must be a unique legal entity, separate from its members. The best way to create this unique entity is to form a cooperative corporation. A cooperative becomes a corporation when its organizers follow the steps set out in a law authorizing the formation of corporations. There is no Federal incorporation statute. Cooperatives incorporate under an appropriate State law. Incorporation offers several advantages over alternative structures, such as partnerships and unincorporated associations: l Incorporation facilitates the orderly succession of ownership. The entity has a perpetual life. As some members resign and new people join, redemption and issuance of a share of common stock or a membership certificate is a relatively simple means of clarifying each person’s status and rights in the association. l A corporation conveys to members and outsiders the image of a solid, longlasting venture. l If a cooperative is incorporated, the personal liability of each individual member, for losses suffered by the cooperative, is limited to the member’s equity in the cooperative. The organization of a cooperative as a business corporation has some important implications for how it conducts its affairs: l A corporation derives all of its legal authority from the State. It is a “person” in the eyes of the law, just like a natural person. It can do many things natural persons can, such as sign contracts, borrow money, own property, and sue and be sued. l While its powers are broad, those powers are limited to the ones granted by the State. For example, when the State agricultural cooperative law says only agricultural producers can vote in farmer cooperative affairs, no one else has the right to participate in policy decisions made by the membership. l The cooperative must obey business laws. Since managers and directors make the decisions for the corporation, they have an obligation to know and make sure the association follows all applicable laws. Persons who organize a cooperative have several incorporation statutes to choose from: l All States have special cooperative incorporation statutes. Some are broad, permitting the incorporation of virtually any business as a cooperative. Other are limited in scope. Many States have an Agricultural Cooperative Associations Act specially written to authorize incorporation of associations of producers of agricultural products. 9 l Every State has a general business corporation statute. A cooperative can be incorporated under this law and have its cooperative character established through proper drafting of the articles of incorporation and bylaws. l While most cooperatives are incorporated under a law of the State where the principle office is located, a few are organized under the laws of a different State. .It is usually best to organize under a cooperative incorporation statute of the State where the association’s headquarters is located. But it’s very important that the statute authorizing the cooperative permits a structure that meets the needs and desires of the members. The General Business Corporation Act and outof-State incorporation laws should be considered if the applicable cooperative law doesn’t permit the necessary organizational structure. A few so-called cooperatives are organized under a general not-for-profit corporation statute. Usually this is done to make it easier to obtain grant money. There are some potential adverse legal consequences of this type of incorporation that should be reviewed before following this path: l Most not-for-profit corporation laws expressly forbid the distribution of any earnings to members, trustees, officers, or other private persons. This means an association organized under such a statute can’t pay patronage refunds, one of the main reasons for operating a business as a cooperative. 0 In many States, if a nonprofit corporation goes out of business, members are prohibited from sharing in any assets left after the debts are paid. l Nonprofit corporations sometimes have had more trouble than cooperative corporations enforcing marketing agreements with their members. Cooperative statutes frequently provide specific authority for enforcement of marketing agreements. Not-for-profit acts have no such provision. If the leadership determines a cooperative is not organized 10 under the appropriate State statute, it is usually possible to reincorporate without seriously disrupting the ongoing business of the association. This will ordinarily involve redrafting the organization papers to conform to the new law and paying a modest fee to the appropriate State agency. ARTICLES OF INCORPORATION Once the leadership has determined the statute to use as the legal authority for a cooperative, the first document prepared is the articles of incorporation (articles). It is the acceptance of the articles by the State that establishes the cooperative as a unique “person” under the law. Most incorporation laws require a fairly common set of provisions to be included in the articles. These are discussed below. The statute will also require that before the articles are official they must be recorded in the office of a designated State officer. Failure to properly file the articles makes any business activity vulnerable to legal challenge. It is usually permissible to include information in the articles beyond that required by the incorporation statute. However, this is ordinarily not done because it is frequently more difficult to amend the articles than it is with other documents that may contain the same information. The articles are not a piece of paper to be prepared and then forgotten. The articles are routinely given the same respect by the courts as a statute. Therefore, the articles are binding on the directors, officers, and manager of a cooperative. Conduct beyond that authorized in the articles can subject the cooperative and its leaders to potential legal liability. The following are the elements common to most cooperative articles of incorporation. Heading The heading sets out the title of the document, the name of the cooperative, and the title of the authorization statute. 1 1 ARTICLES OF INCORPORATION (Name of Cooperative) We, the undersigned, all of whom are engaged in the production of agricultural products, do hereby voluntarily associate ourselves together for the purpose of forming a cooperative association, with (or without) capital stock, under the provisions of the Act of the State of Name The official name of the cooperative must be stated in the body of the articles and is usually the first provision: ARTICLE I. NAME The name of the association shall be Principal Place of Business This is a simple statement of the general location of the cooperative’s office: ARTICLE II. PRINCIPAL PLACE OF BUSINESS The association shall have its principal place of business in the city of County of , Stateof ’ . Purposes The purposes for which the cooperative is being organized are specifically set out. While the purposes clause of the organizational agreement is limited to immediate objectives, the pur12 poses are usually stated as broadly as possible in the articles of incorporation. Any service the cooperative may someday provide is frequently authorized, at least in a general way. This reduces the likelihood the articles will have to be amended whenever the association is asked by the members to provide additional services. Powers ARTICLE III. PURPOSES The association is formed for the following purposes: To market for its members and other producers any and all agricultural products or any products derived therefrom: to engage in any activity in connection with the picking, gathering, harvesting, receiving, assembling, handling, grading, cleaning, shelling, standardizing, packing, preserving, drying, processing, transporting, storing, financing, advertising, selling, marketing, or distribution of any such agricultural products or any products derived therefrom: to purchase for its members and others farm supplies and equipment: to manufacture, process, sell, store, handle, ship, distribute, furnish, supply, and procure any and all such farm supplies and equipment; and to exercise all such powers in any capacity and on any cooperative basis that may be agreed upon. The State statute authorizing formation of a cooperative will set out in detail the activities the cooperative may engage in. As a general rule, the statutory language is copied virtually verbatim into the articles. The following is an example of a typical statutory provision restated as an article of incorporation: ARTICLE IV. POWERS I This association shall have the following powers: 13 (a) To borrow money without limitation as to amount of corporate indebtedness or liability: to give a lien on any of its property as security therefore in any manner permitted by law: and to make advance payments and advances to members and other producers. (b) To act as the agent or representative of any member or members in any of the activities mentioned in Article III hereof. (cl To buy, lease, hold, and exercise all privileges of ownership over such real or personal property as may be necessary or convenient for the conduct and operation of the business of the association, or incidental thereto. (d) To draw, make, accept, endorse, guarantee, execute, and issue promissory notes, bills of exchange, drafts, warrants, certificates, and all kinds of obligations and negotiable or transferable instruments for any purpose that is deemed to further the objects for which this association is formed, and to give a lien on any of its property as security therefor. (e) To acquire, own, and develop any interest in patents, trademarks, and copyrights connected with, or incidental to, the business of the association. (fl To cooperate with other similar associations in creating central, regional, or national cooperative agencies, for any of the purposes for which this association is formed, and to become a member or stockholder of such agencies as now are or hereinafter may be in existence. (g) To have and exercise, in addition to the foregoing, all powers, privileges, and rights conferred on ordinary corporations and cooperative 14 marketing associations by the laws of this State and all powers and rights incidental or conducive to carrying out the purpose for which this association is formed, except such as are inconsistent with the express provisions of the act under which this association is incorporated, and to do any such thing anywhere; and the enumeration of the foregoing powers shall not be held to limit or restrict in any manner the general powers which may by law be possessed by this association, all of which are hereby expressly claimed. Duration The articles will say how long the cooperative is authorized to exist. Virtually all modern laws permit perpetual existence. Some laws in effect at the time longstanding cooperatives were organized limited the permissible life of a cooperative to a set period of time, such as 50 years. Associations that have been active for several decades should check to make sure their duration clause provides for perpetual operation. I ARTICLE V. PERIOD OF DURATION This association shall have perpetual existence. Directors Most statutes require the articles to name the initial policymakers of the cooperative. A majority of the incorporation statutes ask for the number of directors and names and addresses of the initial board. The articles often require “at least” the minimum number of directors required by statute: the precise number is set in the bylaws. Some statutes ask for the names and addresses of incorporators, in which case the appropriate title and references to incorporators would be substituted for “directors” in the example. If the law asks for both. then this draft provision is essentially inserted a second time and appro15 priately worded in each instance. ARTICLE VI. DIRECTORS This association shall have at least_ directors. The names and addresses of those who are to serve as the initial directors are: NAME ADDRESS Capital Structure The articles usually contain a description of the capital structure of the cooperative. If stock is issued, the number of shares authorized and the par value of each share of each class of stock (common, preferred) are set forth. The rights granted owners of each class of stock, the restrictions on owners of each class, and the dividends to which each class is entitled are also explained. If stock is not issued, a description must be included of how the rights and interests of the members will be determined. Sample language for both a stock and a nonstock association is provided below. The capital stock example provides for both voting common and nonvoting preferred stock. Nonvoting preferred stock is a useful way to account for additional nonpatronage investments by members. It has also been used as a way of raising equity from nonmembers, such as other members of the community interested in supporting the cooperative. If any interest in the cooperative is being sold to nonmembers, counsel must be retained to advise the association on applicable securities law requirements. The sample language also assumes that the organization 16 limits each member to one vote. If proportional voting based on patronage is utilized, counsel will have to prepare a description of how votes will be accumulated and any limit on the number of votes any one member can amass. All of the information in the example below is important and should be included somewhere in the organizational documents. However, not all incorporation laws require that all of it be in the articles. It may be possible to place some of these provisions in the bylaws. ARTICLE VII. CAPITAL STOCK (stock cooperative) Section 1. Classes and Authorized Amounts. The capital stock of the association shall consist of shares of common stock with a par value of $ per share, and shares of preferred stock with a par value of $ per share. Section 2. Common Stock. The common stock of this association may be purchased, owned, or held only by agricultural producers who (1) patronize the association in accordance with uniform terms and conditions prescribed by it, and (2) have been approved by the board of directors. ‘Producer’ shall mean and include persons (natural or corporate) engaged in the production of (product), or other agricultural products, including tenants of land used for the production of any such product, and lessors of such land who receive as rent therefore part of any such product of such land, and cooperative associations (corporate or otherwise) of such producers. Each member shall hold only one share of common stock and each eligible holder of common stock shall be entitled to only one vote in any meeting of the stockholders upon each matter submitted to vote at a meeting of the stockholders. In the event the board of directors of the association shall find, following a hearing, that any of 17 the common stock of this association has come into the hands of any person who is not eligible for membership, or that the holder thereof has ceased to be an eligible member, such holder shall have no rights or privileges on account of such stock, or vote or voice in the management or affairs of the association other than the right to participate in accordance with law in case of dissolution, The association shall repurchase such stock for par value. If such holder fails to deliver any certificate evidencing the stock, the association may cancel such certificate on its books and records, and the certificate is thereby null and void. The common stock of this association may be transferred only with the consent of the board of directors of the association and on the books of the association, and then only to persons eligible to hold it. No purported assignment or transfer of common stock shall pass to any person not eligible to hold it, nor the rights or privileges on account of such stock, nor a vote or voice in the management of the affairs of the association. This association shall have a lien .on all of its issued common stock for all indebtedness of the holders thereof to the association. No dividends shall be paid on the common stock. Section 3. Preferred Stock. The preferred stock of this association may be issued to any person, association, partnership, or corporation. Preferred stock shall carry no voting rights. Noncumulative dividends not to exceed percent (_%) per year may be paid on preferred stock at the absolute discretion of the board of directors. Preferred stock may be transferred only on the books of the association. It may be redeemed in whole or in part on a pro rata basis at par, plus any dividends declared and unpaid, at any time on thirty 18 (30) days’ notice by the association, provided said stock is redeemed in the same order as originally issued by years. If the owner fails to deliver any certificate evidencing such stock, the association may cancel the stock on its books. This association shall have a lien on all of its issued preferred stock for all indebtedness of the holders thereof to the association. Upon dissolution or distribution of the assets of the association, the holders of all preferred stock shall be entitled to receive the par value of their stock, plus any dividend declared and unpaid, before any distribution is made on the common stock. *ii********* ARTICLE VII. MENBERSHIP (nonstock cooperative) The association shall not have capital stock but shall admit applicants to membership in the association upon such uniform conditions as may be prescribed in its bylaws. This association shall be operated on a cooperative basis for the mutual benefit of its members as producers. Membership in the association shall be restricted to producers and associations of producers who shall patronize the association, The voting rights of the members of the association shall be equal, and no member shall have more than one vote upon each matter submitted to a vote at a meeting of the members. The property rights and interests of each member in the association shall be unequal and shall be determined and fixed on a patronage basis, and the net proceeds from the business of the association shall be allocated to member-patrons in the proportion that the patronage of each member bears to the total patronage of all the members of the association. 19 Amendment The articles may be changed whenever the appropriate percentage of the membership (and, if required by statute, the directors), as set out in the incorporation statute, votes to amend them. While the percentage is established by law, it is a good idea to include that requirement in the articles to remind people that the articles can be changed and to eliminate doubt as to the supp,ort required when the issue of possible amendment arises. While a majority of the statutes set the requirement at a simple or two-thirds majority of the members voting, several statutes require approval of a majority of the total membership. If turnout for member meetings is light, this poses a serious obstacle to changing the articles. ARTICLE VIII. Amendment These articles may be amended upon the affirmative vote of two-thirds of the members actually voting on the proposed amendment. Signatures Those persons who ask the State to authorize the cooperative, often called incorporators, complete the document by signing it. Signed this day of ,19__, by the undersigned incorporators, all of whom are engaged in agriculture as bona fide producers of agricultural products. I 20 BYLAWS Shortly after the cooperative is incorporated, the members adopt a set of bylaws. Bylaws provide a detailed description of the structure and method of operation of the cooperative. Bylaws are a working plan for how the association should function. Most incorporation laws give members flexibility to structure their cooperative as they see fit. Most references to bylaws are permissive, giving members the authority to write their own rules on how to handle a particular issue. Bylaws normally are not filed with the State. But like the articles, they are treated in a manner similar to statutes by the courts. Failure of the leadership to follow the bylaws can also lead to legal liability. Numerous provisions are usually found in cooperative bylaws. Some are similar to those included in bylaws of forprofit corporations, others are unique to cooperation. The most common provisions are discussed in this report. But a cooperative is free to place virtually any rule on the conduct of its affairs in the bylaws, provided the provision doesn’t conflict with an applicable law or the articles of incorporation. While almost any activity can be covered by a bylaw, only broad issues of long-term significance to members should be the subject of a bylaw. Operating decisions should not be covered in the bylaws, but rather in board policy resolutions. Board policies are directives to the management, issued by the board in its role as policymaker for the cooperative, that can be changed to reflect changing conditions at any time by the board. For example, whether the cooperative will do business with nonmembers is a general, long-term decision that should be covered in the bylaws. How nonmembers will be charged to insure that they pay their fair share of cooperative expenses is a short-term decision requiring the flexibility possible under a policy statement. Membership The first bylaw usually states the qualifications to be a member of the cooperative. Membership should be limited to 21 persons who will patronize the cooperative. For an agricultural cooperative, this means membership should be limited to producers of agricultural products and other farmer cooperative associations. Limiting the membership to producers and producer cooperatives is essential if the association wants to qualify for the limited antitrust protection of the Capper-Volstead Act, or for tax treatment under section 521 of the Internal Revenue Code, or if the cooperative is incorporated under a State law that requires that members be agricultural producers. This bylaw may also include other reasonable prerequisites to membership, such as agreeing to purchase a share of stock, sign a marketing agreement, and patronize the association on a regular basis. This bylaw should also provide for the orderly termination of a membership. This can be particularly important for an agricultural cooperative. The significant legal privileges listed above are only available to associations of producers. This requirement is only met if the membership of anyone who stops farming is revoked. When a membership is terminated, it is a good practice to return the purchase price of the voting share of common stock, or the membership fee in a nonstock cooperative (but not necessarily the retained patronage investments). This makes it clear to the former member that the termination was more than a symbolic gesture and that he or she no longer has the right to participate in the policymaking of the association. This sample language is written for a stock cooperative. In a nonstock cooperative, appropriate references to membership certificates and fees would be substituted for the terms common stock and purchase price. I ARTICLE I. MEMBERSHIP Section 1. Qualifications. Any person, firm, partnership, corporation or association, including both landlord and tenant in share tenancies, who is a bona fide producer of agricultural products in the territory in which the association is engaged in business, and who agrees to be a patron of the associa22 tion, signs a marketing agreement with the association, purchases one share of common stock, and meets such other conditions as may be prescribed by the board of directors, may become a member of the association. All applications for membership must be approved by the board of directors. Member status is effective as of the time the board approves the application for membership. Section 2. Suspension or Termination. In the event the board of directors of the association shall find, following a hearing, that any of the common stock of this association has come into the hands of any person who is not eligible for membership, or that the holder thereof has ceased to be an eligible member, or that such holder has not marketed through the association the products covered by a marketing agreement with the association, or not otherwise patronized the association for a period of (_) year(s), or otherwise violated the articles of incorporation, bylaws, or other agreements made with the association, the association may suspend such holder’s rights as a member and terminate the membership. When a membership is terminated, the association shall repurchase the member’s share of common stock for par value. The holder shall return to the association the certificate evidencing the holder’s share of stock. If such holder fails to deliver the certificate, the association may cancel such certificate on its books and records, and the certificate is then null and void. A suspended or terminated member shall have no rights or privileges on account of any stock held, nor vote or voice in the management or affairs of the association other than the right to participate in accordance with law in case of dissolution. 23 Meetings of Members A cooperative is owned and controlled by its members. A bylaw sets out the ground rules for convening the members to exercise their control function. An annual meeting is held each year to elect directors, review past performance and future plans, and conduct other business as needed. It is often a good idea to set the time of the annual meeting as promptly as possible after the end of the fiscal year. This encourages management to close the books for the year in a timely fashion and the auditor to review financial results and issue the audit report without delay. Also, the members are still focusing on last year’s performance. If the annual meeting is delayed too long, the members are often into another production cycle and not able to properly exercise their control over the cooperative. This bylaw should also authorize special member meetings to handle any business that can’t wait until the next annual meeting. Members should receive sufficient advance notice so they can plan to attend meetings. Many incorporation statutes have specific minimum notice requirements, both in terms of lead time (often 10 days or 2 weeks) and method (direct mail, publication in local newspaper). Associations incorporated under such a law must make sure the bylaw provides at least as much notice as the statute requires, and that appropriate notice is actually given. Otherwise any action taken at the meeting may be open to legal challenge. A statement on how voting will be conducted is also appropriate in this bylaw. How many votes each member will have is only one aspect of this issue. The draft language limits each member to one vote. If proportional voting is used, a description of how members will qualify for multiple votes, and a limit, if any, on the number of votes any one member can accumulate, should be substituted in the applicable place. Language on voting on behalf of members organized as partnerships and corporations can avoid an embarrassing dispute right before or even during a membership meeting over how such a member will vote on an issue. Many cooperatives 24 have members organized as partnerships or corporations designate, in writing, who will cast the member’s vote, and that person alone can vote for the member until the member provides a valid written notice of a change in the designee. Other topics that should be addressed include proxy voting, voting by mail, and cumulative voting. There is no “right” way to handle these matters, although cumulative voting is usually prohibited. Sometimes the incorporation statute discusses proxy voting and voting by mail. Many cooperatives that permit proxy voting limit the number of proxies a member can vote, often to only one. If voting by mail is allowed, it is often limited to issues discussed in the meeting notice. Finally, the minimum number of members that need be present to conduct business, called a quorum, should be specified. If the statute permits, quorum requirements are frequently set low (e.g., 10 members or 10 percent of the membership, whichever is greater) so meetings will not have to be adjourned for lack of a quorum. While this exposes the association to control by an active minority, it is sometimes necessary in order to make sure that any business is conducted at all. ARTICLE II. MEETINGS OF MEMBERS Section 1. Annual Meeting. The annual meeting of the members of this association shall be held in the State of , during the month of -9at such time and in such place as the board of directors shall designate. Section 2. Special Meetings. Special meetings of the members of the association may be called at any time by order of the board of directors and shall be called upon written request of at least members, or at least _ percent (__%) of the membership, whichever is a greater number. Section 3. Notice of Meetings. Written notice of every regular and special meeting of members shall be prepared and mailed to the last known post office 25 address of each member not less than -0 days before such meeting. Such notice shall state the nature of the business expected to be conducted and the time and place of the meeting. No business shall be transacted at any special meeting other than that referred to in the notice. Section 4. Voting. Unless otherwise stated in the articles of incorporation, or these bylaws, or required by applicable law, all questions shall be decided by a vote of a majority of the members voting thereon. Each member shall be entitled to only one vote, Voting by mail shall not be permitted. Proxy voting shall be allowed. Each proxy shall be in writing, and no member shall vote more than one proxy. Cumulative voting is not permitted. If a membership is held by a partnership, corporation, or other legal entity, the member shall designate in writing the person who shall vote on behalf of the member. That designation shall remain in effect until written notice of a properly authorized change in the designated voter shall be received by the association. Section 5. Quorum.( members or percent I%) of the membership, whichever is a larger number, shall constitute a quorum at any properly called annual or special membership meeting. Directors and Officers While the members own and control the cooperative, the responsibility for continuous supervision of the association is usually delegated to a small group of democratically elected leaders referred to as the board of directors, who in turn select officers to carry out specific leadership duties. Many cooperative experts consider the selection of directors as the most important governance decision made by the membership. 26 This bylaw covers the administrative rules for the selection of directors and officers and for the conduct of their meetings. Many important issues are discussed in this provision. Number and Qualification of Directors. The specific number and qualifications of directors must be established. The incorporation law will usually prescribe a minimum number of directors. There is no legal maximum on the size of a board, but experience suggests that if more than about nine people are on a local cooperative board, efficiency is reduced substantially. Many State statutes require that all directors be members of the cooperative. Some permit, or even require, one or more outside directors. The sample bylaw requires directors to be association members. If outside directors are to be authorized, the number and manner of selection should be included in the bylaw. Directors have access to pricing and other marketing plans that could be used by a competitor to take business from the cooperative. Thus, many cooperatives bar persons affiliated with competitors of the association from being directors. Cooperatives usually do not, however, bar such persons from membership. For example, a farmer who sells produce directly to a grocery chain may belong to and market some produce through a cooperative that also sells wholesale, but that farmer is frequently denied access to a seat on the cooperative board. A few cooperatives guarantee board turnover by limiting the number of consecutive terms a director can serve. Director and Officer Selection. The rules for election of directors by the members, and officers by the directors, are set out in the bylaws. In many cooperatives the directors are elected for three-year terms on a staggered basis. While directors are usually elected from the membership at large, some cooperatives elect directors on the basis of geographic regions, usually called districts. Sample language authorizing the election of directors by districts is set out in Appendix A. Officers are usually elected for one-year terms. Even many statutes that require all directors to be association members permit some officers, notably the secretary and treasurer, to be nonmembers of the association. This allows staff employees who normally keep association records and books to have both the appropriate title and attendant responsibilities. 27 Sometimes directors and officers are not able to serve their full term. The bylaws should provide for a method to fill vacant director and officer positions, Usually the remaining directors select an interim director to fill a board vacancy until the next membership meeting. Directors can usually select a replacement officer at any properly called board meeting. Meetings. The bylaws frequently provide much of the same information for director meetings as for member meetings - regular and special meetings are authorized, notice and quorum requirements are set out. Compensation . Another issue that should be addressed is director compensation. Many directors spend innumerable hours each year overseeing and promoting the cooperative. It seems reasonable for the association to at least cover out-ofpocket expenses incurred on behalf of the association. Some cooperatives also pay a modest fee for each meeting directors attend, or time they spend on cooperative affairs. While reimbursement of reasonable expenses is usually covered with a blanket authorization, fees should be handled more delicately. Directors should not have the right to set their own compensation. Both the decision to pay any fee, and the level of any fee authorized, should be made by the members. Nepotism. Many cooperatives also have a bylaw provision preventing directors and members of their immediate families from holding salaried positions with the cooperative. This antinepotism language eliminates the chance some members might view the awarding of the position as the result of undue influence of the director, rather than selection on the basis of merit. Removal of Directors. Finally, it may be necessary at some time to remove a director from that position. Sometimes termination is automatic, e.g., failure to maintain member status or missing too many board meetings. The ultimate authority in a cooperative is vested in the members, and they should be able to remove a director at will. As this is often a severe and divisive undertaking, it is best to provide a procedure in the bylaws that affords due process for the director under attack and conforms closely to any procedural requirements set out in the incorporation statute. 28 ARTICLE III. DIRECTORS AND OFFICERS Section 1. Number and Qualification of Directors. The association shall have a board of directors of _(_) members. Each director elected shall be a member of this association in good standing. No person shall be eligible to be a director if that person is in competition with, or is affiliated with any enterprise that is in competition with, the association. If a majority of the board of directors of the association finds at any time following a hearing that any director is so engaged or affiliated that person shall thereupon cease to be a director. No director after having served for I ) consecutive full term(s) shall be eligible to succeed himself or herself, but after a lapse of _ I_) yed4 d-d again be eligible. Section 2. Election of Directors. At the first annual meeting of the members of this association, directors shall be elected to succeed the incorporating directors. _ director(s) shall be elected for one (1) year: _ directors for two (2) years and _directors for three (3) years. At each annual meeting thereafter, new directors shall be elected, for a term of three (3) years each, to succeed those directors whose terms are expiring. All directors shall be elected by secret ballot, and the nominee(s) receiving the greatest number of votes shall be elected. Section 3. Election of Officers. The board of directors shall meet within seven (7) days after the first election and within seven (7) days after each annual election and shall elect by ballot a president, vice president, secretary, and treasurer, each of whom shall hold office until the election and qualifi29 cation of a successor, unless earlier removed., by death, resignation, or for cause. The president and vice president shall be members of the board of directors. The secretary and treasurer need not be directors or members of the association. Section 4. Vacancies. Whenever a vacancy occurs in the board of directors, other than from the expiration of a term of office, the remaining directors shall appoint a member to fill the vacancy until the next regular meeting of the members. If the term of the vacating director does not expire at that regular member meeting, a special election shall be held to select a director to fill the year or years remaining in that term. If one or more officer positions become vacant, such offices shall be filled by the board of directors, through election by ballot, at either a regular or special meeting of the board. Section 5. Regular Board Meetings. In addition to the meetings mentioned above, regular meetings of the board of directors shall be held monthly, or at such other times and at such places as the board may determine. Section 6. Special Board Meetings. A special meeting of the board of directors shall be held whenever called by the president or by a majority of the directors. Only the business specified in the written notice shall be transacted at a special meeting. Each call for a special meeting shall be in writing, shall be I signed by the person or persons calling the meeting, shall be addressed and delivered to the secretary, and shall state the time and place of such meeting. Section 7. Notice of Board Meetings. Oral or written notice of each meeting of the board of directors shall be given each director by, or under the 30 supervision of, the secretary of the association not less than _ hours prior to the time of meeting. But such notice may be waived by all the directors, and their appearance at a meeting shall constitute a waiver of notice. Section 8. Quorum. A majority of the board of directors shall constitute a quorum at any meeting of the board. Section 9 . Reimbursement and Compensation. The association shall reimburse directors for all reasonable expenses incurred in carrying out their duties and responsibilities. The compensation, if any, of the members of the board of directors shall be determined by the members of the association at any annual or special meeting of the association. No member of the board of directors, or member of the immediate family of any board member, shall occupy any position in the association on regular salary. Section 10. Removal of Directors. Whenever any director shall fail to meet the qualifications as described in Section I of this Article, or fails to attend three (3) consecutive board meetings, either regular or special, without just cause and provided that notice of such meetings has been given in accordance with these bylaws, then it shall be the duty of the board to remove said director and to fill the vacancy in accordance with Section 4 of this Article. Members, through petition noting the charges and signed by at least _(J members or _ percent (_%) of the membership, whichever is a greater number, may request the removal of any member of the board. Such director shall be notified in writing of the charges and given an opportunity to be heard at a membership meeting of the association. Removal of a director shall require a vote of of 31 I members voting. Any vacancy resulting from such action shall be filled by nomination and vote of members at such meeting. Duties of Directors The directors are responsible for the ongoing operations of the cooperative. They set policy and oversee the staff operations that implement that policy. Cooperative bylaws often contain language placing a legally binding obligation on the directors to carry out their most important duties. This bylaw often establishes the general relationship between the directors and the manager. An important responsibility of the board is to hire and supervise the manager. The board sets manager compensation and benefits. The manager, not the board, runs the day-to-day business operations of the cooperative. This includes hiring and firing other employees. If the board is dissatisfied with the way the cooperative is conducting its affairs, it should exercise its authority to replace the manager, but it should not take on the manager’s responsibilities. The bylaw should also recognize another important board responsibility-protecting member assets-by providing for appropriate bonds and insurance, an accounting and auditing system, and board control of association funds. Finally, the board should have the authority to appoint committees so its work load can be handled efficiently. Sometimes specific reference is made to an executive committee. An executive committee with broad powers can be useful, especially when the membership is spread over a large geographic area and some directors have to travel some distance to attend meetings. But the other directors must be careful not to abdicate all board responsibility to the executive committee. ARTI&E IV. DUTIES OF DIRECTORS Section 1. Management of Business. The board of directors shall have general supervision and control of the business and the affairs of the associa32 tion and shall make all rules and regulations not inconsistent with law, the articles of incorporation, or bylaws for the management of the business and the guidance of the members, officers, employees, I and agents of the association. Section 2. Employment of Manager. The board of directors shall have power to employ, define duties, fix compensation, and dismiss a manager with or without cause at any time. The board shall authorize the employment of such other employees, agents, and counsel as it from time to time deems necessary or advisable in the interest of the association. The manager shall have charge of the business of the association under the direction of the board of directors. Section 3. Bonds and Insurance. The board of directors shall require the manager and all other officers, agents, and employees charged by the association with responsibility for the custody of any of its funds or negotiable instruments to give adequate bonds. Such bonds, unless cash security is given, shall be furnished by a responsible bonding company and approved by the board of directors, and the cost thereof shall be paid by the association. The board of directors shall provide for the adequate insurance of the property of the association, or property which may be in the possession of the association, or stored by it, and not otherwise adequately insured, and, in addition, adequate insurance covering liability for accidents to all employees and the public. Section 4. Accounting System and Audits. The board of directors shall have installed an accounting system which shall be adequate to meet the requirements of the business and shall require proper records to be kept of all business transactions. 33 Duti 34 At least once in each year the board of directors shall secure the services of a competent and disinterested public auditor or accountant, who shall make a careful audit of the books and accounts of the association and render a report in writing thereon, which report shall be submitted to the directors and the manager of the association and made available to the members of the association. This report shall include at least a balance sheet showing the true assets and liabilities of the association, and an operating statement for the fiscal period under review. Section 5. Depository. The board of directors shall select one or more banks to act as depositories of the funds of the association and determine the manner of receiving, depositing, and disbursing the funds of the association and the form of checks and the person or persons by whom they shall be signed, with the power to change such banks and the person or persons signing such checks and the form thereof at will. Section 6. Committees. The board may, at its discretion, appoint from its own membership an executive committee of _members, and determine their tenure of office and their powers and duties. The board may delegate to the executive committee all or any stated portion of the functions and powers of the board, subject to the general direction, approval, and control of the board. Copies of the minutes of any meeting of the executive committee shall be mailed to all directors within seven (7) days following such meeting. The board of directors may, at its discretion, appoint such other committees as it deems appropriate. 5 of Officers Nhile the tasks that go with each major office of a corpora- tion are generally well understood, it is still important to have those duties spelled out in the bylaws. This will minimize any uncertainty over the roles each plays in leading the association. ARTICLE V. DUTIES OF OFFICERS Section 1. Duties of President. The president shall (1) preside over all meetings of the association and of the board of directors: (2) call special meetings of the board of directors; (3) appoint such committees as the board of directors may deem advisable for the proper conduct of the cooperative: and (4) perform all acts and duties usually performed by a presiding officer. Section 2. Duties of Vice President. In the absence or disability of the president, the vice president shall perform the duties of the president, provided, however, that in case of death, resignation, or disability of the president, the board of directors may declare the office vacant and elect any eligible person president. Section 3. Duties of Secretary. The secretary shall keep a complete record of all meetings of the association and of the board of directors and shall have general charge and supervision of the books and records of the association. The secretary shall sign papers pertaining to the association as authorized or directed by the board of directors. The secretary shall serve all notices required by law and by these bylaws and shall make a full report of all matters and business pertaining to the office to the members at the annual meeting. The secretary shall keep the corporate seal and all books of blank certificates, complete and countersign all certificates issued, and affix the corporate seal to all papers requiring a seal: shall keep complete stock ownership records: shall make all reports required by law: and shall perform 35 such other duties as may be required by the association or the board of directors. Upon the election of a successor, the secretary shall turn over all books and other property belonging to the association. Section 4. Duties of Treasurer. The treasurer shah be responsible for the keeping and disbursing of all monies of the association, and shall keep accurate books of accounts of all transactions of the association. The treasurer shall perform such duties with respect to the finances of the association as may be prescribed by the board of directors. At the expiration of his term of office, the treasurer shall promptly turn over to his successor all monies, property, books, records, and documents pertaining to his office or belonging to the association. Operation at Cost and Members’ Capital Many of the unique aspects of the bylaws of a cooperative pertain to the association’s financial affairs. Tax law plays an important part in structuring these provisions. This report does not attempt to explain cooperative taxation but only makes passing references to tax terms when explaining the importance of certain bylaw provisions. Since the overall objective of a cooperative is to maximize the income of its members, leaders must have flexibility to acquire capital and minimize taxes. The next several provisions, up to and including dissolution, authorize business and tax planning options compatible with doing business on a cooperative basis. This section often starts with a straightforward statement that the association will operate on a service-at-cost basis for the mutual benefit of the members as patrons and then covers specific issues to implement that statement. Language is usually included to allocate margins on a patronage basis. Allocation can be based on the volume or the value of business conducted on a patronage basis. Cooperatives dealing in one commodity, or in similar commodities, usually use the volume method. Those that handle several products 3s with divergent values often use the dollar-value-of-business method. The sample language assumes that the association is a marketing cooperative using the volume method. Appropriate wording for supply cooperatives and those using the value method is provided in parentheses. Marketing cooperatives have an alternative method of raising equity capital, the collection of per-unit retains. Language authorizing this option should be included in their bylaws. The term “capital credits” is used in the sample language to distinguish the retained margins and per-unit retains from direct member investments in stock. This distinction simplifies establishing an equity redemption program for patronage-based investments apart from any redemption of direct investments. The bylaw should specify whether dividends will be paid on this patronage capital. Since the completeness and accuracy of each patron’s account is vital to assigning financial obligations and benefits in the appropriate manner, a provision obligating the association to keep the required records is an important protection for the members. A statement requiring the timely distribution of written notices of allocation and per-unit retain certificate is both good business practice and a requirement for favorable tax treatment under the Internal Revenue Code. That statement should authorize the board to issue those notices and certificates, in either qualified or nonqualified form, so as to maximize the tax planning alternatives available. ARTICLE VI. OPERATION AT COST AND MEMBERS’ CAPITAL Section 1. Operation at Cost. The association shall at all times be operated on a cooperative service-at-cost basis for the mutual benefit of its member patrons. Section 2. Margin Allocation. In order to induce patronage and to assure that this association 37 will operate on a service-at-cost basis in all its transactions with its members, the association is obligated to account on a patronage basis to all member patrons on an annual basis for all amounts received from business conducted with members on a patronage basis, over and above the cost of providing such services and making reasonable additions to reserves. Such allocation shall be on the basis on the volume (dollar value) of product marketed through (purchased from) the association. The association is hereby obligated to pay all such amounts to the patrons in cash or by credits to a capital account of each member patron. Section 3. Per-Unit Retains. Each member also agrees to provide capital in such amounts as determined by the board of directors based on physical units of product marketed through the association. Such per-unit retains shall be allocated to the member’s capital credit account, Section 4. Dividends. No dividends shall be paid on any capital credits. Section 5. Records and Documentation. The books and records of the association shall be set up and kept in such a manner that at the end of each fiscal year, the amount of capital, if any, so furnished by each member is clearly reflected and credited in an appropriate record to the capital account of each member. The association shall, within 8-l/2 months after the close of each fiscal year, notify each member of the capital so credited to the member’s account. The notice shall be in the form of a written notice of allocation or per-unit retain certificate (as those terms are used in Subchapter T of the Internal Revenue Code) or other appropriate written document. The board shall have discretion to issue such 38 notices and certificates in either “qualified” or “nonqualified” form as permitted by the Internal Revenue Code and other applicable law. Section 6. Fiscal Year. The fiscal year of this association shall commence on the first day of (month) and end on the last day of (preceding month). Equity redemption A bylaw authorizing redemption of patronage capital and explaining the method to be used helps insure that, to the extent possible, current patrons finance the cooperative. There are three types of equity redemption plans. Most cooperatives that have an equity redemption program use a revolving fund plan whereby equities are redeemed in the order in which they were allocated. The first paragraph of the sample bylaw presents this approach. A limited number of cooperatives redeem a percentage of all outstanding equities each year. Sample language to implement this plan is found in section 1 of the Alternative Equity Redemption Bylaw (Appendix B). A few cooperatives have adopted a base capital plan. Under a base capital plan each member is assigned responsibility for providing a pro rata share of needed capital based on proportional use of the cooperative during a base period. A sample bylaw authorizing a Base Capital Plan is presented in Appendix C. Associations interested in such a plan should contact a professional adviser who can draft a scheme tailored to the association’s unique needs. Some cooperatives grant the board discretion to retire outstanding member equity “out of order” as it deems in the best interests of the association. Sample language for implementation of the discretionary approach appears in the second paragraph of the sample bylaw below. Other cooperatives provide a specific redemption preference for equity of the estates of deceased members and/or retired members who have reached a certain age. An event-specific preferences clause can be complex, particularly if it attempts to 39 deal with the special problems created by members organized as legal entities and thus do not regularly retire or die. Sample language covering this situation is provided in section 2 of the sample bylaw in Appendix B. New associations are not going to be in a position to redeem equity for several years. But an early commitment to develop a regular equity redemption program and agreement on the rules for its implementation will strengthen an association’s cooperative character and give early supporters some assurance that they will get their investment back at some time in the future. Consent ARTICLE VII. EQUITY REDEMPTION Section I. Regular Redemption, Revolving Fund. If at any time the board of directors determines that the financial condition of the association will not be impaired thereby, capital credited to members’ accounts may be redeemed in full or in part. Any such redemption of capital shall be made in order of priority according to the year in which the capital was furnished and credited, the capital first received by the association being the first redeemed. Section 2. Discretionary Special Redemptions. Notwithstanding any other provision of these bylaws, the board, at its absolute discretion, shall have the power to retire any capital credited to members’ accounts on such terms and conditions as may be agreed upon by the parties in any instance in which the interests of the association and its members are deemed to be furthered thereby and funds are determined by the board to be available for such purposes. If the cooperative is to deduct the face value of written notices of allocation and per-unit retain certificates from taxable income in the year issued, the Internal Revenue Code requires patrons to consent to include those amounts in taxable income 40 in the year they receive a notice or certificate, even though the cooperative retains the funds. The simplest way to obtain consent from members is to include a bylaw making consent a condition for membership. The Internal Revenue Service has published a model consent bylaw which should be adopted. Another paragraph is inserted making it clear that the cooperative must explain the meaning of consent to members and prospective members: this reminds leaders that such an explanation is also a tax law requirement. ARTICLE VIII. CONSENT Each person who hereafter applies for and is accepted to membership in this association, and each member of this association on the effective date of this bylaw who continues as a member after such date, shall, by such act alone, consent that the amount of any distributions with respect to his patronage occurring after the effective date of this bylaw, which are made in qualified written notices of allocation or qualified per-unit retain certificates (as defined in 26 U.S.C. 1388), and which are received by him from the cooperative, will be taken into account by him at their stated dollar amounts in the manner provided in 26 U.S.C. 1385(a) in the taxable year in which such written notices of allocation and per-unit retain certificates are received by him. Written notification of the adoption of this Article, a statement of its significance, and a copy of the provision shall be given separately to each member and prospective member before membership in the association. Nonmember Business The bylaws should make it clear whether the association may or may not do business with nonmembers. The sample bylaw assumes that the association will want the option to conduct nonmember business. 41 If the association does nonmember business, the CapperVolstead Act and many State incorporation laws require that a majority of the association business be done with or for members. The first three sentences of the sample bylaw are thus found in most cooperative bylaws. If an association wishes to qualify for tax treatment under section 521 of the Internal Revenue Code, it may not do more than 15 percent of its farm supply business with persons who are neither members nor producers (business with the Federal government can be disregarded in making this computation). The last two sentences in the example cover this situation. ARTICLE IX. NONMEMBER BUSINESS This association may conduct business with nonmembers on either a patronage or nonpatronage basis. However, this association shall not market the products of nonmembers in an amount the value of which exceeds the value of the products marketed for members. Itshall not purchase supplies and equipment for nonmembers in an amount the value of which exceeds the value of the supplies and equipment purchased for members. It shall not purchase supplies and equipment for persons who are neither members nor producers of agricultural products in an amount the value of which exceeds fifteen percent (15%) of all its purchases. Business done for the United States or any of its agencies shall be disregarded in determining the limitations imposed by this section. Nonpatronage Income Several factors are combining to increase the proportion of cooperatives that have taxable earnings from nonpatronage sourced. These factors include a growing reliance on nonmember business to sustain the cooperative, more forceful positions by IRS auditors to classify investment income as nonpatronage sources, and less use of section 521. The bylaws should recog42 nize this as special income and provide the board discretion to add it to a capital reserve, distribute it to members, or put it to any other lawful use. I ARTICLE X. NONPAlXONAGE INCOME The nonpatronage income of the association shall be its gross receipts derived from all sources which under law do not qualify as patronage income, less all expenses properly attributable to the production of such nonpatronage sources income and all income taxes payable on such receipts by the association, Nonpatronage income shall be used in behalf of the association and its members in accordance with such lawful purposes, including assignment to an unallocated reserve account and allocation in whole or in part to members, as may be determined by the board of directors. Handling of Losses While cooperatives operate at cost over the long term, the financial world operates for accounting and tax purposes in single-year segments. Sometimes cooperatives have a loss in that relatively short framework. The bylaws should anticipate the possibility of a loss year. They should explain how decisions will be made to allocate the loss on an equitable basis. The proper treatment of losses by cooperatives for tax purposes has long been a contentious issue between cooperatives and the Internal Revenue Service. The sample bylaw reflects a moderate position that financial results on patronage and nonpatronage business should be separated: gains and losses within each category can be combined, or “netted,” for tax purposes; and losses under either category can be carried back or forward to offset earnings in other years under the applicable provisions of the tax code for businesses in general. As the rules for handling losses are subject to change from time to time, counsel should be asked to keep informed on this issue and advise the association when this bylaw may need revision. 43 It may also be prudent to include a prohibition on directors voting a direct assessment on the members. This will prevent outside interests from pressuring the directors into an action likely to have a negative impact on member relations. ARTICLE XI. LOSSES Section z . Patronage Losses. In the event the association suffers a loss during any year on business conducted with or for patrons, such loss may be apportioned among the patrons during the year of loss so that such loss will, to the extent practicable, be borne by the patrons of the loss year on an equitable basis. The board shall have full authority to prescribe the basis on which capital furnished by patrons may be reduced or such loss otherwise equitably apportioned among the patrons. In the event of a patronage loss in one or more departments or divisions of the operation of this association, but not so much as to cause an overall loss for the fiscal year, such loss or losses may be prorated against each of the remaining profitable departments on the basis of their respective percentage of the net margins during such fiscal year. Section 2. Nonpatronage Losses. If in any fiscal year the association shall incur a loss other than on patronage operations, such loss may be charged against any reserve accumulated from nonpatronage earnings in prior years. Section 3. General Provisions. The board shall have no authority to make assessments against members. This section shall not be construed to deprive the association of the right to carry backward or forward losses from any source whatsoever in accordance with the Internal Revenue Code or state taxing statutes. 44 Dissolution Many of the rules to dissolve a cooperative are contained in various statutes and are too complex to reproduce in the bylaws. One issue that should be addressed is how any assets that might remain after all liabilities are met should be distributed. In a noncooperative corporation this is usually done on the basis of stock ownership and, if the bylaws are silent on this issue, this may be the rule imposed on cooperative members by a court. It is a good idea to consider language in the bylaws of a cooperative making clear that such a distribution will be on the basis on patronage. I ARTICLE XII. DISSOLUTION AND PROPERTY INTEREST OF MEMBERS Upon dissolution, after all debts and liabilities of the association shall have been paid, all shares of preferred stock and common stock redeemed, and all capital furnished through patronage shall have been retired without priority on a pro rata basis, the remaining property and assets of the association shall be distributed among the members and former members in the proportion which the aggregate patronage of each member bears to the total patronage of all such members insofar as practicable, unless otherwise provided by law. Indemnification As the trend toward litigating to test the validity of various decisions by corporate leaders has grown, so has the possibility that directors, officers and employees may be found personally liable for the adverse consequences of their decisions. This has made some people understandably reluctant to assume leadership positions, particularly as unpaid or minimally compensated directors and officers. State governments, recognizing the valuable role directors and officers play in corporate affairs, have adopted a variety of 45 laws limiting liability of corporate leaders and permitting corporations to shield leaders from direct personal loss for decisions they make on behalf of the corporation. In many States this is a developing area of the law, and the extent of permissible indemnification changes frequently. To encourage members to serve as directors, and to make sure leaders don’t shy away from innovative ideas, cooperatives should consider a bylaw accepting the maximum amount of responsibility for indemnification permitted by State law. Prudent risk management usually includes the purchase of liability insurance to protect against an indemnification claim that might otherwise lead to significant exposure for the association. This coverage can seem quite expensive, so the sample language uses the permissive term “may” rather than the mandatory term “shall.” But whenever possible, this insurance should be obtained to avoid exposing member assets to unacceptable risk. I ARTICLE XIII. INDl3MNIFICATION The association shall indemnify its officers, directors, employees, and agents to the fullest extent possible under the provisions of the (applicable State law), as it may be amended from time to time. The association may purchase liability insurance coverage for any person serving as an officer, director, employee or agent to the extent permitted by applicable State law. Amendment It is important for cooperative leaders to remember that bylaws are not set in stone. They can, and should, be changed whenever they stand as a barrier to cooperative activity desired by the member-owners and permissible under the law. While the incorporation statute will include language permitting amendment of the bylaws and setting out how this can be accomplished, a bylaw on amendment is usually included to 46 remind leaders that change is possible and to call attention to any unusual legal requirement, such as a higher than normal positive voting requirement, that may be applicable. ARTICLE XIV. AMEXWMENTS If notice of the character of the amendment proposed has been given in the notice of meeting, these bylaws may be altered or amended at any regular or special meeting of the members by the affirmative vote of (_) of the members present or voting by proxy. Again, these are only examples of the provisions common to most cooperative bylaws. Virtually any other rule can be included that is permissible under law. It is up to the leaders and members of a cooperative to craft a set of bylaws that guides the association to serving members’ needs. MARKETING AGREEMENT Cooperatives that market farm products and other goods of their members will usually want a separate contract with each member establishing the terms upon which they will conduct their business transactions. This contract is commonly called a marketing agreement. If the members only want the cooperative to serve as a home-of-last-resort for product that can’t be sold elsewhere, then a marketing agreement is not necessary. But if the members want an organization that will enhance the return they earn on all of their production, then a marketing agreement is an important marketing tool. The marketing agreement is a unique contract in that, because the members own ,and control the cooperative, the members are entering into a contract with themselves. But it is more accurate to picture the agreement as a contract between each individual member and the membership as a whole. An important key to making the system work is for everyone to remember that the cooperative is democratically con47 trolled by the members. No individual member has a right to unilaterally cancel or change the marketing agreement, and the leadership should not insist on arrangements that are contrary to the wishes of a majority of the membership. The marketing agreement builds on the patronage commitment section of the organizational agreement. Each individual member’s obligation to the organization committee is transferred to the new cooperative entity. While the basic content of the articles and bylaws is standardized throughout the cooperative community, the substantive provisions of the marketing agreement are influenced by the custom and trade of the market for the commodity covered by the agreement. Thus the sample language may need substantial modification to meet member needs. As with the articles and bylaws, the terms of the marketing agreement are binding until changed, but they are not etched in stone. The association-represented by its officers and directors-and the members are free to adopt an approach to any issue different than the approach set out in the organization agreement or in previously adopted marketing agreements. Introduction These initial provisions identify the parties to the contract, the cooperative and the producer, and usually establish any other requirements that the producer must meet, including any initial equity investment obligation, to be a member of the cooperative. I MARKEUINGAGREEMENT THIS AGREEMENT, made as of this _ day of x9_, by and between , herein referred to as “Producer,” and t an agricultural cooperative having an office at , herein referred to as “Association”. RECITALS A. Association is an agricultural cooperative organized under the laws of the State of . B. Producer is a member of the Association who produces . C. Producer has purchased one share of common voting stock and paid to Association the sum of dollars ($), calculated at the rate of $ per -(unit) of (product) as specified in Producer’s membership application, receipt of which is acknowledged as an equity investment in the Association. This entitles Producer to all the benefits of membership in the Association as long as Producer complies with the articles of incorporation and bylaws of the Association and the provisions of this agreement. In consideration of the mutual covenants and obligations contained herein, the parties agree as follows: sales Terms This provision outlines how the association will sell the products and pay the member-patrons. The first paragraph normally defines the obligation of the producer to deliver product to the association. The same three options outlined in the patronage commitment examples for the organization agreement-full production, defined volume, and set acreage-are available for use in setting the delivery commitment once operation begins, The defined volume option is utilized in this example, so if another type of obligation is adopted, appropriate modification of the first paragraph should be made. The second paragraph explains how the association will distribute the proceeds of resale to the member. Two ways of accounting for these proceeds are common. One is sometimes referred to as a gross margin operation. The association agrees 49 to pay the member the going market price for the product, less deductions for operating expenses. After the end of the fiscal year, any margin is returned to the producers as a patronage refund. The other is called the pooling method. In this arrangement all proceeds above expenses are returned to the producers on the basis of patronage. Such associations do not generate margins, as such, and thus lack access to retained patronage refunds to obtain equity. Pooling cooperatives must rely on per-unit retains and other means of raising capital. An example of draft language for each option is set forth below. Other terms of sale should also be included in the agreement. Sample language on several areas commonly covered are provided: responsibilities for delivery and for inspection and grading of the product; authorization for the association to pledge the product and sales proceeds as collateral for loans and otherwise exercise the rights of ownership: authorization for the association to withhold fees to cover operating expenses and capital retains from checks to growers; and an explanation of how the parties to the contract will deal with liens against the product. Section 1. Sale of (product). Association agrees to buy and Producer agrees to sell to Association (number) (units) of (product) as defined by USDA standards and grown by Producer. This agreement is intended by the parties to pass an absolute title to (number) _ (units) of (product) grown by Producer as soon as they have a potential existence but such (product) shall be at the risk of Producer until delivery. * * * * * * OPTION - Gross Margin Operation * * * * l l Section 2. Payment to Producer. Association shall market Producer’s (product) and Producer shall accept as payment for Producer’s (product) a price based on the current market price in the area for (product) of like grade and 50 quality. Association shall pay the amount due Producer, less deductions authorized in Section 6 of this agreement, not more than _ days after delivery of [product) to Association or Association’s prescribed buying location. l * * l l * OPTION - Pooling Operation l l * * * * Section 2. Payment to Producer. The Association may at any time pool any or all (product) of Producer with any other (product) of a similar kind and grade. Producer shall receive, for (product) pooled, a unit price equal to the average net unit price obtained for the pooled (product), less deductions authorized in Section 6 of this agreement. Association shall make an advance payment to Producer of percent of the current market price in the area for (product) of like grade and quality not more than _ days after delivery of (product) to Association or Association’s prescribed buying location. Section 3. Delivery. All (product) shall be delivered by Producer at Producer’s expense at the earliest reasonable time after harvesting, or at such time as called for by Association, to Association’s principal place of business or to one of Association’s authorized buying locations as prescribed by Association. The Association will use its best efforts to locate buying locations within a reasonable distance from Producer’s farm. Section 4. Inspection and Grading. Prior to acceptance by Association, all (product) shall be inspected and graded by the USDA in accordance with USDA standard rules and regulations. All purchases and/or marketings of (product) received by Association from Producer 51 shall be based upon USDA grade, and Producer agrees to accept the grading established by USDA. Section 5. Loans and Security. Association shall have the power to borrow money for any purpose on the security of the (product) delivered to Association, the products derived thereupon, and evidence of such products or by-products, or cash or accounts arising from the sale thereof, and to give a lien, either legal or equitable, thereon as the absolute owner and/or marketing agent thereof. Association may commingle such products and byproducts with other products and by-products of like grade and variety and shall exercise all other rights of ownership without limitation. Section 6. Deductions. Association agrees to purchase from and/or market for Producer the (product) set forth in Section 1 and to pay to Producer for said (product) the price set forth in Section 2, less the following deductions authorized by Producer: a. An amount to be determined annually by the board of directors, in the sole discretion of the board, to meet the general contingencies of the business of the Association including operating expenses. b.A$ . per___ (unit) capital retain deduction by the Association on the purchase price of each _(unit) of (product) received from Producer. Section 7. Liens. Producer shall notify the Association of any lien on any (product) covered by this agreement. Producer shall obtain permission from the lien holder for Association to market such (product) and to retain any deductions from the payments to Producer autho52 rized hereunder and under the articles of incorporation and bylaws of the Association. After any such deductions, Producer authorizes the Association to apply the balance of the sale proceeds, or so much thereof as necessary, for payment of the lien. Enforcement As a member owned and controlled entity, one of the most sensitive areas of management and leadership in a cooperative is the disciplining of members who violate their agreements with the association. But unless each member honors his or her obligations to the association, the collective strength of the venture is weakened and the entity’s chance of success is diminished. This is especially true where a marketing agreement is in effect. Management has to be able to anticipate the amount of product that will be delivered so it can plan for its processing and resale. Disruptions in anticipated delivery by natural causes, such as drought, are usually excused under a so-called “Act of God” clause in the cooperative’s contracts with buyers. But if members simply do not deliver product to the association as promised, management may be forced to buy product on the open market to meet association commitments or even default on its own contractual obligations. Usually a member knowingly violates the marketing agreement because the member thinks he or she can get a better price somewhere else. In the short term, this may indeed be the case. No firm always has the best price in a competitive market. But a cooperative must view itself as a long-term undertaking. If some members are allowed to forsake the cooperative for personal shortterm gain, they do so at the expense of those members who honor their agreement. Because the marketing agreement is a contract between each individual member and the membership as a whole, the leadership has the responsibility to protect the interest of the group as a whole. That means taking steps, including legal action if necessary, to enforce the marketing agreement. Most State cooperative incorporation statutes permit contractual provisions to facilitate enforcement of marketing agree53 ments. One is the inclusion of language providing for liquidated damages. In general corporate law, an injured party must prove the extent of the loss with great specificity to be eligible for compensation. This can be very difficult to do when agricultural commodities are involved. Their value changes by the day, or even by the minute. So in this instance, the parties can agree through contract on a specific level of damages, called liquidated damages, that will be the penalty for violating the contract. The level must be high enough to truly discourage breaches of the contract and to compensate the other members for their loss. A frequently used rule-of-thumb is 25 percent of the estimated market value of the commodity if it had been delivered under the contract. Marketing agreements also usually authorize the association to go to court and seek a restraining order against either actual or anticipated breach of the contract. The agreement may also make the offending party liable for legal fees incurred by the association in defending the agreement. Section 8. Liquidated Damages. The remedy at law would be inadequate and it would be impracticable and difficult to determine the actual damages to the Association should Producer fail to deliver the (product] covered by this agreement. Therefore, regardless of the cause of such failure, Producer agrees to pay to the Association for all such (product) delivered or disposed of by Producer, other than in accordance with the terms of this agreement, a sum equal to _ % of the fair market value of the product at the close of business on the day the product should have been delivered to the Association, as liquidated damages for the breach of this agreement. All parties agree that this agreement is one of a series dependent for its true value on the adherence of all the contracting parties to all of the agreements, but the cancellation of any other similar agreement or the failure of any of the parties thereto to comply therewith shall not affect the validity of this agreement. Failure to deliver the (product) commit54 ted herein due to ACTS OF GOD shall not constitute a breach of this agreement. Section 9. Specific Performance. Producer agrees that in the event of a breach or threatened breach by Producer of any provisions of this marketing agreement regarding delivery of (pmduct), the Association shall be entitled to a preliminary restraining order and an injunction to prevent breach or further breach hereof and to a decree of specific performance hereof. The parties agree that this is a contract for the purchase and sale of personal property under special circumstances and conditions and that the Association may, but shall not be obligated to, go into the open markets and buy -(product) to replace any that Producer may fail to deliver. Section 20. Legal Costs and Expenses. If the Association brings any action whatsoever by reason of a breach or threatened breach of this agreement, Producer shall pay to the Association all court costs, costs for bonds, travel expenses and all other expenses arising out of or caused by the litigation, including reasonable attorney’s fees expended or incurred by Association in such proceedings, and all such costs and expenses shall be included in the judgment. Termination and Renewal Management doesn’t want to have to get every member to sign a new agreement each year, and the producers aren’t going to want to be obligated to continue to patronize the cooperative if it isn’t meeting their needs. A provision providing that the contract automatically renews itself for another year unless either the cooperative or the member provides notice during a specific period of time-usually about a month during a slow period in production and cooperative activity-that it wants to terminate the agreement gives adequate flexibility and stability to the relationship. 55 Section 2 1. Termination and Renewal. After this agreement has been in effect one year from the date of execution, either party may terminate it in any year by notifying the other party in writing between (date) and (date). It is mutually agreed that failure to so terminate in any year shall constitute conclusive evidence that the parties have renewed this agreement for another year. Miscellaneous Provisions Individual cooperatives have adopted numerous additional provisions to tailor their marketing agreements to their individual needs. Examples of some of the more common, but by no means all, of these types of provisions are provided. Nonconforming agreements. From time to time, the association may want to alter the terms of its marketing agreement. This may occur when numerous agreements are in effect, and it is a good cooperative practice to treat all member equitably. Therefore, a provision permitting nonconforming contracts, but offering persons with ongoing agreements the option to change to the new agreement, often called a “most favored nation clause,” can be useful. If the association wants to bring all agreements back to uniformity, it can do so during the next time period for terminating existing agreements. Section 12. Nonconforming Agreements. Association may enter into agreements with other growers differing in terms from those contained herein, consistent with the bylaws of the Association, without invalidating this agreement, provided that Producer at Producer’s request may sign a similar agreement as a substitute for this agreement. No contrary agreements. One of the most difficult legal situations to untangle involves the member who signs more than one contract for the sale of the same commodity. A clause forbidding such activity helps place the responsibility for injuries suffered by the cooperative on the member. Section 13. No Contrary Agreements. Producer warrants that Producer has not contracted to sell, market, consign, or deliver and will not contract to sell, market, consign, or deliver any (product) during the term of this agreement to any person, firm or corporation, contrary to this agreement. Forfeiture of membership. If a member is going to disregard the terms of the marketing agreement, the cooperative is usually better off without that person as a member. A provision giving the board authority to revoke the membership of a member who violates the agreement gives appropriate discretion to the directors in dealing with a breach of the contract. Section 14. Forfeiture of Membership. Violation of this agreement in any material respect by Producer shall be grounds for the board of directors to terminate Producer’s membership in the Association. Abide by articles and bylaws. A similar provision requiring members to abide by the articles and bylaws, as written at the time the agreement is signed or subsequently a&nded, makes it clear that a member can’t abrogate the agreement if the membership approves a change in the cooperative organizational documents the individual member doesn’t like. That member must honor the agreement until the annual period for orderly termination arrives. I Section 15. Articles and Bylaws. Producer agrees to conform to and observe the articles of incorporation and bylaws of the Association now in force and as they may be amended hereafter. Assignment. Sometimes reorganizations occur during the year at either the association or the member level. The right of a new entity replacing one of the parties to enforce the contract can be clarified in the agreement itself. Because the association is the members as a whole, it can usually assign its rights at will. However, to protect against one member assigning rights to an 5 7 unqualified person, usually a member must have board approval to assign contract rights. Section 26. Assignment. This agreement may be assigned by the Association in its sole discretion. Producer may assign this agreement, but only upon written authorization granted by the board of directors of the Association. Entire agreement. A major cause of disputes over business contracts is the unwritten exception. One party to the contract will say, “I know the contract says that, but you told me you would do this.” Marketing agreements will frequently include language stating that the organizational documents and the agreement itself are the only contracts between the parties and no oral or other types of agreements will be honored. The manager, in particular, needs to be reminded of this rule. Special unauthorized promises or “deals” for selected members can do serious harm to the cohesiveness of the association. ~ Section 17. Entire Agreement. It is agreed that the articles of incorporation and the bylaws of the Association, now or hereafter in effect, and this marketing agreement constitute the entire agreement between the Association and Producer, and that there are no oral or other conditions, promises, covenants, representations, or inducements in addition to, or at variance with, any terms of this agreement. Governing law. Even if an association intends to limit its activity to a single State, disputes that involve the marketing agreement can arise from transactions that cross State lines in any number of ways. To avoid arguments over which State’s law shall be applied, the contract might have a clause naming the State. This can be particularly important if the association is incorporated under a statute of a State different from the one where its headquarters are located. I Section 18. Governing Law. This agreement shall be governed by the laws of the State of , Signatures. To make the contracts official, they must be signed by both parties. If the producer is a business and not a real person, the association should check to make sure the signee for the business is authorized to enter into such agreements for the business. IN WITNESS WHEREOF, these parties have executed this agreement as of the day, month and year first above written: Producer (Cooperative name) BY President ATTEST I Secretary MEMBERSHIP APPLICATION When a person applies for membership in a cooperative, it is a good idea to have a simple document that ties the loose ends together and, when approved, serves as official notice that the applicant is a bona fide member of the association. If the articles, bylaws, and marketing agreement are well drafted, this need be little more than a summary of the commitments made. Applicant certifies that the requirements of membership have been met, and the appropriate cooperative officers, usually the president and secretary, acknowledge board approval of the applicant. 5 9 MEMBERSHIP APPLICATION Applicant’s Statement. I hereby apply for membership in and agree to abide by the articles of incorporation and bylaws of the association, now and hereafter in effect, copies of which have been presented to me for inspection. I certify that I am a producer of , have tendered the purchase price of one share of common voting stock, have signed a marketing agreement, and met such other qualifications for membership as have been explained to me. After my membership shall have been in effect for one year from the date of its acceptance by the association, either party may terminate it by notifying the other party in writing of this intention between (date) and (date) of any year. If neither of the parties to this agreement so notifies the other, it is mutually agreed that this shall constitute conclusive evidence that the parties have renewed this agreement for another year. Date ,199_. Applicant’s: name address telephone number social security number Applicant’s signature Acceptance. This certifies that is a member of and is entitled to all of the rights, benefits, and privileges of membership in the association. Date , 199_. President: Secretary: As mentioned earlier, familiarity with the documents reviewed in this report is an ongoing responsibility of each cooperative leader, particularly members of the board of directors. The same is true for other important cooperative papers: e.g., audit reports and current financial statements, board policies, loan agreements, the manager’s job description, and minutes of board and membership meetings. As the manager’s job is to run the day-to-day operations of the cooperative, the manager acquires the necessary familiarity with these items as part of his or her ongoing duties. Directors usually don’t have the continuous contact with the business that the manager does. They need to have the documents available so they can look up information and ask informed questions when necessary. A good director handbook meets this need. The director handbook can be nothing more than a solid three-ring binder that contains up-to-date copies of all documents the directors need to set cooperative policy. Every new director should get a current handbook as soon as he or she is elected to the board. At each board meeting the manager or the president should distribute minutes of the previous meeting and new versions of any documents that have been modified or adopted since the last meeting. Time should be taken to make sure the directors place the new pages in the proper place in the book and to let the directors review and ask questions about the additions and replacements. The director handbook will get the important cooperative papers out of the file cabinet and into the mainstream of the decision-making process. It will minimize the likelihood leaders will innocently violate a provision of the articles and bylaws, contracts, or other written guidelines. It will provide ready answers to questions about the limitations on managerial discretion imposed by these documents. And it will facilitate the conduct of business meetings in a professional and efficient manner. In summary, it will soon become a valuable tool for cooperative management and planning. 61 Appendix A. Election of Directors by Districts (bylaw provision) ARTICLE III. DIRECTORS AND OFFICERS Section 2. Election of Directors by Districts. (Two paragraphs as in sample language on page 29, main text. Next, add the following:) The territory in which the association has members shall be divided into _ (same number as number of directors) districts. The respective districts and their boundaries shall be established by resolution of the board of directors. The board of directors may from time to time change the boundaries of one or more districts by adding territory not included within any district, by adding to one district territory previously included in another district, or by excluding from a district a part of its territory. There shall be as many directors as there are districts, one director to be elected by the members of each district. However, when the number of districts is an even number, there shall be one additional director to be known as a director-at-large and to be elected by all members of the association. A district director must be a resident of, or be a producer of agricultural products in, the district for which such director is elected or appointed. Any questions as to the effect of any changes made in district boundaries, or the number or identity or districts, shall be conclusively determined by the board of directors. Nominations for directors, either for a district or at large, shall be made by petition addressed to the secretary of the association requesting placement on the ballot of the name of the person so nominated. Such a petition nominating a district director shall be signed by not less than _ members of that district. Such a petition nominating a director-atlarge shall be signed by not less than _ members of the association. 62 Appendix B. Equity Redemption (alternative bylaw) ARTICLE VII. EQUITY REDEMPTION Section I. Regular Redemption, Percent of All Equities. It shall be the policy of the association, when other redemption priorities set forth herein have been met, and when funds are available, to redeem in cash a percentage of each member patron’s capital credits, rather than ratably by year. The time and method of any such redemption shall be determined by the board of directors. Section 2. Specified Special Redemptions. The association shall give priority to redemption of members’ capital credits held by deceased persons for the settlement of their estate. The association shall thereafter grant priority redemption to capital credits of former members who have attained their 65th birthday and are no longer actively engaged in agricultural production as actual producers or landlords in share tenancy. The time and method of such redemption shall be determined solely by the board of directors, dependent upon the financial condition of the association. In the case of redemption of the equities of those persons who have attained age 65 and retired from farming, preference may be given to the oldest retirees in establishing the order of priority among those eligible. In the case of a corporation or partnership holder of members’ capital credits, such corporation or partnership shall be considered eligible for priority treatment to the same extent as the individual stockholders of such corporation or partners of the partnership would have qualified, if each individual stockholder or partner were an individual memberpatron of this association. Any redemption shall be made to the corporation or partnership, and not to the individual stockholder or partner thereof. Each corporation or partnership shall report to the association the percentage of ownership interest 63 in the corporation or partnership of each of its stockholders or partners. Failure to report accurately the percentage of individual ownership interest shall disqualify any allocations made to the corporation or partnership by this association from redemption priority. If a corporation or partnership should dissolve, its capital credits in this association shall be prorated among, and transferred to, the individual stockholders or partners and considered for redemp tion on an individual ownership basis. The amount of any redemption or prorate related to a corporate or partnership member shall be determined by the percentage of ownership interest as reported by the corporation or partnership. When two or more persons are holders of capital credits as tenants in common, without a designation of rights of survivorship, they shall be deemed by this association to be acting as partners and shall be subject to the same requirements as a partnership. Capital credits held in joint tenancy with rights of survivorship shall be considered for priority of redemption according to the qualifying status of the youngest member of the joint tenancy or, in the event of death of one of the joint tenants, of the survivor. Appendix C. Base Capital Plan (bylaw provision) ARTICLE VII. EQUITY REDEMPTION Section 1. Members’ Equity Requirements. Each year the board of directors shall determine the amount of equity capital necessary for successful operation of the cooperative. The total amount of member volume and the volume each member has marketed through the association during the past _( ) years shall be calculated. Each member’s equity requirement is equal to the amount of equity, determined necessary by the board of directors, multiplied by the member’s proportion of the association’s total member volume during the base _ year period. Section 2. Member Investment. Members can invest equity to meet their requirements by direct cash investment, allocated patronage refunds, and per-unit capital retains. Section 3. Member Account Adjustments. At the end of each fiscal year the association shall recalculate each member’s capital credits account to include all per-unit retains for the year and each member’s share of patronage refunds for the year. (a) If a member’s total capital credits are less than the member’s equity requirement for that year, cash returns on business done with the association will be limited to those required by the Internal Revenue Code or other applicable law. (b) If the member’s capital credits, less any cash that must be refunded to comply with the Internal Revenue Code or other applicable law, are greater than the member’s equity requirement for that year, the excess shall be redeemed in cash within g-112 months after the close of the association’s fiscal year. 65
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Respond with only information from the provided context. What should be included in my new businesses organization agreement? Preface A cooperative is a business. As such, it must operate in a manner compatible with all the laws that apply to a business, with cooperative principles, and with the needs and desires of its member-patrons in mind. To comply with each of these limitations on its operations, a cooperative must have a set of organizational documents that is uniquely crafted to its particular situation. Drafting new, and updating old, legal documents of cooperatives takes both time and expertise. This report is intended to assist persons organizing new cooperatives, managers and directors of existing cooperatives, and their professional advisers to develop and update the important legal documents of cooperatives. It explains issues to be considered and options that are available. It provides sample language to be used as a starting point; the wording is not to be copied without review and thought. To help distinguish sample document language from explanatory text, a straight black line has been drawn along the left-hand margin of the sample document language. Contents ORGANIZATION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Statement of Purposes ...................................................... 2 Organization Committee ................................................... 3 Patronage Commitment ..................................................... 3 Financial Commitment ...................................................... 4 Calling of Membership Meeting ....................................... 6 Accounting .......................................................................... 7 SELECTING THE PROPER STATE INCORPORATION STATUTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLES OF INCORPORATION ..*...................,..*.*.............t. 11 Heading ............................................................................ 1 1 Name ................................................................................. 1 2 Principal Place of Business ............................................. 12 Purposes ............................................................................ 1 2 Powers ............................................................................... 13 Duration ............................................................................ 15 Directors ........................................................................... 15 Capital Structure ............................................................... 16 Amendment ..................................................................... 20 Signatures ......................................................................... 20 BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Membership ...................................................................... 21 Meetings of Members ...................................................... 24 Directors and Officers ....................................................... 26 Duties of Directors ........................................................... 32 ii Duties of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Operation at Cost and Members’ Capital . . . . . . . . . . . . . . . . . . . . . . . . . 36 Equity Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..I....... 39 Consent . . . . . . . . . ..f................................................................ 4 0 Nonmember Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Nonpatronage Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2 Handling of Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Dissolution . . . . . . . . ..f............................................................ 4 5 Indemnification . . . . . . . . . ..I....................................I.............. 45 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 MARKETING AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..*................. 4 7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . ..I...........................................4 6 Sales Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..I...........................4 9 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Termination and Renewal ..****...*.**.*.........................*...... 55 Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 MEMBERSHIP APPLICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 DIRECTOR HANDBOOK . . . . . . ..a.. a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 APPENDIX A. ELECTION OF DIRECTORS BY DISTRICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 APPENDIX B. ALTERNATIVE EQUITY REDEMPTION BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 APPENDIX C. BASE CAPITAL PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 . . . 111 Sample Legal Documents for Cooperatives Donald A. Frederick, Attorney-Adviser One of the axioms of business planning is that a strong foundation is essential if an organization is to have a strong structure. An important component of a strong cooperative foundation is a set of basic legal documents that conforms to Federal, State, and local law and facilitates conducting the business affairs of the association to enhance the mutual well-being of the members. This report explains the role each document plays in building the organization and the various issues treated in each document. It discusses options available to members in handling many of the issues. It also presents sample language as an aid in preparing initial documents, or in revising existing ones, to make sure they promote the objectives of the cooperative venture. Most of the sample language in this report is suitable for virtually any type of cooperative. Where the language must be tailored to reflect specific functions of the association, wording appropriate for an agricultural marketing cooperative is used. Counsel can help make the necessary modifications to cover supply and related service organizations and nonagricultural activities. One point cannot be stressed too much! Cooperative organizers, advisers, and leaders should not just sit down and copy these, or any other set, of legal documents and declare them as their own. These foundation documents should only be adopted after review by a competent attorney, one who understands the unique characteristics of cooperatives and the industry in which the association does business. This will maximize the likelihood that the documents will conform to applicable law and meet the specific needs of the association and its members. One problem in drafting organizational papers is they can be thorough or simple, but not both. This report contains many “compromises” between these two objectives. This only reinforces the need for cooperative founders and leaders, and their professional advisers, to avoid adopting any sample set of documents verbatim and to review existing documents on a regular basis. 1 The idea of forming a cooperative is usually conceived and nurtured by a few individuals who foresee coordinated group action as a solution to a problem confronting themselves and similarly situated persons. This organizing group often has to formulate a development plan, arrange for or provide seed money, and contribute sweat equity to get the association up and running. The organization period involves considerable discussion and data collection. While these efforts provide a good forecast for the level of support the cooperative is likely to attract, before launching the venture it is a good idea to have those persons who say they want the services of the cooperative formally commit to use those services. The organization agreement secures both a patronage and a financial commitment from prospective members. It is also a vehicle for educating prospective members about the cooperative form of business and the objectives of the proposed association. Statement of Purposes This first provision in a typical organization agreement sets out the services the proposed organization will perform. The services can be described in broad terms, such as to “process” and “market” certain farm commodities and “furnish” certain farm supplies. The language should refer only to services the cooperative will provide from its inception. This minimizes member pressure to expand the scope of operations too rapidly. For example, it is usually best not to mention furnishing supplies in the organizational agreement if the new organization will limit its initial activity to marketing fresh vegetables. 1. The undersigned, a producer of agricultural products, hereinafter referred to as “Producer,” together with other signers of agreements similar hereto, propose to organize a cooperative association 2 under the laws of the State of for the purpose of . Organization Committee Although the association has not yet been incorporated, a decision making process should be formalized. The organizers will usually appoint some or all of their group to an official organization committee that will serve as the initial policy body for the association. This provision lists the committee members and sets out the committee’s authority. 2. (a) The association shall be organized with suitable articles of incorporation and bylaws as determined by an organizational committee consisting of the following persons: Name Address 2. (b) This committee may, by vote of a majority of its members, increase its membership, fill any vacancy therein, and appoint any subcommittees deemed necessary to conduct its affairs. The committee, or any subcommittee designated by it, may prescribe an organization fee to be paid by each person signing an organization agreement and may incur necessary obligations, make necessary expenditures, and take any such action as may, in its discretion, be deemed advisable to further the organization of the association. 3 Patronage Commitment Most cooperatives, especially those involved in marketing agricultural commodities, need a minimum level of product to be successful and the best possible projections of anticipated volumes to plan effectively. Their organization agreements should spell out the extent of the prospective members’ commitment: usually all production, a defined volume of product,. or production from a set number of acres. If either all production or production from a set number of acres is used, a projection of likely volume delivered should also be secured. Sample language is provided for each type of commitment: Full Production. 3. Producer agrees to sign a marketing agreement committing all (product) produced by Producer, on land owned or leased by Producer, to the cooperative for direct marketing, processing, or other disposition as the cooperative sees fit. Producer estimates such production will total (units) in (year). *********** Defined Volume. 3. Producer agrees to sign a marketing agreement to commit (units) of (product), produced by Producer, to the cooperative for direct marketing, processing, or other disposition as the cooperative sees fit. *********** Set Acreage. 3. Producer agrees to sign a marketing agreement to commit all (product) produced by Producer on acres of land, owned or leased by Producer, to the cooperative for direct marketing, processing, or other disposition as the cooperative sees fit. Producer estimates such production will total -(units) in _ (year). 4 If the cooperative is likely to have a minimum quality standard that must be met before product will be accepted, that standard should also be explained and the person or entity judging quality should be named. Financial Commitment Every new business must have equity capital. In a cooperative, the members supply that capital. In this provision the prospective member agrees to provide initial financial support for the cooperative. Each prospective member should commit to purchase one share of common voting stock (or, in a nonstock cooperative, pay a membership fee) for a fixed dollar amount, perhaps $1,000. This investment gives the member the right to vote on issues submitted to the membership. Often the initial investment tied to membership status does not raise enough equity to fund the association. Additional capital is needed. Usually the organizers have substantial leeway in collecting and recognizing this investment. Each prospective member may be asked to make an equal contribution, or the level can vary with anticipated patronage. While this investment is classified as preferred stock in this report, it can also be structured as equity credits, revolving fund credits, or any similar term satisfactory to the organizers. Organizers should avoid using any term usually associated with debt capital, such as “note” or “bond,” and should also avoid creating a second class of common stock, which is sure to be confused with regular voting common stock. The agreement should expressly state that this financial commitment is irrevocable unless the organization effort is terminated. Initial development of the cooperative is totally dependent on promised financial support being forthcoming. Leaders must have the tools to force compliance with this commitment, by legal action if necessary. I 4. Producer agrees to purchase one share of voting common stock of the association, par value $ payable on demand following a favorable vozihe signees of agreements similar hereto to 5 incorporate the association. Producer further agrees to purchase shares of nonvoting preferred stock of the association, par value $ each, and agrees to pay for same as follows: S- cash on demand following incorporation of the association, g-on or before . 19 -9 and, $--- on or before ,19_. Producer expressly understands that this stock subscription agreement is an irrevocable legally binding obligation which will be relied upon by the association, other producers who subscribe to its stock, and lending institutions from which the association will seek financing to implement its cooperative purposes. If a cooperative is organized as a nonstock corporation, the sample language might be altered to call for payment of a membership fee, rather than purchase of a share of common stock, and payment of an additional sum into an equity account, rather than purchase of nonvoting preferred stock. Calling of Membership Meeting One of the principal responsibilities of the organization committee is to determine if enough firm interest exists to justify forming the cooperative. It is advisable to put a time limit on member solicitation. An open-ended solicitation period may exceed the patience of early signees to get started or abort the effort. If the committee decides there is enough interest, the agreement usually calls for a meeting of the signees to make the final decision to complete formation and begin operation of the cooperative. While the typical agreement provides that the affirmative vote of a simple majority of signees approves formation, the committee should move cautiously if substantial resistance 6 develops. Few associations overcome internal strife during the formation period to become useful and viable cooperative enterprises. 5. If, on or before 9 19-t the organization committee is of the opinion that sufficient signup has been obtained to enable the association to operate efficiently, the committee shall set a time and place for a meeting of those persons who have signed this agreement to determine, by majority vote, whether to proceed with the formation and operation of the association, and to consider such other business as may be deemed appropriate. Not less than ten days before the meeting, notice of the time and place of the meeting shall be sent to all signees by first-class mail, and an appropriate notice shall be published in one or more newspapers of general circulation in the area in which those who signed agreements like this one reside. , Sometimes the agreement will set minimum levels of support that must be committed before the prospective members will vote to begin the venture, If the organizers decide to adopt that option, the first paragraph of this provision might begin: 5. If, on or before 9 19-t bona fide producers of agricultural products otherwise eligible to become members in the association agree to execute marketing agreements covering (units) of (product) and subscribe to provide equity to the association equal to the sum of at least I dollars, ($ ), the organization committee shall set a time and place for a meeting . . . (continue as above). Accounting There should be a clearly stated obligation placed on the organization committee to keep good records and make the 7 appropriate disposition of any funds remaining after the vote on formation of the cooperative is conducted. 6. The organization committee shall keep detailed, accurate accounts of all receipts and of all expenditures of every kind. It shall have such accounts audited and render a written report thereof to the board of directors of the association when organized. And it shall thereupon turn over to the association any balance remaining in its hands free of obligation. If the association is not organized, such unexpended balance shall be prorated among, and returned to, those who contributed to the organization fund. The agreement should conclude with spaces for the prospective member to sign the agreement, and provide his or her address, and for the chairperson of the organizing committee to sign the agreement as an acceptance. SELECTING THE PROPER STATE INCORPORATION STATUTE While no drafting is involved, and thus no sample language is provided in this section, an important step in the development of a successful cooperative is selection of the proper statutory foundation for the association. To operate effectively in today’s business world, a cooperative must be a unique legal entity, separate from its members. The best way to create this unique entity is to form a cooperative corporation. A cooperative becomes a corporation when its organizers follow the steps set out in a law authorizing the formation of corporations. There is no Federal incorporation statute. Cooperatives incorporate under an appropriate State law. Incorporation offers several advantages over alternative structures, such as partnerships and unincorporated associations: l Incorporation facilitates the orderly succession of ownership. The entity has a perpetual life. As some members resign and new people join, redemption and issuance of a share of common stock or a membership certificate is a relatively simple means of clarifying each person’s status and rights in the association. l A corporation conveys to members and outsiders the image of a solid, longlasting venture. l If a cooperative is incorporated, the personal liability of each individual member, for losses suffered by the cooperative, is limited to the member’s equity in the cooperative. The organization of a cooperative as a business corporation has some important implications for how it conducts its affairs: l A corporation derives all of its legal authority from the State. It is a “person” in the eyes of the law, just like a natural person. It can do many things natural persons can, such as sign contracts, borrow money, own property, and sue and be sued. l While its powers are broad, those powers are limited to the ones granted by the State. For example, when the State agricultural cooperative law says only agricultural producers can vote in farmer cooperative affairs, no one else has the right to participate in policy decisions made by the membership. l The cooperative must obey business laws. Since managers and directors make the decisions for the corporation, they have an obligation to know and make sure the association follows all applicable laws. Persons who organize a cooperative have several incorporation statutes to choose from: l All States have special cooperative incorporation statutes. Some are broad, permitting the incorporation of virtually any business as a cooperative. Other are limited in scope. Many States have an Agricultural Cooperative Associations Act specially written to authorize incorporation of associations of producers of agricultural products. 9 l Every State has a general business corporation statute. A cooperative can be incorporated under this law and have its cooperative character established through proper drafting of the articles of incorporation and bylaws. l While most cooperatives are incorporated under a law of the State where the principle office is located, a few are organized under the laws of a different State. .It is usually best to organize under a cooperative incorporation statute of the State where the association’s headquarters is located. But it’s very important that the statute authorizing the cooperative permits a structure that meets the needs and desires of the members. The General Business Corporation Act and outof-State incorporation laws should be considered if the applicable cooperative law doesn’t permit the necessary organizational structure. A few so-called cooperatives are organized under a general not-for-profit corporation statute. Usually this is done to make it easier to obtain grant money. There are some potential adverse legal consequences of this type of incorporation that should be reviewed before following this path: l Most not-for-profit corporation laws expressly forbid the distribution of any earnings to members, trustees, officers, or other private persons. This means an association organized under such a statute can’t pay patronage refunds, one of the main reasons for operating a business as a cooperative. 0 In many States, if a nonprofit corporation goes out of business, members are prohibited from sharing in any assets left after the debts are paid. l Nonprofit corporations sometimes have had more trouble than cooperative corporations enforcing marketing agreements with their members. Cooperative statutes frequently provide specific authority for enforcement of marketing agreements. Not-for-profit acts have no such provision. If the leadership determines a cooperative is not organized 10 under the appropriate State statute, it is usually possible to reincorporate without seriously disrupting the ongoing business of the association. This will ordinarily involve redrafting the organization papers to conform to the new law and paying a modest fee to the appropriate State agency. ARTICLES OF INCORPORATION Once the leadership has determined the statute to use as the legal authority for a cooperative, the first document prepared is the articles of incorporation (articles). It is the acceptance of the articles by the State that establishes the cooperative as a unique “person” under the law. Most incorporation laws require a fairly common set of provisions to be included in the articles. These are discussed below. The statute will also require that before the articles are official they must be recorded in the office of a designated State officer. Failure to properly file the articles makes any business activity vulnerable to legal challenge. It is usually permissible to include information in the articles beyond that required by the incorporation statute. However, this is ordinarily not done because it is frequently more difficult to amend the articles than it is with other documents that may contain the same information. The articles are not a piece of paper to be prepared and then forgotten. The articles are routinely given the same respect by the courts as a statute. Therefore, the articles are binding on the directors, officers, and manager of a cooperative. Conduct beyond that authorized in the articles can subject the cooperative and its leaders to potential legal liability. The following are the elements common to most cooperative articles of incorporation. Heading The heading sets out the title of the document, the name of the cooperative, and the title of the authorization statute. 1 1 ARTICLES OF INCORPORATION (Name of Cooperative) We, the undersigned, all of whom are engaged in the production of agricultural products, do hereby voluntarily associate ourselves together for the purpose of forming a cooperative association, with (or without) capital stock, under the provisions of the Act of the State of Name The official name of the cooperative must be stated in the body of the articles and is usually the first provision: ARTICLE I. NAME The name of the association shall be Principal Place of Business This is a simple statement of the general location of the cooperative’s office: ARTICLE II. PRINCIPAL PLACE OF BUSINESS The association shall have its principal place of business in the city of County of , Stateof ’ . Purposes The purposes for which the cooperative is being organized are specifically set out. While the purposes clause of the organizational agreement is limited to immediate objectives, the pur12 poses are usually stated as broadly as possible in the articles of incorporation. Any service the cooperative may someday provide is frequently authorized, at least in a general way. This reduces the likelihood the articles will have to be amended whenever the association is asked by the members to provide additional services. Powers ARTICLE III. PURPOSES The association is formed for the following purposes: To market for its members and other producers any and all agricultural products or any products derived therefrom: to engage in any activity in connection with the picking, gathering, harvesting, receiving, assembling, handling, grading, cleaning, shelling, standardizing, packing, preserving, drying, processing, transporting, storing, financing, advertising, selling, marketing, or distribution of any such agricultural products or any products derived therefrom: to purchase for its members and others farm supplies and equipment: to manufacture, process, sell, store, handle, ship, distribute, furnish, supply, and procure any and all such farm supplies and equipment; and to exercise all such powers in any capacity and on any cooperative basis that may be agreed upon. The State statute authorizing formation of a cooperative will set out in detail the activities the cooperative may engage in. As a general rule, the statutory language is copied virtually verbatim into the articles. The following is an example of a typical statutory provision restated as an article of incorporation: ARTICLE IV. POWERS I This association shall have the following powers: 13 (a) To borrow money without limitation as to amount of corporate indebtedness or liability: to give a lien on any of its property as security therefore in any manner permitted by law: and to make advance payments and advances to members and other producers. (b) To act as the agent or representative of any member or members in any of the activities mentioned in Article III hereof. (cl To buy, lease, hold, and exercise all privileges of ownership over such real or personal property as may be necessary or convenient for the conduct and operation of the business of the association, or incidental thereto. (d) To draw, make, accept, endorse, guarantee, execute, and issue promissory notes, bills of exchange, drafts, warrants, certificates, and all kinds of obligations and negotiable or transferable instruments for any purpose that is deemed to further the objects for which this association is formed, and to give a lien on any of its property as security therefor. (e) To acquire, own, and develop any interest in patents, trademarks, and copyrights connected with, or incidental to, the business of the association. (fl To cooperate with other similar associations in creating central, regional, or national cooperative agencies, for any of the purposes for which this association is formed, and to become a member or stockholder of such agencies as now are or hereinafter may be in existence. (g) To have and exercise, in addition to the foregoing, all powers, privileges, and rights conferred on ordinary corporations and cooperative 14 marketing associations by the laws of this State and all powers and rights incidental or conducive to carrying out the purpose for which this association is formed, except such as are inconsistent with the express provisions of the act under which this association is incorporated, and to do any such thing anywhere; and the enumeration of the foregoing powers shall not be held to limit or restrict in any manner the general powers which may by law be possessed by this association, all of which are hereby expressly claimed. Duration The articles will say how long the cooperative is authorized to exist. Virtually all modern laws permit perpetual existence. Some laws in effect at the time longstanding cooperatives were organized limited the permissible life of a cooperative to a set period of time, such as 50 years. Associations that have been active for several decades should check to make sure their duration clause provides for perpetual operation. I ARTICLE V. PERIOD OF DURATION This association shall have perpetual existence. Directors Most statutes require the articles to name the initial policymakers of the cooperative. A majority of the incorporation statutes ask for the number of directors and names and addresses of the initial board. The articles often require “at least” the minimum number of directors required by statute: the precise number is set in the bylaws. Some statutes ask for the names and addresses of incorporators, in which case the appropriate title and references to incorporators would be substituted for “directors” in the example. If the law asks for both. then this draft provision is essentially inserted a second time and appro15 priately worded in each instance. ARTICLE VI. DIRECTORS This association shall have at least_ directors. The names and addresses of those who are to serve as the initial directors are: NAME ADDRESS Capital Structure The articles usually contain a description of the capital structure of the cooperative. If stock is issued, the number of shares authorized and the par value of each share of each class of stock (common, preferred) are set forth. The rights granted owners of each class of stock, the restrictions on owners of each class, and the dividends to which each class is entitled are also explained. If stock is not issued, a description must be included of how the rights and interests of the members will be determined. Sample language for both a stock and a nonstock association is provided below. The capital stock example provides for both voting common and nonvoting preferred stock. Nonvoting preferred stock is a useful way to account for additional nonpatronage investments by members. It has also been used as a way of raising equity from nonmembers, such as other members of the community interested in supporting the cooperative. If any interest in the cooperative is being sold to nonmembers, counsel must be retained to advise the association on applicable securities law requirements. The sample language also assumes that the organization 16 limits each member to one vote. If proportional voting based on patronage is utilized, counsel will have to prepare a description of how votes will be accumulated and any limit on the number of votes any one member can amass. All of the information in the example below is important and should be included somewhere in the organizational documents. However, not all incorporation laws require that all of it be in the articles. It may be possible to place some of these provisions in the bylaws. ARTICLE VII. CAPITAL STOCK (stock cooperative) Section 1. Classes and Authorized Amounts. The capital stock of the association shall consist of shares of common stock with a par value of $ per share, and shares of preferred stock with a par value of $ per share. Section 2. Common Stock. The common stock of this association may be purchased, owned, or held only by agricultural producers who (1) patronize the association in accordance with uniform terms and conditions prescribed by it, and (2) have been approved by the board of directors. ‘Producer’ shall mean and include persons (natural or corporate) engaged in the production of (product), or other agricultural products, including tenants of land used for the production of any such product, and lessors of such land who receive as rent therefore part of any such product of such land, and cooperative associations (corporate or otherwise) of such producers. Each member shall hold only one share of common stock and each eligible holder of common stock shall be entitled to only one vote in any meeting of the stockholders upon each matter submitted to vote at a meeting of the stockholders. In the event the board of directors of the association shall find, following a hearing, that any of 17 the common stock of this association has come into the hands of any person who is not eligible for membership, or that the holder thereof has ceased to be an eligible member, such holder shall have no rights or privileges on account of such stock, or vote or voice in the management or affairs of the association other than the right to participate in accordance with law in case of dissolution, The association shall repurchase such stock for par value. If such holder fails to deliver any certificate evidencing the stock, the association may cancel such certificate on its books and records, and the certificate is thereby null and void. The common stock of this association may be transferred only with the consent of the board of directors of the association and on the books of the association, and then only to persons eligible to hold it. No purported assignment or transfer of common stock shall pass to any person not eligible to hold it, nor the rights or privileges on account of such stock, nor a vote or voice in the management of the affairs of the association. This association shall have a lien .on all of its issued common stock for all indebtedness of the holders thereof to the association. No dividends shall be paid on the common stock. Section 3. Preferred Stock. The preferred stock of this association may be issued to any person, association, partnership, or corporation. Preferred stock shall carry no voting rights. Noncumulative dividends not to exceed percent (_%) per year may be paid on preferred stock at the absolute discretion of the board of directors. Preferred stock may be transferred only on the books of the association. It may be redeemed in whole or in part on a pro rata basis at par, plus any dividends declared and unpaid, at any time on thirty 18 (30) days’ notice by the association, provided said stock is redeemed in the same order as originally issued by years. If the owner fails to deliver any certificate evidencing such stock, the association may cancel the stock on its books. This association shall have a lien on all of its issued preferred stock for all indebtedness of the holders thereof to the association. Upon dissolution or distribution of the assets of the association, the holders of all preferred stock shall be entitled to receive the par value of their stock, plus any dividend declared and unpaid, before any distribution is made on the common stock. *ii********* ARTICLE VII. MENBERSHIP (nonstock cooperative) The association shall not have capital stock but shall admit applicants to membership in the association upon such uniform conditions as may be prescribed in its bylaws. This association shall be operated on a cooperative basis for the mutual benefit of its members as producers. Membership in the association shall be restricted to producers and associations of producers who shall patronize the association, The voting rights of the members of the association shall be equal, and no member shall have more than one vote upon each matter submitted to a vote at a meeting of the members. The property rights and interests of each member in the association shall be unequal and shall be determined and fixed on a patronage basis, and the net proceeds from the business of the association shall be allocated to member-patrons in the proportion that the patronage of each member bears to the total patronage of all the members of the association. 19 Amendment The articles may be changed whenever the appropriate percentage of the membership (and, if required by statute, the directors), as set out in the incorporation statute, votes to amend them. While the percentage is established by law, it is a good idea to include that requirement in the articles to remind people that the articles can be changed and to eliminate doubt as to the supp,ort required when the issue of possible amendment arises. While a majority of the statutes set the requirement at a simple or two-thirds majority of the members voting, several statutes require approval of a majority of the total membership. If turnout for member meetings is light, this poses a serious obstacle to changing the articles. ARTICLE VIII. Amendment These articles may be amended upon the affirmative vote of two-thirds of the members actually voting on the proposed amendment. Signatures Those persons who ask the State to authorize the cooperative, often called incorporators, complete the document by signing it. Signed this day of ,19__, by the undersigned incorporators, all of whom are engaged in agriculture as bona fide producers of agricultural products. I 20 BYLAWS Shortly after the cooperative is incorporated, the members adopt a set of bylaws. Bylaws provide a detailed description of the structure and method of operation of the cooperative. Bylaws are a working plan for how the association should function. Most incorporation laws give members flexibility to structure their cooperative as they see fit. Most references to bylaws are permissive, giving members the authority to write their own rules on how to handle a particular issue. Bylaws normally are not filed with the State. But like the articles, they are treated in a manner similar to statutes by the courts. Failure of the leadership to follow the bylaws can also lead to legal liability. Numerous provisions are usually found in cooperative bylaws. Some are similar to those included in bylaws of forprofit corporations, others are unique to cooperation. The most common provisions are discussed in this report. But a cooperative is free to place virtually any rule on the conduct of its affairs in the bylaws, provided the provision doesn’t conflict with an applicable law or the articles of incorporation. While almost any activity can be covered by a bylaw, only broad issues of long-term significance to members should be the subject of a bylaw. Operating decisions should not be covered in the bylaws, but rather in board policy resolutions. Board policies are directives to the management, issued by the board in its role as policymaker for the cooperative, that can be changed to reflect changing conditions at any time by the board. For example, whether the cooperative will do business with nonmembers is a general, long-term decision that should be covered in the bylaws. How nonmembers will be charged to insure that they pay their fair share of cooperative expenses is a short-term decision requiring the flexibility possible under a policy statement. Membership The first bylaw usually states the qualifications to be a member of the cooperative. Membership should be limited to 21 persons who will patronize the cooperative. For an agricultural cooperative, this means membership should be limited to producers of agricultural products and other farmer cooperative associations. Limiting the membership to producers and producer cooperatives is essential if the association wants to qualify for the limited antitrust protection of the Capper-Volstead Act, or for tax treatment under section 521 of the Internal Revenue Code, or if the cooperative is incorporated under a State law that requires that members be agricultural producers. This bylaw may also include other reasonable prerequisites to membership, such as agreeing to purchase a share of stock, sign a marketing agreement, and patronize the association on a regular basis. This bylaw should also provide for the orderly termination of a membership. This can be particularly important for an agricultural cooperative. The significant legal privileges listed above are only available to associations of producers. This requirement is only met if the membership of anyone who stops farming is revoked. When a membership is terminated, it is a good practice to return the purchase price of the voting share of common stock, or the membership fee in a nonstock cooperative (but not necessarily the retained patronage investments). This makes it clear to the former member that the termination was more than a symbolic gesture and that he or she no longer has the right to participate in the policymaking of the association. This sample language is written for a stock cooperative. In a nonstock cooperative, appropriate references to membership certificates and fees would be substituted for the terms common stock and purchase price. I ARTICLE I. MEMBERSHIP Section 1. Qualifications. Any person, firm, partnership, corporation or association, including both landlord and tenant in share tenancies, who is a bona fide producer of agricultural products in the territory in which the association is engaged in business, and who agrees to be a patron of the associa22 tion, signs a marketing agreement with the association, purchases one share of common stock, and meets such other conditions as may be prescribed by the board of directors, may become a member of the association. All applications for membership must be approved by the board of directors. Member status is effective as of the time the board approves the application for membership. Section 2. Suspension or Termination. In the event the board of directors of the association shall find, following a hearing, that any of the common stock of this association has come into the hands of any person who is not eligible for membership, or that the holder thereof has ceased to be an eligible member, or that such holder has not marketed through the association the products covered by a marketing agreement with the association, or not otherwise patronized the association for a period of (_) year(s), or otherwise violated the articles of incorporation, bylaws, or other agreements made with the association, the association may suspend such holder’s rights as a member and terminate the membership. When a membership is terminated, the association shall repurchase the member’s share of common stock for par value. The holder shall return to the association the certificate evidencing the holder’s share of stock. If such holder fails to deliver the certificate, the association may cancel such certificate on its books and records, and the certificate is then null and void. A suspended or terminated member shall have no rights or privileges on account of any stock held, nor vote or voice in the management or affairs of the association other than the right to participate in accordance with law in case of dissolution. 23 Meetings of Members A cooperative is owned and controlled by its members. A bylaw sets out the ground rules for convening the members to exercise their control function. An annual meeting is held each year to elect directors, review past performance and future plans, and conduct other business as needed. It is often a good idea to set the time of the annual meeting as promptly as possible after the end of the fiscal year. This encourages management to close the books for the year in a timely fashion and the auditor to review financial results and issue the audit report without delay. Also, the members are still focusing on last year’s performance. If the annual meeting is delayed too long, the members are often into another production cycle and not able to properly exercise their control over the cooperative. This bylaw should also authorize special member meetings to handle any business that can’t wait until the next annual meeting. Members should receive sufficient advance notice so they can plan to attend meetings. Many incorporation statutes have specific minimum notice requirements, both in terms of lead time (often 10 days or 2 weeks) and method (direct mail, publication in local newspaper). Associations incorporated under such a law must make sure the bylaw provides at least as much notice as the statute requires, and that appropriate notice is actually given. Otherwise any action taken at the meeting may be open to legal challenge. A statement on how voting will be conducted is also appropriate in this bylaw. How many votes each member will have is only one aspect of this issue. The draft language limits each member to one vote. If proportional voting is used, a description of how members will qualify for multiple votes, and a limit, if any, on the number of votes any one member can accumulate, should be substituted in the applicable place. Language on voting on behalf of members organized as partnerships and corporations can avoid an embarrassing dispute right before or even during a membership meeting over how such a member will vote on an issue. Many cooperatives 24 have members organized as partnerships or corporations designate, in writing, who will cast the member’s vote, and that person alone can vote for the member until the member provides a valid written notice of a change in the designee. Other topics that should be addressed include proxy voting, voting by mail, and cumulative voting. There is no “right” way to handle these matters, although cumulative voting is usually prohibited. Sometimes the incorporation statute discusses proxy voting and voting by mail. Many cooperatives that permit proxy voting limit the number of proxies a member can vote, often to only one. If voting by mail is allowed, it is often limited to issues discussed in the meeting notice. Finally, the minimum number of members that need be present to conduct business, called a quorum, should be specified. If the statute permits, quorum requirements are frequently set low (e.g., 10 members or 10 percent of the membership, whichever is greater) so meetings will not have to be adjourned for lack of a quorum. While this exposes the association to control by an active minority, it is sometimes necessary in order to make sure that any business is conducted at all. ARTICLE II. MEETINGS OF MEMBERS Section 1. Annual Meeting. The annual meeting of the members of this association shall be held in the State of , during the month of -9at such time and in such place as the board of directors shall designate. Section 2. Special Meetings. Special meetings of the members of the association may be called at any time by order of the board of directors and shall be called upon written request of at least members, or at least _ percent (__%) of the membership, whichever is a greater number. Section 3. Notice of Meetings. Written notice of every regular and special meeting of members shall be prepared and mailed to the last known post office 25 address of each member not less than -0 days before such meeting. Such notice shall state the nature of the business expected to be conducted and the time and place of the meeting. No business shall be transacted at any special meeting other than that referred to in the notice. Section 4. Voting. Unless otherwise stated in the articles of incorporation, or these bylaws, or required by applicable law, all questions shall be decided by a vote of a majority of the members voting thereon. Each member shall be entitled to only one vote, Voting by mail shall not be permitted. Proxy voting shall be allowed. Each proxy shall be in writing, and no member shall vote more than one proxy. Cumulative voting is not permitted. If a membership is held by a partnership, corporation, or other legal entity, the member shall designate in writing the person who shall vote on behalf of the member. That designation shall remain in effect until written notice of a properly authorized change in the designated voter shall be received by the association. Section 5. Quorum.( members or percent I%) of the membership, whichever is a larger number, shall constitute a quorum at any properly called annual or special membership meeting. Directors and Officers While the members own and control the cooperative, the responsibility for continuous supervision of the association is usually delegated to a small group of democratically elected leaders referred to as the board of directors, who in turn select officers to carry out specific leadership duties. Many cooperative experts consider the selection of directors as the most important governance decision made by the membership. 26 This bylaw covers the administrative rules for the selection of directors and officers and for the conduct of their meetings. Many important issues are discussed in this provision. Number and Qualification of Directors. The specific number and qualifications of directors must be established. The incorporation law will usually prescribe a minimum number of directors. There is no legal maximum on the size of a board, but experience suggests that if more than about nine people are on a local cooperative board, efficiency is reduced substantially. Many State statutes require that all directors be members of the cooperative. Some permit, or even require, one or more outside directors. The sample bylaw requires directors to be association members. If outside directors are to be authorized, the number and manner of selection should be included in the bylaw. Directors have access to pricing and other marketing plans that could be used by a competitor to take business from the cooperative. Thus, many cooperatives bar persons affiliated with competitors of the association from being directors. Cooperatives usually do not, however, bar such persons from membership. For example, a farmer who sells produce directly to a grocery chain may belong to and market some produce through a cooperative that also sells wholesale, but that farmer is frequently denied access to a seat on the cooperative board. A few cooperatives guarantee board turnover by limiting the number of consecutive terms a director can serve. Director and Officer Selection. The rules for election of directors by the members, and officers by the directors, are set out in the bylaws. In many cooperatives the directors are elected for three-year terms on a staggered basis. While directors are usually elected from the membership at large, some cooperatives elect directors on the basis of geographic regions, usually called districts. Sample language authorizing the election of directors by districts is set out in Appendix A. Officers are usually elected for one-year terms. Even many statutes that require all directors to be association members permit some officers, notably the secretary and treasurer, to be nonmembers of the association. This allows staff employees who normally keep association records and books to have both the appropriate title and attendant responsibilities. 27 Sometimes directors and officers are not able to serve their full term. The bylaws should provide for a method to fill vacant director and officer positions, Usually the remaining directors select an interim director to fill a board vacancy until the next membership meeting. Directors can usually select a replacement officer at any properly called board meeting. Meetings. The bylaws frequently provide much of the same information for director meetings as for member meetings - regular and special meetings are authorized, notice and quorum requirements are set out. Compensation . Another issue that should be addressed is director compensation. Many directors spend innumerable hours each year overseeing and promoting the cooperative. It seems reasonable for the association to at least cover out-ofpocket expenses incurred on behalf of the association. Some cooperatives also pay a modest fee for each meeting directors attend, or time they spend on cooperative affairs. While reimbursement of reasonable expenses is usually covered with a blanket authorization, fees should be handled more delicately. Directors should not have the right to set their own compensation. Both the decision to pay any fee, and the level of any fee authorized, should be made by the members. Nepotism. Many cooperatives also have a bylaw provision preventing directors and members of their immediate families from holding salaried positions with the cooperative. This antinepotism language eliminates the chance some members might view the awarding of the position as the result of undue influence of the director, rather than selection on the basis of merit. Removal of Directors. Finally, it may be necessary at some time to remove a director from that position. Sometimes termination is automatic, e.g., failure to maintain member status or missing too many board meetings. The ultimate authority in a cooperative is vested in the members, and they should be able to remove a director at will. As this is often a severe and divisive undertaking, it is best to provide a procedure in the bylaws that affords due process for the director under attack and conforms closely to any procedural requirements set out in the incorporation statute. 28 ARTICLE III. DIRECTORS AND OFFICERS Section 1. Number and Qualification of Directors. The association shall have a board of directors of _(_) members. Each director elected shall be a member of this association in good standing. No person shall be eligible to be a director if that person is in competition with, or is affiliated with any enterprise that is in competition with, the association. If a majority of the board of directors of the association finds at any time following a hearing that any director is so engaged or affiliated that person shall thereupon cease to be a director. No director after having served for I ) consecutive full term(s) shall be eligible to succeed himself or herself, but after a lapse of _ I_) yed4 d-d again be eligible. Section 2. Election of Directors. At the first annual meeting of the members of this association, directors shall be elected to succeed the incorporating directors. _ director(s) shall be elected for one (1) year: _ directors for two (2) years and _directors for three (3) years. At each annual meeting thereafter, new directors shall be elected, for a term of three (3) years each, to succeed those directors whose terms are expiring. All directors shall be elected by secret ballot, and the nominee(s) receiving the greatest number of votes shall be elected. Section 3. Election of Officers. The board of directors shall meet within seven (7) days after the first election and within seven (7) days after each annual election and shall elect by ballot a president, vice president, secretary, and treasurer, each of whom shall hold office until the election and qualifi29 cation of a successor, unless earlier removed., by death, resignation, or for cause. The president and vice president shall be members of the board of directors. The secretary and treasurer need not be directors or members of the association. Section 4. Vacancies. Whenever a vacancy occurs in the board of directors, other than from the expiration of a term of office, the remaining directors shall appoint a member to fill the vacancy until the next regular meeting of the members. If the term of the vacating director does not expire at that regular member meeting, a special election shall be held to select a director to fill the year or years remaining in that term. If one or more officer positions become vacant, such offices shall be filled by the board of directors, through election by ballot, at either a regular or special meeting of the board. Section 5. Regular Board Meetings. In addition to the meetings mentioned above, regular meetings of the board of directors shall be held monthly, or at such other times and at such places as the board may determine. Section 6. Special Board Meetings. A special meeting of the board of directors shall be held whenever called by the president or by a majority of the directors. Only the business specified in the written notice shall be transacted at a special meeting. Each call for a special meeting shall be in writing, shall be I signed by the person or persons calling the meeting, shall be addressed and delivered to the secretary, and shall state the time and place of such meeting. Section 7. Notice of Board Meetings. Oral or written notice of each meeting of the board of directors shall be given each director by, or under the 30 supervision of, the secretary of the association not less than _ hours prior to the time of meeting. But such notice may be waived by all the directors, and their appearance at a meeting shall constitute a waiver of notice. Section 8. Quorum. A majority of the board of directors shall constitute a quorum at any meeting of the board. Section 9 . Reimbursement and Compensation. The association shall reimburse directors for all reasonable expenses incurred in carrying out their duties and responsibilities. The compensation, if any, of the members of the board of directors shall be determined by the members of the association at any annual or special meeting of the association. No member of the board of directors, or member of the immediate family of any board member, shall occupy any position in the association on regular salary. Section 10. Removal of Directors. Whenever any director shall fail to meet the qualifications as described in Section I of this Article, or fails to attend three (3) consecutive board meetings, either regular or special, without just cause and provided that notice of such meetings has been given in accordance with these bylaws, then it shall be the duty of the board to remove said director and to fill the vacancy in accordance with Section 4 of this Article. Members, through petition noting the charges and signed by at least _(J members or _ percent (_%) of the membership, whichever is a greater number, may request the removal of any member of the board. Such director shall be notified in writing of the charges and given an opportunity to be heard at a membership meeting of the association. Removal of a director shall require a vote of of 31 I members voting. Any vacancy resulting from such action shall be filled by nomination and vote of members at such meeting. Duties of Directors The directors are responsible for the ongoing operations of the cooperative. They set policy and oversee the staff operations that implement that policy. Cooperative bylaws often contain language placing a legally binding obligation on the directors to carry out their most important duties. This bylaw often establishes the general relationship between the directors and the manager. An important responsibility of the board is to hire and supervise the manager. The board sets manager compensation and benefits. The manager, not the board, runs the day-to-day business operations of the cooperative. This includes hiring and firing other employees. If the board is dissatisfied with the way the cooperative is conducting its affairs, it should exercise its authority to replace the manager, but it should not take on the manager’s responsibilities. The bylaw should also recognize another important board responsibility-protecting member assets-by providing for appropriate bonds and insurance, an accounting and auditing system, and board control of association funds. Finally, the board should have the authority to appoint committees so its work load can be handled efficiently. Sometimes specific reference is made to an executive committee. An executive committee with broad powers can be useful, especially when the membership is spread over a large geographic area and some directors have to travel some distance to attend meetings. But the other directors must be careful not to abdicate all board responsibility to the executive committee. ARTI&E IV. DUTIES OF DIRECTORS Section 1. Management of Business. The board of directors shall have general supervision and control of the business and the affairs of the associa32 tion and shall make all rules and regulations not inconsistent with law, the articles of incorporation, or bylaws for the management of the business and the guidance of the members, officers, employees, I and agents of the association. Section 2. Employment of Manager. The board of directors shall have power to employ, define duties, fix compensation, and dismiss a manager with or without cause at any time. The board shall authorize the employment of such other employees, agents, and counsel as it from time to time deems necessary or advisable in the interest of the association. The manager shall have charge of the business of the association under the direction of the board of directors. Section 3. Bonds and Insurance. The board of directors shall require the manager and all other officers, agents, and employees charged by the association with responsibility for the custody of any of its funds or negotiable instruments to give adequate bonds. Such bonds, unless cash security is given, shall be furnished by a responsible bonding company and approved by the board of directors, and the cost thereof shall be paid by the association. The board of directors shall provide for the adequate insurance of the property of the association, or property which may be in the possession of the association, or stored by it, and not otherwise adequately insured, and, in addition, adequate insurance covering liability for accidents to all employees and the public. Section 4. Accounting System and Audits. The board of directors shall have installed an accounting system which shall be adequate to meet the requirements of the business and shall require proper records to be kept of all business transactions. 33 Duti 34 At least once in each year the board of directors shall secure the services of a competent and disinterested public auditor or accountant, who shall make a careful audit of the books and accounts of the association and render a report in writing thereon, which report shall be submitted to the directors and the manager of the association and made available to the members of the association. This report shall include at least a balance sheet showing the true assets and liabilities of the association, and an operating statement for the fiscal period under review. Section 5. Depository. The board of directors shall select one or more banks to act as depositories of the funds of the association and determine the manner of receiving, depositing, and disbursing the funds of the association and the form of checks and the person or persons by whom they shall be signed, with the power to change such banks and the person or persons signing such checks and the form thereof at will. Section 6. Committees. The board may, at its discretion, appoint from its own membership an executive committee of _members, and determine their tenure of office and their powers and duties. The board may delegate to the executive committee all or any stated portion of the functions and powers of the board, subject to the general direction, approval, and control of the board. Copies of the minutes of any meeting of the executive committee shall be mailed to all directors within seven (7) days following such meeting. The board of directors may, at its discretion, appoint such other committees as it deems appropriate. 5 of Officers Nhile the tasks that go with each major office of a corpora- tion are generally well understood, it is still important to have those duties spelled out in the bylaws. This will minimize any uncertainty over the roles each plays in leading the association. ARTICLE V. DUTIES OF OFFICERS Section 1. Duties of President. The president shall (1) preside over all meetings of the association and of the board of directors: (2) call special meetings of the board of directors; (3) appoint such committees as the board of directors may deem advisable for the proper conduct of the cooperative: and (4) perform all acts and duties usually performed by a presiding officer. Section 2. Duties of Vice President. In the absence or disability of the president, the vice president shall perform the duties of the president, provided, however, that in case of death, resignation, or disability of the president, the board of directors may declare the office vacant and elect any eligible person president. Section 3. Duties of Secretary. The secretary shall keep a complete record of all meetings of the association and of the board of directors and shall have general charge and supervision of the books and records of the association. The secretary shall sign papers pertaining to the association as authorized or directed by the board of directors. The secretary shall serve all notices required by law and by these bylaws and shall make a full report of all matters and business pertaining to the office to the members at the annual meeting. The secretary shall keep the corporate seal and all books of blank certificates, complete and countersign all certificates issued, and affix the corporate seal to all papers requiring a seal: shall keep complete stock ownership records: shall make all reports required by law: and shall perform 35 such other duties as may be required by the association or the board of directors. Upon the election of a successor, the secretary shall turn over all books and other property belonging to the association. Section 4. Duties of Treasurer. The treasurer shah be responsible for the keeping and disbursing of all monies of the association, and shall keep accurate books of accounts of all transactions of the association. The treasurer shall perform such duties with respect to the finances of the association as may be prescribed by the board of directors. At the expiration of his term of office, the treasurer shall promptly turn over to his successor all monies, property, books, records, and documents pertaining to his office or belonging to the association. Operation at Cost and Members’ Capital Many of the unique aspects of the bylaws of a cooperative pertain to the association’s financial affairs. Tax law plays an important part in structuring these provisions. This report does not attempt to explain cooperative taxation but only makes passing references to tax terms when explaining the importance of certain bylaw provisions. Since the overall objective of a cooperative is to maximize the income of its members, leaders must have flexibility to acquire capital and minimize taxes. The next several provisions, up to and including dissolution, authorize business and tax planning options compatible with doing business on a cooperative basis. This section often starts with a straightforward statement that the association will operate on a service-at-cost basis for the mutual benefit of the members as patrons and then covers specific issues to implement that statement. Language is usually included to allocate margins on a patronage basis. Allocation can be based on the volume or the value of business conducted on a patronage basis. Cooperatives dealing in one commodity, or in similar commodities, usually use the volume method. Those that handle several products 3s with divergent values often use the dollar-value-of-business method. The sample language assumes that the association is a marketing cooperative using the volume method. Appropriate wording for supply cooperatives and those using the value method is provided in parentheses. Marketing cooperatives have an alternative method of raising equity capital, the collection of per-unit retains. Language authorizing this option should be included in their bylaws. The term “capital credits” is used in the sample language to distinguish the retained margins and per-unit retains from direct member investments in stock. This distinction simplifies establishing an equity redemption program for patronage-based investments apart from any redemption of direct investments. The bylaw should specify whether dividends will be paid on this patronage capital. Since the completeness and accuracy of each patron’s account is vital to assigning financial obligations and benefits in the appropriate manner, a provision obligating the association to keep the required records is an important protection for the members. A statement requiring the timely distribution of written notices of allocation and per-unit retain certificate is both good business practice and a requirement for favorable tax treatment under the Internal Revenue Code. That statement should authorize the board to issue those notices and certificates, in either qualified or nonqualified form, so as to maximize the tax planning alternatives available. ARTICLE VI. OPERATION AT COST AND MEMBERS’ CAPITAL Section 1. Operation at Cost. The association shall at all times be operated on a cooperative service-at-cost basis for the mutual benefit of its member patrons. Section 2. Margin Allocation. In order to induce patronage and to assure that this association 37 will operate on a service-at-cost basis in all its transactions with its members, the association is obligated to account on a patronage basis to all member patrons on an annual basis for all amounts received from business conducted with members on a patronage basis, over and above the cost of providing such services and making reasonable additions to reserves. Such allocation shall be on the basis on the volume (dollar value) of product marketed through (purchased from) the association. The association is hereby obligated to pay all such amounts to the patrons in cash or by credits to a capital account of each member patron. Section 3. Per-Unit Retains. Each member also agrees to provide capital in such amounts as determined by the board of directors based on physical units of product marketed through the association. Such per-unit retains shall be allocated to the member’s capital credit account, Section 4. Dividends. No dividends shall be paid on any capital credits. Section 5. Records and Documentation. The books and records of the association shall be set up and kept in such a manner that at the end of each fiscal year, the amount of capital, if any, so furnished by each member is clearly reflected and credited in an appropriate record to the capital account of each member. The association shall, within 8-l/2 months after the close of each fiscal year, notify each member of the capital so credited to the member’s account. The notice shall be in the form of a written notice of allocation or per-unit retain certificate (as those terms are used in Subchapter T of the Internal Revenue Code) or other appropriate written document. The board shall have discretion to issue such 38 notices and certificates in either “qualified” or “nonqualified” form as permitted by the Internal Revenue Code and other applicable law. Section 6. Fiscal Year. The fiscal year of this association shall commence on the first day of (month) and end on the last day of (preceding month). Equity redemption A bylaw authorizing redemption of patronage capital and explaining the method to be used helps insure that, to the extent possible, current patrons finance the cooperative. There are three types of equity redemption plans. Most cooperatives that have an equity redemption program use a revolving fund plan whereby equities are redeemed in the order in which they were allocated. The first paragraph of the sample bylaw presents this approach. A limited number of cooperatives redeem a percentage of all outstanding equities each year. Sample language to implement this plan is found in section 1 of the Alternative Equity Redemption Bylaw (Appendix B). A few cooperatives have adopted a base capital plan. Under a base capital plan each member is assigned responsibility for providing a pro rata share of needed capital based on proportional use of the cooperative during a base period. A sample bylaw authorizing a Base Capital Plan is presented in Appendix C. Associations interested in such a plan should contact a professional adviser who can draft a scheme tailored to the association’s unique needs. Some cooperatives grant the board discretion to retire outstanding member equity “out of order” as it deems in the best interests of the association. Sample language for implementation of the discretionary approach appears in the second paragraph of the sample bylaw below. Other cooperatives provide a specific redemption preference for equity of the estates of deceased members and/or retired members who have reached a certain age. An event-specific preferences clause can be complex, particularly if it attempts to 39 deal with the special problems created by members organized as legal entities and thus do not regularly retire or die. Sample language covering this situation is provided in section 2 of the sample bylaw in Appendix B. New associations are not going to be in a position to redeem equity for several years. But an early commitment to develop a regular equity redemption program and agreement on the rules for its implementation will strengthen an association’s cooperative character and give early supporters some assurance that they will get their investment back at some time in the future. Consent ARTICLE VII. EQUITY REDEMPTION Section I. Regular Redemption, Revolving Fund. If at any time the board of directors determines that the financial condition of the association will not be impaired thereby, capital credited to members’ accounts may be redeemed in full or in part. Any such redemption of capital shall be made in order of priority according to the year in which the capital was furnished and credited, the capital first received by the association being the first redeemed. Section 2. Discretionary Special Redemptions. Notwithstanding any other provision of these bylaws, the board, at its absolute discretion, shall have the power to retire any capital credited to members’ accounts on such terms and conditions as may be agreed upon by the parties in any instance in which the interests of the association and its members are deemed to be furthered thereby and funds are determined by the board to be available for such purposes. If the cooperative is to deduct the face value of written notices of allocation and per-unit retain certificates from taxable income in the year issued, the Internal Revenue Code requires patrons to consent to include those amounts in taxable income 40 in the year they receive a notice or certificate, even though the cooperative retains the funds. The simplest way to obtain consent from members is to include a bylaw making consent a condition for membership. The Internal Revenue Service has published a model consent bylaw which should be adopted. Another paragraph is inserted making it clear that the cooperative must explain the meaning of consent to members and prospective members: this reminds leaders that such an explanation is also a tax law requirement. ARTICLE VIII. CONSENT Each person who hereafter applies for and is accepted to membership in this association, and each member of this association on the effective date of this bylaw who continues as a member after such date, shall, by such act alone, consent that the amount of any distributions with respect to his patronage occurring after the effective date of this bylaw, which are made in qualified written notices of allocation or qualified per-unit retain certificates (as defined in 26 U.S.C. 1388), and which are received by him from the cooperative, will be taken into account by him at their stated dollar amounts in the manner provided in 26 U.S.C. 1385(a) in the taxable year in which such written notices of allocation and per-unit retain certificates are received by him. Written notification of the adoption of this Article, a statement of its significance, and a copy of the provision shall be given separately to each member and prospective member before membership in the association. Nonmember Business The bylaws should make it clear whether the association may or may not do business with nonmembers. The sample bylaw assumes that the association will want the option to conduct nonmember business. 41 If the association does nonmember business, the CapperVolstead Act and many State incorporation laws require that a majority of the association business be done with or for members. The first three sentences of the sample bylaw are thus found in most cooperative bylaws. If an association wishes to qualify for tax treatment under section 521 of the Internal Revenue Code, it may not do more than 15 percent of its farm supply business with persons who are neither members nor producers (business with the Federal government can be disregarded in making this computation). The last two sentences in the example cover this situation. ARTICLE IX. NONMEMBER BUSINESS This association may conduct business with nonmembers on either a patronage or nonpatronage basis. However, this association shall not market the products of nonmembers in an amount the value of which exceeds the value of the products marketed for members. Itshall not purchase supplies and equipment for nonmembers in an amount the value of which exceeds the value of the supplies and equipment purchased for members. It shall not purchase supplies and equipment for persons who are neither members nor producers of agricultural products in an amount the value of which exceeds fifteen percent (15%) of all its purchases. Business done for the United States or any of its agencies shall be disregarded in determining the limitations imposed by this section. Nonpatronage Income Several factors are combining to increase the proportion of cooperatives that have taxable earnings from nonpatronage sourced. These factors include a growing reliance on nonmember business to sustain the cooperative, more forceful positions by IRS auditors to classify investment income as nonpatronage sources, and less use of section 521. The bylaws should recog42 nize this as special income and provide the board discretion to add it to a capital reserve, distribute it to members, or put it to any other lawful use. I ARTICLE X. NONPAlXONAGE INCOME The nonpatronage income of the association shall be its gross receipts derived from all sources which under law do not qualify as patronage income, less all expenses properly attributable to the production of such nonpatronage sources income and all income taxes payable on such receipts by the association, Nonpatronage income shall be used in behalf of the association and its members in accordance with such lawful purposes, including assignment to an unallocated reserve account and allocation in whole or in part to members, as may be determined by the board of directors. Handling of Losses While cooperatives operate at cost over the long term, the financial world operates for accounting and tax purposes in single-year segments. Sometimes cooperatives have a loss in that relatively short framework. The bylaws should anticipate the possibility of a loss year. They should explain how decisions will be made to allocate the loss on an equitable basis. The proper treatment of losses by cooperatives for tax purposes has long been a contentious issue between cooperatives and the Internal Revenue Service. The sample bylaw reflects a moderate position that financial results on patronage and nonpatronage business should be separated: gains and losses within each category can be combined, or “netted,” for tax purposes; and losses under either category can be carried back or forward to offset earnings in other years under the applicable provisions of the tax code for businesses in general. As the rules for handling losses are subject to change from time to time, counsel should be asked to keep informed on this issue and advise the association when this bylaw may need revision. 43 It may also be prudent to include a prohibition on directors voting a direct assessment on the members. This will prevent outside interests from pressuring the directors into an action likely to have a negative impact on member relations. ARTICLE XI. LOSSES Section z . Patronage Losses. In the event the association suffers a loss during any year on business conducted with or for patrons, such loss may be apportioned among the patrons during the year of loss so that such loss will, to the extent practicable, be borne by the patrons of the loss year on an equitable basis. The board shall have full authority to prescribe the basis on which capital furnished by patrons may be reduced or such loss otherwise equitably apportioned among the patrons. In the event of a patronage loss in one or more departments or divisions of the operation of this association, but not so much as to cause an overall loss for the fiscal year, such loss or losses may be prorated against each of the remaining profitable departments on the basis of their respective percentage of the net margins during such fiscal year. Section 2. Nonpatronage Losses. If in any fiscal year the association shall incur a loss other than on patronage operations, such loss may be charged against any reserve accumulated from nonpatronage earnings in prior years. Section 3. General Provisions. The board shall have no authority to make assessments against members. This section shall not be construed to deprive the association of the right to carry backward or forward losses from any source whatsoever in accordance with the Internal Revenue Code or state taxing statutes. 44 Dissolution Many of the rules to dissolve a cooperative are contained in various statutes and are too complex to reproduce in the bylaws. One issue that should be addressed is how any assets that might remain after all liabilities are met should be distributed. In a noncooperative corporation this is usually done on the basis of stock ownership and, if the bylaws are silent on this issue, this may be the rule imposed on cooperative members by a court. It is a good idea to consider language in the bylaws of a cooperative making clear that such a distribution will be on the basis on patronage. I ARTICLE XII. DISSOLUTION AND PROPERTY INTEREST OF MEMBERS Upon dissolution, after all debts and liabilities of the association shall have been paid, all shares of preferred stock and common stock redeemed, and all capital furnished through patronage shall have been retired without priority on a pro rata basis, the remaining property and assets of the association shall be distributed among the members and former members in the proportion which the aggregate patronage of each member bears to the total patronage of all such members insofar as practicable, unless otherwise provided by law. Indemnification As the trend toward litigating to test the validity of various decisions by corporate leaders has grown, so has the possibility that directors, officers and employees may be found personally liable for the adverse consequences of their decisions. This has made some people understandably reluctant to assume leadership positions, particularly as unpaid or minimally compensated directors and officers. State governments, recognizing the valuable role directors and officers play in corporate affairs, have adopted a variety of 45 laws limiting liability of corporate leaders and permitting corporations to shield leaders from direct personal loss for decisions they make on behalf of the corporation. In many States this is a developing area of the law, and the extent of permissible indemnification changes frequently. To encourage members to serve as directors, and to make sure leaders don’t shy away from innovative ideas, cooperatives should consider a bylaw accepting the maximum amount of responsibility for indemnification permitted by State law. Prudent risk management usually includes the purchase of liability insurance to protect against an indemnification claim that might otherwise lead to significant exposure for the association. This coverage can seem quite expensive, so the sample language uses the permissive term “may” rather than the mandatory term “shall.” But whenever possible, this insurance should be obtained to avoid exposing member assets to unacceptable risk. I ARTICLE XIII. INDl3MNIFICATION The association shall indemnify its officers, directors, employees, and agents to the fullest extent possible under the provisions of the (applicable State law), as it may be amended from time to time. The association may purchase liability insurance coverage for any person serving as an officer, director, employee or agent to the extent permitted by applicable State law. Amendment It is important for cooperative leaders to remember that bylaws are not set in stone. They can, and should, be changed whenever they stand as a barrier to cooperative activity desired by the member-owners and permissible under the law. While the incorporation statute will include language permitting amendment of the bylaws and setting out how this can be accomplished, a bylaw on amendment is usually included to 46 remind leaders that change is possible and to call attention to any unusual legal requirement, such as a higher than normal positive voting requirement, that may be applicable. ARTICLE XIV. AMEXWMENTS If notice of the character of the amendment proposed has been given in the notice of meeting, these bylaws may be altered or amended at any regular or special meeting of the members by the affirmative vote of (_) of the members present or voting by proxy. Again, these are only examples of the provisions common to most cooperative bylaws. Virtually any other rule can be included that is permissible under law. It is up to the leaders and members of a cooperative to craft a set of bylaws that guides the association to serving members’ needs. MARKETING AGREEMENT Cooperatives that market farm products and other goods of their members will usually want a separate contract with each member establishing the terms upon which they will conduct their business transactions. This contract is commonly called a marketing agreement. If the members only want the cooperative to serve as a home-of-last-resort for product that can’t be sold elsewhere, then a marketing agreement is not necessary. But if the members want an organization that will enhance the return they earn on all of their production, then a marketing agreement is an important marketing tool. The marketing agreement is a unique contract in that, because the members own ,and control the cooperative, the members are entering into a contract with themselves. But it is more accurate to picture the agreement as a contract between each individual member and the membership as a whole. An important key to making the system work is for everyone to remember that the cooperative is democratically con47 trolled by the members. No individual member has a right to unilaterally cancel or change the marketing agreement, and the leadership should not insist on arrangements that are contrary to the wishes of a majority of the membership. The marketing agreement builds on the patronage commitment section of the organizational agreement. Each individual member’s obligation to the organization committee is transferred to the new cooperative entity. While the basic content of the articles and bylaws is standardized throughout the cooperative community, the substantive provisions of the marketing agreement are influenced by the custom and trade of the market for the commodity covered by the agreement. Thus the sample language may need substantial modification to meet member needs. As with the articles and bylaws, the terms of the marketing agreement are binding until changed, but they are not etched in stone. The association-represented by its officers and directors-and the members are free to adopt an approach to any issue different than the approach set out in the organization agreement or in previously adopted marketing agreements. Introduction These initial provisions identify the parties to the contract, the cooperative and the producer, and usually establish any other requirements that the producer must meet, including any initial equity investment obligation, to be a member of the cooperative. I MARKEUINGAGREEMENT THIS AGREEMENT, made as of this _ day of x9_, by and between , herein referred to as “Producer,” and t an agricultural cooperative having an office at , herein referred to as “Association”. RECITALS A. Association is an agricultural cooperative organized under the laws of the State of . B. Producer is a member of the Association who produces . C. Producer has purchased one share of common voting stock and paid to Association the sum of dollars ($), calculated at the rate of $ per -(unit) of (product) as specified in Producer’s membership application, receipt of which is acknowledged as an equity investment in the Association. This entitles Producer to all the benefits of membership in the Association as long as Producer complies with the articles of incorporation and bylaws of the Association and the provisions of this agreement. In consideration of the mutual covenants and obligations contained herein, the parties agree as follows: sales Terms This provision outlines how the association will sell the products and pay the member-patrons. The first paragraph normally defines the obligation of the producer to deliver product to the association. The same three options outlined in the patronage commitment examples for the organization agreement-full production, defined volume, and set acreage-are available for use in setting the delivery commitment once operation begins, The defined volume option is utilized in this example, so if another type of obligation is adopted, appropriate modification of the first paragraph should be made. The second paragraph explains how the association will distribute the proceeds of resale to the member. Two ways of accounting for these proceeds are common. One is sometimes referred to as a gross margin operation. The association agrees 49 to pay the member the going market price for the product, less deductions for operating expenses. After the end of the fiscal year, any margin is returned to the producers as a patronage refund. The other is called the pooling method. In this arrangement all proceeds above expenses are returned to the producers on the basis of patronage. Such associations do not generate margins, as such, and thus lack access to retained patronage refunds to obtain equity. Pooling cooperatives must rely on per-unit retains and other means of raising capital. An example of draft language for each option is set forth below. Other terms of sale should also be included in the agreement. Sample language on several areas commonly covered are provided: responsibilities for delivery and for inspection and grading of the product; authorization for the association to pledge the product and sales proceeds as collateral for loans and otherwise exercise the rights of ownership: authorization for the association to withhold fees to cover operating expenses and capital retains from checks to growers; and an explanation of how the parties to the contract will deal with liens against the product. Section 1. Sale of (product). Association agrees to buy and Producer agrees to sell to Association (number) (units) of (product) as defined by USDA standards and grown by Producer. This agreement is intended by the parties to pass an absolute title to (number) _ (units) of (product) grown by Producer as soon as they have a potential existence but such (product) shall be at the risk of Producer until delivery. * * * * * * OPTION - Gross Margin Operation * * * * l l Section 2. Payment to Producer. Association shall market Producer’s (product) and Producer shall accept as payment for Producer’s (product) a price based on the current market price in the area for (product) of like grade and 50 quality. Association shall pay the amount due Producer, less deductions authorized in Section 6 of this agreement, not more than _ days after delivery of [product) to Association or Association’s prescribed buying location. l * * l l * OPTION - Pooling Operation l l * * * * Section 2. Payment to Producer. The Association may at any time pool any or all (product) of Producer with any other (product) of a similar kind and grade. Producer shall receive, for (product) pooled, a unit price equal to the average net unit price obtained for the pooled (product), less deductions authorized in Section 6 of this agreement. Association shall make an advance payment to Producer of percent of the current market price in the area for (product) of like grade and quality not more than _ days after delivery of (product) to Association or Association’s prescribed buying location. Section 3. Delivery. All (product) shall be delivered by Producer at Producer’s expense at the earliest reasonable time after harvesting, or at such time as called for by Association, to Association’s principal place of business or to one of Association’s authorized buying locations as prescribed by Association. The Association will use its best efforts to locate buying locations within a reasonable distance from Producer’s farm. Section 4. Inspection and Grading. Prior to acceptance by Association, all (product) shall be inspected and graded by the USDA in accordance with USDA standard rules and regulations. All purchases and/or marketings of (product) received by Association from Producer 51 shall be based upon USDA grade, and Producer agrees to accept the grading established by USDA. Section 5. Loans and Security. Association shall have the power to borrow money for any purpose on the security of the (product) delivered to Association, the products derived thereupon, and evidence of such products or by-products, or cash or accounts arising from the sale thereof, and to give a lien, either legal or equitable, thereon as the absolute owner and/or marketing agent thereof. Association may commingle such products and byproducts with other products and by-products of like grade and variety and shall exercise all other rights of ownership without limitation. Section 6. Deductions. Association agrees to purchase from and/or market for Producer the (product) set forth in Section 1 and to pay to Producer for said (product) the price set forth in Section 2, less the following deductions authorized by Producer: a. An amount to be determined annually by the board of directors, in the sole discretion of the board, to meet the general contingencies of the business of the Association including operating expenses. b.A$ . per___ (unit) capital retain deduction by the Association on the purchase price of each _(unit) of (product) received from Producer. Section 7. Liens. Producer shall notify the Association of any lien on any (product) covered by this agreement. Producer shall obtain permission from the lien holder for Association to market such (product) and to retain any deductions from the payments to Producer autho52 rized hereunder and under the articles of incorporation and bylaws of the Association. After any such deductions, Producer authorizes the Association to apply the balance of the sale proceeds, or so much thereof as necessary, for payment of the lien. Enforcement As a member owned and controlled entity, one of the most sensitive areas of management and leadership in a cooperative is the disciplining of members who violate their agreements with the association. But unless each member honors his or her obligations to the association, the collective strength of the venture is weakened and the entity’s chance of success is diminished. This is especially true where a marketing agreement is in effect. Management has to be able to anticipate the amount of product that will be delivered so it can plan for its processing and resale. Disruptions in anticipated delivery by natural causes, such as drought, are usually excused under a so-called “Act of God” clause in the cooperative’s contracts with buyers. But if members simply do not deliver product to the association as promised, management may be forced to buy product on the open market to meet association commitments or even default on its own contractual obligations. Usually a member knowingly violates the marketing agreement because the member thinks he or she can get a better price somewhere else. In the short term, this may indeed be the case. No firm always has the best price in a competitive market. But a cooperative must view itself as a long-term undertaking. If some members are allowed to forsake the cooperative for personal shortterm gain, they do so at the expense of those members who honor their agreement. Because the marketing agreement is a contract between each individual member and the membership as a whole, the leadership has the responsibility to protect the interest of the group as a whole. That means taking steps, including legal action if necessary, to enforce the marketing agreement. Most State cooperative incorporation statutes permit contractual provisions to facilitate enforcement of marketing agree53 ments. One is the inclusion of language providing for liquidated damages. In general corporate law, an injured party must prove the extent of the loss with great specificity to be eligible for compensation. This can be very difficult to do when agricultural commodities are involved. Their value changes by the day, or even by the minute. So in this instance, the parties can agree through contract on a specific level of damages, called liquidated damages, that will be the penalty for violating the contract. The level must be high enough to truly discourage breaches of the contract and to compensate the other members for their loss. A frequently used rule-of-thumb is 25 percent of the estimated market value of the commodity if it had been delivered under the contract. Marketing agreements also usually authorize the association to go to court and seek a restraining order against either actual or anticipated breach of the contract. The agreement may also make the offending party liable for legal fees incurred by the association in defending the agreement. Section 8. Liquidated Damages. The remedy at law would be inadequate and it would be impracticable and difficult to determine the actual damages to the Association should Producer fail to deliver the (product] covered by this agreement. Therefore, regardless of the cause of such failure, Producer agrees to pay to the Association for all such (product) delivered or disposed of by Producer, other than in accordance with the terms of this agreement, a sum equal to _ % of the fair market value of the product at the close of business on the day the product should have been delivered to the Association, as liquidated damages for the breach of this agreement. All parties agree that this agreement is one of a series dependent for its true value on the adherence of all the contracting parties to all of the agreements, but the cancellation of any other similar agreement or the failure of any of the parties thereto to comply therewith shall not affect the validity of this agreement. Failure to deliver the (product) commit54 ted herein due to ACTS OF GOD shall not constitute a breach of this agreement. Section 9. Specific Performance. Producer agrees that in the event of a breach or threatened breach by Producer of any provisions of this marketing agreement regarding delivery of (pmduct), the Association shall be entitled to a preliminary restraining order and an injunction to prevent breach or further breach hereof and to a decree of specific performance hereof. The parties agree that this is a contract for the purchase and sale of personal property under special circumstances and conditions and that the Association may, but shall not be obligated to, go into the open markets and buy -(product) to replace any that Producer may fail to deliver. Section 20. Legal Costs and Expenses. If the Association brings any action whatsoever by reason of a breach or threatened breach of this agreement, Producer shall pay to the Association all court costs, costs for bonds, travel expenses and all other expenses arising out of or caused by the litigation, including reasonable attorney’s fees expended or incurred by Association in such proceedings, and all such costs and expenses shall be included in the judgment. Termination and Renewal Management doesn’t want to have to get every member to sign a new agreement each year, and the producers aren’t going to want to be obligated to continue to patronize the cooperative if it isn’t meeting their needs. A provision providing that the contract automatically renews itself for another year unless either the cooperative or the member provides notice during a specific period of time-usually about a month during a slow period in production and cooperative activity-that it wants to terminate the agreement gives adequate flexibility and stability to the relationship. 55 Section 2 1. Termination and Renewal. After this agreement has been in effect one year from the date of execution, either party may terminate it in any year by notifying the other party in writing between (date) and (date). It is mutually agreed that failure to so terminate in any year shall constitute conclusive evidence that the parties have renewed this agreement for another year. Miscellaneous Provisions Individual cooperatives have adopted numerous additional provisions to tailor their marketing agreements to their individual needs. Examples of some of the more common, but by no means all, of these types of provisions are provided. Nonconforming agreements. From time to time, the association may want to alter the terms of its marketing agreement. This may occur when numerous agreements are in effect, and it is a good cooperative practice to treat all member equitably. Therefore, a provision permitting nonconforming contracts, but offering persons with ongoing agreements the option to change to the new agreement, often called a “most favored nation clause,” can be useful. If the association wants to bring all agreements back to uniformity, it can do so during the next time period for terminating existing agreements. Section 12. Nonconforming Agreements. Association may enter into agreements with other growers differing in terms from those contained herein, consistent with the bylaws of the Association, without invalidating this agreement, provided that Producer at Producer’s request may sign a similar agreement as a substitute for this agreement. No contrary agreements. One of the most difficult legal situations to untangle involves the member who signs more than one contract for the sale of the same commodity. A clause forbidding such activity helps place the responsibility for injuries suffered by the cooperative on the member. Section 13. No Contrary Agreements. Producer warrants that Producer has not contracted to sell, market, consign, or deliver and will not contract to sell, market, consign, or deliver any (product) during the term of this agreement to any person, firm or corporation, contrary to this agreement. Forfeiture of membership. If a member is going to disregard the terms of the marketing agreement, the cooperative is usually better off without that person as a member. A provision giving the board authority to revoke the membership of a member who violates the agreement gives appropriate discretion to the directors in dealing with a breach of the contract. Section 14. Forfeiture of Membership. Violation of this agreement in any material respect by Producer shall be grounds for the board of directors to terminate Producer’s membership in the Association. Abide by articles and bylaws. A similar provision requiring members to abide by the articles and bylaws, as written at the time the agreement is signed or subsequently a&nded, makes it clear that a member can’t abrogate the agreement if the membership approves a change in the cooperative organizational documents the individual member doesn’t like. That member must honor the agreement until the annual period for orderly termination arrives. I Section 15. Articles and Bylaws. Producer agrees to conform to and observe the articles of incorporation and bylaws of the Association now in force and as they may be amended hereafter. Assignment. Sometimes reorganizations occur during the year at either the association or the member level. The right of a new entity replacing one of the parties to enforce the contract can be clarified in the agreement itself. Because the association is the members as a whole, it can usually assign its rights at will. However, to protect against one member assigning rights to an 5 7 unqualified person, usually a member must have board approval to assign contract rights. Section 26. Assignment. This agreement may be assigned by the Association in its sole discretion. Producer may assign this agreement, but only upon written authorization granted by the board of directors of the Association. Entire agreement. A major cause of disputes over business contracts is the unwritten exception. One party to the contract will say, “I know the contract says that, but you told me you would do this.” Marketing agreements will frequently include language stating that the organizational documents and the agreement itself are the only contracts between the parties and no oral or other types of agreements will be honored. The manager, in particular, needs to be reminded of this rule. Special unauthorized promises or “deals” for selected members can do serious harm to the cohesiveness of the association. ~ Section 17. Entire Agreement. It is agreed that the articles of incorporation and the bylaws of the Association, now or hereafter in effect, and this marketing agreement constitute the entire agreement between the Association and Producer, and that there are no oral or other conditions, promises, covenants, representations, or inducements in addition to, or at variance with, any terms of this agreement. Governing law. Even if an association intends to limit its activity to a single State, disputes that involve the marketing agreement can arise from transactions that cross State lines in any number of ways. To avoid arguments over which State’s law shall be applied, the contract might have a clause naming the State. This can be particularly important if the association is incorporated under a statute of a State different from the one where its headquarters are located. I Section 18. Governing Law. This agreement shall be governed by the laws of the State of , Signatures. To make the contracts official, they must be signed by both parties. If the producer is a business and not a real person, the association should check to make sure the signee for the business is authorized to enter into such agreements for the business. IN WITNESS WHEREOF, these parties have executed this agreement as of the day, month and year first above written: Producer (Cooperative name) BY President ATTEST I Secretary MEMBERSHIP APPLICATION When a person applies for membership in a cooperative, it is a good idea to have a simple document that ties the loose ends together and, when approved, serves as official notice that the applicant is a bona fide member of the association. If the articles, bylaws, and marketing agreement are well drafted, this need be little more than a summary of the commitments made. Applicant certifies that the requirements of membership have been met, and the appropriate cooperative officers, usually the president and secretary, acknowledge board approval of the applicant. 5 9 MEMBERSHIP APPLICATION Applicant’s Statement. I hereby apply for membership in and agree to abide by the articles of incorporation and bylaws of the association, now and hereafter in effect, copies of which have been presented to me for inspection. I certify that I am a producer of , have tendered the purchase price of one share of common voting stock, have signed a marketing agreement, and met such other qualifications for membership as have been explained to me. After my membership shall have been in effect for one year from the date of its acceptance by the association, either party may terminate it by notifying the other party in writing of this intention between (date) and (date) of any year. If neither of the parties to this agreement so notifies the other, it is mutually agreed that this shall constitute conclusive evidence that the parties have renewed this agreement for another year. Date ,199_. Applicant’s: name address telephone number social security number Applicant’s signature Acceptance. This certifies that is a member of and is entitled to all of the rights, benefits, and privileges of membership in the association. Date , 199_. President: Secretary: As mentioned earlier, familiarity with the documents reviewed in this report is an ongoing responsibility of each cooperative leader, particularly members of the board of directors. The same is true for other important cooperative papers: e.g., audit reports and current financial statements, board policies, loan agreements, the manager’s job description, and minutes of board and membership meetings. As the manager’s job is to run the day-to-day operations of the cooperative, the manager acquires the necessary familiarity with these items as part of his or her ongoing duties. Directors usually don’t have the continuous contact with the business that the manager does. They need to have the documents available so they can look up information and ask informed questions when necessary. A good director handbook meets this need. The director handbook can be nothing more than a solid three-ring binder that contains up-to-date copies of all documents the directors need to set cooperative policy. Every new director should get a current handbook as soon as he or she is elected to the board. At each board meeting the manager or the president should distribute minutes of the previous meeting and new versions of any documents that have been modified or adopted since the last meeting. Time should be taken to make sure the directors place the new pages in the proper place in the book and to let the directors review and ask questions about the additions and replacements. The director handbook will get the important cooperative papers out of the file cabinet and into the mainstream of the decision-making process. It will minimize the likelihood leaders will innocently violate a provision of the articles and bylaws, contracts, or other written guidelines. It will provide ready answers to questions about the limitations on managerial discretion imposed by these documents. And it will facilitate the conduct of business meetings in a professional and efficient manner. In summary, it will soon become a valuable tool for cooperative management and planning. 61 Appendix A. Election of Directors by Districts (bylaw provision) ARTICLE III. DIRECTORS AND OFFICERS Section 2. Election of Directors by Districts. (Two paragraphs as in sample language on page 29, main text. Next, add the following:) The territory in which the association has members shall be divided into _ (same number as number of directors) districts. The respective districts and their boundaries shall be established by resolution of the board of directors. The board of directors may from time to time change the boundaries of one or more districts by adding territory not included within any district, by adding to one district territory previously included in another district, or by excluding from a district a part of its territory. There shall be as many directors as there are districts, one director to be elected by the members of each district. However, when the number of districts is an even number, there shall be one additional director to be known as a director-at-large and to be elected by all members of the association. A district director must be a resident of, or be a producer of agricultural products in, the district for which such director is elected or appointed. Any questions as to the effect of any changes made in district boundaries, or the number or identity or districts, shall be conclusively determined by the board of directors. Nominations for directors, either for a district or at large, shall be made by petition addressed to the secretary of the association requesting placement on the ballot of the name of the person so nominated. Such a petition nominating a district director shall be signed by not less than _ members of that district. Such a petition nominating a director-atlarge shall be signed by not less than _ members of the association. 62 Appendix B. Equity Redemption (alternative bylaw) ARTICLE VII. EQUITY REDEMPTION Section I. Regular Redemption, Percent of All Equities. It shall be the policy of the association, when other redemption priorities set forth herein have been met, and when funds are available, to redeem in cash a percentage of each member patron’s capital credits, rather than ratably by year. The time and method of any such redemption shall be determined by the board of directors. Section 2. Specified Special Redemptions. The association shall give priority to redemption of members’ capital credits held by deceased persons for the settlement of their estate. The association shall thereafter grant priority redemption to capital credits of former members who have attained their 65th birthday and are no longer actively engaged in agricultural production as actual producers or landlords in share tenancy. The time and method of such redemption shall be determined solely by the board of directors, dependent upon the financial condition of the association. In the case of redemption of the equities of those persons who have attained age 65 and retired from farming, preference may be given to the oldest retirees in establishing the order of priority among those eligible. In the case of a corporation or partnership holder of members’ capital credits, such corporation or partnership shall be considered eligible for priority treatment to the same extent as the individual stockholders of such corporation or partners of the partnership would have qualified, if each individual stockholder or partner were an individual memberpatron of this association. Any redemption shall be made to the corporation or partnership, and not to the individual stockholder or partner thereof. Each corporation or partnership shall report to the association the percentage of ownership interest 63 in the corporation or partnership of each of its stockholders or partners. Failure to report accurately the percentage of individual ownership interest shall disqualify any allocations made to the corporation or partnership by this association from redemption priority. If a corporation or partnership should dissolve, its capital credits in this association shall be prorated among, and transferred to, the individual stockholders or partners and considered for redemp tion on an individual ownership basis. The amount of any redemption or prorate related to a corporate or partnership member shall be determined by the percentage of ownership interest as reported by the corporation or partnership. When two or more persons are holders of capital credits as tenants in common, without a designation of rights of survivorship, they shall be deemed by this association to be acting as partners and shall be subject to the same requirements as a partnership. Capital credits held in joint tenancy with rights of survivorship shall be considered for priority of redemption according to the qualifying status of the youngest member of the joint tenancy or, in the event of death of one of the joint tenants, of the survivor. Appendix C. Base Capital Plan (bylaw provision) ARTICLE VII. EQUITY REDEMPTION Section 1. Members’ Equity Requirements. Each year the board of directors shall determine the amount of equity capital necessary for successful operation of the cooperative. The total amount of member volume and the volume each member has marketed through the association during the past _( ) years shall be calculated. Each member’s equity requirement is equal to the amount of equity, determined necessary by the board of directors, multiplied by the member’s proportion of the association’s total member volume during the base _ year period. Section 2. Member Investment. Members can invest equity to meet their requirements by direct cash investment, allocated patronage refunds, and per-unit capital retains. Section 3. Member Account Adjustments. At the end of each fiscal year the association shall recalculate each member’s capital credits account to include all per-unit retains for the year and each member’s share of patronage refunds for the year. (a) If a member’s total capital credits are less than the member’s equity requirement for that year, cash returns on business done with the association will be limited to those required by the Internal Revenue Code or other applicable law. (b) If the member’s capital credits, less any cash that must be refunded to comply with the Internal Revenue Code or other applicable law, are greater than the member’s equity requirement for that year, the excess shall be redeemed in cash within g-112 months after the close of the association’s fiscal year. 65
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Respond with only information from the provided context.
EVIDENCE:
Preface A cooperative is a business. As such, it must operate in a manner compatible with all the laws that apply to a business, with cooperative principles, and with the needs and desires of its member-patrons in mind. To comply with each of these limitations on its operations, a cooperative must have a set of organizational documents that is uniquely crafted to its particular situation. Drafting new, and updating old, legal documents of cooperatives takes both time and expertise. This report is intended to assist persons organizing new cooperatives, managers and directors of existing cooperatives, and their professional advisers to develop and update the important legal documents of cooperatives. It explains issues to be considered and options that are available. It provides sample language to be used as a starting point; the wording is not to be copied without review and thought. To help distinguish sample document language from explanatory text, a straight black line has been drawn along the left-hand margin of the sample document language. Contents ORGANIZATION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Statement of Purposes ...................................................... 2 Organization Committee ................................................... 3 Patronage Commitment ..................................................... 3 Financial Commitment ...................................................... 4 Calling of Membership Meeting ....................................... 6 Accounting .......................................................................... 7 SELECTING THE PROPER STATE INCORPORATION STATUTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLES OF INCORPORATION ..*...................,..*.*.............t. 11 Heading ............................................................................ 1 1 Name ................................................................................. 1 2 Principal Place of Business ............................................. 12 Purposes ............................................................................ 1 2 Powers ............................................................................... 13 Duration ............................................................................ 15 Directors ........................................................................... 15 Capital Structure ............................................................... 16 Amendment ..................................................................... 20 Signatures ......................................................................... 20 BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Membership ...................................................................... 21 Meetings of Members ...................................................... 24 Directors and Officers ....................................................... 26 Duties of Directors ........................................................... 32 ii Duties of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Operation at Cost and Members’ Capital . . . . . . . . . . . . . . . . . . . . . . . . . 36 Equity Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..I....... 39 Consent . . . . . . . . . ..f................................................................ 4 0 Nonmember Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Nonpatronage Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2 Handling of Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Dissolution . . . . . . . . ..f............................................................ 4 5 Indemnification . . . . . . . . . ..I....................................I.............. 45 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 MARKETING AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..*................. 4 7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . ..I...........................................4 6 Sales Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..I...........................4 9 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Termination and Renewal ..****...*.**.*.........................*...... 55 Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 MEMBERSHIP APPLICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 DIRECTOR HANDBOOK . . . . . . ..a.. a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 APPENDIX A. ELECTION OF DIRECTORS BY DISTRICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 APPENDIX B. ALTERNATIVE EQUITY REDEMPTION BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 APPENDIX C. BASE CAPITAL PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 . . . 111 Sample Legal Documents for Cooperatives Donald A. Frederick, Attorney-Adviser One of the axioms of business planning is that a strong foundation is essential if an organization is to have a strong structure. An important component of a strong cooperative foundation is a set of basic legal documents that conforms to Federal, State, and local law and facilitates conducting the business affairs of the association to enhance the mutual well-being of the members. This report explains the role each document plays in building the organization and the various issues treated in each document. It discusses options available to members in handling many of the issues. It also presents sample language as an aid in preparing initial documents, or in revising existing ones, to make sure they promote the objectives of the cooperative venture. Most of the sample language in this report is suitable for virtually any type of cooperative. Where the language must be tailored to reflect specific functions of the association, wording appropriate for an agricultural marketing cooperative is used. Counsel can help make the necessary modifications to cover supply and related service organizations and nonagricultural activities. One point cannot be stressed too much! Cooperative organizers, advisers, and leaders should not just sit down and copy these, or any other set, of legal documents and declare them as their own. These foundation documents should only be adopted after review by a competent attorney, one who understands the unique characteristics of cooperatives and the industry in which the association does business. This will maximize the likelihood that the documents will conform to applicable law and meet the specific needs of the association and its members. One problem in drafting organizational papers is they can be thorough or simple, but not both. This report contains many “compromises” between these two objectives. This only reinforces the need for cooperative founders and leaders, and their professional advisers, to avoid adopting any sample set of documents verbatim and to review existing documents on a regular basis. 1 The idea of forming a cooperative is usually conceived and nurtured by a few individuals who foresee coordinated group action as a solution to a problem confronting themselves and similarly situated persons. This organizing group often has to formulate a development plan, arrange for or provide seed money, and contribute sweat equity to get the association up and running. The organization period involves considerable discussion and data collection. While these efforts provide a good forecast for the level of support the cooperative is likely to attract, before launching the venture it is a good idea to have those persons who say they want the services of the cooperative formally commit to use those services. The organization agreement secures both a patronage and a financial commitment from prospective members. It is also a vehicle for educating prospective members about the cooperative form of business and the objectives of the proposed association. Statement of Purposes This first provision in a typical organization agreement sets out the services the proposed organization will perform. The services can be described in broad terms, such as to “process” and “market” certain farm commodities and “furnish” certain farm supplies. The language should refer only to services the cooperative will provide from its inception. This minimizes member pressure to expand the scope of operations too rapidly. For example, it is usually best not to mention furnishing supplies in the organizational agreement if the new organization will limit its initial activity to marketing fresh vegetables. 1. The undersigned, a producer of agricultural products, hereinafter referred to as “Producer,” together with other signers of agreements similar hereto, propose to organize a cooperative association 2 under the laws of the State of for the purpose of . Organization Committee Although the association has not yet been incorporated, a decision making process should be formalized. The organizers will usually appoint some or all of their group to an official organization committee that will serve as the initial policy body for the association. This provision lists the committee members and sets out the committee’s authority. 2. (a) The association shall be organized with suitable articles of incorporation and bylaws as determined by an organizational committee consisting of the following persons: Name Address 2. (b) This committee may, by vote of a majority of its members, increase its membership, fill any vacancy therein, and appoint any subcommittees deemed necessary to conduct its affairs. The committee, or any subcommittee designated by it, may prescribe an organization fee to be paid by each person signing an organization agreement and may incur necessary obligations, make necessary expenditures, and take any such action as may, in its discretion, be deemed advisable to further the organization of the association. 3 Patronage Commitment Most cooperatives, especially those involved in marketing agricultural commodities, need a minimum level of product to be successful and the best possible projections of anticipated volumes to plan effectively. Their organization agreements should spell out the extent of the prospective members’ commitment: usually all production, a defined volume of product,. or production from a set number of acres. If either all production or production from a set number of acres is used, a projection of likely volume delivered should also be secured. Sample language is provided for each type of commitment: Full Production. 3. Producer agrees to sign a marketing agreement committing all (product) produced by Producer, on land owned or leased by Producer, to the cooperative for direct marketing, processing, or other disposition as the cooperative sees fit. Producer estimates such production will total (units) in (year). *********** Defined Volume. 3. Producer agrees to sign a marketing agreement to commit (units) of (product), produced by Producer, to the cooperative for direct marketing, processing, or other disposition as the cooperative sees fit. *********** Set Acreage. 3. Producer agrees to sign a marketing agreement to commit all (product) produced by Producer on acres of land, owned or leased by Producer, to the cooperative for direct marketing, processing, or other disposition as the cooperative sees fit. Producer estimates such production will total -(units) in _ (year). 4 If the cooperative is likely to have a minimum quality standard that must be met before product will be accepted, that standard should also be explained and the person or entity judging quality should be named. Financial Commitment Every new business must have equity capital. In a cooperative, the members supply that capital. In this provision the prospective member agrees to provide initial financial support for the cooperative. Each prospective member should commit to purchase one share of common voting stock (or, in a nonstock cooperative, pay a membership fee) for a fixed dollar amount, perhaps $1,000. This investment gives the member the right to vote on issues submitted to the membership. Often the initial investment tied to membership status does not raise enough equity to fund the association. Additional capital is needed. Usually the organizers have substantial leeway in collecting and recognizing this investment. Each prospective member may be asked to make an equal contribution, or the level can vary with anticipated patronage. While this investment is classified as preferred stock in this report, it can also be structured as equity credits, revolving fund credits, or any similar term satisfactory to the organizers. Organizers should avoid using any term usually associated with debt capital, such as “note” or “bond,” and should also avoid creating a second class of common stock, which is sure to be confused with regular voting common stock. The agreement should expressly state that this financial commitment is irrevocable unless the organization effort is terminated. Initial development of the cooperative is totally dependent on promised financial support being forthcoming. Leaders must have the tools to force compliance with this commitment, by legal action if necessary. I 4. Producer agrees to purchase one share of voting common stock of the association, par value $ payable on demand following a favorable vozihe signees of agreements similar hereto to 5 incorporate the association. Producer further agrees to purchase shares of nonvoting preferred stock of the association, par value $ each, and agrees to pay for same as follows: S- cash on demand following incorporation of the association, g-on or before . 19 -9 and, $--- on or before ,19_. Producer expressly understands that this stock subscription agreement is an irrevocable legally binding obligation which will be relied upon by the association, other producers who subscribe to its stock, and lending institutions from which the association will seek financing to implement its cooperative purposes. If a cooperative is organized as a nonstock corporation, the sample language might be altered to call for payment of a membership fee, rather than purchase of a share of common stock, and payment of an additional sum into an equity account, rather than purchase of nonvoting preferred stock. Calling of Membership Meeting One of the principal responsibilities of the organization committee is to determine if enough firm interest exists to justify forming the cooperative. It is advisable to put a time limit on member solicitation. An open-ended solicitation period may exceed the patience of early signees to get started or abort the effort. If the committee decides there is enough interest, the agreement usually calls for a meeting of the signees to make the final decision to complete formation and begin operation of the cooperative. While the typical agreement provides that the affirmative vote of a simple majority of signees approves formation, the committee should move cautiously if substantial resistance 6 develops. Few associations overcome internal strife during the formation period to become useful and viable cooperative enterprises. 5. If, on or before 9 19-t the organization committee is of the opinion that sufficient signup has been obtained to enable the association to operate efficiently, the committee shall set a time and place for a meeting of those persons who have signed this agreement to determine, by majority vote, whether to proceed with the formation and operation of the association, and to consider such other business as may be deemed appropriate. Not less than ten days before the meeting, notice of the time and place of the meeting shall be sent to all signees by first-class mail, and an appropriate notice shall be published in one or more newspapers of general circulation in the area in which those who signed agreements like this one reside. , Sometimes the agreement will set minimum levels of support that must be committed before the prospective members will vote to begin the venture, If the organizers decide to adopt that option, the first paragraph of this provision might begin: 5. If, on or before 9 19-t bona fide producers of agricultural products otherwise eligible to become members in the association agree to execute marketing agreements covering (units) of (product) and subscribe to provide equity to the association equal to the sum of at least I dollars, ($ ), the organization committee shall set a time and place for a meeting . . . (continue as above). Accounting There should be a clearly stated obligation placed on the organization committee to keep good records and make the 7 appropriate disposition of any funds remaining after the vote on formation of the cooperative is conducted. 6. The organization committee shall keep detailed, accurate accounts of all receipts and of all expenditures of every kind. It shall have such accounts audited and render a written report thereof to the board of directors of the association when organized. And it shall thereupon turn over to the association any balance remaining in its hands free of obligation. If the association is not organized, such unexpended balance shall be prorated among, and returned to, those who contributed to the organization fund. The agreement should conclude with spaces for the prospective member to sign the agreement, and provide his or her address, and for the chairperson of the organizing committee to sign the agreement as an acceptance. SELECTING THE PROPER STATE INCORPORATION STATUTE While no drafting is involved, and thus no sample language is provided in this section, an important step in the development of a successful cooperative is selection of the proper statutory foundation for the association. To operate effectively in today’s business world, a cooperative must be a unique legal entity, separate from its members. The best way to create this unique entity is to form a cooperative corporation. A cooperative becomes a corporation when its organizers follow the steps set out in a law authorizing the formation of corporations. There is no Federal incorporation statute. Cooperatives incorporate under an appropriate State law. Incorporation offers several advantages over alternative structures, such as partnerships and unincorporated associations: l Incorporation facilitates the orderly succession of ownership. The entity has a perpetual life. As some members resign and new people join, redemption and issuance of a share of common stock or a membership certificate is a relatively simple means of clarifying each person’s status and rights in the association. l A corporation conveys to members and outsiders the image of a solid, longlasting venture. l If a cooperative is incorporated, the personal liability of each individual member, for losses suffered by the cooperative, is limited to the member’s equity in the cooperative. The organization of a cooperative as a business corporation has some important implications for how it conducts its affairs: l A corporation derives all of its legal authority from the State. It is a “person” in the eyes of the law, just like a natural person. It can do many things natural persons can, such as sign contracts, borrow money, own property, and sue and be sued. l While its powers are broad, those powers are limited to the ones granted by the State. For example, when the State agricultural cooperative law says only agricultural producers can vote in farmer cooperative affairs, no one else has the right to participate in policy decisions made by the membership. l The cooperative must obey business laws. Since managers and directors make the decisions for the corporation, they have an obligation to know and make sure the association follows all applicable laws. Persons who organize a cooperative have several incorporation statutes to choose from: l All States have special cooperative incorporation statutes. Some are broad, permitting the incorporation of virtually any business as a cooperative. Other are limited in scope. Many States have an Agricultural Cooperative Associations Act specially written to authorize incorporation of associations of producers of agricultural products. 9 l Every State has a general business corporation statute. A cooperative can be incorporated under this law and have its cooperative character established through proper drafting of the articles of incorporation and bylaws. l While most cooperatives are incorporated under a law of the State where the principle office is located, a few are organized under the laws of a different State. .It is usually best to organize under a cooperative incorporation statute of the State where the association’s headquarters is located. But it’s very important that the statute authorizing the cooperative permits a structure that meets the needs and desires of the members. The General Business Corporation Act and outof-State incorporation laws should be considered if the applicable cooperative law doesn’t permit the necessary organizational structure. A few so-called cooperatives are organized under a general not-for-profit corporation statute. Usually this is done to make it easier to obtain grant money. There are some potential adverse legal consequences of this type of incorporation that should be reviewed before following this path: l Most not-for-profit corporation laws expressly forbid the distribution of any earnings to members, trustees, officers, or other private persons. This means an association organized under such a statute can’t pay patronage refunds, one of the main reasons for operating a business as a cooperative. 0 In many States, if a nonprofit corporation goes out of business, members are prohibited from sharing in any assets left after the debts are paid. l Nonprofit corporations sometimes have had more trouble than cooperative corporations enforcing marketing agreements with their members. Cooperative statutes frequently provide specific authority for enforcement of marketing agreements. Not-for-profit acts have no such provision. If the leadership determines a cooperative is not organized 10 under the appropriate State statute, it is usually possible to reincorporate without seriously disrupting the ongoing business of the association. This will ordinarily involve redrafting the organization papers to conform to the new law and paying a modest fee to the appropriate State agency. ARTICLES OF INCORPORATION Once the leadership has determined the statute to use as the legal authority for a cooperative, the first document prepared is the articles of incorporation (articles). It is the acceptance of the articles by the State that establishes the cooperative as a unique “person” under the law. Most incorporation laws require a fairly common set of provisions to be included in the articles. These are discussed below. The statute will also require that before the articles are official they must be recorded in the office of a designated State officer. Failure to properly file the articles makes any business activity vulnerable to legal challenge. It is usually permissible to include information in the articles beyond that required by the incorporation statute. However, this is ordinarily not done because it is frequently more difficult to amend the articles than it is with other documents that may contain the same information. The articles are not a piece of paper to be prepared and then forgotten. The articles are routinely given the same respect by the courts as a statute. Therefore, the articles are binding on the directors, officers, and manager of a cooperative. Conduct beyond that authorized in the articles can subject the cooperative and its leaders to potential legal liability. The following are the elements common to most cooperative articles of incorporation. Heading The heading sets out the title of the document, the name of the cooperative, and the title of the authorization statute. 1 1 ARTICLES OF INCORPORATION (Name of Cooperative) We, the undersigned, all of whom are engaged in the production of agricultural products, do hereby voluntarily associate ourselves together for the purpose of forming a cooperative association, with (or without) capital stock, under the provisions of the Act of the State of Name The official name of the cooperative must be stated in the body of the articles and is usually the first provision: ARTICLE I. NAME The name of the association shall be Principal Place of Business This is a simple statement of the general location of the cooperative’s office: ARTICLE II. PRINCIPAL PLACE OF BUSINESS The association shall have its principal place of business in the city of County of , Stateof ’ . Purposes The purposes for which the cooperative is being organized are specifically set out. While the purposes clause of the organizational agreement is limited to immediate objectives, the pur12 poses are usually stated as broadly as possible in the articles of incorporation. Any service the cooperative may someday provide is frequently authorized, at least in a general way. This reduces the likelihood the articles will have to be amended whenever the association is asked by the members to provide additional services. Powers ARTICLE III. PURPOSES The association is formed for the following purposes: To market for its members and other producers any and all agricultural products or any products derived therefrom: to engage in any activity in connection with the picking, gathering, harvesting, receiving, assembling, handling, grading, cleaning, shelling, standardizing, packing, preserving, drying, processing, transporting, storing, financing, advertising, selling, marketing, or distribution of any such agricultural products or any products derived therefrom: to purchase for its members and others farm supplies and equipment: to manufacture, process, sell, store, handle, ship, distribute, furnish, supply, and procure any and all such farm supplies and equipment; and to exercise all such powers in any capacity and on any cooperative basis that may be agreed upon. The State statute authorizing formation of a cooperative will set out in detail the activities the cooperative may engage in. As a general rule, the statutory language is copied virtually verbatim into the articles. The following is an example of a typical statutory provision restated as an article of incorporation: ARTICLE IV. POWERS I This association shall have the following powers: 13 (a) To borrow money without limitation as to amount of corporate indebtedness or liability: to give a lien on any of its property as security therefore in any manner permitted by law: and to make advance payments and advances to members and other producers. (b) To act as the agent or representative of any member or members in any of the activities mentioned in Article III hereof. (cl To buy, lease, hold, and exercise all privileges of ownership over such real or personal property as may be necessary or convenient for the conduct and operation of the business of the association, or incidental thereto. (d) To draw, make, accept, endorse, guarantee, execute, and issue promissory notes, bills of exchange, drafts, warrants, certificates, and all kinds of obligations and negotiable or transferable instruments for any purpose that is deemed to further the objects for which this association is formed, and to give a lien on any of its property as security therefor. (e) To acquire, own, and develop any interest in patents, trademarks, and copyrights connected with, or incidental to, the business of the association. (fl To cooperate with other similar associations in creating central, regional, or national cooperative agencies, for any of the purposes for which this association is formed, and to become a member or stockholder of such agencies as now are or hereinafter may be in existence. (g) To have and exercise, in addition to the foregoing, all powers, privileges, and rights conferred on ordinary corporations and cooperative 14 marketing associations by the laws of this State and all powers and rights incidental or conducive to carrying out the purpose for which this association is formed, except such as are inconsistent with the express provisions of the act under which this association is incorporated, and to do any such thing anywhere; and the enumeration of the foregoing powers shall not be held to limit or restrict in any manner the general powers which may by law be possessed by this association, all of which are hereby expressly claimed. Duration The articles will say how long the cooperative is authorized to exist. Virtually all modern laws permit perpetual existence. Some laws in effect at the time longstanding cooperatives were organized limited the permissible life of a cooperative to a set period of time, such as 50 years. Associations that have been active for several decades should check to make sure their duration clause provides for perpetual operation. I ARTICLE V. PERIOD OF DURATION This association shall have perpetual existence. Directors Most statutes require the articles to name the initial policymakers of the cooperative. A majority of the incorporation statutes ask for the number of directors and names and addresses of the initial board. The articles often require “at least” the minimum number of directors required by statute: the precise number is set in the bylaws. Some statutes ask for the names and addresses of incorporators, in which case the appropriate title and references to incorporators would be substituted for “directors” in the example. If the law asks for both. then this draft provision is essentially inserted a second time and appro15 priately worded in each instance. ARTICLE VI. DIRECTORS This association shall have at least_ directors. The names and addresses of those who are to serve as the initial directors are: NAME ADDRESS Capital Structure The articles usually contain a description of the capital structure of the cooperative. If stock is issued, the number of shares authorized and the par value of each share of each class of stock (common, preferred) are set forth. The rights granted owners of each class of stock, the restrictions on owners of each class, and the dividends to which each class is entitled are also explained. If stock is not issued, a description must be included of how the rights and interests of the members will be determined. Sample language for both a stock and a nonstock association is provided below. The capital stock example provides for both voting common and nonvoting preferred stock. Nonvoting preferred stock is a useful way to account for additional nonpatronage investments by members. It has also been used as a way of raising equity from nonmembers, such as other members of the community interested in supporting the cooperative. If any interest in the cooperative is being sold to nonmembers, counsel must be retained to advise the association on applicable securities law requirements. The sample language also assumes that the organization 16 limits each member to one vote. If proportional voting based on patronage is utilized, counsel will have to prepare a description of how votes will be accumulated and any limit on the number of votes any one member can amass. All of the information in the example below is important and should be included somewhere in the organizational documents. However, not all incorporation laws require that all of it be in the articles. It may be possible to place some of these provisions in the bylaws. ARTICLE VII. CAPITAL STOCK (stock cooperative) Section 1. Classes and Authorized Amounts. The capital stock of the association shall consist of shares of common stock with a par value of $ per share, and shares of preferred stock with a par value of $ per share. Section 2. Common Stock. The common stock of this association may be purchased, owned, or held only by agricultural producers who (1) patronize the association in accordance with uniform terms and conditions prescribed by it, and (2) have been approved by the board of directors. ‘Producer’ shall mean and include persons (natural or corporate) engaged in the production of (product), or other agricultural products, including tenants of land used for the production of any such product, and lessors of such land who receive as rent therefore part of any such product of such land, and cooperative associations (corporate or otherwise) of such producers. Each member shall hold only one share of common stock and each eligible holder of common stock shall be entitled to only one vote in any meeting of the stockholders upon each matter submitted to vote at a meeting of the stockholders. In the event the board of directors of the association shall find, following a hearing, that any of 17 the common stock of this association has come into the hands of any person who is not eligible for membership, or that the holder thereof has ceased to be an eligible member, such holder shall have no rights or privileges on account of such stock, or vote or voice in the management or affairs of the association other than the right to participate in accordance with law in case of dissolution, The association shall repurchase such stock for par value. If such holder fails to deliver any certificate evidencing the stock, the association may cancel such certificate on its books and records, and the certificate is thereby null and void. The common stock of this association may be transferred only with the consent of the board of directors of the association and on the books of the association, and then only to persons eligible to hold it. No purported assignment or transfer of common stock shall pass to any person not eligible to hold it, nor the rights or privileges on account of such stock, nor a vote or voice in the management of the affairs of the association. This association shall have a lien .on all of its issued common stock for all indebtedness of the holders thereof to the association. No dividends shall be paid on the common stock. Section 3. Preferred Stock. The preferred stock of this association may be issued to any person, association, partnership, or corporation. Preferred stock shall carry no voting rights. Noncumulative dividends not to exceed percent (_%) per year may be paid on preferred stock at the absolute discretion of the board of directors. Preferred stock may be transferred only on the books of the association. It may be redeemed in whole or in part on a pro rata basis at par, plus any dividends declared and unpaid, at any time on thirty 18 (30) days’ notice by the association, provided said stock is redeemed in the same order as originally issued by years. If the owner fails to deliver any certificate evidencing such stock, the association may cancel the stock on its books. This association shall have a lien on all of its issued preferred stock for all indebtedness of the holders thereof to the association. Upon dissolution or distribution of the assets of the association, the holders of all preferred stock shall be entitled to receive the par value of their stock, plus any dividend declared and unpaid, before any distribution is made on the common stock. *ii********* ARTICLE VII. MENBERSHIP (nonstock cooperative) The association shall not have capital stock but shall admit applicants to membership in the association upon such uniform conditions as may be prescribed in its bylaws. This association shall be operated on a cooperative basis for the mutual benefit of its members as producers. Membership in the association shall be restricted to producers and associations of producers who shall patronize the association, The voting rights of the members of the association shall be equal, and no member shall have more than one vote upon each matter submitted to a vote at a meeting of the members. The property rights and interests of each member in the association shall be unequal and shall be determined and fixed on a patronage basis, and the net proceeds from the business of the association shall be allocated to member-patrons in the proportion that the patronage of each member bears to the total patronage of all the members of the association. 19 Amendment The articles may be changed whenever the appropriate percentage of the membership (and, if required by statute, the directors), as set out in the incorporation statute, votes to amend them. While the percentage is established by law, it is a good idea to include that requirement in the articles to remind people that the articles can be changed and to eliminate doubt as to the supp,ort required when the issue of possible amendment arises. While a majority of the statutes set the requirement at a simple or two-thirds majority of the members voting, several statutes require approval of a majority of the total membership. If turnout for member meetings is light, this poses a serious obstacle to changing the articles. ARTICLE VIII. Amendment These articles may be amended upon the affirmative vote of two-thirds of the members actually voting on the proposed amendment. Signatures Those persons who ask the State to authorize the cooperative, often called incorporators, complete the document by signing it. Signed this day of ,19__, by the undersigned incorporators, all of whom are engaged in agriculture as bona fide producers of agricultural products. I 20 BYLAWS Shortly after the cooperative is incorporated, the members adopt a set of bylaws. Bylaws provide a detailed description of the structure and method of operation of the cooperative. Bylaws are a working plan for how the association should function. Most incorporation laws give members flexibility to structure their cooperative as they see fit. Most references to bylaws are permissive, giving members the authority to write their own rules on how to handle a particular issue. Bylaws normally are not filed with the State. But like the articles, they are treated in a manner similar to statutes by the courts. Failure of the leadership to follow the bylaws can also lead to legal liability. Numerous provisions are usually found in cooperative bylaws. Some are similar to those included in bylaws of forprofit corporations, others are unique to cooperation. The most common provisions are discussed in this report. But a cooperative is free to place virtually any rule on the conduct of its affairs in the bylaws, provided the provision doesn’t conflict with an applicable law or the articles of incorporation. While almost any activity can be covered by a bylaw, only broad issues of long-term significance to members should be the subject of a bylaw. Operating decisions should not be covered in the bylaws, but rather in board policy resolutions. Board policies are directives to the management, issued by the board in its role as policymaker for the cooperative, that can be changed to reflect changing conditions at any time by the board. For example, whether the cooperative will do business with nonmembers is a general, long-term decision that should be covered in the bylaws. How nonmembers will be charged to insure that they pay their fair share of cooperative expenses is a short-term decision requiring the flexibility possible under a policy statement. Membership The first bylaw usually states the qualifications to be a member of the cooperative. Membership should be limited to 21 persons who will patronize the cooperative. For an agricultural cooperative, this means membership should be limited to producers of agricultural products and other farmer cooperative associations. Limiting the membership to producers and producer cooperatives is essential if the association wants to qualify for the limited antitrust protection of the Capper-Volstead Act, or for tax treatment under section 521 of the Internal Revenue Code, or if the cooperative is incorporated under a State law that requires that members be agricultural producers. This bylaw may also include other reasonable prerequisites to membership, such as agreeing to purchase a share of stock, sign a marketing agreement, and patronize the association on a regular basis. This bylaw should also provide for the orderly termination of a membership. This can be particularly important for an agricultural cooperative. The significant legal privileges listed above are only available to associations of producers. This requirement is only met if the membership of anyone who stops farming is revoked. When a membership is terminated, it is a good practice to return the purchase price of the voting share of common stock, or the membership fee in a nonstock cooperative (but not necessarily the retained patronage investments). This makes it clear to the former member that the termination was more than a symbolic gesture and that he or she no longer has the right to participate in the policymaking of the association. This sample language is written for a stock cooperative. In a nonstock cooperative, appropriate references to membership certificates and fees would be substituted for the terms common stock and purchase price. I ARTICLE I. MEMBERSHIP Section 1. Qualifications. Any person, firm, partnership, corporation or association, including both landlord and tenant in share tenancies, who is a bona fide producer of agricultural products in the territory in which the association is engaged in business, and who agrees to be a patron of the associa22 tion, signs a marketing agreement with the association, purchases one share of common stock, and meets such other conditions as may be prescribed by the board of directors, may become a member of the association. All applications for membership must be approved by the board of directors. Member status is effective as of the time the board approves the application for membership. Section 2. Suspension or Termination. In the event the board of directors of the association shall find, following a hearing, that any of the common stock of this association has come into the hands of any person who is not eligible for membership, or that the holder thereof has ceased to be an eligible member, or that such holder has not marketed through the association the products covered by a marketing agreement with the association, or not otherwise patronized the association for a period of (_) year(s), or otherwise violated the articles of incorporation, bylaws, or other agreements made with the association, the association may suspend such holder’s rights as a member and terminate the membership. When a membership is terminated, the association shall repurchase the member’s share of common stock for par value. The holder shall return to the association the certificate evidencing the holder’s share of stock. If such holder fails to deliver the certificate, the association may cancel such certificate on its books and records, and the certificate is then null and void. A suspended or terminated member shall have no rights or privileges on account of any stock held, nor vote or voice in the management or affairs of the association other than the right to participate in accordance with law in case of dissolution. 23 Meetings of Members A cooperative is owned and controlled by its members. A bylaw sets out the ground rules for convening the members to exercise their control function. An annual meeting is held each year to elect directors, review past performance and future plans, and conduct other business as needed. It is often a good idea to set the time of the annual meeting as promptly as possible after the end of the fiscal year. This encourages management to close the books for the year in a timely fashion and the auditor to review financial results and issue the audit report without delay. Also, the members are still focusing on last year’s performance. If the annual meeting is delayed too long, the members are often into another production cycle and not able to properly exercise their control over the cooperative. This bylaw should also authorize special member meetings to handle any business that can’t wait until the next annual meeting. Members should receive sufficient advance notice so they can plan to attend meetings. Many incorporation statutes have specific minimum notice requirements, both in terms of lead time (often 10 days or 2 weeks) and method (direct mail, publication in local newspaper). Associations incorporated under such a law must make sure the bylaw provides at least as much notice as the statute requires, and that appropriate notice is actually given. Otherwise any action taken at the meeting may be open to legal challenge. A statement on how voting will be conducted is also appropriate in this bylaw. How many votes each member will have is only one aspect of this issue. The draft language limits each member to one vote. If proportional voting is used, a description of how members will qualify for multiple votes, and a limit, if any, on the number of votes any one member can accumulate, should be substituted in the applicable place. Language on voting on behalf of members organized as partnerships and corporations can avoid an embarrassing dispute right before or even during a membership meeting over how such a member will vote on an issue. Many cooperatives 24 have members organized as partnerships or corporations designate, in writing, who will cast the member’s vote, and that person alone can vote for the member until the member provides a valid written notice of a change in the designee. Other topics that should be addressed include proxy voting, voting by mail, and cumulative voting. There is no “right” way to handle these matters, although cumulative voting is usually prohibited. Sometimes the incorporation statute discusses proxy voting and voting by mail. Many cooperatives that permit proxy voting limit the number of proxies a member can vote, often to only one. If voting by mail is allowed, it is often limited to issues discussed in the meeting notice. Finally, the minimum number of members that need be present to conduct business, called a quorum, should be specified. If the statute permits, quorum requirements are frequently set low (e.g., 10 members or 10 percent of the membership, whichever is greater) so meetings will not have to be adjourned for lack of a quorum. While this exposes the association to control by an active minority, it is sometimes necessary in order to make sure that any business is conducted at all. ARTICLE II. MEETINGS OF MEMBERS Section 1. Annual Meeting. The annual meeting of the members of this association shall be held in the State of , during the month of -9at such time and in such place as the board of directors shall designate. Section 2. Special Meetings. Special meetings of the members of the association may be called at any time by order of the board of directors and shall be called upon written request of at least members, or at least _ percent (__%) of the membership, whichever is a greater number. Section 3. Notice of Meetings. Written notice of every regular and special meeting of members shall be prepared and mailed to the last known post office 25 address of each member not less than -0 days before such meeting. Such notice shall state the nature of the business expected to be conducted and the time and place of the meeting. No business shall be transacted at any special meeting other than that referred to in the notice. Section 4. Voting. Unless otherwise stated in the articles of incorporation, or these bylaws, or required by applicable law, all questions shall be decided by a vote of a majority of the members voting thereon. Each member shall be entitled to only one vote, Voting by mail shall not be permitted. Proxy voting shall be allowed. Each proxy shall be in writing, and no member shall vote more than one proxy. Cumulative voting is not permitted. If a membership is held by a partnership, corporation, or other legal entity, the member shall designate in writing the person who shall vote on behalf of the member. That designation shall remain in effect until written notice of a properly authorized change in the designated voter shall be received by the association. Section 5. Quorum.( members or percent I%) of the membership, whichever is a larger number, shall constitute a quorum at any properly called annual or special membership meeting. Directors and Officers While the members own and control the cooperative, the responsibility for continuous supervision of the association is usually delegated to a small group of democratically elected leaders referred to as the board of directors, who in turn select officers to carry out specific leadership duties. Many cooperative experts consider the selection of directors as the most important governance decision made by the membership. 26 This bylaw covers the administrative rules for the selection of directors and officers and for the conduct of their meetings. Many important issues are discussed in this provision. Number and Qualification of Directors. The specific number and qualifications of directors must be established. The incorporation law will usually prescribe a minimum number of directors. There is no legal maximum on the size of a board, but experience suggests that if more than about nine people are on a local cooperative board, efficiency is reduced substantially. Many State statutes require that all directors be members of the cooperative. Some permit, or even require, one or more outside directors. The sample bylaw requires directors to be association members. If outside directors are to be authorized, the number and manner of selection should be included in the bylaw. Directors have access to pricing and other marketing plans that could be used by a competitor to take business from the cooperative. Thus, many cooperatives bar persons affiliated with competitors of the association from being directors. Cooperatives usually do not, however, bar such persons from membership. For example, a farmer who sells produce directly to a grocery chain may belong to and market some produce through a cooperative that also sells wholesale, but that farmer is frequently denied access to a seat on the cooperative board. A few cooperatives guarantee board turnover by limiting the number of consecutive terms a director can serve. Director and Officer Selection. The rules for election of directors by the members, and officers by the directors, are set out in the bylaws. In many cooperatives the directors are elected for three-year terms on a staggered basis. While directors are usually elected from the membership at large, some cooperatives elect directors on the basis of geographic regions, usually called districts. Sample language authorizing the election of directors by districts is set out in Appendix A. Officers are usually elected for one-year terms. Even many statutes that require all directors to be association members permit some officers, notably the secretary and treasurer, to be nonmembers of the association. This allows staff employees who normally keep association records and books to have both the appropriate title and attendant responsibilities. 27 Sometimes directors and officers are not able to serve their full term. The bylaws should provide for a method to fill vacant director and officer positions, Usually the remaining directors select an interim director to fill a board vacancy until the next membership meeting. Directors can usually select a replacement officer at any properly called board meeting. Meetings. The bylaws frequently provide much of the same information for director meetings as for member meetings - regular and special meetings are authorized, notice and quorum requirements are set out. Compensation . Another issue that should be addressed is director compensation. Many directors spend innumerable hours each year overseeing and promoting the cooperative. It seems reasonable for the association to at least cover out-ofpocket expenses incurred on behalf of the association. Some cooperatives also pay a modest fee for each meeting directors attend, or time they spend on cooperative affairs. While reimbursement of reasonable expenses is usually covered with a blanket authorization, fees should be handled more delicately. Directors should not have the right to set their own compensation. Both the decision to pay any fee, and the level of any fee authorized, should be made by the members. Nepotism. Many cooperatives also have a bylaw provision preventing directors and members of their immediate families from holding salaried positions with the cooperative. This antinepotism language eliminates the chance some members might view the awarding of the position as the result of undue influence of the director, rather than selection on the basis of merit. Removal of Directors. Finally, it may be necessary at some time to remove a director from that position. Sometimes termination is automatic, e.g., failure to maintain member status or missing too many board meetings. The ultimate authority in a cooperative is vested in the members, and they should be able to remove a director at will. As this is often a severe and divisive undertaking, it is best to provide a procedure in the bylaws that affords due process for the director under attack and conforms closely to any procedural requirements set out in the incorporation statute. 28 ARTICLE III. DIRECTORS AND OFFICERS Section 1. Number and Qualification of Directors. The association shall have a board of directors of _(_) members. Each director elected shall be a member of this association in good standing. No person shall be eligible to be a director if that person is in competition with, or is affiliated with any enterprise that is in competition with, the association. If a majority of the board of directors of the association finds at any time following a hearing that any director is so engaged or affiliated that person shall thereupon cease to be a director. No director after having served for I ) consecutive full term(s) shall be eligible to succeed himself or herself, but after a lapse of _ I_) yed4 d-d again be eligible. Section 2. Election of Directors. At the first annual meeting of the members of this association, directors shall be elected to succeed the incorporating directors. _ director(s) shall be elected for one (1) year: _ directors for two (2) years and _directors for three (3) years. At each annual meeting thereafter, new directors shall be elected, for a term of three (3) years each, to succeed those directors whose terms are expiring. All directors shall be elected by secret ballot, and the nominee(s) receiving the greatest number of votes shall be elected. Section 3. Election of Officers. The board of directors shall meet within seven (7) days after the first election and within seven (7) days after each annual election and shall elect by ballot a president, vice president, secretary, and treasurer, each of whom shall hold office until the election and qualifi29 cation of a successor, unless earlier removed., by death, resignation, or for cause. The president and vice president shall be members of the board of directors. The secretary and treasurer need not be directors or members of the association. Section 4. Vacancies. Whenever a vacancy occurs in the board of directors, other than from the expiration of a term of office, the remaining directors shall appoint a member to fill the vacancy until the next regular meeting of the members. If the term of the vacating director does not expire at that regular member meeting, a special election shall be held to select a director to fill the year or years remaining in that term. If one or more officer positions become vacant, such offices shall be filled by the board of directors, through election by ballot, at either a regular or special meeting of the board. Section 5. Regular Board Meetings. In addition to the meetings mentioned above, regular meetings of the board of directors shall be held monthly, or at such other times and at such places as the board may determine. Section 6. Special Board Meetings. A special meeting of the board of directors shall be held whenever called by the president or by a majority of the directors. Only the business specified in the written notice shall be transacted at a special meeting. Each call for a special meeting shall be in writing, shall be I signed by the person or persons calling the meeting, shall be addressed and delivered to the secretary, and shall state the time and place of such meeting. Section 7. Notice of Board Meetings. Oral or written notice of each meeting of the board of directors shall be given each director by, or under the 30 supervision of, the secretary of the association not less than _ hours prior to the time of meeting. But such notice may be waived by all the directors, and their appearance at a meeting shall constitute a waiver of notice. Section 8. Quorum. A majority of the board of directors shall constitute a quorum at any meeting of the board. Section 9 . Reimbursement and Compensation. The association shall reimburse directors for all reasonable expenses incurred in carrying out their duties and responsibilities. The compensation, if any, of the members of the board of directors shall be determined by the members of the association at any annual or special meeting of the association. No member of the board of directors, or member of the immediate family of any board member, shall occupy any position in the association on regular salary. Section 10. Removal of Directors. Whenever any director shall fail to meet the qualifications as described in Section I of this Article, or fails to attend three (3) consecutive board meetings, either regular or special, without just cause and provided that notice of such meetings has been given in accordance with these bylaws, then it shall be the duty of the board to remove said director and to fill the vacancy in accordance with Section 4 of this Article. Members, through petition noting the charges and signed by at least _(J members or _ percent (_%) of the membership, whichever is a greater number, may request the removal of any member of the board. Such director shall be notified in writing of the charges and given an opportunity to be heard at a membership meeting of the association. Removal of a director shall require a vote of of 31 I members voting. Any vacancy resulting from such action shall be filled by nomination and vote of members at such meeting. Duties of Directors The directors are responsible for the ongoing operations of the cooperative. They set policy and oversee the staff operations that implement that policy. Cooperative bylaws often contain language placing a legally binding obligation on the directors to carry out their most important duties. This bylaw often establishes the general relationship between the directors and the manager. An important responsibility of the board is to hire and supervise the manager. The board sets manager compensation and benefits. The manager, not the board, runs the day-to-day business operations of the cooperative. This includes hiring and firing other employees. If the board is dissatisfied with the way the cooperative is conducting its affairs, it should exercise its authority to replace the manager, but it should not take on the manager’s responsibilities. The bylaw should also recognize another important board responsibility-protecting member assets-by providing for appropriate bonds and insurance, an accounting and auditing system, and board control of association funds. Finally, the board should have the authority to appoint committees so its work load can be handled efficiently. Sometimes specific reference is made to an executive committee. An executive committee with broad powers can be useful, especially when the membership is spread over a large geographic area and some directors have to travel some distance to attend meetings. But the other directors must be careful not to abdicate all board responsibility to the executive committee. ARTI&E IV. DUTIES OF DIRECTORS Section 1. Management of Business. The board of directors shall have general supervision and control of the business and the affairs of the associa32 tion and shall make all rules and regulations not inconsistent with law, the articles of incorporation, or bylaws for the management of the business and the guidance of the members, officers, employees, I and agents of the association. Section 2. Employment of Manager. The board of directors shall have power to employ, define duties, fix compensation, and dismiss a manager with or without cause at any time. The board shall authorize the employment of such other employees, agents, and counsel as it from time to time deems necessary or advisable in the interest of the association. The manager shall have charge of the business of the association under the direction of the board of directors. Section 3. Bonds and Insurance. The board of directors shall require the manager and all other officers, agents, and employees charged by the association with responsibility for the custody of any of its funds or negotiable instruments to give adequate bonds. Such bonds, unless cash security is given, shall be furnished by a responsible bonding company and approved by the board of directors, and the cost thereof shall be paid by the association. The board of directors shall provide for the adequate insurance of the property of the association, or property which may be in the possession of the association, or stored by it, and not otherwise adequately insured, and, in addition, adequate insurance covering liability for accidents to all employees and the public. Section 4. Accounting System and Audits. The board of directors shall have installed an accounting system which shall be adequate to meet the requirements of the business and shall require proper records to be kept of all business transactions. 33 Duti 34 At least once in each year the board of directors shall secure the services of a competent and disinterested public auditor or accountant, who shall make a careful audit of the books and accounts of the association and render a report in writing thereon, which report shall be submitted to the directors and the manager of the association and made available to the members of the association. This report shall include at least a balance sheet showing the true assets and liabilities of the association, and an operating statement for the fiscal period under review. Section 5. Depository. The board of directors shall select one or more banks to act as depositories of the funds of the association and determine the manner of receiving, depositing, and disbursing the funds of the association and the form of checks and the person or persons by whom they shall be signed, with the power to change such banks and the person or persons signing such checks and the form thereof at will. Section 6. Committees. The board may, at its discretion, appoint from its own membership an executive committee of _members, and determine their tenure of office and their powers and duties. The board may delegate to the executive committee all or any stated portion of the functions and powers of the board, subject to the general direction, approval, and control of the board. Copies of the minutes of any meeting of the executive committee shall be mailed to all directors within seven (7) days following such meeting. The board of directors may, at its discretion, appoint such other committees as it deems appropriate. 5 of Officers Nhile the tasks that go with each major office of a corpora- tion are generally well understood, it is still important to have those duties spelled out in the bylaws. This will minimize any uncertainty over the roles each plays in leading the association. ARTICLE V. DUTIES OF OFFICERS Section 1. Duties of President. The president shall (1) preside over all meetings of the association and of the board of directors: (2) call special meetings of the board of directors; (3) appoint such committees as the board of directors may deem advisable for the proper conduct of the cooperative: and (4) perform all acts and duties usually performed by a presiding officer. Section 2. Duties of Vice President. In the absence or disability of the president, the vice president shall perform the duties of the president, provided, however, that in case of death, resignation, or disability of the president, the board of directors may declare the office vacant and elect any eligible person president. Section 3. Duties of Secretary. The secretary shall keep a complete record of all meetings of the association and of the board of directors and shall have general charge and supervision of the books and records of the association. The secretary shall sign papers pertaining to the association as authorized or directed by the board of directors. The secretary shall serve all notices required by law and by these bylaws and shall make a full report of all matters and business pertaining to the office to the members at the annual meeting. The secretary shall keep the corporate seal and all books of blank certificates, complete and countersign all certificates issued, and affix the corporate seal to all papers requiring a seal: shall keep complete stock ownership records: shall make all reports required by law: and shall perform 35 such other duties as may be required by the association or the board of directors. Upon the election of a successor, the secretary shall turn over all books and other property belonging to the association. Section 4. Duties of Treasurer. The treasurer shah be responsible for the keeping and disbursing of all monies of the association, and shall keep accurate books of accounts of all transactions of the association. The treasurer shall perform such duties with respect to the finances of the association as may be prescribed by the board of directors. At the expiration of his term of office, the treasurer shall promptly turn over to his successor all monies, property, books, records, and documents pertaining to his office or belonging to the association. Operation at Cost and Members’ Capital Many of the unique aspects of the bylaws of a cooperative pertain to the association’s financial affairs. Tax law plays an important part in structuring these provisions. This report does not attempt to explain cooperative taxation but only makes passing references to tax terms when explaining the importance of certain bylaw provisions. Since the overall objective of a cooperative is to maximize the income of its members, leaders must have flexibility to acquire capital and minimize taxes. The next several provisions, up to and including dissolution, authorize business and tax planning options compatible with doing business on a cooperative basis. This section often starts with a straightforward statement that the association will operate on a service-at-cost basis for the mutual benefit of the members as patrons and then covers specific issues to implement that statement. Language is usually included to allocate margins on a patronage basis. Allocation can be based on the volume or the value of business conducted on a patronage basis. Cooperatives dealing in one commodity, or in similar commodities, usually use the volume method. Those that handle several products 3s with divergent values often use the dollar-value-of-business method. The sample language assumes that the association is a marketing cooperative using the volume method. Appropriate wording for supply cooperatives and those using the value method is provided in parentheses. Marketing cooperatives have an alternative method of raising equity capital, the collection of per-unit retains. Language authorizing this option should be included in their bylaws. The term “capital credits” is used in the sample language to distinguish the retained margins and per-unit retains from direct member investments in stock. This distinction simplifies establishing an equity redemption program for patronage-based investments apart from any redemption of direct investments. The bylaw should specify whether dividends will be paid on this patronage capital. Since the completeness and accuracy of each patron’s account is vital to assigning financial obligations and benefits in the appropriate manner, a provision obligating the association to keep the required records is an important protection for the members. A statement requiring the timely distribution of written notices of allocation and per-unit retain certificate is both good business practice and a requirement for favorable tax treatment under the Internal Revenue Code. That statement should authorize the board to issue those notices and certificates, in either qualified or nonqualified form, so as to maximize the tax planning alternatives available. ARTICLE VI. OPERATION AT COST AND MEMBERS’ CAPITAL Section 1. Operation at Cost. The association shall at all times be operated on a cooperative service-at-cost basis for the mutual benefit of its member patrons. Section 2. Margin Allocation. In order to induce patronage and to assure that this association 37 will operate on a service-at-cost basis in all its transactions with its members, the association is obligated to account on a patronage basis to all member patrons on an annual basis for all amounts received from business conducted with members on a patronage basis, over and above the cost of providing such services and making reasonable additions to reserves. Such allocation shall be on the basis on the volume (dollar value) of product marketed through (purchased from) the association. The association is hereby obligated to pay all such amounts to the patrons in cash or by credits to a capital account of each member patron. Section 3. Per-Unit Retains. Each member also agrees to provide capital in such amounts as determined by the board of directors based on physical units of product marketed through the association. Such per-unit retains shall be allocated to the member’s capital credit account, Section 4. Dividends. No dividends shall be paid on any capital credits. Section 5. Records and Documentation. The books and records of the association shall be set up and kept in such a manner that at the end of each fiscal year, the amount of capital, if any, so furnished by each member is clearly reflected and credited in an appropriate record to the capital account of each member. The association shall, within 8-l/2 months after the close of each fiscal year, notify each member of the capital so credited to the member’s account. The notice shall be in the form of a written notice of allocation or per-unit retain certificate (as those terms are used in Subchapter T of the Internal Revenue Code) or other appropriate written document. The board shall have discretion to issue such 38 notices and certificates in either “qualified” or “nonqualified” form as permitted by the Internal Revenue Code and other applicable law. Section 6. Fiscal Year. The fiscal year of this association shall commence on the first day of (month) and end on the last day of (preceding month). Equity redemption A bylaw authorizing redemption of patronage capital and explaining the method to be used helps insure that, to the extent possible, current patrons finance the cooperative. There are three types of equity redemption plans. Most cooperatives that have an equity redemption program use a revolving fund plan whereby equities are redeemed in the order in which they were allocated. The first paragraph of the sample bylaw presents this approach. A limited number of cooperatives redeem a percentage of all outstanding equities each year. Sample language to implement this plan is found in section 1 of the Alternative Equity Redemption Bylaw (Appendix B). A few cooperatives have adopted a base capital plan. Under a base capital plan each member is assigned responsibility for providing a pro rata share of needed capital based on proportional use of the cooperative during a base period. A sample bylaw authorizing a Base Capital Plan is presented in Appendix C. Associations interested in such a plan should contact a professional adviser who can draft a scheme tailored to the association’s unique needs. Some cooperatives grant the board discretion to retire outstanding member equity “out of order” as it deems in the best interests of the association. Sample language for implementation of the discretionary approach appears in the second paragraph of the sample bylaw below. Other cooperatives provide a specific redemption preference for equity of the estates of deceased members and/or retired members who have reached a certain age. An event-specific preferences clause can be complex, particularly if it attempts to 39 deal with the special problems created by members organized as legal entities and thus do not regularly retire or die. Sample language covering this situation is provided in section 2 of the sample bylaw in Appendix B. New associations are not going to be in a position to redeem equity for several years. But an early commitment to develop a regular equity redemption program and agreement on the rules for its implementation will strengthen an association’s cooperative character and give early supporters some assurance that they will get their investment back at some time in the future. Consent ARTICLE VII. EQUITY REDEMPTION Section I. Regular Redemption, Revolving Fund. If at any time the board of directors determines that the financial condition of the association will not be impaired thereby, capital credited to members’ accounts may be redeemed in full or in part. Any such redemption of capital shall be made in order of priority according to the year in which the capital was furnished and credited, the capital first received by the association being the first redeemed. Section 2. Discretionary Special Redemptions. Notwithstanding any other provision of these bylaws, the board, at its absolute discretion, shall have the power to retire any capital credited to members’ accounts on such terms and conditions as may be agreed upon by the parties in any instance in which the interests of the association and its members are deemed to be furthered thereby and funds are determined by the board to be available for such purposes. If the cooperative is to deduct the face value of written notices of allocation and per-unit retain certificates from taxable income in the year issued, the Internal Revenue Code requires patrons to consent to include those amounts in taxable income 40 in the year they receive a notice or certificate, even though the cooperative retains the funds. The simplest way to obtain consent from members is to include a bylaw making consent a condition for membership. The Internal Revenue Service has published a model consent bylaw which should be adopted. Another paragraph is inserted making it clear that the cooperative must explain the meaning of consent to members and prospective members: this reminds leaders that such an explanation is also a tax law requirement. ARTICLE VIII. CONSENT Each person who hereafter applies for and is accepted to membership in this association, and each member of this association on the effective date of this bylaw who continues as a member after such date, shall, by such act alone, consent that the amount of any distributions with respect to his patronage occurring after the effective date of this bylaw, which are made in qualified written notices of allocation or qualified per-unit retain certificates (as defined in 26 U.S.C. 1388), and which are received by him from the cooperative, will be taken into account by him at their stated dollar amounts in the manner provided in 26 U.S.C. 1385(a) in the taxable year in which such written notices of allocation and per-unit retain certificates are received by him. Written notification of the adoption of this Article, a statement of its significance, and a copy of the provision shall be given separately to each member and prospective member before membership in the association. Nonmember Business The bylaws should make it clear whether the association may or may not do business with nonmembers. The sample bylaw assumes that the association will want the option to conduct nonmember business. 41 If the association does nonmember business, the CapperVolstead Act and many State incorporation laws require that a majority of the association business be done with or for members. The first three sentences of the sample bylaw are thus found in most cooperative bylaws. If an association wishes to qualify for tax treatment under section 521 of the Internal Revenue Code, it may not do more than 15 percent of its farm supply business with persons who are neither members nor producers (business with the Federal government can be disregarded in making this computation). The last two sentences in the example cover this situation. ARTICLE IX. NONMEMBER BUSINESS This association may conduct business with nonmembers on either a patronage or nonpatronage basis. However, this association shall not market the products of nonmembers in an amount the value of which exceeds the value of the products marketed for members. Itshall not purchase supplies and equipment for nonmembers in an amount the value of which exceeds the value of the supplies and equipment purchased for members. It shall not purchase supplies and equipment for persons who are neither members nor producers of agricultural products in an amount the value of which exceeds fifteen percent (15%) of all its purchases. Business done for the United States or any of its agencies shall be disregarded in determining the limitations imposed by this section. Nonpatronage Income Several factors are combining to increase the proportion of cooperatives that have taxable earnings from nonpatronage sourced. These factors include a growing reliance on nonmember business to sustain the cooperative, more forceful positions by IRS auditors to classify investment income as nonpatronage sources, and less use of section 521. The bylaws should recog42 nize this as special income and provide the board discretion to add it to a capital reserve, distribute it to members, or put it to any other lawful use. I ARTICLE X. NONPAlXONAGE INCOME The nonpatronage income of the association shall be its gross receipts derived from all sources which under law do not qualify as patronage income, less all expenses properly attributable to the production of such nonpatronage sources income and all income taxes payable on such receipts by the association, Nonpatronage income shall be used in behalf of the association and its members in accordance with such lawful purposes, including assignment to an unallocated reserve account and allocation in whole or in part to members, as may be determined by the board of directors. Handling of Losses While cooperatives operate at cost over the long term, the financial world operates for accounting and tax purposes in single-year segments. Sometimes cooperatives have a loss in that relatively short framework. The bylaws should anticipate the possibility of a loss year. They should explain how decisions will be made to allocate the loss on an equitable basis. The proper treatment of losses by cooperatives for tax purposes has long been a contentious issue between cooperatives and the Internal Revenue Service. The sample bylaw reflects a moderate position that financial results on patronage and nonpatronage business should be separated: gains and losses within each category can be combined, or “netted,” for tax purposes; and losses under either category can be carried back or forward to offset earnings in other years under the applicable provisions of the tax code for businesses in general. As the rules for handling losses are subject to change from time to time, counsel should be asked to keep informed on this issue and advise the association when this bylaw may need revision. 43 It may also be prudent to include a prohibition on directors voting a direct assessment on the members. This will prevent outside interests from pressuring the directors into an action likely to have a negative impact on member relations. ARTICLE XI. LOSSES Section z . Patronage Losses. In the event the association suffers a loss during any year on business conducted with or for patrons, such loss may be apportioned among the patrons during the year of loss so that such loss will, to the extent practicable, be borne by the patrons of the loss year on an equitable basis. The board shall have full authority to prescribe the basis on which capital furnished by patrons may be reduced or such loss otherwise equitably apportioned among the patrons. In the event of a patronage loss in one or more departments or divisions of the operation of this association, but not so much as to cause an overall loss for the fiscal year, such loss or losses may be prorated against each of the remaining profitable departments on the basis of their respective percentage of the net margins during such fiscal year. Section 2. Nonpatronage Losses. If in any fiscal year the association shall incur a loss other than on patronage operations, such loss may be charged against any reserve accumulated from nonpatronage earnings in prior years. Section 3. General Provisions. The board shall have no authority to make assessments against members. This section shall not be construed to deprive the association of the right to carry backward or forward losses from any source whatsoever in accordance with the Internal Revenue Code or state taxing statutes. 44 Dissolution Many of the rules to dissolve a cooperative are contained in various statutes and are too complex to reproduce in the bylaws. One issue that should be addressed is how any assets that might remain after all liabilities are met should be distributed. In a noncooperative corporation this is usually done on the basis of stock ownership and, if the bylaws are silent on this issue, this may be the rule imposed on cooperative members by a court. It is a good idea to consider language in the bylaws of a cooperative making clear that such a distribution will be on the basis on patronage. I ARTICLE XII. DISSOLUTION AND PROPERTY INTEREST OF MEMBERS Upon dissolution, after all debts and liabilities of the association shall have been paid, all shares of preferred stock and common stock redeemed, and all capital furnished through patronage shall have been retired without priority on a pro rata basis, the remaining property and assets of the association shall be distributed among the members and former members in the proportion which the aggregate patronage of each member bears to the total patronage of all such members insofar as practicable, unless otherwise provided by law. Indemnification As the trend toward litigating to test the validity of various decisions by corporate leaders has grown, so has the possibility that directors, officers and employees may be found personally liable for the adverse consequences of their decisions. This has made some people understandably reluctant to assume leadership positions, particularly as unpaid or minimally compensated directors and officers. State governments, recognizing the valuable role directors and officers play in corporate affairs, have adopted a variety of 45 laws limiting liability of corporate leaders and permitting corporations to shield leaders from direct personal loss for decisions they make on behalf of the corporation. In many States this is a developing area of the law, and the extent of permissible indemnification changes frequently. To encourage members to serve as directors, and to make sure leaders don’t shy away from innovative ideas, cooperatives should consider a bylaw accepting the maximum amount of responsibility for indemnification permitted by State law. Prudent risk management usually includes the purchase of liability insurance to protect against an indemnification claim that might otherwise lead to significant exposure for the association. This coverage can seem quite expensive, so the sample language uses the permissive term “may” rather than the mandatory term “shall.” But whenever possible, this insurance should be obtained to avoid exposing member assets to unacceptable risk. I ARTICLE XIII. INDl3MNIFICATION The association shall indemnify its officers, directors, employees, and agents to the fullest extent possible under the provisions of the (applicable State law), as it may be amended from time to time. The association may purchase liability insurance coverage for any person serving as an officer, director, employee or agent to the extent permitted by applicable State law. Amendment It is important for cooperative leaders to remember that bylaws are not set in stone. They can, and should, be changed whenever they stand as a barrier to cooperative activity desired by the member-owners and permissible under the law. While the incorporation statute will include language permitting amendment of the bylaws and setting out how this can be accomplished, a bylaw on amendment is usually included to 46 remind leaders that change is possible and to call attention to any unusual legal requirement, such as a higher than normal positive voting requirement, that may be applicable. ARTICLE XIV. AMEXWMENTS If notice of the character of the amendment proposed has been given in the notice of meeting, these bylaws may be altered or amended at any regular or special meeting of the members by the affirmative vote of (_) of the members present or voting by proxy. Again, these are only examples of the provisions common to most cooperative bylaws. Virtually any other rule can be included that is permissible under law. It is up to the leaders and members of a cooperative to craft a set of bylaws that guides the association to serving members’ needs. MARKETING AGREEMENT Cooperatives that market farm products and other goods of their members will usually want a separate contract with each member establishing the terms upon which they will conduct their business transactions. This contract is commonly called a marketing agreement. If the members only want the cooperative to serve as a home-of-last-resort for product that can’t be sold elsewhere, then a marketing agreement is not necessary. But if the members want an organization that will enhance the return they earn on all of their production, then a marketing agreement is an important marketing tool. The marketing agreement is a unique contract in that, because the members own ,and control the cooperative, the members are entering into a contract with themselves. But it is more accurate to picture the agreement as a contract between each individual member and the membership as a whole. An important key to making the system work is for everyone to remember that the cooperative is democratically con47 trolled by the members. No individual member has a right to unilaterally cancel or change the marketing agreement, and the leadership should not insist on arrangements that are contrary to the wishes of a majority of the membership. The marketing agreement builds on the patronage commitment section of the organizational agreement. Each individual member’s obligation to the organization committee is transferred to the new cooperative entity. While the basic content of the articles and bylaws is standardized throughout the cooperative community, the substantive provisions of the marketing agreement are influenced by the custom and trade of the market for the commodity covered by the agreement. Thus the sample language may need substantial modification to meet member needs. As with the articles and bylaws, the terms of the marketing agreement are binding until changed, but they are not etched in stone. The association-represented by its officers and directors-and the members are free to adopt an approach to any issue different than the approach set out in the organization agreement or in previously adopted marketing agreements. Introduction These initial provisions identify the parties to the contract, the cooperative and the producer, and usually establish any other requirements that the producer must meet, including any initial equity investment obligation, to be a member of the cooperative. I MARKEUINGAGREEMENT THIS AGREEMENT, made as of this _ day of x9_, by and between , herein referred to as “Producer,” and t an agricultural cooperative having an office at , herein referred to as “Association”. RECITALS A. Association is an agricultural cooperative organized under the laws of the State of . B. Producer is a member of the Association who produces . C. Producer has purchased one share of common voting stock and paid to Association the sum of dollars ($), calculated at the rate of $ per -(unit) of (product) as specified in Producer’s membership application, receipt of which is acknowledged as an equity investment in the Association. This entitles Producer to all the benefits of membership in the Association as long as Producer complies with the articles of incorporation and bylaws of the Association and the provisions of this agreement. In consideration of the mutual covenants and obligations contained herein, the parties agree as follows: sales Terms This provision outlines how the association will sell the products and pay the member-patrons. The first paragraph normally defines the obligation of the producer to deliver product to the association. The same three options outlined in the patronage commitment examples for the organization agreement-full production, defined volume, and set acreage-are available for use in setting the delivery commitment once operation begins, The defined volume option is utilized in this example, so if another type of obligation is adopted, appropriate modification of the first paragraph should be made. The second paragraph explains how the association will distribute the proceeds of resale to the member. Two ways of accounting for these proceeds are common. One is sometimes referred to as a gross margin operation. The association agrees 49 to pay the member the going market price for the product, less deductions for operating expenses. After the end of the fiscal year, any margin is returned to the producers as a patronage refund. The other is called the pooling method. In this arrangement all proceeds above expenses are returned to the producers on the basis of patronage. Such associations do not generate margins, as such, and thus lack access to retained patronage refunds to obtain equity. Pooling cooperatives must rely on per-unit retains and other means of raising capital. An example of draft language for each option is set forth below. Other terms of sale should also be included in the agreement. Sample language on several areas commonly covered are provided: responsibilities for delivery and for inspection and grading of the product; authorization for the association to pledge the product and sales proceeds as collateral for loans and otherwise exercise the rights of ownership: authorization for the association to withhold fees to cover operating expenses and capital retains from checks to growers; and an explanation of how the parties to the contract will deal with liens against the product. Section 1. Sale of (product). Association agrees to buy and Producer agrees to sell to Association (number) (units) of (product) as defined by USDA standards and grown by Producer. This agreement is intended by the parties to pass an absolute title to (number) _ (units) of (product) grown by Producer as soon as they have a potential existence but such (product) shall be at the risk of Producer until delivery. * * * * * * OPTION - Gross Margin Operation * * * * l l Section 2. Payment to Producer. Association shall market Producer’s (product) and Producer shall accept as payment for Producer’s (product) a price based on the current market price in the area for (product) of like grade and 50 quality. Association shall pay the amount due Producer, less deductions authorized in Section 6 of this agreement, not more than _ days after delivery of [product) to Association or Association’s prescribed buying location. l * * l l * OPTION - Pooling Operation l l * * * * Section 2. Payment to Producer. The Association may at any time pool any or all (product) of Producer with any other (product) of a similar kind and grade. Producer shall receive, for (product) pooled, a unit price equal to the average net unit price obtained for the pooled (product), less deductions authorized in Section 6 of this agreement. Association shall make an advance payment to Producer of percent of the current market price in the area for (product) of like grade and quality not more than _ days after delivery of (product) to Association or Association’s prescribed buying location. Section 3. Delivery. All (product) shall be delivered by Producer at Producer’s expense at the earliest reasonable time after harvesting, or at such time as called for by Association, to Association’s principal place of business or to one of Association’s authorized buying locations as prescribed by Association. The Association will use its best efforts to locate buying locations within a reasonable distance from Producer’s farm. Section 4. Inspection and Grading. Prior to acceptance by Association, all (product) shall be inspected and graded by the USDA in accordance with USDA standard rules and regulations. All purchases and/or marketings of (product) received by Association from Producer 51 shall be based upon USDA grade, and Producer agrees to accept the grading established by USDA. Section 5. Loans and Security. Association shall have the power to borrow money for any purpose on the security of the (product) delivered to Association, the products derived thereupon, and evidence of such products or by-products, or cash or accounts arising from the sale thereof, and to give a lien, either legal or equitable, thereon as the absolute owner and/or marketing agent thereof. Association may commingle such products and byproducts with other products and by-products of like grade and variety and shall exercise all other rights of ownership without limitation. Section 6. Deductions. Association agrees to purchase from and/or market for Producer the (product) set forth in Section 1 and to pay to Producer for said (product) the price set forth in Section 2, less the following deductions authorized by Producer: a. An amount to be determined annually by the board of directors, in the sole discretion of the board, to meet the general contingencies of the business of the Association including operating expenses. b.A$ . per___ (unit) capital retain deduction by the Association on the purchase price of each _(unit) of (product) received from Producer. Section 7. Liens. Producer shall notify the Association of any lien on any (product) covered by this agreement. Producer shall obtain permission from the lien holder for Association to market such (product) and to retain any deductions from the payments to Producer autho52 rized hereunder and under the articles of incorporation and bylaws of the Association. After any such deductions, Producer authorizes the Association to apply the balance of the sale proceeds, or so much thereof as necessary, for payment of the lien. Enforcement As a member owned and controlled entity, one of the most sensitive areas of management and leadership in a cooperative is the disciplining of members who violate their agreements with the association. But unless each member honors his or her obligations to the association, the collective strength of the venture is weakened and the entity’s chance of success is diminished. This is especially true where a marketing agreement is in effect. Management has to be able to anticipate the amount of product that will be delivered so it can plan for its processing and resale. Disruptions in anticipated delivery by natural causes, such as drought, are usually excused under a so-called “Act of God” clause in the cooperative’s contracts with buyers. But if members simply do not deliver product to the association as promised, management may be forced to buy product on the open market to meet association commitments or even default on its own contractual obligations. Usually a member knowingly violates the marketing agreement because the member thinks he or she can get a better price somewhere else. In the short term, this may indeed be the case. No firm always has the best price in a competitive market. But a cooperative must view itself as a long-term undertaking. If some members are allowed to forsake the cooperative for personal shortterm gain, they do so at the expense of those members who honor their agreement. Because the marketing agreement is a contract between each individual member and the membership as a whole, the leadership has the responsibility to protect the interest of the group as a whole. That means taking steps, including legal action if necessary, to enforce the marketing agreement. Most State cooperative incorporation statutes permit contractual provisions to facilitate enforcement of marketing agree53 ments. One is the inclusion of language providing for liquidated damages. In general corporate law, an injured party must prove the extent of the loss with great specificity to be eligible for compensation. This can be very difficult to do when agricultural commodities are involved. Their value changes by the day, or even by the minute. So in this instance, the parties can agree through contract on a specific level of damages, called liquidated damages, that will be the penalty for violating the contract. The level must be high enough to truly discourage breaches of the contract and to compensate the other members for their loss. A frequently used rule-of-thumb is 25 percent of the estimated market value of the commodity if it had been delivered under the contract. Marketing agreements also usually authorize the association to go to court and seek a restraining order against either actual or anticipated breach of the contract. The agreement may also make the offending party liable for legal fees incurred by the association in defending the agreement. Section 8. Liquidated Damages. The remedy at law would be inadequate and it would be impracticable and difficult to determine the actual damages to the Association should Producer fail to deliver the (product] covered by this agreement. Therefore, regardless of the cause of such failure, Producer agrees to pay to the Association for all such (product) delivered or disposed of by Producer, other than in accordance with the terms of this agreement, a sum equal to _ % of the fair market value of the product at the close of business on the day the product should have been delivered to the Association, as liquidated damages for the breach of this agreement. All parties agree that this agreement is one of a series dependent for its true value on the adherence of all the contracting parties to all of the agreements, but the cancellation of any other similar agreement or the failure of any of the parties thereto to comply therewith shall not affect the validity of this agreement. Failure to deliver the (product) commit54 ted herein due to ACTS OF GOD shall not constitute a breach of this agreement. Section 9. Specific Performance. Producer agrees that in the event of a breach or threatened breach by Producer of any provisions of this marketing agreement regarding delivery of (pmduct), the Association shall be entitled to a preliminary restraining order and an injunction to prevent breach or further breach hereof and to a decree of specific performance hereof. The parties agree that this is a contract for the purchase and sale of personal property under special circumstances and conditions and that the Association may, but shall not be obligated to, go into the open markets and buy -(product) to replace any that Producer may fail to deliver. Section 20. Legal Costs and Expenses. If the Association brings any action whatsoever by reason of a breach or threatened breach of this agreement, Producer shall pay to the Association all court costs, costs for bonds, travel expenses and all other expenses arising out of or caused by the litigation, including reasonable attorney’s fees expended or incurred by Association in such proceedings, and all such costs and expenses shall be included in the judgment. Termination and Renewal Management doesn’t want to have to get every member to sign a new agreement each year, and the producers aren’t going to want to be obligated to continue to patronize the cooperative if it isn’t meeting their needs. A provision providing that the contract automatically renews itself for another year unless either the cooperative or the member provides notice during a specific period of time-usually about a month during a slow period in production and cooperative activity-that it wants to terminate the agreement gives adequate flexibility and stability to the relationship. 55 Section 2 1. Termination and Renewal. After this agreement has been in effect one year from the date of execution, either party may terminate it in any year by notifying the other party in writing between (date) and (date). It is mutually agreed that failure to so terminate in any year shall constitute conclusive evidence that the parties have renewed this agreement for another year. Miscellaneous Provisions Individual cooperatives have adopted numerous additional provisions to tailor their marketing agreements to their individual needs. Examples of some of the more common, but by no means all, of these types of provisions are provided. Nonconforming agreements. From time to time, the association may want to alter the terms of its marketing agreement. This may occur when numerous agreements are in effect, and it is a good cooperative practice to treat all member equitably. Therefore, a provision permitting nonconforming contracts, but offering persons with ongoing agreements the option to change to the new agreement, often called a “most favored nation clause,” can be useful. If the association wants to bring all agreements back to uniformity, it can do so during the next time period for terminating existing agreements. Section 12. Nonconforming Agreements. Association may enter into agreements with other growers differing in terms from those contained herein, consistent with the bylaws of the Association, without invalidating this agreement, provided that Producer at Producer’s request may sign a similar agreement as a substitute for this agreement. No contrary agreements. One of the most difficult legal situations to untangle involves the member who signs more than one contract for the sale of the same commodity. A clause forbidding such activity helps place the responsibility for injuries suffered by the cooperative on the member. Section 13. No Contrary Agreements. Producer warrants that Producer has not contracted to sell, market, consign, or deliver and will not contract to sell, market, consign, or deliver any (product) during the term of this agreement to any person, firm or corporation, contrary to this agreement. Forfeiture of membership. If a member is going to disregard the terms of the marketing agreement, the cooperative is usually better off without that person as a member. A provision giving the board authority to revoke the membership of a member who violates the agreement gives appropriate discretion to the directors in dealing with a breach of the contract. Section 14. Forfeiture of Membership. Violation of this agreement in any material respect by Producer shall be grounds for the board of directors to terminate Producer’s membership in the Association. Abide by articles and bylaws. A similar provision requiring members to abide by the articles and bylaws, as written at the time the agreement is signed or subsequently a&nded, makes it clear that a member can’t abrogate the agreement if the membership approves a change in the cooperative organizational documents the individual member doesn’t like. That member must honor the agreement until the annual period for orderly termination arrives. I Section 15. Articles and Bylaws. Producer agrees to conform to and observe the articles of incorporation and bylaws of the Association now in force and as they may be amended hereafter. Assignment. Sometimes reorganizations occur during the year at either the association or the member level. The right of a new entity replacing one of the parties to enforce the contract can be clarified in the agreement itself. Because the association is the members as a whole, it can usually assign its rights at will. However, to protect against one member assigning rights to an 5 7 unqualified person, usually a member must have board approval to assign contract rights. Section 26. Assignment. This agreement may be assigned by the Association in its sole discretion. Producer may assign this agreement, but only upon written authorization granted by the board of directors of the Association. Entire agreement. A major cause of disputes over business contracts is the unwritten exception. One party to the contract will say, “I know the contract says that, but you told me you would do this.” Marketing agreements will frequently include language stating that the organizational documents and the agreement itself are the only contracts between the parties and no oral or other types of agreements will be honored. The manager, in particular, needs to be reminded of this rule. Special unauthorized promises or “deals” for selected members can do serious harm to the cohesiveness of the association. ~ Section 17. Entire Agreement. It is agreed that the articles of incorporation and the bylaws of the Association, now or hereafter in effect, and this marketing agreement constitute the entire agreement between the Association and Producer, and that there are no oral or other conditions, promises, covenants, representations, or inducements in addition to, or at variance with, any terms of this agreement. Governing law. Even if an association intends to limit its activity to a single State, disputes that involve the marketing agreement can arise from transactions that cross State lines in any number of ways. To avoid arguments over which State’s law shall be applied, the contract might have a clause naming the State. This can be particularly important if the association is incorporated under a statute of a State different from the one where its headquarters are located. I Section 18. Governing Law. This agreement shall be governed by the laws of the State of , Signatures. To make the contracts official, they must be signed by both parties. If the producer is a business and not a real person, the association should check to make sure the signee for the business is authorized to enter into such agreements for the business. IN WITNESS WHEREOF, these parties have executed this agreement as of the day, month and year first above written: Producer (Cooperative name) BY President ATTEST I Secretary MEMBERSHIP APPLICATION When a person applies for membership in a cooperative, it is a good idea to have a simple document that ties the loose ends together and, when approved, serves as official notice that the applicant is a bona fide member of the association. If the articles, bylaws, and marketing agreement are well drafted, this need be little more than a summary of the commitments made. Applicant certifies that the requirements of membership have been met, and the appropriate cooperative officers, usually the president and secretary, acknowledge board approval of the applicant. 5 9 MEMBERSHIP APPLICATION Applicant’s Statement. I hereby apply for membership in and agree to abide by the articles of incorporation and bylaws of the association, now and hereafter in effect, copies of which have been presented to me for inspection. I certify that I am a producer of , have tendered the purchase price of one share of common voting stock, have signed a marketing agreement, and met such other qualifications for membership as have been explained to me. After my membership shall have been in effect for one year from the date of its acceptance by the association, either party may terminate it by notifying the other party in writing of this intention between (date) and (date) of any year. If neither of the parties to this agreement so notifies the other, it is mutually agreed that this shall constitute conclusive evidence that the parties have renewed this agreement for another year. Date ,199_. Applicant’s: name address telephone number social security number Applicant’s signature Acceptance. This certifies that is a member of and is entitled to all of the rights, benefits, and privileges of membership in the association. Date , 199_. President: Secretary: As mentioned earlier, familiarity with the documents reviewed in this report is an ongoing responsibility of each cooperative leader, particularly members of the board of directors. The same is true for other important cooperative papers: e.g., audit reports and current financial statements, board policies, loan agreements, the manager’s job description, and minutes of board and membership meetings. As the manager’s job is to run the day-to-day operations of the cooperative, the manager acquires the necessary familiarity with these items as part of his or her ongoing duties. Directors usually don’t have the continuous contact with the business that the manager does. They need to have the documents available so they can look up information and ask informed questions when necessary. A good director handbook meets this need. The director handbook can be nothing more than a solid three-ring binder that contains up-to-date copies of all documents the directors need to set cooperative policy. Every new director should get a current handbook as soon as he or she is elected to the board. At each board meeting the manager or the president should distribute minutes of the previous meeting and new versions of any documents that have been modified or adopted since the last meeting. Time should be taken to make sure the directors place the new pages in the proper place in the book and to let the directors review and ask questions about the additions and replacements. The director handbook will get the important cooperative papers out of the file cabinet and into the mainstream of the decision-making process. It will minimize the likelihood leaders will innocently violate a provision of the articles and bylaws, contracts, or other written guidelines. It will provide ready answers to questions about the limitations on managerial discretion imposed by these documents. And it will facilitate the conduct of business meetings in a professional and efficient manner. In summary, it will soon become a valuable tool for cooperative management and planning. 61 Appendix A. Election of Directors by Districts (bylaw provision) ARTICLE III. DIRECTORS AND OFFICERS Section 2. Election of Directors by Districts. (Two paragraphs as in sample language on page 29, main text. Next, add the following:) The territory in which the association has members shall be divided into _ (same number as number of directors) districts. The respective districts and their boundaries shall be established by resolution of the board of directors. The board of directors may from time to time change the boundaries of one or more districts by adding territory not included within any district, by adding to one district territory previously included in another district, or by excluding from a district a part of its territory. There shall be as many directors as there are districts, one director to be elected by the members of each district. However, when the number of districts is an even number, there shall be one additional director to be known as a director-at-large and to be elected by all members of the association. A district director must be a resident of, or be a producer of agricultural products in, the district for which such director is elected or appointed. Any questions as to the effect of any changes made in district boundaries, or the number or identity or districts, shall be conclusively determined by the board of directors. Nominations for directors, either for a district or at large, shall be made by petition addressed to the secretary of the association requesting placement on the ballot of the name of the person so nominated. Such a petition nominating a district director shall be signed by not less than _ members of that district. Such a petition nominating a director-atlarge shall be signed by not less than _ members of the association. 62 Appendix B. Equity Redemption (alternative bylaw) ARTICLE VII. EQUITY REDEMPTION Section I. Regular Redemption, Percent of All Equities. It shall be the policy of the association, when other redemption priorities set forth herein have been met, and when funds are available, to redeem in cash a percentage of each member patron’s capital credits, rather than ratably by year. The time and method of any such redemption shall be determined by the board of directors. Section 2. Specified Special Redemptions. The association shall give priority to redemption of members’ capital credits held by deceased persons for the settlement of their estate. The association shall thereafter grant priority redemption to capital credits of former members who have attained their 65th birthday and are no longer actively engaged in agricultural production as actual producers or landlords in share tenancy. The time and method of such redemption shall be determined solely by the board of directors, dependent upon the financial condition of the association. In the case of redemption of the equities of those persons who have attained age 65 and retired from farming, preference may be given to the oldest retirees in establishing the order of priority among those eligible. In the case of a corporation or partnership holder of members’ capital credits, such corporation or partnership shall be considered eligible for priority treatment to the same extent as the individual stockholders of such corporation or partners of the partnership would have qualified, if each individual stockholder or partner were an individual memberpatron of this association. Any redemption shall be made to the corporation or partnership, and not to the individual stockholder or partner thereof. Each corporation or partnership shall report to the association the percentage of ownership interest 63 in the corporation or partnership of each of its stockholders or partners. Failure to report accurately the percentage of individual ownership interest shall disqualify any allocations made to the corporation or partnership by this association from redemption priority. If a corporation or partnership should dissolve, its capital credits in this association shall be prorated among, and transferred to, the individual stockholders or partners and considered for redemp tion on an individual ownership basis. The amount of any redemption or prorate related to a corporate or partnership member shall be determined by the percentage of ownership interest as reported by the corporation or partnership. When two or more persons are holders of capital credits as tenants in common, without a designation of rights of survivorship, they shall be deemed by this association to be acting as partners and shall be subject to the same requirements as a partnership. Capital credits held in joint tenancy with rights of survivorship shall be considered for priority of redemption according to the qualifying status of the youngest member of the joint tenancy or, in the event of death of one of the joint tenants, of the survivor. Appendix C. Base Capital Plan (bylaw provision) ARTICLE VII. EQUITY REDEMPTION Section 1. Members’ Equity Requirements. Each year the board of directors shall determine the amount of equity capital necessary for successful operation of the cooperative. The total amount of member volume and the volume each member has marketed through the association during the past _( ) years shall be calculated. Each member’s equity requirement is equal to the amount of equity, determined necessary by the board of directors, multiplied by the member’s proportion of the association’s total member volume during the base _ year period. Section 2. Member Investment. Members can invest equity to meet their requirements by direct cash investment, allocated patronage refunds, and per-unit capital retains. Section 3. Member Account Adjustments. At the end of each fiscal year the association shall recalculate each member’s capital credits account to include all per-unit retains for the year and each member’s share of patronage refunds for the year. (a) If a member’s total capital credits are less than the member’s equity requirement for that year, cash returns on business done with the association will be limited to those required by the Internal Revenue Code or other applicable law. (b) If the member’s capital credits, less any cash that must be refunded to comply with the Internal Revenue Code or other applicable law, are greater than the member’s equity requirement for that year, the excess shall be redeemed in cash within g-112 months after the close of the association’s fiscal year. 65
USER:
What should be included in my new businesses organization agreement?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Answer in a single sentence. Use only the document as your source.
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According to the above article what causes heart disease?
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** Heart Disease** The human heart beats about 2.5 billion times over an average lifetime, pushing millions of gallons of blood throughout the body. This steady blood flow carries oxygen, hormones, and other compounds. It also whisks away the waste products of metabolism. Given the heart's never-ending workload, it's a wonder it performs so well for so long. But it can also fail, brought down by poor diet, lack of exercise, smoking, infection, unfavorable genes, and more. Heart disease and cardiovascular disease are two of the most significant heart health issues. They are often used interchangeably, but they are not the same. Heart disease refers to diseases of the heart, such as coronary artery disease, heart failure, heart valve abnormalities, and abnormal heart rhythms. Cardiovascular disease is a catch-all term for all heart and blood vessel diseases. It includes heart disease, but also stroke. Does a coronary stent make sense for stable angina? What are the different types of heart disease? Heart disease refers to diseases that affect the function and condition of the heart. There are several kinds of heart disease, including: cardiomyopathy: a heart muscle disease that causes the heart to become abnormally enlarged, thickened, and/or stiffened. congenital heart disease: heart disease or abnormalities in the heart's structure that are present at birth. coronary artery disease: accumulation of cholesterol-filled plaques, which clog the arteries that supply blood and oxygen to the heart. endocarditis: infection and inflammation of the heart valves and the inner lining of the heart chambers, called the endocardium. heart attack (myocardial infarction): the sudden stopping of blood flow to part of the heart muscle heart failure: the inability of the heart to pump as forcefully or efficiently as needed to supply the body with oxygenated blood. heart rhythm disorders (arrhythmias): heartbeats that are too fast, too slow, or irregular. heart valve disorders: problems with the valves that control blood flow from one part of the heart to another part of the heart or to the body. myocarditis: inflammation of the myocardium, the middle layer of the heart wall, that decreases the ability of the heart to pump blood normally. pericarditis: inflammation of the pericardium, a thin sac surrounding the heart. sudden cardiac arrest: the sudden cessation of the heartbeat. You might also be interested in... Controlling Your Blood Pressure An alarming one in three American adults has high blood pressure. Known medically as hypertension, many people don't even know they have it, because high blood pressure has no symptoms or warning signs. But when elevated blood pressure is accompanied by abnormal cholesterol and blood sugar levels, the damage to your arteries, kidneys, and heart accelerates exponentially. Fortunately, high blood pressure is easy to detect and treat. In the Special Health Report, Controlling Your Blood Pressure, find out how to keep blood pressure in a healthy range simply by making lifestyle changes, such as losing weight, increasing activity, and eating more healthfully. READ MORE What causes heart disease? The most common type of heart disease is coronary artery disease (CAD), and the leading cause of CAD is atherosclerosis, the buildup of cholesterol plaque inside the coronary arteries. Too much plaque limits blood flow through the arteries that supply blood to the heart. Restricted blood flow can cause chest pain or pressure (known as angina) and requires immediate medical attention. When plaque ruptures, it can form a blood clot that stops blood flow and triggers a heart attack. The risk factors for atherosclerosis (and thus CAD) include: High total blood cholesterol level High level of LDL (bad) cholesterol High levels of triglycerides High levels of lipoprotein(a) High blood pressure (hypertension) Diabetes Family history of heart disease Smoking Obesity Physical inactivity Inflammation Stroke: Strategies to prevent, treat, and recover from a "brain attack" Protect your brain: That’s the strategy that Harvard doctors recommend in this report on preventing and treating stroke. Whether you’ve already had a mini-stroke or a major stroke, or have been warned that your high blood pressure might cause a future stroke, Stroke: Strategies to prevent, treat, and recover from a "brain attack" provides help and advice. READ MORE Heart disease symptoms A variety of symptoms and signs may indicate heart disease. If you experience any of the following for no apparent reason, immediately report them to your doctor. Fatigue. Fatigue can be caused by many illnesses and medicines. But constant, new fatigue can sometimes signal two kinds of heart disease: heart failure and coronary artery disease. Unexplained aches or pains. Blockage of blood to the heart muscle can cause pain or pressure in the chest, shoulders, arms, back, jaw, or abdomen, primarily when pain in these locations occurs with exercise and disappears with rest. Shortness of breath. Unexplained shortness of breath that occurs with small amounts of activity. Swollen legs, feet, or ankles. The kind of swelling that leaves an indentation if you press your finger into it could be a sign of heart failure. Heart palpitations. Palpitations refers to a heartbeat that feels irregular or rapid. Most palpitations may be caused by anxiety, caffeine intake, or dehydration. But sometimes they indicate a heart problem. You might also be interested in... Managing Your Cholesterol Managing Your Cholesterol offers up-to-date information to help you or a loved one keep cholesterol in check. The report spells out what are healthy and unhealthy cholesterol levels, and offers specific ways to keep cholesterol in line. It covers cholesterol tests and the genetics of cholesterol. The report also focuses on treatments based on the latest scientific evidence, including the pros and cons of statins and other medications, and provides the lowdown on other substances advertised to lower cholesterol. Managing Your Cholesterol can also help you work with your doctor to individualize your treatment. READ MORE How can you prevent heart disease? The best way to prevent heart disease is to adopt heart-healthy habits. These include managing blood pressure and cholesterol levels, eating a plant-based diet, adopting regular exercise, maintaining a proper weight, getting enough sleep, and not smoking. Blood pressure. High blood pressure makes the heart work harder, which can weaken the heart muscle over time. Blood pressure is measured in millimeters of mercury (mm Hg) and is categorized as follows: Normal: Less than 120/80 mm Hg Elevated: 120/less than 80 to 129/less than 80 mm Hg Stage 1 hypertension: 130/80 to 139/89 mm Hg Stage 2 hypertension: 140/90 mm Hg and above Cholesterol. There are two main types: “bad” low-density lipoprotein (LDL) and “good” high-density lipoprotein (HDL). Ideally, most adults should keep their LDL below 100 milligrams per deciliter (mg/dL) and their HDL above 40 mg/dL. However, your ideal numbers may differ based on your health, risk factors for heart disease, and individual goals, as determined in consultation with your doctor. Diet. Following a plant-based diet is known to protect against heart disease. The plant diets that have been most studied for heart health are the Mediterranean diet and the DASH (Dietary Approaches to Stop Hypertension) diet. Each emphasizes eating foods associated with heart-healthy benefits, such as whole grains, fruits, vegetables, legumes, nuts and seeds, fatty fish, and healthy oils like olive oil, and reducing the intake of red meat and processed foods. Exercise. Guidelines recommend that adults engage in at least 150 minutes of moderate-intensity aerobic activity per week, which breaks down to 30 minutes daily, five days a week. But this is the minimum. Evidence suggests that doing more is better. Weight. About 30% of American adults are classified as overweight. While it’s natural for people’s weight to increase somewhat with age, even five to 10 pounds over your ideal number is associated with an increased risk of heart disease. Check with your doctor to determine your weight range for your gender, age, and body type. Sleep. Experts recommend that adults get at least seven hours of sleep per night. Studies have found that less than this amount is associated with heart disease risk factors like higher stress levels, increased inflammation, high blood pressure, and weight gain. Smoking. Smokers have a much higher heart disease risk than never-smokers and two to three times the risk of early death. Certain medications and nicotine replacement therapies can help people quit. Speak with your doctor about these or other options.
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[Task Instructions] ================== Answer in a single sentence. Use only the document as your source. ================ [Query] ================== According to the above article what causes heart disease? ================ [Text] ================== ** Heart Disease** The human heart beats about 2.5 billion times over an average lifetime, pushing millions of gallons of blood throughout the body. This steady blood flow carries oxygen, hormones, and other compounds. It also whisks away the waste products of metabolism. Given the heart's never-ending workload, it's a wonder it performs so well for so long. But it can also fail, brought down by poor diet, lack of exercise, smoking, infection, unfavorable genes, and more. Heart disease and cardiovascular disease are two of the most significant heart health issues. They are often used interchangeably, but they are not the same. Heart disease refers to diseases of the heart, such as coronary artery disease, heart failure, heart valve abnormalities, and abnormal heart rhythms. Cardiovascular disease is a catch-all term for all heart and blood vessel diseases. It includes heart disease, but also stroke. Does a coronary stent make sense for stable angina? What are the different types of heart disease? Heart disease refers to diseases that affect the function and condition of the heart. There are several kinds of heart disease, including: cardiomyopathy: a heart muscle disease that causes the heart to become abnormally enlarged, thickened, and/or stiffened. congenital heart disease: heart disease or abnormalities in the heart's structure that are present at birth. coronary artery disease: accumulation of cholesterol-filled plaques, which clog the arteries that supply blood and oxygen to the heart. endocarditis: infection and inflammation of the heart valves and the inner lining of the heart chambers, called the endocardium. heart attack (myocardial infarction): the sudden stopping of blood flow to part of the heart muscle heart failure: the inability of the heart to pump as forcefully or efficiently as needed to supply the body with oxygenated blood. heart rhythm disorders (arrhythmias): heartbeats that are too fast, too slow, or irregular. heart valve disorders: problems with the valves that control blood flow from one part of the heart to another part of the heart or to the body. myocarditis: inflammation of the myocardium, the middle layer of the heart wall, that decreases the ability of the heart to pump blood normally. pericarditis: inflammation of the pericardium, a thin sac surrounding the heart. sudden cardiac arrest: the sudden cessation of the heartbeat. You might also be interested in... Controlling Your Blood Pressure An alarming one in three American adults has high blood pressure. Known medically as hypertension, many people don't even know they have it, because high blood pressure has no symptoms or warning signs. But when elevated blood pressure is accompanied by abnormal cholesterol and blood sugar levels, the damage to your arteries, kidneys, and heart accelerates exponentially. Fortunately, high blood pressure is easy to detect and treat. In the Special Health Report, Controlling Your Blood Pressure, find out how to keep blood pressure in a healthy range simply by making lifestyle changes, such as losing weight, increasing activity, and eating more healthfully. READ MORE What causes heart disease? The most common type of heart disease is coronary artery disease (CAD), and the leading cause of CAD is atherosclerosis, the buildup of cholesterol plaque inside the coronary arteries. Too much plaque limits blood flow through the arteries that supply blood to the heart. Restricted blood flow can cause chest pain or pressure (known as angina) and requires immediate medical attention. When plaque ruptures, it can form a blood clot that stops blood flow and triggers a heart attack. The risk factors for atherosclerosis (and thus CAD) include: High total blood cholesterol level High level of LDL (bad) cholesterol High levels of triglycerides High levels of lipoprotein(a) High blood pressure (hypertension) Diabetes Family history of heart disease Smoking Obesity Physical inactivity Inflammation Stroke: Strategies to prevent, treat, and recover from a "brain attack" Protect your brain: That’s the strategy that Harvard doctors recommend in this report on preventing and treating stroke. Whether you’ve already had a mini-stroke or a major stroke, or have been warned that your high blood pressure might cause a future stroke, Stroke: Strategies to prevent, treat, and recover from a "brain attack" provides help and advice. READ MORE Heart disease symptoms A variety of symptoms and signs may indicate heart disease. If you experience any of the following for no apparent reason, immediately report them to your doctor. Fatigue. Fatigue can be caused by many illnesses and medicines. But constant, new fatigue can sometimes signal two kinds of heart disease: heart failure and coronary artery disease. Unexplained aches or pains. Blockage of blood to the heart muscle can cause pain or pressure in the chest, shoulders, arms, back, jaw, or abdomen, primarily when pain in these locations occurs with exercise and disappears with rest. Shortness of breath. Unexplained shortness of breath that occurs with small amounts of activity. Swollen legs, feet, or ankles. The kind of swelling that leaves an indentation if you press your finger into it could be a sign of heart failure. Heart palpitations. Palpitations refers to a heartbeat that feels irregular or rapid. Most palpitations may be caused by anxiety, caffeine intake, or dehydration. But sometimes they indicate a heart problem. You might also be interested in... Managing Your Cholesterol Managing Your Cholesterol offers up-to-date information to help you or a loved one keep cholesterol in check. The report spells out what are healthy and unhealthy cholesterol levels, and offers specific ways to keep cholesterol in line. It covers cholesterol tests and the genetics of cholesterol. The report also focuses on treatments based on the latest scientific evidence, including the pros and cons of statins and other medications, and provides the lowdown on other substances advertised to lower cholesterol. Managing Your Cholesterol can also help you work with your doctor to individualize your treatment. READ MORE How can you prevent heart disease? The best way to prevent heart disease is to adopt heart-healthy habits. These include managing blood pressure and cholesterol levels, eating a plant-based diet, adopting regular exercise, maintaining a proper weight, getting enough sleep, and not smoking. Blood pressure. High blood pressure makes the heart work harder, which can weaken the heart muscle over time. Blood pressure is measured in millimeters of mercury (mm Hg) and is categorized as follows: Normal: Less than 120/80 mm Hg Elevated: 120/less than 80 to 129/less than 80 mm Hg Stage 1 hypertension: 130/80 to 139/89 mm Hg Stage 2 hypertension: 140/90 mm Hg and above Cholesterol. There are two main types: “bad” low-density lipoprotein (LDL) and “good” high-density lipoprotein (HDL). Ideally, most adults should keep their LDL below 100 milligrams per deciliter (mg/dL) and their HDL above 40 mg/dL. However, your ideal numbers may differ based on your health, risk factors for heart disease, and individual goals, as determined in consultation with your doctor. Diet. Following a plant-based diet is known to protect against heart disease. The plant diets that have been most studied for heart health are the Mediterranean diet and the DASH (Dietary Approaches to Stop Hypertension) diet. Each emphasizes eating foods associated with heart-healthy benefits, such as whole grains, fruits, vegetables, legumes, nuts and seeds, fatty fish, and healthy oils like olive oil, and reducing the intake of red meat and processed foods. Exercise. Guidelines recommend that adults engage in at least 150 minutes of moderate-intensity aerobic activity per week, which breaks down to 30 minutes daily, five days a week. But this is the minimum. Evidence suggests that doing more is better. Weight. About 30% of American adults are classified as overweight. While it’s natural for people’s weight to increase somewhat with age, even five to 10 pounds over your ideal number is associated with an increased risk of heart disease. Check with your doctor to determine your weight range for your gender, age, and body type. Sleep. Experts recommend that adults get at least seven hours of sleep per night. Studies have found that less than this amount is associated with heart disease risk factors like higher stress levels, increased inflammation, high blood pressure, and weight gain. Smoking. Smokers have a much higher heart disease risk than never-smokers and two to three times the risk of early death. Certain medications and nicotine replacement therapies can help people quit. Speak with your doctor about these or other options.
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Answer in a single sentence. Use only the document as your source.
EVIDENCE:
** Heart Disease** The human heart beats about 2.5 billion times over an average lifetime, pushing millions of gallons of blood throughout the body. This steady blood flow carries oxygen, hormones, and other compounds. It also whisks away the waste products of metabolism. Given the heart's never-ending workload, it's a wonder it performs so well for so long. But it can also fail, brought down by poor diet, lack of exercise, smoking, infection, unfavorable genes, and more. Heart disease and cardiovascular disease are two of the most significant heart health issues. They are often used interchangeably, but they are not the same. Heart disease refers to diseases of the heart, such as coronary artery disease, heart failure, heart valve abnormalities, and abnormal heart rhythms. Cardiovascular disease is a catch-all term for all heart and blood vessel diseases. It includes heart disease, but also stroke. Does a coronary stent make sense for stable angina? What are the different types of heart disease? Heart disease refers to diseases that affect the function and condition of the heart. There are several kinds of heart disease, including: cardiomyopathy: a heart muscle disease that causes the heart to become abnormally enlarged, thickened, and/or stiffened. congenital heart disease: heart disease or abnormalities in the heart's structure that are present at birth. coronary artery disease: accumulation of cholesterol-filled plaques, which clog the arteries that supply blood and oxygen to the heart. endocarditis: infection and inflammation of the heart valves and the inner lining of the heart chambers, called the endocardium. heart attack (myocardial infarction): the sudden stopping of blood flow to part of the heart muscle heart failure: the inability of the heart to pump as forcefully or efficiently as needed to supply the body with oxygenated blood. heart rhythm disorders (arrhythmias): heartbeats that are too fast, too slow, or irregular. heart valve disorders: problems with the valves that control blood flow from one part of the heart to another part of the heart or to the body. myocarditis: inflammation of the myocardium, the middle layer of the heart wall, that decreases the ability of the heart to pump blood normally. pericarditis: inflammation of the pericardium, a thin sac surrounding the heart. sudden cardiac arrest: the sudden cessation of the heartbeat. You might also be interested in... Controlling Your Blood Pressure An alarming one in three American adults has high blood pressure. Known medically as hypertension, many people don't even know they have it, because high blood pressure has no symptoms or warning signs. But when elevated blood pressure is accompanied by abnormal cholesterol and blood sugar levels, the damage to your arteries, kidneys, and heart accelerates exponentially. Fortunately, high blood pressure is easy to detect and treat. In the Special Health Report, Controlling Your Blood Pressure, find out how to keep blood pressure in a healthy range simply by making lifestyle changes, such as losing weight, increasing activity, and eating more healthfully. READ MORE What causes heart disease? The most common type of heart disease is coronary artery disease (CAD), and the leading cause of CAD is atherosclerosis, the buildup of cholesterol plaque inside the coronary arteries. Too much plaque limits blood flow through the arteries that supply blood to the heart. Restricted blood flow can cause chest pain or pressure (known as angina) and requires immediate medical attention. When plaque ruptures, it can form a blood clot that stops blood flow and triggers a heart attack. The risk factors for atherosclerosis (and thus CAD) include: High total blood cholesterol level High level of LDL (bad) cholesterol High levels of triglycerides High levels of lipoprotein(a) High blood pressure (hypertension) Diabetes Family history of heart disease Smoking Obesity Physical inactivity Inflammation Stroke: Strategies to prevent, treat, and recover from a "brain attack" Protect your brain: That’s the strategy that Harvard doctors recommend in this report on preventing and treating stroke. Whether you’ve already had a mini-stroke or a major stroke, or have been warned that your high blood pressure might cause a future stroke, Stroke: Strategies to prevent, treat, and recover from a "brain attack" provides help and advice. READ MORE Heart disease symptoms A variety of symptoms and signs may indicate heart disease. If you experience any of the following for no apparent reason, immediately report them to your doctor. Fatigue. Fatigue can be caused by many illnesses and medicines. But constant, new fatigue can sometimes signal two kinds of heart disease: heart failure and coronary artery disease. Unexplained aches or pains. Blockage of blood to the heart muscle can cause pain or pressure in the chest, shoulders, arms, back, jaw, or abdomen, primarily when pain in these locations occurs with exercise and disappears with rest. Shortness of breath. Unexplained shortness of breath that occurs with small amounts of activity. Swollen legs, feet, or ankles. The kind of swelling that leaves an indentation if you press your finger into it could be a sign of heart failure. Heart palpitations. Palpitations refers to a heartbeat that feels irregular or rapid. Most palpitations may be caused by anxiety, caffeine intake, or dehydration. But sometimes they indicate a heart problem. You might also be interested in... Managing Your Cholesterol Managing Your Cholesterol offers up-to-date information to help you or a loved one keep cholesterol in check. The report spells out what are healthy and unhealthy cholesterol levels, and offers specific ways to keep cholesterol in line. It covers cholesterol tests and the genetics of cholesterol. The report also focuses on treatments based on the latest scientific evidence, including the pros and cons of statins and other medications, and provides the lowdown on other substances advertised to lower cholesterol. Managing Your Cholesterol can also help you work with your doctor to individualize your treatment. READ MORE How can you prevent heart disease? The best way to prevent heart disease is to adopt heart-healthy habits. These include managing blood pressure and cholesterol levels, eating a plant-based diet, adopting regular exercise, maintaining a proper weight, getting enough sleep, and not smoking. Blood pressure. High blood pressure makes the heart work harder, which can weaken the heart muscle over time. Blood pressure is measured in millimeters of mercury (mm Hg) and is categorized as follows: Normal: Less than 120/80 mm Hg Elevated: 120/less than 80 to 129/less than 80 mm Hg Stage 1 hypertension: 130/80 to 139/89 mm Hg Stage 2 hypertension: 140/90 mm Hg and above Cholesterol. There are two main types: “bad” low-density lipoprotein (LDL) and “good” high-density lipoprotein (HDL). Ideally, most adults should keep their LDL below 100 milligrams per deciliter (mg/dL) and their HDL above 40 mg/dL. However, your ideal numbers may differ based on your health, risk factors for heart disease, and individual goals, as determined in consultation with your doctor. Diet. Following a plant-based diet is known to protect against heart disease. The plant diets that have been most studied for heart health are the Mediterranean diet and the DASH (Dietary Approaches to Stop Hypertension) diet. Each emphasizes eating foods associated with heart-healthy benefits, such as whole grains, fruits, vegetables, legumes, nuts and seeds, fatty fish, and healthy oils like olive oil, and reducing the intake of red meat and processed foods. Exercise. Guidelines recommend that adults engage in at least 150 minutes of moderate-intensity aerobic activity per week, which breaks down to 30 minutes daily, five days a week. But this is the minimum. Evidence suggests that doing more is better. Weight. About 30% of American adults are classified as overweight. While it’s natural for people’s weight to increase somewhat with age, even five to 10 pounds over your ideal number is associated with an increased risk of heart disease. Check with your doctor to determine your weight range for your gender, age, and body type. Sleep. Experts recommend that adults get at least seven hours of sleep per night. Studies have found that less than this amount is associated with heart disease risk factors like higher stress levels, increased inflammation, high blood pressure, and weight gain. Smoking. Smokers have a much higher heart disease risk than never-smokers and two to three times the risk of early death. Certain medications and nicotine replacement therapies can help people quit. Speak with your doctor about these or other options.
USER:
According to the above article what causes heart disease?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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| 9
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. [user request] [context document]
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I got a mail order bride, she cheated on me.... a lot. what is her scenario going to be now that i want to divorce her and have nothing to do with her. We don't have a kid, she's never had a real job, she doesn't have a bank account, pretty much has nothing going for herself. it's only been 10 months since we got her conditional green card. what happens to her?
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Green Card Types When you obtain a green card through marriage, it will either be a permanent renewable green card that is valid for ten years or a conditional two-year green card. The conditional green card is issued to applicants that have been married for less than two years at the time the green card is issued. You can apply to have these conditions lifted two years after arriving in the United States. Divorce and a Permanent Green Card If you divorce and you have a permanent green card, there is typically no impact to the renewal process. When it comes time to renew your green card, you simply file Form I-90 (officially called “Application to Replace Permanent Resident Card”). There are no questions about your marital or relationship status for a green card renewal. If you legally changed your name after your divorce, you can also update your green card at that time by submitting a legal record with your new name. Divorce and a Conditional Green Card In order to lift the conditions after two years, you need to prove that you and your partner are still married. Therefore, divorce when you hold a conditional green card can cause issues. A waiver is available when you file Form I-751 to remove the conditions on your green card, but you will have to prove that your marriage prior to the divorce was genuine and not the result of immigration fraud. Typically, U.S. Citizenship and Immigration Services (USCIS) closely examines applications with waivers and you might be asked to provide additional evidence to prove you entered the marriage in good faith. To prove your marriage was real, you can include joint financial records, proof that you lived together, evidence that you have children together, or that you sought marriage counseling. You will also need to include a detailed written statement explaining why your marriage ended. If you and your partner separated because of irreconcilable differences, explain what those differences were. For example, perhaps one partner wanted to have children but the other didn’t. Sometimes, a marriage ends because of the actions of a spouse, such as domestic abuse or adultery. In these cases, you would submit copies of your divorce papers and if available, court records detailing these claims. If the divorce was as a result of your actions, it is best that you consult with an experienced immigration attorney about your case. Removing conditions when the divorce is not final If your divorce has not yet been finalized, you will need to include evidence that you or your partner have initiated divorce proceedings. In this case, USCIS will typically send you a notice in the mail extending your conditional residence status for one more year. At a later date, you will also likely receive a Request For Evidence (RFE) for the final decree of divorce. Removing conditions when you are separated but not divorced In rare cases, you can apply to remove conditions when you and your spouse are separated but you aren’t divorced, or your spouse refuses to grant you a divorce. If you are able to prove “extreme hardship,” then you may still be eligible for a permanent green card. USCIS provides detailed examples of what constitutes “extreme hardship,” Divorcing During the Green Card Application Process If you divorce during the application process for a marriage green card, then the application will stop and no longer progress. This is the case whether you are applying for a marriage green card or you are married to someone being sponsored for a green card through their U.S. employer. It’s also important to be aware that USCIS is very vigilant about immigration fraud and that pretending to be married or not disclosing a divorce when applying for a green card could be viewed as immigration fraud.
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. I got a mail order bride, she cheated on me.... a lot. what is her scenario going to be now that i want to divorce her and have nothing to do with her. We don't have a kid, she's never had a real job, she doesn't have a bank account, pretty much has nothing going for herself. it's only been 10 months since we got her conditional green card. what happens to her? Green Card Types When you obtain a green card through marriage, it will either be a permanent renewable green card that is valid for ten years or a conditional two-year green card. The conditional green card is issued to applicants that have been married for less than two years at the time the green card is issued. You can apply to have these conditions lifted two years after arriving in the United States. Divorce and a Permanent Green Card If you divorce and you have a permanent green card, there is typically no impact to the renewal process. When it comes time to renew your green card, you simply file Form I-90 (officially called “Application to Replace Permanent Resident Card”). There are no questions about your marital or relationship status for a green card renewal. If you legally changed your name after your divorce, you can also update your green card at that time by submitting a legal record with your new name. Divorce and a Conditional Green Card In order to lift the conditions after two years, you need to prove that you and your partner are still married. Therefore, divorce when you hold a conditional green card can cause issues. A waiver is available when you file Form I-751 to remove the conditions on your green card, but you will have to prove that your marriage prior to the divorce was genuine and not the result of immigration fraud. Typically, U.S. Citizenship and Immigration Services (USCIS) closely examines applications with waivers and you might be asked to provide additional evidence to prove you entered the marriage in good faith. To prove your marriage was real, you can include joint financial records, proof that you lived together, evidence that you have children together, or that you sought marriage counseling. You will also need to include a detailed written statement explaining why your marriage ended. If you and your partner separated because of irreconcilable differences, explain what those differences were. For example, perhaps one partner wanted to have children but the other didn’t. Sometimes, a marriage ends because of the actions of a spouse, such as domestic abuse or adultery. In these cases, you would submit copies of your divorce papers and if available, court records detailing these claims. If the divorce was as a result of your actions, it is best that you consult with an experienced immigration attorney about your case. Removing conditions when the divorce is not final If your divorce has not yet been finalized, you will need to include evidence that you or your partner have initiated divorce proceedings. In this case, USCIS will typically send you a notice in the mail extending your conditional residence status for one more year. At a later date, you will also likely receive a Request For Evidence (RFE) for the final decree of divorce. Removing conditions when you are separated but not divorced In rare cases, you can apply to remove conditions when you and your spouse are separated but you aren’t divorced, or your spouse refuses to grant you a divorce. If you are able to prove “extreme hardship,” then you may still be eligible for a permanent green card. USCIS provides detailed examples of what constitutes “extreme hardship,” Divorcing During the Green Card Application Process If you divorce during the application process for a marriage green card, then the application will stop and no longer progress. This is the case whether you are applying for a marriage green card or you are married to someone being sponsored for a green card through their U.S. employer. It’s also important to be aware that USCIS is very vigilant about immigration fraud and that pretending to be married or not disclosing a divorce when applying for a green card could be viewed as immigration fraud. https://www.boundless.com/immigration-resources/marriage-green-card-divorce/
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. [user request] [context document]
EVIDENCE:
Green Card Types When you obtain a green card through marriage, it will either be a permanent renewable green card that is valid for ten years or a conditional two-year green card. The conditional green card is issued to applicants that have been married for less than two years at the time the green card is issued. You can apply to have these conditions lifted two years after arriving in the United States. Divorce and a Permanent Green Card If you divorce and you have a permanent green card, there is typically no impact to the renewal process. When it comes time to renew your green card, you simply file Form I-90 (officially called “Application to Replace Permanent Resident Card”). There are no questions about your marital or relationship status for a green card renewal. If you legally changed your name after your divorce, you can also update your green card at that time by submitting a legal record with your new name. Divorce and a Conditional Green Card In order to lift the conditions after two years, you need to prove that you and your partner are still married. Therefore, divorce when you hold a conditional green card can cause issues. A waiver is available when you file Form I-751 to remove the conditions on your green card, but you will have to prove that your marriage prior to the divorce was genuine and not the result of immigration fraud. Typically, U.S. Citizenship and Immigration Services (USCIS) closely examines applications with waivers and you might be asked to provide additional evidence to prove you entered the marriage in good faith. To prove your marriage was real, you can include joint financial records, proof that you lived together, evidence that you have children together, or that you sought marriage counseling. You will also need to include a detailed written statement explaining why your marriage ended. If you and your partner separated because of irreconcilable differences, explain what those differences were. For example, perhaps one partner wanted to have children but the other didn’t. Sometimes, a marriage ends because of the actions of a spouse, such as domestic abuse or adultery. In these cases, you would submit copies of your divorce papers and if available, court records detailing these claims. If the divorce was as a result of your actions, it is best that you consult with an experienced immigration attorney about your case. Removing conditions when the divorce is not final If your divorce has not yet been finalized, you will need to include evidence that you or your partner have initiated divorce proceedings. In this case, USCIS will typically send you a notice in the mail extending your conditional residence status for one more year. At a later date, you will also likely receive a Request For Evidence (RFE) for the final decree of divorce. Removing conditions when you are separated but not divorced In rare cases, you can apply to remove conditions when you and your spouse are separated but you aren’t divorced, or your spouse refuses to grant you a divorce. If you are able to prove “extreme hardship,” then you may still be eligible for a permanent green card. USCIS provides detailed examples of what constitutes “extreme hardship,” Divorcing During the Green Card Application Process If you divorce during the application process for a marriage green card, then the application will stop and no longer progress. This is the case whether you are applying for a marriage green card or you are married to someone being sponsored for a green card through their U.S. employer. It’s also important to be aware that USCIS is very vigilant about immigration fraud and that pretending to be married or not disclosing a divorce when applying for a green card could be viewed as immigration fraud.
USER:
I got a mail order bride, she cheated on me.... a lot. what is her scenario going to be now that i want to divorce her and have nothing to do with her. We don't have a kid, she's never had a real job, she doesn't have a bank account, pretty much has nothing going for herself. it's only been 10 months since we got her conditional green card. what happens to her?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 24
| 73
| 636
| null | 722
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
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My daughter is 11 months old, and I'm trying to decide what type of sippy cup to buy. Explain the different types of sippy cups. Then, tell me the best options, including pros and cons for each. My biggest concerns are durability, and being able to travel without spils. Don't include soft spout cups, she already has those and we want to try a different type.
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Types of sippy cups You can choose from a few different types of sippy cups: Soft spout. These are the closest to a bottle, containing a nipple spout that still allows for sucking. They can be used to transition your baby to latched tops or open tops by allowing them to first get used to holding and gripping the cup and its handles. Hard spout. Hard-spout sippy cups encourage your child to transition from sucking to tilting and sipping. It’s often best to introduce it after they’ve mastered the soft spout. Straw. Straw sippy cups, as you may have guessed, employ a straw rather than a spout. Some feel that a straw is preferable for speech development over a spout. They can also help your child get used to drinking from a straw and using a cup. No spout or flat lid. These sippy cups are spoutless with a flat top (sometimes referred to as 360 cups). They allow for water to flow from all edges of the cup opening to resemble the action of a real cup while still using a lid. They typically lack any no-spill valves, and that’s a good thing. Sippy cups can be a good option for bridging the gap between a bottle and an open cup. They prevent spilling while still giving your child more independence. Your child may not take to the first option you present to them, but keep trying! The key to success is choosing cups that are appropriate for your child’s age and stage of development. 6 to 12 months old As your baby continues transitioning to cup use, the options get more varied and include: spout cups spoutless cups straw cups The variety you choose is up to you and your baby. Since the cup may be too heavy for your little one to hold with just one hand, cups with handles are helpful at this stage. And even if a cup has a larger capacity, resist filling it to the top so your baby can maneuver it. Continue to supervise your baby using a cup until they are at least 1 year old. Best soft-spout cup NUK Learner Cup Price: $$ Pros: Options for both 5- and 10-ounce cup sizes; removable handles for when your little one is ready to transition to more of a cup; includes a plastic lid to help prevent spills when traveling Cons: Spout can be slow and require hard sucking The NUK Learner Cup comes in 5- or 10-ounce sizes and features removable handles for your growing baby. It’s appropriate for babies 6 months old or over, and it’s made from BPA-free plastic. The cup has a soft silicone spout that has a special vent to prevent baby from swallowing too much air. Parents share that this cup is easy to handwash and that the travel piece that comes with the cup prevents leaks when it’s tossed in a diaper bag. Others say their babies had trouble getting milk out of the cup, even when sucking very hard. Shop now at Amazon Best straw sippy cup ZoLi BOT Straw Sippy Cup Price: $$$ Pros: Weighted straw makes it easier to get the last of the liquid out; dishwasher safe Cons: One of the more expensive cup options; not the thickest of straws and can be bitten through The ZoLi BOT Straw Sippy Cup is suitable for babies 9 months old or over. It features a weighted straw, so your little one can get liquid no matter how the cup is oriented. The plastic is BPA-free and can be hand washed or run through your dishwasher for cleaning. You can also purchase replacement straws. Parents who like this cup say that it’s simple to assemble and that the handles are easy for babies to hold. On the downside, it can also be difficult to screw the top on correctly, making it prone to leaks. The cup can also leak if the straw becomes damaged from biting or normal wear and tear. Shop now at Amazon Best spoutless sippy cup Munchkin Miracle 360 Trainer Cup Price: $ Pros: Budget-friendly option; dishwasher safe; comes in a variety of sizes and colors Cons: The top’s design can allow for big spills; the design can be hard for some children to figure out how to drink from The Munchkin Miracle 360 Trainer Cup is an affordable option. The unique spoutless construction allows babies 6 months old and over to simulate drinking from an open cup without the spills. It’s also streamlined with only three main pieces and top-rack dishwasher safe. Some parents complain that, while the cup is spill-proof, their smart babies figured out they can pour the liquid by simply pressing on the center of the top. Shop now on Amazon 12 to 18 months old Toddlers have mastered more dexterity with their hands, so many may graduate from handles at this age. Cups with a curved or hourglass shape can help little hands grip and hold. Best for toddlers First Essentials by NUK Fun Grips Hard Spout Sippy Cup Price: $ Pros: Made in the United States; dishwasher safe; hourglass shape is easier to hold without needing handles Cons: The cup’s wide base won’t fit in standard cup holders The economical First Essentials by NUK Fun Grips Sippy Cup (previously sold as Gerber Graduates) is made in the United States from BPA-free plastic. The two-part design is simple and the hourglass shape is easy for toddlers ages 12 months and older to grab. This cup features a 100 percent spill-proof, leak-proof, break-proof guarantee. You may wash this sippy cup either by hand or in the dishwasher. On the negative side, some reviewers say the cup’s base is too wide and that it doesn’t fit easily into standard cup holders or diaper bag pockets. Shop now at Amazon Best straw sippy cup Nuby No-Spill Cup with Flex Straw Price: $ Pros: Budget-friendly option; contoured design offers secure grip without handles; thicker straw Cons:10-ounce size might be larger than some children can easily handle; valve in the straw requires a “squeeze and suck” action Nuby’s No-Spill Flex Straw Cup is a popular choice for toddlers who prefer straws to spouts. The silicone straw has a built-in valve to prevent spills and leaks, and it’s sturdy enough to stand up to occasional biting. While this 10-ounce cup doesn’t have handles, it does feature a contoured design for little hands to grip and is made from BPA-free plastic. The straw does require a “squeeze and suck” action to get liquid through the valve, and some tots find this difficult to master. That said, many parents share that the protection the valve provides is worth the extra effort. Shop now on Amazon
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== My daughter is 11 months old, and I'm trying to decide what type of sippy cup to buy. Explain the different types of sippy cups. Then, tell me the best options, including pros and cons for each. My biggest concerns are durability, and being able to travel without spils. Don't include soft spout cups, she already has those and we want to try a different type. {passage 0} ========== Types of sippy cups You can choose from a few different types of sippy cups: Soft spout. These are the closest to a bottle, containing a nipple spout that still allows for sucking. They can be used to transition your baby to latched tops or open tops by allowing them to first get used to holding and gripping the cup and its handles. Hard spout. Hard-spout sippy cups encourage your child to transition from sucking to tilting and sipping. It’s often best to introduce it after they’ve mastered the soft spout. Straw. Straw sippy cups, as you may have guessed, employ a straw rather than a spout. Some feel that a straw is preferable for speech development over a spout. They can also help your child get used to drinking from a straw and using a cup. No spout or flat lid. These sippy cups are spoutless with a flat top (sometimes referred to as 360 cups). They allow for water to flow from all edges of the cup opening to resemble the action of a real cup while still using a lid. They typically lack any no-spill valves, and that’s a good thing. Sippy cups can be a good option for bridging the gap between a bottle and an open cup. They prevent spilling while still giving your child more independence. Your child may not take to the first option you present to them, but keep trying! The key to success is choosing cups that are appropriate for your child’s age and stage of development. 6 to 12 months old As your baby continues transitioning to cup use, the options get more varied and include: spout cups spoutless cups straw cups The variety you choose is up to you and your baby. Since the cup may be too heavy for your little one to hold with just one hand, cups with handles are helpful at this stage. And even if a cup has a larger capacity, resist filling it to the top so your baby can maneuver it. Continue to supervise your baby using a cup until they are at least 1 year old. Best soft-spout cup NUK Learner Cup Price: $$ Pros: Options for both 5- and 10-ounce cup sizes; removable handles for when your little one is ready to transition to more of a cup; includes a plastic lid to help prevent spills when traveling Cons: Spout can be slow and require hard sucking The NUK Learner Cup comes in 5- or 10-ounce sizes and features removable handles for your growing baby. It’s appropriate for babies 6 months old or over, and it’s made from BPA-free plastic. The cup has a soft silicone spout that has a special vent to prevent baby from swallowing too much air. Parents share that this cup is easy to handwash and that the travel piece that comes with the cup prevents leaks when it’s tossed in a diaper bag. Others say their babies had trouble getting milk out of the cup, even when sucking very hard. Shop now at Amazon Best straw sippy cup ZoLi BOT Straw Sippy Cup Price: $$$ Pros: Weighted straw makes it easier to get the last of the liquid out; dishwasher safe Cons: One of the more expensive cup options; not the thickest of straws and can be bitten through The ZoLi BOT Straw Sippy Cup is suitable for babies 9 months old or over. It features a weighted straw, so your little one can get liquid no matter how the cup is oriented. The plastic is BPA-free and can be hand washed or run through your dishwasher for cleaning. You can also purchase replacement straws. Parents who like this cup say that it’s simple to assemble and that the handles are easy for babies to hold. On the downside, it can also be difficult to screw the top on correctly, making it prone to leaks. The cup can also leak if the straw becomes damaged from biting or normal wear and tear. Shop now at Amazon Best spoutless sippy cup Munchkin Miracle 360 Trainer Cup Price: $ Pros: Budget-friendly option; dishwasher safe; comes in a variety of sizes and colors Cons: The top’s design can allow for big spills; the design can be hard for some children to figure out how to drink from The Munchkin Miracle 360 Trainer Cup is an affordable option. The unique spoutless construction allows babies 6 months old and over to simulate drinking from an open cup without the spills. It’s also streamlined with only three main pieces and top-rack dishwasher safe. Some parents complain that, while the cup is spill-proof, their smart babies figured out they can pour the liquid by simply pressing on the center of the top. Shop now on Amazon 12 to 18 months old Toddlers have mastered more dexterity with their hands, so many may graduate from handles at this age. Cups with a curved or hourglass shape can help little hands grip and hold. Best for toddlers First Essentials by NUK Fun Grips Hard Spout Sippy Cup Price: $ Pros: Made in the United States; dishwasher safe; hourglass shape is easier to hold without needing handles Cons: The cup’s wide base won’t fit in standard cup holders The economical First Essentials by NUK Fun Grips Sippy Cup (previously sold as Gerber Graduates) is made in the United States from BPA-free plastic. The two-part design is simple and the hourglass shape is easy for toddlers ages 12 months and older to grab. This cup features a 100 percent spill-proof, leak-proof, break-proof guarantee. You may wash this sippy cup either by hand or in the dishwasher. On the negative side, some reviewers say the cup’s base is too wide and that it doesn’t fit easily into standard cup holders or diaper bag pockets. Shop now at Amazon Best straw sippy cup Nuby No-Spill Cup with Flex Straw Price: $ Pros: Budget-friendly option; contoured design offers secure grip without handles; thicker straw Cons:10-ounce size might be larger than some children can easily handle; valve in the straw requires a “squeeze and suck” action Nuby’s No-Spill Flex Straw Cup is a popular choice for toddlers who prefer straws to spouts. The silicone straw has a built-in valve to prevent spills and leaks, and it’s sturdy enough to stand up to occasional biting. While this 10-ounce cup doesn’t have handles, it does feature a contoured design for little hands to grip and is made from BPA-free plastic. The straw does require a “squeeze and suck” action to get liquid through the valve, and some tots find this difficult to master. That said, many parents share that the protection the valve provides is worth the extra effort. Shop now on Amazon https://www.healthline.com/health/parenting/best-sippy-cups#6-to-12-months
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
EVIDENCE:
Types of sippy cups You can choose from a few different types of sippy cups: Soft spout. These are the closest to a bottle, containing a nipple spout that still allows for sucking. They can be used to transition your baby to latched tops or open tops by allowing them to first get used to holding and gripping the cup and its handles. Hard spout. Hard-spout sippy cups encourage your child to transition from sucking to tilting and sipping. It’s often best to introduce it after they’ve mastered the soft spout. Straw. Straw sippy cups, as you may have guessed, employ a straw rather than a spout. Some feel that a straw is preferable for speech development over a spout. They can also help your child get used to drinking from a straw and using a cup. No spout or flat lid. These sippy cups are spoutless with a flat top (sometimes referred to as 360 cups). They allow for water to flow from all edges of the cup opening to resemble the action of a real cup while still using a lid. They typically lack any no-spill valves, and that’s a good thing. Sippy cups can be a good option for bridging the gap between a bottle and an open cup. They prevent spilling while still giving your child more independence. Your child may not take to the first option you present to them, but keep trying! The key to success is choosing cups that are appropriate for your child’s age and stage of development. 6 to 12 months old As your baby continues transitioning to cup use, the options get more varied and include: spout cups spoutless cups straw cups The variety you choose is up to you and your baby. Since the cup may be too heavy for your little one to hold with just one hand, cups with handles are helpful at this stage. And even if a cup has a larger capacity, resist filling it to the top so your baby can maneuver it. Continue to supervise your baby using a cup until they are at least 1 year old. Best soft-spout cup NUK Learner Cup Price: $$ Pros: Options for both 5- and 10-ounce cup sizes; removable handles for when your little one is ready to transition to more of a cup; includes a plastic lid to help prevent spills when traveling Cons: Spout can be slow and require hard sucking The NUK Learner Cup comes in 5- or 10-ounce sizes and features removable handles for your growing baby. It’s appropriate for babies 6 months old or over, and it’s made from BPA-free plastic. The cup has a soft silicone spout that has a special vent to prevent baby from swallowing too much air. Parents share that this cup is easy to handwash and that the travel piece that comes with the cup prevents leaks when it’s tossed in a diaper bag. Others say their babies had trouble getting milk out of the cup, even when sucking very hard. Shop now at Amazon Best straw sippy cup ZoLi BOT Straw Sippy Cup Price: $$$ Pros: Weighted straw makes it easier to get the last of the liquid out; dishwasher safe Cons: One of the more expensive cup options; not the thickest of straws and can be bitten through The ZoLi BOT Straw Sippy Cup is suitable for babies 9 months old or over. It features a weighted straw, so your little one can get liquid no matter how the cup is oriented. The plastic is BPA-free and can be hand washed or run through your dishwasher for cleaning. You can also purchase replacement straws. Parents who like this cup say that it’s simple to assemble and that the handles are easy for babies to hold. On the downside, it can also be difficult to screw the top on correctly, making it prone to leaks. The cup can also leak if the straw becomes damaged from biting or normal wear and tear. Shop now at Amazon Best spoutless sippy cup Munchkin Miracle 360 Trainer Cup Price: $ Pros: Budget-friendly option; dishwasher safe; comes in a variety of sizes and colors Cons: The top’s design can allow for big spills; the design can be hard for some children to figure out how to drink from The Munchkin Miracle 360 Trainer Cup is an affordable option. The unique spoutless construction allows babies 6 months old and over to simulate drinking from an open cup without the spills. It’s also streamlined with only three main pieces and top-rack dishwasher safe. Some parents complain that, while the cup is spill-proof, their smart babies figured out they can pour the liquid by simply pressing on the center of the top. Shop now on Amazon 12 to 18 months old Toddlers have mastered more dexterity with their hands, so many may graduate from handles at this age. Cups with a curved or hourglass shape can help little hands grip and hold. Best for toddlers First Essentials by NUK Fun Grips Hard Spout Sippy Cup Price: $ Pros: Made in the United States; dishwasher safe; hourglass shape is easier to hold without needing handles Cons: The cup’s wide base won’t fit in standard cup holders The economical First Essentials by NUK Fun Grips Sippy Cup (previously sold as Gerber Graduates) is made in the United States from BPA-free plastic. The two-part design is simple and the hourglass shape is easy for toddlers ages 12 months and older to grab. This cup features a 100 percent spill-proof, leak-proof, break-proof guarantee. You may wash this sippy cup either by hand or in the dishwasher. On the negative side, some reviewers say the cup’s base is too wide and that it doesn’t fit easily into standard cup holders or diaper bag pockets. Shop now at Amazon Best straw sippy cup Nuby No-Spill Cup with Flex Straw Price: $ Pros: Budget-friendly option; contoured design offers secure grip without handles; thicker straw Cons:10-ounce size might be larger than some children can easily handle; valve in the straw requires a “squeeze and suck” action Nuby’s No-Spill Flex Straw Cup is a popular choice for toddlers who prefer straws to spouts. The silicone straw has a built-in valve to prevent spills and leaks, and it’s sturdy enough to stand up to occasional biting. While this 10-ounce cup doesn’t have handles, it does feature a contoured design for little hands to grip and is made from BPA-free plastic. The straw does require a “squeeze and suck” action to get liquid through the valve, and some tots find this difficult to master. That said, many parents share that the protection the valve provides is worth the extra effort. Shop now on Amazon
USER:
My daughter is 11 months old, and I'm trying to decide what type of sippy cup to buy. Explain the different types of sippy cups. Then, tell me the best options, including pros and cons for each. My biggest concerns are durability, and being able to travel without spils. Don't include soft spout cups, she already has those and we want to try a different type.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 26
| 66
| 1,121
| null | 712
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[question] [user request] ===================== [text] [context document] ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
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What are the implications of the recent NCAA settlements, and what might it mean for the future of athlete compensation in college sports? Write in a minimum of 200 words.
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Formal settlement documents were filed with the Northern District Court of California Friday to advance the settlement approval process to resolve class-action lawsuits involving the NCAA and the Atlantic Coast Conference, Big Ten Conference, Big 12 Conference, Pac-12 Conference and Southeastern Conference (Autonomy 5 conferences). The settlement documents address three cases – House v. NCAA, Hubbard v. NCAA and Carter v. NCAA – involving back damages and future benefits for Division I student-athletes. "This is another important step in the ongoing effort to provide increased benefits to student-athletes while creating a stable and sustainable model for the future of college sports," said the commissioners of the five conferences and the NCAA president. "While there is still much work to be done in the settlement approval process, this is a significant step toward establishing clarity for the future of all of Division I athletics while maintaining a lasting education-based model for college sports, ensuring the opportunity for student-athletes to earn a degree and the tools necessary to be successful in life after sports." The Settlement The settlement addresses three primary issues: payment of back damages for claims relating to name, image and likeness (NIL), academic-related awards and other benefits; increased benefits from institutions to student-athletes going forward, including additional NIL opportunities for student-athletes directly with the institution; and eliminating scholarships limits in favor of roster limits. The settlement calls for total back damages of approximately $2.78 billion, to be paid over 10 years, equating to approximately $280 million annually with distribution of back damages as determined by plaintiffs. Going forward, the settlement allows the A5 conference member institutions (and other DI schools that choose to participate in the new structure) to provide increased benefits to student-athletes, including for NIL. If approved by the court, this model will allow schools to provide up to 22% of the average Autonomy 5 athletic media, ticket, and sponsorship revenue to student-athletes, starting in the 2025-26 academic year. The future model could result in student-athletes receiving $1.5 billion to $2 billion in new benefits annually. The new benefits that may be made available to student-athletes would be in addition to the myriad benefits currently provided to student-athletes, including free tuition, room & board, educational grants, academic support and tutoring, medical and mental health resources & support, nutrition resources & support, life skills development, superior coaching and training and extended medical coverage after they stop competing. Adding these existing benefits together with the benefits to be available under the new model, many A5 schools would be providing nearly 50 percent of athletics revenue to their student-athletes. Under the new model, institutions may pay student-athletes directly for their NIL rights. Any institutional NIL payments would apply toward the 22% cap. Third parties may continue to enter into NIL agreements with student-athletes. Such agreements will be subject to review to ensure they are legitimate, fair market value agreements and not used for pay-for-play. NIL payments by third parties would not apply toward the 22% cap but must be disclosed to a clearinghouse for review. The new model allows for the establishment of a robust and effective enforcement and oversight program to ensure the new NIL model achieves its objectives. The establishment of a clearinghouse for NIL payments over $600 would give institutions access to information about external NIL activities, providing a level of transparency that does not currently exist to allow for better management of third-party influence and better assurance of legitimate NIL activity. Lastly, scholarship limits will be eliminated in all sports, and roster limits will be established. Institutions have the discretion to offer partial or full scholarships provided they do not exceed the roster limits. This change will allow institutions to provide additional scholarships to student-athletes in the future. Next Steps The settlement must be approved by the court before it becomes final, a process expected to take several months. If the court preliminarily approves the settlement, the class members will be provided notice of the settlement. Class members with claims for monetary damages based on prior conduct will have an opportunity to opt out of the settlement if they choose. Class members—including incoming student-athletes—will also receive notice and be allowed to present objections to the future relief/model to the court. Unresolved Issues While approval of the settlement would be a significant step forward, there would still be pending issues to be addressed that highlight the continuing need for federal legislation. These issues include: The settlement does not resolve the patchwork of state laws, many of which may conflict with the settlement. These laws will need to be preempted by federal legislation in order for the settlement to be effective. The settlement does not address ongoing efforts to designate student-athletes as employees under state and federal labor and employment laws. These efforts by the NLRB and plaintiffs' attorneys pose a direct threat to both the sustainability of sports programs (especially for non-revenue generating ones) and to the baseline of support provided to all athletes. "This settlement is an important step forward for student-athletes and college sports, but it does not address every challenge," said the A5 conference commissioners and NCAA president. "The need for Federal legislation to provide solutions remains. If Congress does not act, the progress reached through the settlement could be significantly mitigated by state laws and continued litigation."
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[question] What are the implications of the recent NCAA settlements, and what might it mean for the future of athlete compensation in college sports? Write in a minimum of 200 words. ===================== [text] Formal settlement documents were filed with the Northern District Court of California Friday to advance the settlement approval process to resolve class-action lawsuits involving the NCAA and the Atlantic Coast Conference, Big Ten Conference, Big 12 Conference, Pac-12 Conference and Southeastern Conference (Autonomy 5 conferences). The settlement documents address three cases – House v. NCAA, Hubbard v. NCAA and Carter v. NCAA – involving back damages and future benefits for Division I student-athletes. "This is another important step in the ongoing effort to provide increased benefits to student-athletes while creating a stable and sustainable model for the future of college sports," said the commissioners of the five conferences and the NCAA president. "While there is still much work to be done in the settlement approval process, this is a significant step toward establishing clarity for the future of all of Division I athletics while maintaining a lasting education-based model for college sports, ensuring the opportunity for student-athletes to earn a degree and the tools necessary to be successful in life after sports." The Settlement The settlement addresses three primary issues: payment of back damages for claims relating to name, image and likeness (NIL), academic-related awards and other benefits; increased benefits from institutions to student-athletes going forward, including additional NIL opportunities for student-athletes directly with the institution; and eliminating scholarships limits in favor of roster limits. The settlement calls for total back damages of approximately $2.78 billion, to be paid over 10 years, equating to approximately $280 million annually with distribution of back damages as determined by plaintiffs. Going forward, the settlement allows the A5 conference member institutions (and other DI schools that choose to participate in the new structure) to provide increased benefits to student-athletes, including for NIL. If approved by the court, this model will allow schools to provide up to 22% of the average Autonomy 5 athletic media, ticket, and sponsorship revenue to student-athletes, starting in the 2025-26 academic year. The future model could result in student-athletes receiving $1.5 billion to $2 billion in new benefits annually. The new benefits that may be made available to student-athletes would be in addition to the myriad benefits currently provided to student-athletes, including free tuition, room & board, educational grants, academic support and tutoring, medical and mental health resources & support, nutrition resources & support, life skills development, superior coaching and training and extended medical coverage after they stop competing. Adding these existing benefits together with the benefits to be available under the new model, many A5 schools would be providing nearly 50 percent of athletics revenue to their student-athletes. Under the new model, institutions may pay student-athletes directly for their NIL rights. Any institutional NIL payments would apply toward the 22% cap. Third parties may continue to enter into NIL agreements with student-athletes. Such agreements will be subject to review to ensure they are legitimate, fair market value agreements and not used for pay-for-play. NIL payments by third parties would not apply toward the 22% cap but must be disclosed to a clearinghouse for review. The new model allows for the establishment of a robust and effective enforcement and oversight program to ensure the new NIL model achieves its objectives. The establishment of a clearinghouse for NIL payments over $600 would give institutions access to information about external NIL activities, providing a level of transparency that does not currently exist to allow for better management of third-party influence and better assurance of legitimate NIL activity. Lastly, scholarship limits will be eliminated in all sports, and roster limits will be established. Institutions have the discretion to offer partial or full scholarships provided they do not exceed the roster limits. This change will allow institutions to provide additional scholarships to student-athletes in the future. Next Steps The settlement must be approved by the court before it becomes final, a process expected to take several months. If the court preliminarily approves the settlement, the class members will be provided notice of the settlement. Class members with claims for monetary damages based on prior conduct will have an opportunity to opt out of the settlement if they choose. Class members—including incoming student-athletes—will also receive notice and be allowed to present objections to the future relief/model to the court. Unresolved Issues While approval of the settlement would be a significant step forward, there would still be pending issues to be addressed that highlight the continuing need for federal legislation. These issues include: The settlement does not resolve the patchwork of state laws, many of which may conflict with the settlement. These laws will need to be preempted by federal legislation in order for the settlement to be effective. The settlement does not address ongoing efforts to designate student-athletes as employees under state and federal labor and employment laws. These efforts by the NLRB and plaintiffs' attorneys pose a direct threat to both the sustainability of sports programs (especially for non-revenue generating ones) and to the baseline of support provided to all athletes. "This settlement is an important step forward for student-athletes and college sports, but it does not address every challenge," said the A5 conference commissioners and NCAA president. "The need for Federal legislation to provide solutions remains. If Congress does not act, the progress reached through the settlement could be significantly mitigated by state laws and continued litigation." https://www.ncaa.org/news/2024/7/25/media-center-settlement-documents-filed-in-college-athletics-class-action-lawsuits#:~:text=The%20settlement%20calls%20for%20total,damages%20as%20determined%20by%20plaintiffs. ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
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[question] [user request] ===================== [text] [context document] ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
EVIDENCE:
Formal settlement documents were filed with the Northern District Court of California Friday to advance the settlement approval process to resolve class-action lawsuits involving the NCAA and the Atlantic Coast Conference, Big Ten Conference, Big 12 Conference, Pac-12 Conference and Southeastern Conference (Autonomy 5 conferences). The settlement documents address three cases – House v. NCAA, Hubbard v. NCAA and Carter v. NCAA – involving back damages and future benefits for Division I student-athletes. "This is another important step in the ongoing effort to provide increased benefits to student-athletes while creating a stable and sustainable model for the future of college sports," said the commissioners of the five conferences and the NCAA president. "While there is still much work to be done in the settlement approval process, this is a significant step toward establishing clarity for the future of all of Division I athletics while maintaining a lasting education-based model for college sports, ensuring the opportunity for student-athletes to earn a degree and the tools necessary to be successful in life after sports." The Settlement The settlement addresses three primary issues: payment of back damages for claims relating to name, image and likeness (NIL), academic-related awards and other benefits; increased benefits from institutions to student-athletes going forward, including additional NIL opportunities for student-athletes directly with the institution; and eliminating scholarships limits in favor of roster limits. The settlement calls for total back damages of approximately $2.78 billion, to be paid over 10 years, equating to approximately $280 million annually with distribution of back damages as determined by plaintiffs. Going forward, the settlement allows the A5 conference member institutions (and other DI schools that choose to participate in the new structure) to provide increased benefits to student-athletes, including for NIL. If approved by the court, this model will allow schools to provide up to 22% of the average Autonomy 5 athletic media, ticket, and sponsorship revenue to student-athletes, starting in the 2025-26 academic year. The future model could result in student-athletes receiving $1.5 billion to $2 billion in new benefits annually. The new benefits that may be made available to student-athletes would be in addition to the myriad benefits currently provided to student-athletes, including free tuition, room & board, educational grants, academic support and tutoring, medical and mental health resources & support, nutrition resources & support, life skills development, superior coaching and training and extended medical coverage after they stop competing. Adding these existing benefits together with the benefits to be available under the new model, many A5 schools would be providing nearly 50 percent of athletics revenue to their student-athletes. Under the new model, institutions may pay student-athletes directly for their NIL rights. Any institutional NIL payments would apply toward the 22% cap. Third parties may continue to enter into NIL agreements with student-athletes. Such agreements will be subject to review to ensure they are legitimate, fair market value agreements and not used for pay-for-play. NIL payments by third parties would not apply toward the 22% cap but must be disclosed to a clearinghouse for review. The new model allows for the establishment of a robust and effective enforcement and oversight program to ensure the new NIL model achieves its objectives. The establishment of a clearinghouse for NIL payments over $600 would give institutions access to information about external NIL activities, providing a level of transparency that does not currently exist to allow for better management of third-party influence and better assurance of legitimate NIL activity. Lastly, scholarship limits will be eliminated in all sports, and roster limits will be established. Institutions have the discretion to offer partial or full scholarships provided they do not exceed the roster limits. This change will allow institutions to provide additional scholarships to student-athletes in the future. Next Steps The settlement must be approved by the court before it becomes final, a process expected to take several months. If the court preliminarily approves the settlement, the class members will be provided notice of the settlement. Class members with claims for monetary damages based on prior conduct will have an opportunity to opt out of the settlement if they choose. Class members—including incoming student-athletes—will also receive notice and be allowed to present objections to the future relief/model to the court. Unresolved Issues While approval of the settlement would be a significant step forward, there would still be pending issues to be addressed that highlight the continuing need for federal legislation. These issues include: The settlement does not resolve the patchwork of state laws, many of which may conflict with the settlement. These laws will need to be preempted by federal legislation in order for the settlement to be effective. The settlement does not address ongoing efforts to designate student-athletes as employees under state and federal labor and employment laws. These efforts by the NLRB and plaintiffs' attorneys pose a direct threat to both the sustainability of sports programs (especially for non-revenue generating ones) and to the baseline of support provided to all athletes. "This settlement is an important step forward for student-athletes and college sports, but it does not address every challenge," said the A5 conference commissioners and NCAA president. "The need for Federal legislation to provide solutions remains. If Congress does not act, the progress reached through the settlement could be significantly mitigated by state laws and continued litigation."
USER:
What are the implications of the recent NCAA settlements, and what might it mean for the future of athlete compensation in college sports? Write in a minimum of 200 words.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
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| 30
| 884
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You must only draw information for your response from the text provided. Do not use any external sources. Your answer is always less than 200 words. When mentioning Newcastle United you refer to the club as NUFC and always in bold. When mentioning Sports Direct you will refer to the company as SD and always in italics.
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How many clubs do the allegations affect?
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In summary, the Claimant alleges that: 1. The Club has abused its dominant position in the market for the wholesale supply of Newcastle United replica kit in the UK, in breach of the prohibition in Chapter II of the Act, by refusing to supply Sports Direct with the Club’s replica kit for the 2024/25 season and granting JD Sports, another UK sports retailer, exclusive rights as a third-party retailer of the Club’s replica kit (alongside only the Club’s and Adidas’s own channels), thereby foreclosing Sports Direct from the downstream retail market and eliminating effective competition on that market; and 2. If and to the extent that the Club contends that the refusal to supply is the necessary result of exclusivity arrangements it has agreed with JD Sports and/or Adidas, any such agreement is itself in breach of the prohibition in Chapter I of the Act and therefore void, and insofar as the Club implements any such agreement, it is breaching the Chapter I prohibition. The Claimant seeks an injunction restraining the Defendants from engaging in, and/or implementing the above breaches, damages and other relief. According to the Claim, replica kit are authentic reproductions of the short- and long-sleeved shirt, shorts, training wear, and socks (home, away, third, goalkeeper and special edition) in adult, junior and infant sizes to which a football club’s trademark is applied and which are worn by the club’s players when competing in professional football matches.
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System Instruction: You must only draw information for your response from the text provided. Do not use any external sources. Your answer is always less than 200 words. When mentioning Newcastle United you refer to the club as NUFC and always in bold. When mentioning Sports Direct you will refer to the company as SD and always in italics. Question: How many clubs do the allegations affect? Context: In summary, the Claimant alleges that: 1. The Club has abused its dominant position in the market for the wholesale supply of Newcastle United replica kit in the UK, in breach of the prohibition in Chapter II of the Act, by refusing to supply Sports Direct with the Club’s replica kit for the 2024/25 season and granting JD Sports, another UK sports retailer, exclusive rights as a third-party retailer of the Club’s replica kit (alongside only the Club’s and Adidas’s own channels), thereby foreclosing Sports Direct from the downstream retail market and eliminating effective competition on that market; and 2. If and to the extent that the Club contends that the refusal to supply is the necessary result of exclusivity arrangements it has agreed with JD Sports and/or Adidas, any such agreement is itself in breach of the prohibition in Chapter I of the Act and therefore void, and insofar as the Club implements any such agreement, it is breaching the Chapter I prohibition. The Claimant seeks an injunction restraining the Defendants from engaging in, and/or implementing the above breaches, damages and other relief. According to the Claim, replica kit are authentic reproductions of the short- and long-sleeved shirt, shorts, training wear, and socks (home, away, third, goalkeeper and special edition) in adult, junior and infant sizes to which a football club’s trademark is applied and which are worn by the club’s players when competing in professional football matches.
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You must only draw information for your response from the text provided. Do not use any external sources. Your answer is always less than 200 words. When mentioning Newcastle United you refer to the club as NUFC and always in bold. When mentioning Sports Direct you will refer to the company as SD and always in italics.
EVIDENCE:
In summary, the Claimant alleges that: 1. The Club has abused its dominant position in the market for the wholesale supply of Newcastle United replica kit in the UK, in breach of the prohibition in Chapter II of the Act, by refusing to supply Sports Direct with the Club’s replica kit for the 2024/25 season and granting JD Sports, another UK sports retailer, exclusive rights as a third-party retailer of the Club’s replica kit (alongside only the Club’s and Adidas’s own channels), thereby foreclosing Sports Direct from the downstream retail market and eliminating effective competition on that market; and 2. If and to the extent that the Club contends that the refusal to supply is the necessary result of exclusivity arrangements it has agreed with JD Sports and/or Adidas, any such agreement is itself in breach of the prohibition in Chapter I of the Act and therefore void, and insofar as the Club implements any such agreement, it is breaching the Chapter I prohibition. The Claimant seeks an injunction restraining the Defendants from engaging in, and/or implementing the above breaches, damages and other relief. According to the Claim, replica kit are authentic reproductions of the short- and long-sleeved shirt, shorts, training wear, and socks (home, away, third, goalkeeper and special edition) in adult, junior and infant sizes to which a football club’s trademark is applied and which are worn by the club’s players when competing in professional football matches.
USER:
How many clubs do the allegations affect?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 57
| 7
| 239
| null | 443
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Base your answer purely in the provided context. Answer in only one sentence.
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Based only on the article provided, what is the difference between how SoundCloud's recommendation algorithm works and those of other streaming services?
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**WHAT’S NEW WITH SOUNDCLOUD IN FEBRUARY: CARPLAY, 2FA, AND MORE** As winter is winding down, we’re starting to get hot. Read on for more information about our latest launches and updates to SoundCloud. In case you missed it: Apple CarPlay is here Road trips just got better: SoundCloud is available on Apple Carplay for Go, Go+, and Next Pro subscribers. Protect your account with 2FA We know how much time it took to create that track or curate that perfect playlist. At SoundCloud, we love people who love music and are committed to keeping their data as safe as possible. That’s why your security is such a priority to us, and why we’re encouraging you to up your security game by enabling two-factor authorization (2FA). After pairing your device with a 2FA app, you will now be asked to enter a quick security code whenever you log in to your account to prove it’s you, not a bot or hacker. Learn how to enable two-factor authentication here. Refreshed music algorithms and recommendations Most streaming services recommend tracks based on what similar people are listening to. If someone similar to me listens to and likes “Fred Again”, chances are I’ll be recommended “Fred Again”. That obviously works well for artists who are already being heard. But what about all of the songs that don’t have any plays yet? Well, that’s exactly the problem with most music algorithms. They simply can’t recommend tracks with zero plays. If no one has listened yet, they’ve got no signals. Next Pro changes the game. Using AI, we can quickly analyze tracks and surface them to listeners who are likely to enjoy them. Even if they were just uploaded and have zero plays. If you’re not already on Next Pro, sign up today and get your first 100 plays. Bulk edits in Track Manager page We recently updated the Track Manager to make the creator workflow more intuitive and easy. Now, you can bulk edit multiple tracks at once, add tracks to playlists, and quickly edit a single track. It’s part of a greater revamp to improve our web experience and refresh our product over the coming months, so watch this space. Removal of Sync with SoundCloud We removed a massive amount of friction and frustration within the “Monetize” tab. Previously artists had to manually push a button to sync the data to see their tracks, resulting in confusion. Now, tracks are automatically synced. Stay tuned and make sure to follow us at @SCSupport for the latest.
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<query> ========== Based only on the article provided, what is the difference between how SoundCloud's recommendation algorithm works and those of other streaming services? ---------------- <task instructions> ========== Base your answer purely in the provided context. Answer in only one sentence. ---------------- <text passage> ========== **WHAT’S NEW WITH SOUNDCLOUD IN FEBRUARY: CARPLAY, 2FA, AND MORE** As winter is winding down, we’re starting to get hot. Read on for more information about our latest launches and updates to SoundCloud. In case you missed it: Apple CarPlay is here Road trips just got better: SoundCloud is available on Apple Carplay for Go, Go+, and Next Pro subscribers. Protect your account with 2FA We know how much time it took to create that track or curate that perfect playlist. At SoundCloud, we love people who love music and are committed to keeping their data as safe as possible. That’s why your security is such a priority to us, and why we’re encouraging you to up your security game by enabling two-factor authorization (2FA). After pairing your device with a 2FA app, you will now be asked to enter a quick security code whenever you log in to your account to prove it’s you, not a bot or hacker. Learn how to enable two-factor authentication here. Refreshed music algorithms and recommendations Most streaming services recommend tracks based on what similar people are listening to. If someone similar to me listens to and likes “Fred Again”, chances are I’ll be recommended “Fred Again”. That obviously works well for artists who are already being heard. But what about all of the songs that don’t have any plays yet? Well, that’s exactly the problem with most music algorithms. They simply can’t recommend tracks with zero plays. If no one has listened yet, they’ve got no signals. Next Pro changes the game. Using AI, we can quickly analyze tracks and surface them to listeners who are likely to enjoy them. Even if they were just uploaded and have zero plays. If you’re not already on Next Pro, sign up today and get your first 100 plays. Bulk edits in Track Manager page We recently updated the Track Manager to make the creator workflow more intuitive and easy. Now, you can bulk edit multiple tracks at once, add tracks to playlists, and quickly edit a single track. It’s part of a greater revamp to improve our web experience and refresh our product over the coming months, so watch this space. Removal of Sync with SoundCloud We removed a massive amount of friction and frustration within the “Monetize” tab. Previously artists had to manually push a button to sync the data to see their tracks, resulting in confusion. Now, tracks are automatically synced. Stay tuned and make sure to follow us at @SCSupport for the latest.
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Base your answer purely in the provided context. Answer in only one sentence.
EVIDENCE:
**WHAT’S NEW WITH SOUNDCLOUD IN FEBRUARY: CARPLAY, 2FA, AND MORE** As winter is winding down, we’re starting to get hot. Read on for more information about our latest launches and updates to SoundCloud. In case you missed it: Apple CarPlay is here Road trips just got better: SoundCloud is available on Apple Carplay for Go, Go+, and Next Pro subscribers. Protect your account with 2FA We know how much time it took to create that track or curate that perfect playlist. At SoundCloud, we love people who love music and are committed to keeping their data as safe as possible. That’s why your security is such a priority to us, and why we’re encouraging you to up your security game by enabling two-factor authorization (2FA). After pairing your device with a 2FA app, you will now be asked to enter a quick security code whenever you log in to your account to prove it’s you, not a bot or hacker. Learn how to enable two-factor authentication here. Refreshed music algorithms and recommendations Most streaming services recommend tracks based on what similar people are listening to. If someone similar to me listens to and likes “Fred Again”, chances are I’ll be recommended “Fred Again”. That obviously works well for artists who are already being heard. But what about all of the songs that don’t have any plays yet? Well, that’s exactly the problem with most music algorithms. They simply can’t recommend tracks with zero plays. If no one has listened yet, they’ve got no signals. Next Pro changes the game. Using AI, we can quickly analyze tracks and surface them to listeners who are likely to enjoy them. Even if they were just uploaded and have zero plays. If you’re not already on Next Pro, sign up today and get your first 100 plays. Bulk edits in Track Manager page We recently updated the Track Manager to make the creator workflow more intuitive and easy. Now, you can bulk edit multiple tracks at once, add tracks to playlists, and quickly edit a single track. It’s part of a greater revamp to improve our web experience and refresh our product over the coming months, so watch this space. Removal of Sync with SoundCloud We removed a massive amount of friction and frustration within the “Monetize” tab. Previously artists had to manually push a button to sync the data to see their tracks, resulting in confusion. Now, tracks are automatically synced. Stay tuned and make sure to follow us at @SCSupport for the latest.
USER:
Based only on the article provided, what is the difference between how SoundCloud's recommendation algorithm works and those of other streaming services?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Only use the provided text to answer.
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When should egfr be considered?
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FDA Approved Indication(s) SGLT2 inhibitors are indicated as adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus. Dapagliflozin-, canagliflozin-, and empagliflozin-containing products are also indicated in adult patients with type 2 diabetes mellitus and established cardiovascular disease (CV) (or multiple cardiovascular risk factors [dapaglifozin only]) to: • Reduce the risk of hospitalization for heart failure (HF) (dapagliflozin) • Reduce the risk of major adverse CV events: CV death, nonfatal myocardial infarction, and nonfatal stroke (canagliflozin) • Reduce the risk of CV death (empagliflozin) Canagliflozin-containing products are additionally indicated to reduce the risk of end-stage kidney disease, doubling of serum creatinine, CV death, and hospitalization for HF in adults with type 2 diabetes mellitus and diabetic nephropathy with albuminuria > 300 mg/day. Farxiga is additionally indicated to: • Reduce the risk of CV death and hospitalization for HF in adults with heart failure with reduced ejection fraction (HFrEF) (New York Heart Association [NYHA] class II-IV) • Reduce the risk of sustained estimated glomerular filtration rate (eGFR) decline, end stage kidney disease cardiovascular death, and hospitalization for heart failure in adults with chronic kidney disease (CKD) at risk of progression Jardiance is additionally indicated to: • Reduce the risk of CV death plus hospitalization for HF in adults with HFrEF Limitation(s) of use: • SGLT2 inhibitors should not be used in patients with type 1 diabetes or for the treatment of diabetic ketoacidosis. SGLT2 inhibitors may increase the risk of diabetic ketoacidosis. • Qternmet XR initiation is intended only for patients currently taking metformin. • Farxiga is not recommended for use to improve glycemic control in adults with type 2 diabetes mellitus with an eGFR less than 45 mL/min/1.73 m2. Farxiga is likely to be ineffective in this setting based upon its mechanism of action. • Farxiga is not recommended for the treatment of chronic kidney disease in patients with polycystic kidney disease or patients requiring or with a recent history of immunosuppressive therapy for the treatment of kidney disease. Farxiga is not expected to be effective in these populations. CLINICAL POLICY Sodium-Glucose Co-Transporter 2 (SGLT2) Inhibitors Page 2 of 9 • Jardiance is not recommended for use to improve glycemic control in adults with type 2 diabetes mellitus with an eGFR less than 30 mL/min/1.73 m2. Jardiance is likely to be ineffective in this setting based upon its mechanism of action. Policy/Criteria Provider must submit documentation (such as office chart notes, lab results or other clinical information) supporting that member has met all approval criteria. Health plan approved formularies should be reviewed for all coverage determinations. Requirements to use preferred alternative agents apply only when such requirements align with the health plan approved formulary. It is the policy of health plans affiliated with Envolve Pharmacy Solutions™ that SGLT2 inhibitors are medically necessary when the following criteria are met: I. Initial Approval Criteria A. Type 2 Diabetes Mellitus (must meet all): 1. Diagnosis of type 2 diabetes mellitus; 2. Age ≥ 18 years; 3. Member meets one of the following (a or b): a. Failure of ≥ 3 consecutive months of metformin, unless contraindicated or clinically significant adverse effects are experienced; b. For medication-naïve members, requested agent is approvable if intended for concurrent use with metformin due to HbA1c ≥ 8.5% (drawn within the past 3 months); 4. Failure of ≥ 3 consecutive months of Jardiance or Invokana, unless both are contraindicated or clinically significant adverse effects are experienced; 5. Dose does not exceed the FDA-approved maximum recommended dose (see Section V). Approval duration: 12 months B. Heart Failure (must meet all): 1. Diagnosis of HFrEF of NYHA Class II, III, or IV; 2. Request is for Farxiga or Jardiance; 3. Prescribed by or in consultation with a cardiologist; 4. Age ≥ 18 years; 5. Left ventricular ejection fraction (LVEF) is ≤ 40%; 6. Member does not have a diagnosis of type 1 diabetes mellitus; 7. Member is currently receiving standard HF drug therapy at target doses for ≥ 4 weeks, including both of the following (a and b) unless clinically significant adverse effects are experienced or all are contraindicated: a. Angiotensin converting enzyme inhibitor, angiotensin receptor blocker, or Entresto®; b. Beta blocker; 8. Dose does not exceed 10 mg (1 tablet) per day. Approval duration: 12 months C. Chronic Kidney Disease (must meet all): 1. Diagnosis of CKD; 2. Request is for Farxiga; 3. Age ≥ 18 years; 4. Both of the following (a and b): a. eGFR between 25 and 75 mL/min/1.73 m2; b. Urine albumin creatinine ratio (UACR) ≥ 200 mg/g; 5. Member does not have a diagnosis of type 1 diabetes mellitus or polycystic kidney disease; 6. Member has not received immunosuppressive therapy for the treatment of kidney disease in the past 6 months; CLINICAL POLICY Sodium-Glucose Co-Transporter 2 (SGLT2) Inhibitors Page 3 of 9 7. Member is currently receiving standard CKD drug therapy (angiotensin converting enzyme inhibitor or angiotensin receptor blocker) at maximally tolerated doses for ≥ 4 weeks, unless clinically significant adverse effects are experienced or all are contraindicated; 8. Dose does not exceed 10 mg (1 tablet) per day. Approval duration: 12 months D. Other diagnoses/indications 1. Refer to ERX.PA.01 if diagnosis is NOT specifically listed under section III (Diagnoses/Indications for which coverage is NOT authorized). II. Continued Therapy A. Type 2 Diabetes Mellitus (must meet all): 1. Currently receiving medication via a health plan affiliated with Envolve Pharmacy Solutions or member has previously met initial approval criteria; 2. Member is responding positively to therapy; 3. If request is for a dose increase, new dose does not exceed the FDA-approved maximum recommended dose (see Section V). Approval duration: 12 months B. Heart Failure (must meet all): 1. Currently receiving medication via a health plan affiliated with Envolve Pharmacy Solutions, or documentation supports that member is currently receiving Farxiga for HFrEF and has received this medication for at least 30 days; 2. Request is for Farxiga or Jardiance; 3. Member is responding positively to therapy; 4. If request is for a dose increase, new dose does not exceed 10 mg (1 tablet) per day. Approval duration: 12 months C. Chronic Kidney Disease (must meet all): 1. Currently receiving medication via a health plan affiliated with Envolve Pharmacy Solutions or member has previously met initial approval criteria; 2. Request is for Farxiga; 3. Member is responding positively to therapy; 4. If request is for a dose increase, new dose does not exceed 10 mg (1 tablet) per day. Approval duration: 12 months D. Other diagnoses/indications (must meet 1 or 2): 1. Currently receiving medication via a health plan affiliated with Envolve Pharmacy Solutions and documentation supports positive response to therapy. Approval duration: Duration of request or 12 months (whichever is less); or 2. Refer to ERX.PA.01 if diagnosis is NOT specifically listed under section III (Diagnoses/Indications for which coverage is NOT authorized). III. Diagnoses/Indications for which coverage is NOT authorized: A. Non-FDA approved indications, which are not addressed in this policy, unless there is sufficient documentation of efficacy and safety according to the off-label use policy – ERX.PA.01 or evidence of coverage documents.
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Context Block: [FDA Approved Indication(s) SGLT2 inhibitors are indicated as adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus. Dapagliflozin-, canagliflozin-, and empagliflozin-containing products are also indicated in adult patients with type 2 diabetes mellitus and established cardiovascular disease (CV) (or multiple cardiovascular risk factors [dapaglifozin only]) to: • Reduce the risk of hospitalization for heart failure (HF) (dapagliflozin) • Reduce the risk of major adverse CV events: CV death, nonfatal myocardial infarction, and nonfatal stroke (canagliflozin) • Reduce the risk of CV death (empagliflozin) Canagliflozin-containing products are additionally indicated to reduce the risk of end-stage kidney disease, doubling of serum creatinine, CV death, and hospitalization for HF in adults with type 2 diabetes mellitus and diabetic nephropathy with albuminuria > 300 mg/day. Farxiga is additionally indicated to: • Reduce the risk of CV death and hospitalization for HF in adults with heart failure with reduced ejection fraction (HFrEF) (New York Heart Association [NYHA] class II-IV) • Reduce the risk of sustained estimated glomerular filtration rate (eGFR) decline, end stage kidney disease cardiovascular death, and hospitalization for heart failure in adults with chronic kidney disease (CKD) at risk of progression Jardiance is additionally indicated to: • Reduce the risk of CV death plus hospitalization for HF in adults with HFrEF Limitation(s) of use: • SGLT2 inhibitors should not be used in patients with type 1 diabetes or for the treatment of diabetic ketoacidosis. SGLT2 inhibitors may increase the risk of diabetic ketoacidosis. • Qternmet XR initiation is intended only for patients currently taking metformin. • Farxiga is not recommended for use to improve glycemic control in adults with type 2 diabetes mellitus with an eGFR less than 45 mL/min/1.73 m2. Farxiga is likely to be ineffective in this setting based upon its mechanism of action. • Farxiga is not recommended for the treatment of chronic kidney disease in patients with polycystic kidney disease or patients requiring or with a recent history of immunosuppressive therapy for the treatment of kidney disease. Farxiga is not expected to be effective in these populations. CLINICAL POLICY Sodium-Glucose Co-Transporter 2 (SGLT2) Inhibitors Page 2 of 9 • Jardiance is not recommended for use to improve glycemic control in adults with type 2 diabetes mellitus with an eGFR less than 30 mL/min/1.73 m2. Jardiance is likely to be ineffective in this setting based upon its mechanism of action. Policy/Criteria Provider must submit documentation (such as office chart notes, lab results or other clinical information) supporting that member has met all approval criteria. Health plan approved formularies should be reviewed for all coverage determinations. Requirements to use preferred alternative agents apply only when such requirements align with the health plan approved formulary. It is the policy of health plans affiliated with Envolve Pharmacy Solutions™ that SGLT2 inhibitors are medically necessary when the following criteria are met: I. Initial Approval Criteria A. Type 2 Diabetes Mellitus (must meet all): 1. Diagnosis of type 2 diabetes mellitus; 2. Age ≥ 18 years; 3. Member meets one of the following (a or b): a. Failure of ≥ 3 consecutive months of metformin, unless contraindicated or clinically significant adverse effects are experienced; b. For medication-naïve members, requested agent is approvable if intended for concurrent use with metformin due to HbA1c ≥ 8.5% (drawn within the past 3 months); 4. Failure of ≥ 3 consecutive months of Jardiance or Invokana, unless both are contraindicated or clinically significant adverse effects are experienced; 5. Dose does not exceed the FDA-approved maximum recommended dose (see Section V). Approval duration: 12 months B. Heart Failure (must meet all): 1. Diagnosis of HFrEF of NYHA Class II, III, or IV; 2. Request is for Farxiga or Jardiance; 3. Prescribed by or in consultation with a cardiologist; 4. Age ≥ 18 years; 5. Left ventricular ejection fraction (LVEF) is ≤ 40%; 6. Member does not have a diagnosis of type 1 diabetes mellitus; 7. Member is currently receiving standard HF drug therapy at target doses for ≥ 4 weeks, including both of the following (a and b) unless clinically significant adverse effects are experienced or all are contraindicated: a. Angiotensin converting enzyme inhibitor, angiotensin receptor blocker, or Entresto®; b. Beta blocker; 8. Dose does not exceed 10 mg (1 tablet) per day. Approval duration: 12 months C. Chronic Kidney Disease (must meet all): 1. Diagnosis of CKD; 2. Request is for Farxiga; 3. Age ≥ 18 years; 4. Both of the following (a and b): a. eGFR between 25 and 75 mL/min/1.73 m2; b. Urine albumin creatinine ratio (UACR) ≥ 200 mg/g; 5. Member does not have a diagnosis of type 1 diabetes mellitus or polycystic kidney disease; 6. Member has not received immunosuppressive therapy for the treatment of kidney disease in the past 6 months; CLINICAL POLICY Sodium-Glucose Co-Transporter 2 (SGLT2) Inhibitors Page 3 of 9 7. Member is currently receiving standard CKD drug therapy (angiotensin converting enzyme inhibitor or angiotensin receptor blocker) at maximally tolerated doses for ≥ 4 weeks, unless clinically significant adverse effects are experienced or all are contraindicated; 8. Dose does not exceed 10 mg (1 tablet) per day. Approval duration: 12 months D. Other diagnoses/indications 1. Refer to ERX.PA.01 if diagnosis is NOT specifically listed under section III (Diagnoses/Indications for which coverage is NOT authorized). II. Continued Therapy A. Type 2 Diabetes Mellitus (must meet all): 1. Currently receiving medication via a health plan affiliated with Envolve Pharmacy Solutions or member has previously met initial approval criteria; 2. Member is responding positively to therapy; 3. If request is for a dose increase, new dose does not exceed the FDA-approved maximum recommended dose (see Section V). Approval duration: 12 months B. Heart Failure (must meet all): 1. Currently receiving medication via a health plan affiliated with Envolve Pharmacy Solutions, or documentation supports that member is currently receiving Farxiga for HFrEF and has received this medication for at least 30 days; 2. Request is for Farxiga or Jardiance; 3. Member is responding positively to therapy; 4. If request is for a dose increase, new dose does not exceed 10 mg (1 tablet) per day. Approval duration: 12 months C. Chronic Kidney Disease (must meet all): 1. Currently receiving medication via a health plan affiliated with Envolve Pharmacy Solutions or member has previously met initial approval criteria; 2. Request is for Farxiga; 3. Member is responding positively to therapy; 4. If request is for a dose increase, new dose does not exceed 10 mg (1 tablet) per day. Approval duration: 12 months D. Other diagnoses/indications (must meet 1 or 2): 1. Currently receiving medication via a health plan affiliated with Envolve Pharmacy Solutions and documentation supports positive response to therapy. Approval duration: Duration of request or 12 months (whichever is less); or 2. Refer to ERX.PA.01 if diagnosis is NOT specifically listed under section III (Diagnoses/Indications for which coverage is NOT authorized). III. Diagnoses/Indications for which coverage is NOT authorized: A. Non-FDA approved indications, which are not addressed in this policy, unless there is sufficient documentation of efficacy and safety according to the off-label use policy – ERX.PA.01 or evidence of coverage documents.] System Instruction: [Only use the provided text to answer.] Question: [When should egfr be considered?]
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Only use the provided text to answer.
EVIDENCE:
FDA Approved Indication(s) SGLT2 inhibitors are indicated as adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus. Dapagliflozin-, canagliflozin-, and empagliflozin-containing products are also indicated in adult patients with type 2 diabetes mellitus and established cardiovascular disease (CV) (or multiple cardiovascular risk factors [dapaglifozin only]) to: • Reduce the risk of hospitalization for heart failure (HF) (dapagliflozin) • Reduce the risk of major adverse CV events: CV death, nonfatal myocardial infarction, and nonfatal stroke (canagliflozin) • Reduce the risk of CV death (empagliflozin) Canagliflozin-containing products are additionally indicated to reduce the risk of end-stage kidney disease, doubling of serum creatinine, CV death, and hospitalization for HF in adults with type 2 diabetes mellitus and diabetic nephropathy with albuminuria > 300 mg/day. Farxiga is additionally indicated to: • Reduce the risk of CV death and hospitalization for HF in adults with heart failure with reduced ejection fraction (HFrEF) (New York Heart Association [NYHA] class II-IV) • Reduce the risk of sustained estimated glomerular filtration rate (eGFR) decline, end stage kidney disease cardiovascular death, and hospitalization for heart failure in adults with chronic kidney disease (CKD) at risk of progression Jardiance is additionally indicated to: • Reduce the risk of CV death plus hospitalization for HF in adults with HFrEF Limitation(s) of use: • SGLT2 inhibitors should not be used in patients with type 1 diabetes or for the treatment of diabetic ketoacidosis. SGLT2 inhibitors may increase the risk of diabetic ketoacidosis. • Qternmet XR initiation is intended only for patients currently taking metformin. • Farxiga is not recommended for use to improve glycemic control in adults with type 2 diabetes mellitus with an eGFR less than 45 mL/min/1.73 m2. Farxiga is likely to be ineffective in this setting based upon its mechanism of action. • Farxiga is not recommended for the treatment of chronic kidney disease in patients with polycystic kidney disease or patients requiring or with a recent history of immunosuppressive therapy for the treatment of kidney disease. Farxiga is not expected to be effective in these populations. CLINICAL POLICY Sodium-Glucose Co-Transporter 2 (SGLT2) Inhibitors Page 2 of 9 • Jardiance is not recommended for use to improve glycemic control in adults with type 2 diabetes mellitus with an eGFR less than 30 mL/min/1.73 m2. Jardiance is likely to be ineffective in this setting based upon its mechanism of action. Policy/Criteria Provider must submit documentation (such as office chart notes, lab results or other clinical information) supporting that member has met all approval criteria. Health plan approved formularies should be reviewed for all coverage determinations. Requirements to use preferred alternative agents apply only when such requirements align with the health plan approved formulary. It is the policy of health plans affiliated with Envolve Pharmacy Solutions™ that SGLT2 inhibitors are medically necessary when the following criteria are met: I. Initial Approval Criteria A. Type 2 Diabetes Mellitus (must meet all): 1. Diagnosis of type 2 diabetes mellitus; 2. Age ≥ 18 years; 3. Member meets one of the following (a or b): a. Failure of ≥ 3 consecutive months of metformin, unless contraindicated or clinically significant adverse effects are experienced; b. For medication-naïve members, requested agent is approvable if intended for concurrent use with metformin due to HbA1c ≥ 8.5% (drawn within the past 3 months); 4. Failure of ≥ 3 consecutive months of Jardiance or Invokana, unless both are contraindicated or clinically significant adverse effects are experienced; 5. Dose does not exceed the FDA-approved maximum recommended dose (see Section V). Approval duration: 12 months B. Heart Failure (must meet all): 1. Diagnosis of HFrEF of NYHA Class II, III, or IV; 2. Request is for Farxiga or Jardiance; 3. Prescribed by or in consultation with a cardiologist; 4. Age ≥ 18 years; 5. Left ventricular ejection fraction (LVEF) is ≤ 40%; 6. Member does not have a diagnosis of type 1 diabetes mellitus; 7. Member is currently receiving standard HF drug therapy at target doses for ≥ 4 weeks, including both of the following (a and b) unless clinically significant adverse effects are experienced or all are contraindicated: a. Angiotensin converting enzyme inhibitor, angiotensin receptor blocker, or Entresto®; b. Beta blocker; 8. Dose does not exceed 10 mg (1 tablet) per day. Approval duration: 12 months C. Chronic Kidney Disease (must meet all): 1. Diagnosis of CKD; 2. Request is for Farxiga; 3. Age ≥ 18 years; 4. Both of the following (a and b): a. eGFR between 25 and 75 mL/min/1.73 m2; b. Urine albumin creatinine ratio (UACR) ≥ 200 mg/g; 5. Member does not have a diagnosis of type 1 diabetes mellitus or polycystic kidney disease; 6. Member has not received immunosuppressive therapy for the treatment of kidney disease in the past 6 months; CLINICAL POLICY Sodium-Glucose Co-Transporter 2 (SGLT2) Inhibitors Page 3 of 9 7. Member is currently receiving standard CKD drug therapy (angiotensin converting enzyme inhibitor or angiotensin receptor blocker) at maximally tolerated doses for ≥ 4 weeks, unless clinically significant adverse effects are experienced or all are contraindicated; 8. Dose does not exceed 10 mg (1 tablet) per day. Approval duration: 12 months D. Other diagnoses/indications 1. Refer to ERX.PA.01 if diagnosis is NOT specifically listed under section III (Diagnoses/Indications for which coverage is NOT authorized). II. Continued Therapy A. Type 2 Diabetes Mellitus (must meet all): 1. Currently receiving medication via a health plan affiliated with Envolve Pharmacy Solutions or member has previously met initial approval criteria; 2. Member is responding positively to therapy; 3. If request is for a dose increase, new dose does not exceed the FDA-approved maximum recommended dose (see Section V). Approval duration: 12 months B. Heart Failure (must meet all): 1. Currently receiving medication via a health plan affiliated with Envolve Pharmacy Solutions, or documentation supports that member is currently receiving Farxiga for HFrEF and has received this medication for at least 30 days; 2. Request is for Farxiga or Jardiance; 3. Member is responding positively to therapy; 4. If request is for a dose increase, new dose does not exceed 10 mg (1 tablet) per day. Approval duration: 12 months C. Chronic Kidney Disease (must meet all): 1. Currently receiving medication via a health plan affiliated with Envolve Pharmacy Solutions or member has previously met initial approval criteria; 2. Request is for Farxiga; 3. Member is responding positively to therapy; 4. If request is for a dose increase, new dose does not exceed 10 mg (1 tablet) per day. Approval duration: 12 months D. Other diagnoses/indications (must meet 1 or 2): 1. Currently receiving medication via a health plan affiliated with Envolve Pharmacy Solutions and documentation supports positive response to therapy. Approval duration: Duration of request or 12 months (whichever is less); or 2. Refer to ERX.PA.01 if diagnosis is NOT specifically listed under section III (Diagnoses/Indications for which coverage is NOT authorized). III. Diagnoses/Indications for which coverage is NOT authorized: A. Non-FDA approved indications, which are not addressed in this policy, unless there is sufficient documentation of efficacy and safety according to the off-label use policy – ERX.PA.01 or evidence of coverage documents.
USER:
When should egfr be considered?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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"================ <TEXT PASSAGE> ======= [context document] ================ <QUESTION> ======= [user request] ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
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I moved to an apartment in a duplex building two months ago. My landlord lives in the other apartment in the same building. I am an adept of Santería, and, after a small ceremony in my living room using incense, I received a notice from my landlord. He asked me to leave the premises because the contract stipulates that only Protestants might rent his apartments and that utilization of incense is prohibited. The contract contains this provision indeed, but I can't accept it! That's open discrimination! My state follows the FHA's broad dispositions. Who will prevail?
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A Guide To The Fair Housing Act And Its Exemptions Everyone deserves a stable, affordable place to live. But the unfortunate truth is that discrimination in housing has prevented some vulnerable groups from achieving this cornerstone of the American Dream. The good news is that there are laws in place to protect people from being discriminated against when securing housing. One of the most important is the Fair Housing Act (FHA). Here’s what the FHA covers and how you can protect yourself from discriminatory practices. Faster, easier mortgage lending Check your rates today with Better Mortgage. View Rates What Is the Fair Housing Act of 1968? The Fair Housing Act is a critical set of guidelines that prevent prospective homeowners and renters from discrimination through the sale, rental agreement or financing of their home. The act was signed into law by President Lydon Johnson in 1968 after several years of policymakers struggling to push it through until the assassination of Rev. Dr. Martin Luther King, Jr. prompted congressional action. Today, the U.S. Department of Housing and Urban Development (HUD) oversees and enforces the Fair Housing Act. It prohibits discrimination in housing based on: race or color, national origin, religion, sex (including sexual orientation and gender identity, per a new executive order), familial status and disabilty. Anyone who attempts to rent, buy or sell a home, take out a mortgage or obtain housing assistance, is protected. The act also applies to most housing types, with a few exceptions. How the Fair Housing Act Protects Against Housing Discrimination Housing is a broad term. So who, exactly, is prohibited from engaging in discrimination? The FHA outlaws discrimination by: Landlords Property owners and managers Developers Real estate agents Mortgage lenders and brokers Homeowner associations Insurance providers Anyone else who impacts housing opportunities Essentially, any person or entity that’s involved in the process of securing housing is required to follow FHA guidelines. If someone believes they were discriminated against, they can contact HUD, which they will then investigate. Examples of Housing Discrimination Discrimination can occur in many ways and to different classes of people. Here are a few examples: Selling or renting. It’s illegal to refuse a home sale or rental to someone based on race, sex or any of the other factors outlined in the FHA. That includes falsely stating that a home is no longer on the market when it is, or providing different terms or facilities to one person over another. It’s also against the law to persuade homeowners to sell or rent their property based on the fact that people of a particular race or other protected class are moving into the neighborhood, intending to earn a profit. Mortgage lending. Lenders can also discriminate against mortgage applicants if the lender refuses to provide information about a loan, rejected the applicant entirely or imposed different terms and conditions (interest rates, fees, etc.) based on the applicant’s race, color, religion, sex, disability, familial status or national origin. Similar discrimination can occur during the appraisal process. Homeowners insurance. If an insurance company refuses to provide homeowners insurance to an owner or occupant of a dwelling because of their race, color, religion, sex, disability, familial status or national origin, it’s considered discrimination. It’s also discrimination to offer different terms or conditions, or provide limited or information about an insurance product based on those same factors. Accommodating disabilities. People who have mental or physical disabilities (such as mobility impairment or chronic mental illness) that “substantially limits one or more major life activities” are entitled to certain housing accommodations. If reasonable accommodations aren’t allowed even at your own expense, it may be considered discrimination. For example, a building that usually doesn’t permit tenants to have pets would need to allow a visually impaired tenant to keep a guide animal. Advertising. When advertising the sale or rental availability of a dwelling, any language published that indicates preference or limitations based on race, color, religion, sex, disability, familial status or national origin is discrimination. This also applies to advertising for single-family and owner-occupied housing, which is otherwise exempt from the FHA. Fair Housing Act Exemptions Though the Fair Housing Act applies to most situations, there are some exemptions. For example, if a dwelling has four or fewer units and the owner lives in one of them, they are exempt from the FHA. However, they would not be exempt under the Pennsylvania Human Relations Act unless the dwelling contained only two units and one was owner-occupied. Additionally, any single-family housing that’s sold or rented without the use of a broker is exempt from the FHA, as long as the owner is a private individual who doesn’t own more than three such homes at one time. Again, they would not be exempt in the state of Pennsylvania due to the Pennsylvania Human Relations Act. Housing communities for the elderly are also exempt from the FHA in most cases. In order to not violate the family status provision, it must meet one of several conditions. For instance, HUD must have determined that it’s specifically designed for and occupied by elderly occupants under a federal, state or local government program. Alternatively, it can be 100% occupied by people age 62 or older. Another option is that the community houses at least one person age 55 or older in at least 80% of the occupied units. The property must also have a policy demonstrating that the intent of the community is to house people age 55 or older. Finally, religious organizations and private clubs are allowed to give preference to members as long as they don’t discriminate in their membership. How Fair Housing Laws Are Enforced The HUD is the federal agency in charge of implementing and enforcing the Fair Housing Act. It does so through its Office of Fair Housing and Equal Opportunity (FHEO), which is headquartered in Washington, with 10 regional offices across the U.S. The purpose of these offices is to enforce FHA compliance, administer fair housing programs and educate consumers. The FHEO primarily enforces fair housing programs by funding third-party organizations. For instance, the Fair Housing Initiatives Program provides grants to private organizations that investigate complaints, and even place people undercover to find FHA violations. How to Protect Yourself Against Fair Housing Violations If you believe your rights were violated under the Fair Housing Act, it’s important to file a complaint right away. HUD will investigate claims made within one year of the violation. When filing a complaint, be prepared to provide the following information: Your name and address Name and address of the person or company your complaint is against (also known as the respondent) Address or other identification of the housing involved The date and a brief description of the incident that led to your rights being violated You can file a complaint with the FHEO online, using the HUD Form 903. You can also download this form and email it to your local FHEO office. You can also mail a letter or call an office directly. Once your complaint is received and accepted, HUD will notify you in writing. It will also notify the respondent that you filed a complaint and give them some time to submit a written response. The FHEO will investigate your complaint and decide whether or not there is reasonable cause to believe that the respondent violated the FHA. Additionally, HUD will offer you and the respondent the opportunity to voluntarily resolve the complaint with a Conciliation Agreement. If it’s determined there was a rights violation and you don’t come to an agreement with the respondent, you may need to consult with a lawyer and determine the next steps.
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"================ <TEXT PASSAGE> ======= A Guide To The Fair Housing Act And Its Exemptions Everyone deserves a stable, affordable place to live. But the unfortunate truth is that discrimination in housing has prevented some vulnerable groups from achieving this cornerstone of the American Dream. The good news is that there are laws in place to protect people from being discriminated against when securing housing. One of the most important is the Fair Housing Act (FHA). Here’s what the FHA covers and how you can protect yourself from discriminatory practices. Faster, easier mortgage lending Check your rates today with Better Mortgage. View Rates What Is the Fair Housing Act of 1968? The Fair Housing Act is a critical set of guidelines that prevent prospective homeowners and renters from discrimination through the sale, rental agreement or financing of their home. The act was signed into law by President Lydon Johnson in 1968 after several years of policymakers struggling to push it through until the assassination of Rev. Dr. Martin Luther King, Jr. prompted congressional action. Today, the U.S. Department of Housing and Urban Development (HUD) oversees and enforces the Fair Housing Act. It prohibits discrimination in housing based on: race or color, national origin, religion, sex (including sexual orientation and gender identity, per a new executive order), familial status and disabilty. Anyone who attempts to rent, buy or sell a home, take out a mortgage or obtain housing assistance, is protected. The act also applies to most housing types, with a few exceptions. How the Fair Housing Act Protects Against Housing Discrimination Housing is a broad term. So who, exactly, is prohibited from engaging in discrimination? The FHA outlaws discrimination by: Landlords Property owners and managers Developers Real estate agents Mortgage lenders and brokers Homeowner associations Insurance providers Anyone else who impacts housing opportunities Essentially, any person or entity that’s involved in the process of securing housing is required to follow FHA guidelines. If someone believes they were discriminated against, they can contact HUD, which they will then investigate. Examples of Housing Discrimination Discrimination can occur in many ways and to different classes of people. Here are a few examples: Selling or renting. It’s illegal to refuse a home sale or rental to someone based on race, sex or any of the other factors outlined in the FHA. That includes falsely stating that a home is no longer on the market when it is, or providing different terms or facilities to one person over another. It’s also against the law to persuade homeowners to sell or rent their property based on the fact that people of a particular race or other protected class are moving into the neighborhood, intending to earn a profit. Mortgage lending. Lenders can also discriminate against mortgage applicants if the lender refuses to provide information about a loan, rejected the applicant entirely or imposed different terms and conditions (interest rates, fees, etc.) based on the applicant’s race, color, religion, sex, disability, familial status or national origin. Similar discrimination can occur during the appraisal process. Homeowners insurance. If an insurance company refuses to provide homeowners insurance to an owner or occupant of a dwelling because of their race, color, religion, sex, disability, familial status or national origin, it’s considered discrimination. It’s also discrimination to offer different terms or conditions, or provide limited or information about an insurance product based on those same factors. Accommodating disabilities. People who have mental or physical disabilities (such as mobility impairment or chronic mental illness) that “substantially limits one or more major life activities” are entitled to certain housing accommodations. If reasonable accommodations aren’t allowed even at your own expense, it may be considered discrimination. For example, a building that usually doesn’t permit tenants to have pets would need to allow a visually impaired tenant to keep a guide animal. Advertising. When advertising the sale or rental availability of a dwelling, any language published that indicates preference or limitations based on race, color, religion, sex, disability, familial status or national origin is discrimination. This also applies to advertising for single-family and owner-occupied housing, which is otherwise exempt from the FHA. Fair Housing Act Exemptions Though the Fair Housing Act applies to most situations, there are some exemptions. For example, if a dwelling has four or fewer units and the owner lives in one of them, they are exempt from the FHA. However, they would not be exempt under the Pennsylvania Human Relations Act unless the dwelling contained only two units and one was owner-occupied. Additionally, any single-family housing that’s sold or rented without the use of a broker is exempt from the FHA, as long as the owner is a private individual who doesn’t own more than three such homes at one time. Again, they would not be exempt in the state of Pennsylvania due to the Pennsylvania Human Relations Act. Housing communities for the elderly are also exempt from the FHA in most cases. In order to not violate the family status provision, it must meet one of several conditions. For instance, HUD must have determined that it’s specifically designed for and occupied by elderly occupants under a federal, state or local government program. Alternatively, it can be 100% occupied by people age 62 or older. Another option is that the community houses at least one person age 55 or older in at least 80% of the occupied units. The property must also have a policy demonstrating that the intent of the community is to house people age 55 or older. Finally, religious organizations and private clubs are allowed to give preference to members as long as they don’t discriminate in their membership. How Fair Housing Laws Are Enforced The HUD is the federal agency in charge of implementing and enforcing the Fair Housing Act. It does so through its Office of Fair Housing and Equal Opportunity (FHEO), which is headquartered in Washington, with 10 regional offices across the U.S. The purpose of these offices is to enforce FHA compliance, administer fair housing programs and educate consumers. The FHEO primarily enforces fair housing programs by funding third-party organizations. For instance, the Fair Housing Initiatives Program provides grants to private organizations that investigate complaints, and even place people undercover to find FHA violations. How to Protect Yourself Against Fair Housing Violations If you believe your rights were violated under the Fair Housing Act, it’s important to file a complaint right away. HUD will investigate claims made within one year of the violation. When filing a complaint, be prepared to provide the following information: Your name and address Name and address of the person or company your complaint is against (also known as the respondent) Address or other identification of the housing involved The date and a brief description of the incident that led to your rights being violated You can file a complaint with the FHEO online, using the HUD Form 903. You can also download this form and email it to your local FHEO office. You can also mail a letter or call an office directly. Once your complaint is received and accepted, HUD will notify you in writing. It will also notify the respondent that you filed a complaint and give them some time to submit a written response. The FHEO will investigate your complaint and decide whether or not there is reasonable cause to believe that the respondent violated the FHA. Additionally, HUD will offer you and the respondent the opportunity to voluntarily resolve the complaint with a Conciliation Agreement. If it’s determined there was a rights violation and you don’t come to an agreement with the respondent, you may need to consult with a lawyer and determine the next steps. https://www.forbes.com/advisor/mortgages/fair-housing-act/ ================ <QUESTION> ======= I moved to an apartment in a duplex building two months ago. My landlord lives in the other apartment in the same building. I am an adept of Santería, and, after a small ceremony in my living room using incense, I received a notice from my landlord. He asked me to leave the premises because the contract stipulates that only Protestants might rent his apartments and that utilization of incense is prohibited. The contract contains this provision indeed, but I can't accept it! That's open discrimination! My state follows the FHA's broad dispositions. Who will prevail? ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
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"================ <TEXT PASSAGE> ======= [context document] ================ <QUESTION> ======= [user request] ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
EVIDENCE:
A Guide To The Fair Housing Act And Its Exemptions Everyone deserves a stable, affordable place to live. But the unfortunate truth is that discrimination in housing has prevented some vulnerable groups from achieving this cornerstone of the American Dream. The good news is that there are laws in place to protect people from being discriminated against when securing housing. One of the most important is the Fair Housing Act (FHA). Here’s what the FHA covers and how you can protect yourself from discriminatory practices. Faster, easier mortgage lending Check your rates today with Better Mortgage. View Rates What Is the Fair Housing Act of 1968? The Fair Housing Act is a critical set of guidelines that prevent prospective homeowners and renters from discrimination through the sale, rental agreement or financing of their home. The act was signed into law by President Lydon Johnson in 1968 after several years of policymakers struggling to push it through until the assassination of Rev. Dr. Martin Luther King, Jr. prompted congressional action. Today, the U.S. Department of Housing and Urban Development (HUD) oversees and enforces the Fair Housing Act. It prohibits discrimination in housing based on: race or color, national origin, religion, sex (including sexual orientation and gender identity, per a new executive order), familial status and disabilty. Anyone who attempts to rent, buy or sell a home, take out a mortgage or obtain housing assistance, is protected. The act also applies to most housing types, with a few exceptions. How the Fair Housing Act Protects Against Housing Discrimination Housing is a broad term. So who, exactly, is prohibited from engaging in discrimination? The FHA outlaws discrimination by: Landlords Property owners and managers Developers Real estate agents Mortgage lenders and brokers Homeowner associations Insurance providers Anyone else who impacts housing opportunities Essentially, any person or entity that’s involved in the process of securing housing is required to follow FHA guidelines. If someone believes they were discriminated against, they can contact HUD, which they will then investigate. Examples of Housing Discrimination Discrimination can occur in many ways and to different classes of people. Here are a few examples: Selling or renting. It’s illegal to refuse a home sale or rental to someone based on race, sex or any of the other factors outlined in the FHA. That includes falsely stating that a home is no longer on the market when it is, or providing different terms or facilities to one person over another. It’s also against the law to persuade homeowners to sell or rent their property based on the fact that people of a particular race or other protected class are moving into the neighborhood, intending to earn a profit. Mortgage lending. Lenders can also discriminate against mortgage applicants if the lender refuses to provide information about a loan, rejected the applicant entirely or imposed different terms and conditions (interest rates, fees, etc.) based on the applicant’s race, color, religion, sex, disability, familial status or national origin. Similar discrimination can occur during the appraisal process. Homeowners insurance. If an insurance company refuses to provide homeowners insurance to an owner or occupant of a dwelling because of their race, color, religion, sex, disability, familial status or national origin, it’s considered discrimination. It’s also discrimination to offer different terms or conditions, or provide limited or information about an insurance product based on those same factors. Accommodating disabilities. People who have mental or physical disabilities (such as mobility impairment or chronic mental illness) that “substantially limits one or more major life activities” are entitled to certain housing accommodations. If reasonable accommodations aren’t allowed even at your own expense, it may be considered discrimination. For example, a building that usually doesn’t permit tenants to have pets would need to allow a visually impaired tenant to keep a guide animal. Advertising. When advertising the sale or rental availability of a dwelling, any language published that indicates preference or limitations based on race, color, religion, sex, disability, familial status or national origin is discrimination. This also applies to advertising for single-family and owner-occupied housing, which is otherwise exempt from the FHA. Fair Housing Act Exemptions Though the Fair Housing Act applies to most situations, there are some exemptions. For example, if a dwelling has four or fewer units and the owner lives in one of them, they are exempt from the FHA. However, they would not be exempt under the Pennsylvania Human Relations Act unless the dwelling contained only two units and one was owner-occupied. Additionally, any single-family housing that’s sold or rented without the use of a broker is exempt from the FHA, as long as the owner is a private individual who doesn’t own more than three such homes at one time. Again, they would not be exempt in the state of Pennsylvania due to the Pennsylvania Human Relations Act. Housing communities for the elderly are also exempt from the FHA in most cases. In order to not violate the family status provision, it must meet one of several conditions. For instance, HUD must have determined that it’s specifically designed for and occupied by elderly occupants under a federal, state or local government program. Alternatively, it can be 100% occupied by people age 62 or older. Another option is that the community houses at least one person age 55 or older in at least 80% of the occupied units. The property must also have a policy demonstrating that the intent of the community is to house people age 55 or older. Finally, religious organizations and private clubs are allowed to give preference to members as long as they don’t discriminate in their membership. How Fair Housing Laws Are Enforced The HUD is the federal agency in charge of implementing and enforcing the Fair Housing Act. It does so through its Office of Fair Housing and Equal Opportunity (FHEO), which is headquartered in Washington, with 10 regional offices across the U.S. The purpose of these offices is to enforce FHA compliance, administer fair housing programs and educate consumers. The FHEO primarily enforces fair housing programs by funding third-party organizations. For instance, the Fair Housing Initiatives Program provides grants to private organizations that investigate complaints, and even place people undercover to find FHA violations. How to Protect Yourself Against Fair Housing Violations If you believe your rights were violated under the Fair Housing Act, it’s important to file a complaint right away. HUD will investigate claims made within one year of the violation. When filing a complaint, be prepared to provide the following information: Your name and address Name and address of the person or company your complaint is against (also known as the respondent) Address or other identification of the housing involved The date and a brief description of the incident that led to your rights being violated You can file a complaint with the FHEO online, using the HUD Form 903. You can also download this form and email it to your local FHEO office. You can also mail a letter or call an office directly. Once your complaint is received and accepted, HUD will notify you in writing. It will also notify the respondent that you filed a complaint and give them some time to submit a written response. The FHEO will investigate your complaint and decide whether or not there is reasonable cause to believe that the respondent violated the FHA. Additionally, HUD will offer you and the respondent the opportunity to voluntarily resolve the complaint with a Conciliation Agreement. If it’s determined there was a rights violation and you don’t come to an agreement with the respondent, you may need to consult with a lawyer and determine the next steps.
USER:
I moved to an apartment in a duplex building two months ago. My landlord lives in the other apartment in the same building. I am an adept of Santería, and, after a small ceremony in my living room using incense, I received a notice from my landlord. He asked me to leave the premises because the contract stipulates that only Protestants might rent his apartments and that utilization of incense is prohibited. The contract contains this provision indeed, but I can't accept it! That's open discrimination! My state follows the FHA's broad dispositions. Who will prevail?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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| 96
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You will answer using only the provided text. The response will be in the form of a short paragraph and bulleted list for each topic.
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I need a break down of this text in an organised format to study with. Include reasonable detail.
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Although the OSI model is useful, the TCP/IP protocols don’t match its structure exactly. Therefore, in our discussions of TCP/IP, we use the layers of the OSI model in the following way: Application Layer The Application Layer is the level of the protocol hierarchy where user-accessed network processes reside. In this text, a TCP/IP application is any network pro- cess that occurs above the Transport Layer. This includes all of the processes that users directly interact with as well as other processes at this level that users are not necessarily aware of. Presentation Layer For cooperating applications to exchange data, they must agree about how data is represented. In OSI, the Presentation Layer provides standard data presenta- tion routines. This function is frequently handled within the applications in TCP/IP, though TCP/IP protocols such as XDR and MIME also perform this function. Session Layer As with the Presentation Layer, the Session Layer is not identifiable as a separate layer in the TCP/IP protocol hierarchy. The OSI Session Layer manages the 8 | Chapter 1: Overview of TCP/IP sessions (connections) between cooperating applications. In TCP/IP, this func- tion largely occurs in the Transport Layer, and the term “session” is not used; instead, the terms “socket” and “port” are used to describe the path over which cooperating applications communicate. Transport Layer Much of our discussion of TCP/IP is directed to the protocols that occur in the Transport Layer. The Transport Layer in the OSI reference model guarantees that the receiver gets the data exactly as it was sent. In TCP/IP, this function is performed by the Transmission Control Protocol (TCP). However, TCP/IP offers a second Transport Layer service, User Datagram Protocol (UDP), that does not perform the end-to-end reliability checks. Network Layer The Network Layer manages connections across the network and isolates the upper layer protocols from the details of the underlying network. The Internet Protocol (IP), which isolates the upper layers from the underlying network and handles the addressing and delivery of data, is usually described as TCP/IP’s Network Layer. Data Link Layer The reliable delivery of data across the underlying physical network is handled by the Data Link Layer. TCP/IP rarely creates protocols in the Data Link Layer. Most RFCs that relate to the Data Link Layer discuss how IP can make use of existing data link protocols. Physical Layer The Physical Layer defines the characteristics of the hardware needed to carry the data transmission signal. Features such as voltage levels and the number and location of interface pins are defined in this layer. Examples of standards at the Physical Layer are interface connectors such as RS232C and V.35, and stan- dards for local area network wiring such as IEEE 802.3. TCP/IP does not define physical standards—it makes use of existing standards. The terminology of the OSI reference model helps us describe TCP/IP, but to fully understand it, we must use an architectural model that more closely matches the structure of TCP/IP. The next section introduces the protocol model we’ll use to describe TCP/IP. Transmission Control Protocol Applications that require the transport protocol to provide reliable data delivery use TCP because it verifies that data is delivered across the network accurately and in the proper sequence. TCP is a reliable, connection-oriented, byte-stream protocol. Let’s look at each of these characteristics in more detail. TCP provides reliability with a mechanism called Positive Acknowledgment with Retransmission (PAR). Simply stated, a system using PAR sends the data again unless it hears from the remote system that the data arrived OK. The unit of data exchanged between cooperating TCP modules is called a segment (see Figure 1-9). Each segment contains a checksum that the recipient uses to verify that the data is undamaged. If the data segment is received undamaged, the receiver sends a positive acknowledgment back to the sender. If the data segment is damaged, the receiver discards it. After an appropriate timeout period, the sending TCP module re-transmits any segment for which no positive acknowledgment has been received. TCP is connection-oriented. It establishes a logical end-to-end connection between the two communicating hosts. Control information, called a handshake, is exchanged between the two endpoints to establish a dialogue before data is transmitted. TCP indicates the control function of a segment by setting the appropriate bit in the Flags field in word 4 of the segment header. The type of handshake used by TCP is called a three-way handshake because three segments are exchanged. Figure 1-10 shows the simplest form of the three-way hand- shake. Host A begins the connection by sending host B a segment with the “Synchro- nize sequence numbers” (SYN) bit set. This segment tells host B that A wishes to set Transport Layer This is the Title of the Book, eMatter Edition Copyright © 2010 O’Reilly & Associates, Inc. All rights reserved. | 19 up a connection, and it tells B what sequence number host A will use as a starting number for its segments. (Sequence numbers are used to keep data in the proper order.) Host B responds to A with a segment that has the “Acknowledgment” (ACK) and SYN bits set. B’s segment acknowledges the receipt of A’s segment, and informs A which sequence number host B will start with. Finally, host A sends a segment that acknowledges receipt of B’s segment, and transfers the first actual data. After this exchange, host A’s TCP has positive evidence that the remote TCP is alive and ready to receive data. As soon as the connection is established, data can be trans- ferred. When the cooperating modules have concluded the data transfers, they will exchange a three-way handshake with segments containing the “No more data from sender” bit (called the FIN bit) to close the connection. It is the end-to-end exchange of data that provides the logical connection between the two systems. TCP views the data it sends as a continuous stream of bytes, not as independent packets. Therefore, TCP takes care to maintain the sequence in which bytes are sent and received. The Sequence Number and Acknowledgment Number fields in the TCP segment header keep track of the bytes. The TCP standard does not require that each system start numbering bytes with any specific number; each system chooses the number it will use as a starting point. To keep track of the data stream correctly, each end of the connection must know the other end’s initial number. The two ends of the connection synchronize byte-num- bering systems by exchanging SYN segments during the handshake. The Sequence Number field in the SYN segment contains the Initial Sequence Number (ISN), which is the starting point for the byte-numbering system. For security reasons the ISN should be a random number. Each byte of data is numbered sequentially from the ISN, so the first real byte of data sent has a Sequence Number of ISN+1. The Sequence Number in the header of a data segment identifies the sequential position in the data stream of the first data byte in 20 |Chapter 1: Overview of TCP/IP the segment. For example, if the first byte in the data stream was sequence number 1 (ISN=0) and 4000 bytes of data have already been transferred, then the first byte of data in the current segment is byte 4001, and the Sequence Number would be 4001. The Acknowledgment Segment (ACK) performs two functions: positive acknowledg- ment and flow control. The acknowledgment tells the sender how much data has been received and how much more the receiver can accept. The Acknowledgment Number is the sequence number of the next byte the receiver expects to receive. The standard does not require an individual acknowledgment for every packet. The acknowledgment number is a positive acknowledgment of all bytes up to that num- ber. For example, if the first byte sent was numbered 1 and 2000 bytes have been successfully received, the Acknowledgment Number would be 2001. The Window field contains the window, or the number of bytes the remote end is able to accept. If the receiver is capable of accepting 6000 more bytes, the window would be 6000. The window indicates to the sender that it can continue sending seg- ments as long as the total number of bytes that it sends is smaller than the window of bytes that the receiver can accept. The receiver controls the flow of bytes from the sender by changing the size of the window. A zero window tells the sender to cease transmission until it receives a non-zero window value.
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I need a break down of this text in an organised format to study with. Include reasonable detail. You will answer using only the provided text. The response will be in the form of a short paragraph and bulleted list for each topic. Although the OSI model is useful, the TCP/IP protocols don’t match its structure exactly. Therefore, in our discussions of TCP/IP, we use the layers of the OSI model in the following way: Application Layer The Application Layer is the level of the protocol hierarchy where user-accessed network processes reside. In this text, a TCP/IP application is any network pro- cess that occurs above the Transport Layer. This includes all of the processes that users directly interact with as well as other processes at this level that users are not necessarily aware of. Presentation Layer For cooperating applications to exchange data, they must agree about how data is represented. In OSI, the Presentation Layer provides standard data presenta- tion routines. This function is frequently handled within the applications in TCP/IP, though TCP/IP protocols such as XDR and MIME also perform this function. Session Layer As with the Presentation Layer, the Session Layer is not identifiable as a separate layer in the TCP/IP protocol hierarchy. The OSI Session Layer manages the 8 | Chapter 1: Overview of TCP/IP sessions (connections) between cooperating applications. In TCP/IP, this func- tion largely occurs in the Transport Layer, and the term “session” is not used; instead, the terms “socket” and “port” are used to describe the path over which cooperating applications communicate. Transport Layer Much of our discussion of TCP/IP is directed to the protocols that occur in the Transport Layer. The Transport Layer in the OSI reference model guarantees that the receiver gets the data exactly as it was sent. In TCP/IP, this function is performed by the Transmission Control Protocol (TCP). However, TCP/IP offers a second Transport Layer service, User Datagram Protocol (UDP), that does not perform the end-to-end reliability checks. Network Layer The Network Layer manages connections across the network and isolates the upper layer protocols from the details of the underlying network. The Internet Protocol (IP), which isolates the upper layers from the underlying network and handles the addressing and delivery of data, is usually described as TCP/IP’s Network Layer. Data Link Layer The reliable delivery of data across the underlying physical network is handled by the Data Link Layer. TCP/IP rarely creates protocols in the Data Link Layer. Most RFCs that relate to the Data Link Layer discuss how IP can make use of existing data link protocols. Physical Layer The Physical Layer defines the characteristics of the hardware needed to carry the data transmission signal. Features such as voltage levels and the number and location of interface pins are defined in this layer. Examples of standards at the Physical Layer are interface connectors such as RS232C and V.35, and stan- dards for local area network wiring such as IEEE 802.3. TCP/IP does not define physical standards—it makes use of existing standards. The terminology of the OSI reference model helps us describe TCP/IP, but to fully understand it, we must use an architectural model that more closely matches the structure of TCP/IP. The next section introduces the protocol model we’ll use to describe TCP/IP. Transmission Control Protocol Applications that require the transport protocol to provide reliable data delivery use TCP because it verifies that data is delivered across the network accurately and in the proper sequence. TCP is a reliable, connection-oriented, byte-stream protocol. Let’s look at each of these characteristics in more detail. TCP provides reliability with a mechanism called Positive Acknowledgment with Retransmission (PAR). Simply stated, a system using PAR sends the data again unless it hears from the remote system that the data arrived OK. The unit of data exchanged between cooperating TCP modules is called a segment (see Figure 1-9). Each segment contains a checksum that the recipient uses to verify that the data is undamaged. If the data segment is received undamaged, the receiver sends a positive acknowledgment back to the sender. If the data segment is damaged, the receiver discards it. After an appropriate timeout period, the sending TCP module re-transmits any segment for which no positive acknowledgment has been received. TCP is connection-oriented. It establishes a logical end-to-end connection between the two communicating hosts. Control information, called a handshake, is exchanged between the two endpoints to establish a dialogue before data is transmitted. TCP indicates the control function of a segment by setting the appropriate bit in the Flags field in word 4 of the segment header. The type of handshake used by TCP is called a three-way handshake because three segments are exchanged. Figure 1-10 shows the simplest form of the three-way hand- shake. Host A begins the connection by sending host B a segment with the “Synchro- nize sequence numbers” (SYN) bit set. This segment tells host B that A wishes to set Transport Layer This is the Title of the Book, eMatter Edition Copyright © 2010 O’Reilly & Associates, Inc. All rights reserved. | 19 up a connection, and it tells B what sequence number host A will use as a starting number for its segments. (Sequence numbers are used to keep data in the proper order.) Host B responds to A with a segment that has the “Acknowledgment” (ACK) and SYN bits set. B’s segment acknowledges the receipt of A’s segment, and informs A which sequence number host B will start with. Finally, host A sends a segment that acknowledges receipt of B’s segment, and transfers the first actual data. After this exchange, host A’s TCP has positive evidence that the remote TCP is alive and ready to receive data. As soon as the connection is established, data can be trans- ferred. When the cooperating modules have concluded the data transfers, they will exchange a three-way handshake with segments containing the “No more data from sender” bit (called the FIN bit) to close the connection. It is the end-to-end exchange of data that provides the logical connection between the two systems. TCP views the data it sends as a continuous stream of bytes, not as independent packets. Therefore, TCP takes care to maintain the sequence in which bytes are sent and received. The Sequence Number and Acknowledgment Number fields in the TCP segment header keep track of the bytes. The TCP standard does not require that each system start numbering bytes with any specific number; each system chooses the number it will use as a starting point. To keep track of the data stream correctly, each end of the connection must know the other end’s initial number. The two ends of the connection synchronize byte-num- bering systems by exchanging SYN segments during the handshake. The Sequence Number field in the SYN segment contains the Initial Sequence Number (ISN), which is the starting point for the byte-numbering system. For security reasons the ISN should be a random number. Each byte of data is numbered sequentially from the ISN, so the first real byte of data sent has a Sequence Number of ISN+1. The Sequence Number in the header of a data segment identifies the sequential position in the data stream of the first data byte in 20 |Chapter 1: Overview of TCP/IP the segment. For example, if the first byte in the data stream was sequence number 1 (ISN=0) and 4000 bytes of data have already been transferred, then the first byte of data in the current segment is byte 4001, and the Sequence Number would be 4001. The Acknowledgment Segment (ACK) performs two functions: positive acknowledg- ment and flow control. The acknowledgment tells the sender how much data has been received and how much more the receiver can accept. The Acknowledgment Number is the sequence number of the next byte the receiver expects to receive. The standard does not require an individual acknowledgment for every packet. The acknowledgment number is a positive acknowledgment of all bytes up to that num- ber. For example, if the first byte sent was numbered 1 and 2000 bytes have been successfully received, the Acknowledgment Number would be 2001. The Window field contains the window, or the number of bytes the remote end is able to accept. If the receiver is capable of accepting 6000 more bytes, the window would be 6000. The window indicates to the sender that it can continue sending seg- ments as long as the total number of bytes that it sends is smaller than the window of bytes that the receiver can accept. The receiver controls the flow of bytes from the sender by changing the size of the window. A zero window tells the sender to cease transmission until it receives a non-zero window value.
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You will answer using only the provided text. The response will be in the form of a short paragraph and bulleted list for each topic.
EVIDENCE:
Although the OSI model is useful, the TCP/IP protocols don’t match its structure exactly. Therefore, in our discussions of TCP/IP, we use the layers of the OSI model in the following way: Application Layer The Application Layer is the level of the protocol hierarchy where user-accessed network processes reside. In this text, a TCP/IP application is any network pro- cess that occurs above the Transport Layer. This includes all of the processes that users directly interact with as well as other processes at this level that users are not necessarily aware of. Presentation Layer For cooperating applications to exchange data, they must agree about how data is represented. In OSI, the Presentation Layer provides standard data presenta- tion routines. This function is frequently handled within the applications in TCP/IP, though TCP/IP protocols such as XDR and MIME also perform this function. Session Layer As with the Presentation Layer, the Session Layer is not identifiable as a separate layer in the TCP/IP protocol hierarchy. The OSI Session Layer manages the 8 | Chapter 1: Overview of TCP/IP sessions (connections) between cooperating applications. In TCP/IP, this func- tion largely occurs in the Transport Layer, and the term “session” is not used; instead, the terms “socket” and “port” are used to describe the path over which cooperating applications communicate. Transport Layer Much of our discussion of TCP/IP is directed to the protocols that occur in the Transport Layer. The Transport Layer in the OSI reference model guarantees that the receiver gets the data exactly as it was sent. In TCP/IP, this function is performed by the Transmission Control Protocol (TCP). However, TCP/IP offers a second Transport Layer service, User Datagram Protocol (UDP), that does not perform the end-to-end reliability checks. Network Layer The Network Layer manages connections across the network and isolates the upper layer protocols from the details of the underlying network. The Internet Protocol (IP), which isolates the upper layers from the underlying network and handles the addressing and delivery of data, is usually described as TCP/IP’s Network Layer. Data Link Layer The reliable delivery of data across the underlying physical network is handled by the Data Link Layer. TCP/IP rarely creates protocols in the Data Link Layer. Most RFCs that relate to the Data Link Layer discuss how IP can make use of existing data link protocols. Physical Layer The Physical Layer defines the characteristics of the hardware needed to carry the data transmission signal. Features such as voltage levels and the number and location of interface pins are defined in this layer. Examples of standards at the Physical Layer are interface connectors such as RS232C and V.35, and stan- dards for local area network wiring such as IEEE 802.3. TCP/IP does not define physical standards—it makes use of existing standards. The terminology of the OSI reference model helps us describe TCP/IP, but to fully understand it, we must use an architectural model that more closely matches the structure of TCP/IP. The next section introduces the protocol model we’ll use to describe TCP/IP. Transmission Control Protocol Applications that require the transport protocol to provide reliable data delivery use TCP because it verifies that data is delivered across the network accurately and in the proper sequence. TCP is a reliable, connection-oriented, byte-stream protocol. Let’s look at each of these characteristics in more detail. TCP provides reliability with a mechanism called Positive Acknowledgment with Retransmission (PAR). Simply stated, a system using PAR sends the data again unless it hears from the remote system that the data arrived OK. The unit of data exchanged between cooperating TCP modules is called a segment (see Figure 1-9). Each segment contains a checksum that the recipient uses to verify that the data is undamaged. If the data segment is received undamaged, the receiver sends a positive acknowledgment back to the sender. If the data segment is damaged, the receiver discards it. After an appropriate timeout period, the sending TCP module re-transmits any segment for which no positive acknowledgment has been received. TCP is connection-oriented. It establishes a logical end-to-end connection between the two communicating hosts. Control information, called a handshake, is exchanged between the two endpoints to establish a dialogue before data is transmitted. TCP indicates the control function of a segment by setting the appropriate bit in the Flags field in word 4 of the segment header. The type of handshake used by TCP is called a three-way handshake because three segments are exchanged. Figure 1-10 shows the simplest form of the three-way hand- shake. Host A begins the connection by sending host B a segment with the “Synchro- nize sequence numbers” (SYN) bit set. This segment tells host B that A wishes to set Transport Layer This is the Title of the Book, eMatter Edition Copyright © 2010 O’Reilly & Associates, Inc. All rights reserved. | 19 up a connection, and it tells B what sequence number host A will use as a starting number for its segments. (Sequence numbers are used to keep data in the proper order.) Host B responds to A with a segment that has the “Acknowledgment” (ACK) and SYN bits set. B’s segment acknowledges the receipt of A’s segment, and informs A which sequence number host B will start with. Finally, host A sends a segment that acknowledges receipt of B’s segment, and transfers the first actual data. After this exchange, host A’s TCP has positive evidence that the remote TCP is alive and ready to receive data. As soon as the connection is established, data can be trans- ferred. When the cooperating modules have concluded the data transfers, they will exchange a three-way handshake with segments containing the “No more data from sender” bit (called the FIN bit) to close the connection. It is the end-to-end exchange of data that provides the logical connection between the two systems. TCP views the data it sends as a continuous stream of bytes, not as independent packets. Therefore, TCP takes care to maintain the sequence in which bytes are sent and received. The Sequence Number and Acknowledgment Number fields in the TCP segment header keep track of the bytes. The TCP standard does not require that each system start numbering bytes with any specific number; each system chooses the number it will use as a starting point. To keep track of the data stream correctly, each end of the connection must know the other end’s initial number. The two ends of the connection synchronize byte-num- bering systems by exchanging SYN segments during the handshake. The Sequence Number field in the SYN segment contains the Initial Sequence Number (ISN), which is the starting point for the byte-numbering system. For security reasons the ISN should be a random number. Each byte of data is numbered sequentially from the ISN, so the first real byte of data sent has a Sequence Number of ISN+1. The Sequence Number in the header of a data segment identifies the sequential position in the data stream of the first data byte in 20 |Chapter 1: Overview of TCP/IP the segment. For example, if the first byte in the data stream was sequence number 1 (ISN=0) and 4000 bytes of data have already been transferred, then the first byte of data in the current segment is byte 4001, and the Sequence Number would be 4001. The Acknowledgment Segment (ACK) performs two functions: positive acknowledg- ment and flow control. The acknowledgment tells the sender how much data has been received and how much more the receiver can accept. The Acknowledgment Number is the sequence number of the next byte the receiver expects to receive. The standard does not require an individual acknowledgment for every packet. The acknowledgment number is a positive acknowledgment of all bytes up to that num- ber. For example, if the first byte sent was numbered 1 and 2000 bytes have been successfully received, the Acknowledgment Number would be 2001. The Window field contains the window, or the number of bytes the remote end is able to accept. If the receiver is capable of accepting 6000 more bytes, the window would be 6000. The window indicates to the sender that it can continue sending seg- ments as long as the total number of bytes that it sends is smaller than the window of bytes that the receiver can accept. The receiver controls the flow of bytes from the sender by changing the size of the window. A zero window tells the sender to cease transmission until it receives a non-zero window value.
USER:
I need a break down of this text in an organised format to study with. Include reasonable detail.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
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Please respond to this prompt ONLY using the information provided in the context block.
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According to the provided text, how does virtual memory improve the efficiency of real physical memory (RAM) usage in computer systems?
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Virtual memory is a computer system technique which gives an application program the impression that it has contiguous working memory (an address space), while in fact it may be physically fragmented and may even overflow on to disk storage. Systems that use this technique make programming of large applications easier and use real physical memory (e.g. RAM) more efficiently than those without virtual memory. http://en.wikipedia.org/wiki/Virtual_memory Page Fault: A page is a fixed-length block of memory that is used as a unit of transfer between physical memory and external storage like a disk, and a page fault is an interrupt (or exception) to the software raised by the hardware, when a program accesses a page that is mapped in address space, but not loaded in physical memory. http://en.wikipedia.org/wiki/Page_fault Thrash is the term used to describe a degenerate situation on a computer where increasing resources are used to do a decreasing amount of work. In this situation the system is said to be thrashing. Usually it refers to two or more processes accessing a shared resource repeatedly such that serious system performance degradation occurs because the system is spending a disproportionate amount of time just accessing the shared resource. Resource access time may generally be considered as wasted, since it does not contribute to the advancement of any process. In modern computers, thrashing may occur in the paging system (if there is not ‘sufficient’ physical memory or the disk access time is overly long), or in the communications system (especially in conflicts over internal bus access), etc. http://en.wikipedia.org/wiki/Thrash_(computer_science)
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Please respond to this prompt ONLY using the information provided in the context block. According to the provided text, how does virtual memory improve the efficiency of real physical memory (RAM) usage in computer systems? Virtual memory is a computer system technique which gives an application program the impression that it has contiguous working memory (an address space), while in fact it may be physically fragmented and may even overflow on to disk storage. Systems that use this technique make programming of large applications easier and use real physical memory (e.g. RAM) more efficiently than those without virtual memory. http://en.wikipedia.org/wiki/Virtual_memory Page Fault: A page is a fixed-length block of memory that is used as a unit of transfer between physical memory and external storage like a disk, and a page fault is an interrupt (or exception) to the software raised by the hardware, when a program accesses a page that is mapped in address space, but not loaded in physical memory. http://en.wikipedia.org/wiki/Page_fault Thrash is the term used to describe a degenerate situation on a computer where increasing resources are used to do a decreasing amount of work. In this situation the system is said to be thrashing. Usually it refers to two or more processes accessing a shared resource repeatedly such that serious system performance degradation occurs because the system is spending a disproportionate amount of time just accessing the shared resource. Resource access time may generally be considered as wasted, since it does not contribute to the advancement of any process. In modern computers, thrashing may occur in the paging system (if there is not ‘sufficient’ physical memory or the disk access time is overly long), or in the communications system (especially in conflicts over internal bus access), etc. http://en.wikipedia.org/wiki/Thrash_(computer_science)
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Please respond to this prompt ONLY using the information provided in the context block.
EVIDENCE:
Virtual memory is a computer system technique which gives an application program the impression that it has contiguous working memory (an address space), while in fact it may be physically fragmented and may even overflow on to disk storage. Systems that use this technique make programming of large applications easier and use real physical memory (e.g. RAM) more efficiently than those without virtual memory. http://en.wikipedia.org/wiki/Virtual_memory Page Fault: A page is a fixed-length block of memory that is used as a unit of transfer between physical memory and external storage like a disk, and a page fault is an interrupt (or exception) to the software raised by the hardware, when a program accesses a page that is mapped in address space, but not loaded in physical memory. http://en.wikipedia.org/wiki/Page_fault Thrash is the term used to describe a degenerate situation on a computer where increasing resources are used to do a decreasing amount of work. In this situation the system is said to be thrashing. Usually it refers to two or more processes accessing a shared resource repeatedly such that serious system performance degradation occurs because the system is spending a disproportionate amount of time just accessing the shared resource. Resource access time may generally be considered as wasted, since it does not contribute to the advancement of any process. In modern computers, thrashing may occur in the paging system (if there is not ‘sufficient’ physical memory or the disk access time is overly long), or in the communications system (especially in conflicts over internal bus access), etc. http://en.wikipedia.org/wiki/Thrash_(computer_science)
USER:
According to the provided text, how does virtual memory improve the efficiency of real physical memory (RAM) usage in computer systems?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| true
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Answer in 10 words or less. Keep things simple and plain--easy to understand. Don't use any information apart from what I'm giving you.
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Give me a list of people that died in 1957.
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After the show, Christian Dior began thinking about his design again, in his mind he thought he had the responsibility to bring fashion to women, and he wanted women looks like flowers. Because the subversive designing and perfect looking, the dresses were accepted by most society people through they were expensive in that time. (Marly, 1990) Christian Dior’s wonderful new look made fashion area crazy in that some, some people liked it very much, others against it. Because of the traditional understanding about the clothes, some governments thought this kind of clothes wasteful and awful, they even ordered some factories stop making the clothes. People who liked Dior’s styles very much, started thinking about against governments, they came to meet Christian Dior and discussed how they could do to protect the clothing line. For Christian Dior himself, he believed his new fashion would be popular by women, he did want return to the old fashion again, and so every 6 months he made a new line to continue his clothes until reached 22 lines. A big change was happened in 1957 when the Master’s death stunned the whole fashion market, he was the creator who made Christian Dior be known. However, the company could not stop developing, and it became the domination in that time of fashion marketing. Dior’s new designs always shocked the fashion marketing after that time it made Christian Dior’s company became more and more famous. A lot of Dior’s stores appeared in Paris, Hollywood, New York…it was well known as a luxury label from that time all over the world. For developing and expanding its market, Christian Dior began to add some other products not only clothes, but also fashion and leather goods, watches and jewelries, wines and spirits, perfumes and cosmetics… The aims of this article is considering the developed of Dior industry in last few years from about 2003 to 2009, and trying to find out some strategies for future development for Dior. And also considered how Christian Dior keeps its predominant in fashion industries, especially in the similar luxury brands like Louis Vuitton, Armani, Gucci, and Channel. It is obliviously that if any industry insists on one strategy or old-fashioned fossilized attitudes in the market, it would be gone out from the market quickly. The following article will discuss the strategies by four tools, which considered from the industry life cycle, PESTAL framework, five framework and strategic group to understand the development of Christian Dior. And through the five tools we also could understand the different strategies used in different time or under different economic environment. And at last, conducting a SWOT analysis of Christian Dior also becomes a necessary step. Industry Life Cycle: The products in any industry should have a process which is called industry life cycle in marketing. Normally, it would separate to four steps: introduction; growth; maturity and decline. The competition becomes white-hot in the luxury marketing, it is a almost total mature market. According to the industry life cycle, it should nearly reach or have already reached the decline step. So, how to change the poison and improve competitive in fashion marketing become an emergence for Manage groups of Christian Dior. Strategies of sustainable development are necessary considered by them in this period. PESTEL Framework (Political, Economic, Social, Technological, Environmental and Legal): Political: Since some new members joint into European Union, the tariff decline quite a lot, it is a big effect to Dior’s export and import business. Expanding new business line and opening new stores in different areas is one of Dior’s most important strategies. It brought a lot of benefits and challenges to Dior. Reduced price of some products to improve its competitive to other luxury brands, and expanding its overseas plan, especially plan in Asian market. The following graph is Dior’s financial report in Europe: Financial Highlights (in millions of euros) 2005 2004 Revenue by business groups Christian Dior Couture 663 595 Wine and Sprites 2,644 2,259 Fashion and leather goods 4,812 4,366 Perfumes and Cosmetics 2,285 2,128 Watches and Jewelry 573 493 Selective Retailing 3,648 3,276 Other activities and eliminations (69) (57) Total 14,556 13,060 Percentage earned outsides France 84% 76% Profit from recurring operations 2,791 2,413 (Source from Christian Dior financial report 2006) Through this report, it seems under this politics, Dior’s export sales increased about 8% in one year. Economic conditions: In 2008, world financial crisis started from America, the economic condition impacted every industry quickly. In the first three months of 2009, Christian Dior (2009) stressed Dior Couture declined about “8% at current exchange rates and of 12% at constant exchange rates”. The United States and Japan is impacted seriously by the financial crisis, the Dior’s goods sales decreased obviously in the period. However, the good news is that sales situation remains strong in China and some Middle East countries. Christian Dior invested strategies into these new areas to develop itself. Christian Dior (2009) stated that the manager groups changed their focus on these new economic powerful countries, and kept the balance between its strengths and weaknesses. This strategy brought a lot of advantages, and keeps Dior’s dominance position on the world luxury marketing in 2009. Social Christian Dior has a huge range of customers, because it consist its best design and quality, it created a fashion culture and history for itself. Dior as a label is respected by many people. Technological To improve competition, Christian Dior signed up a contract with John Galliano who is one of most influential designer in fashion areas. It is a big issue for Dior, and also for fashion industries. For example Dior watch designed by John Galliano and Victoire de Castellane in 2005, it impact the trend of Dior’s Fashion style. It is not difficult to image women would like taking a lot of money in a new style handbag, that means they also would expend a high price on a fashion watch if it is a new fashion trend in their minds. Furthermore to open up new avenues of business, Christian Dior began cracking other business areas. The first step is co-operating with other brands which is famous on other business industries. For example, On June 2008, Dior co-operated with Apple, created a dress for Apple’s iphone. It was named “Dior Homme iPhone Holder”, obviously, it was so expensive, compare with old iPhone, Dior Hommer iPhone Holder cost twice price. It is the not the first time Christian Dior enter into another total different industry. Then, Christian Dior collaborate Mode Labs and produced its handset. This handset is called “My Dior”, and it is extremely expensive, with a 2 Mega pixel camera, a tough screen, and multimedia goodies. One My Dior’s retail is start from 5000 dollars. And Dior’s company will come up with its own new mobile later soon. (Troaca, 2008) Environmental and Legal Obviously, Christian Dior is Legal company, it keeps abiding by every laws, including employee’s law; company environment condition; fair competitive law and others. Because obey these laws are the basic situations to run a company. Five Forces Framework: It will follow 5 parts: Competitive Rivalry, Buyer, Suppliers, Substitutes, and Potential Entrants. Competitive Rivalry Some researches show the price is not the most important factor customers would consider, they are more focus on the value of the products. Like Dior, many rich people are honest fans of its products through the price is very high. This is a big difference between normal products and luxury goods. They buy Dior for distinguishing others. According to the psychology of customers, Dior promoted a strategy from 2003, which is called limited edition. Dior Company produces some goods with specific design, and most important point is the company will control the numbers of the goods. It made a big success until now, every time when Dior creates new limited-good, they will be sold much quickly than others. Beside great quality goods, Dior pays a lot of attentions on its services for customers, Dall’Olmo Riley and Lacroix ( 2000) pointed out that all luxury brands not only focus on selling goods but also making a great relationship with their customers after sale. All of these strategies made Dior Compare with its biggest competitors like Gucci, Armani, and Hermes. Christian Dior got more benefits in sales within its talent manager groups.
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[System Instruction] Answer in 10 words or less. Keep things simple and plain--easy to understand. Don't use any information apart from what I'm giving you. [Question] Give me a list of people that died in 1957. [Context] After the show, Christian Dior began thinking about his design again, in his mind he thought he had the responsibility to bring fashion to women, and he wanted women looks like flowers. Because the subversive designing and perfect looking, the dresses were accepted by most society people through they were expensive in that time. (Marly, 1990) Christian Dior’s wonderful new look made fashion area crazy in that some, some people liked it very much, others against it. Because of the traditional understanding about the clothes, some governments thought this kind of clothes wasteful and awful, they even ordered some factories stop making the clothes. People who liked Dior’s styles very much, started thinking about against governments, they came to meet Christian Dior and discussed how they could do to protect the clothing line. For Christian Dior himself, he believed his new fashion would be popular by women, he did want return to the old fashion again, and so every 6 months he made a new line to continue his clothes until reached 22 lines. A big change was happened in 1957 when the Master’s death stunned the whole fashion market, he was the creator who made Christian Dior be known. However, the company could not stop developing, and it became the domination in that time of fashion marketing. Dior’s new designs always shocked the fashion marketing after that time it made Christian Dior’s company became more and more famous. A lot of Dior’s stores appeared in Paris, Hollywood, New York…it was well known as a luxury label from that time all over the world. For developing and expanding its market, Christian Dior began to add some other products not only clothes, but also fashion and leather goods, watches and jewelries, wines and spirits, perfumes and cosmetics… The aims of this article is considering the developed of Dior industry in last few years from about 2003 to 2009, and trying to find out some strategies for future development for Dior. And also considered how Christian Dior keeps its predominant in fashion industries, especially in the similar luxury brands like Louis Vuitton, Armani, Gucci, and Channel. It is obliviously that if any industry insists on one strategy or old-fashioned fossilized attitudes in the market, it would be gone out from the market quickly. The following article will discuss the strategies by four tools, which considered from the industry life cycle, PESTAL framework, five framework and strategic group to understand the development of Christian Dior. And through the five tools we also could understand the different strategies used in different time or under different economic environment. And at last, conducting a SWOT analysis of Christian Dior also becomes a necessary step. Industry Life Cycle: The products in any industry should have a process which is called industry life cycle in marketing. Normally, it would separate to four steps: introduction; growth; maturity and decline. The competition becomes white-hot in the luxury marketing, it is a almost total mature market. According to the industry life cycle, it should nearly reach or have already reached the decline step. So, how to change the poison and improve competitive in fashion marketing become an emergence for Manage groups of Christian Dior. Strategies of sustainable development are necessary considered by them in this period. PESTEL Framework (Political, Economic, Social, Technological, Environmental and Legal): Political: Since some new members joint into European Union, the tariff decline quite a lot, it is a big effect to Dior’s export and import business. Expanding new business line and opening new stores in different areas is one of Dior’s most important strategies. It brought a lot of benefits and challenges to Dior. Reduced price of some products to improve its competitive to other luxury brands, and expanding its overseas plan, especially plan in Asian market. The following graph is Dior’s financial report in Europe: Financial Highlights (in millions of euros) 2005 2004 Revenue by business groups Christian Dior Couture 663 595 Wine and Sprites 2,644 2,259 Fashion and leather goods 4,812 4,366 Perfumes and Cosmetics 2,285 2,128 Watches and Jewelry 573 493 Selective Retailing 3,648 3,276 Other activities and eliminations (69) (57) Total 14,556 13,060 Percentage earned outsides France 84% 76% Profit from recurring operations 2,791 2,413 (Source from Christian Dior financial report 2006) Through this report, it seems under this politics, Dior’s export sales increased about 8% in one year. Economic conditions: In 2008, world financial crisis started from America, the economic condition impacted every industry quickly. In the first three months of 2009, Christian Dior (2009) stressed Dior Couture declined about “8% at current exchange rates and of 12% at constant exchange rates”. The United States and Japan is impacted seriously by the financial crisis, the Dior’s goods sales decreased obviously in the period. However, the good news is that sales situation remains strong in China and some Middle East countries. Christian Dior invested strategies into these new areas to develop itself. Christian Dior (2009) stated that the manager groups changed their focus on these new economic powerful countries, and kept the balance between its strengths and weaknesses. This strategy brought a lot of advantages, and keeps Dior’s dominance position on the world luxury marketing in 2009. Social Christian Dior has a huge range of customers, because it consist its best design and quality, it created a fashion culture and history for itself. Dior as a label is respected by many people. Technological To improve competition, Christian Dior signed up a contract with John Galliano who is one of most influential designer in fashion areas. It is a big issue for Dior, and also for fashion industries. For example Dior watch designed by John Galliano and Victoire de Castellane in 2005, it impact the trend of Dior’s Fashion style. It is not difficult to image women would like taking a lot of money in a new style handbag, that means they also would expend a high price on a fashion watch if it is a new fashion trend in their minds. Furthermore to open up new avenues of business, Christian Dior began cracking other business areas. The first step is co-operating with other brands which is famous on other business industries. For example, On June 2008, Dior co-operated with Apple, created a dress for Apple’s iphone. It was named “Dior Homme iPhone Holder”, obviously, it was so expensive, compare with old iPhone, Dior Hommer iPhone Holder cost twice price. It is the not the first time Christian Dior enter into another total different industry. Then, Christian Dior collaborate Mode Labs and produced its handset. This handset is called “My Dior”, and it is extremely expensive, with a 2 Mega pixel camera, a tough screen, and multimedia goodies. One My Dior’s retail is start from 5000 dollars. And Dior’s company will come up with its own new mobile later soon. (Troaca, 2008) Environmental and Legal Obviously, Christian Dior is Legal company, it keeps abiding by every laws, including employee’s law; company environment condition; fair competitive law and others. Because obey these laws are the basic situations to run a company. Five Forces Framework: It will follow 5 parts: Competitive Rivalry, Buyer, Suppliers, Substitutes, and Potential Entrants. Competitive Rivalry Some researches show the price is not the most important factor customers would consider, they are more focus on the value of the products. Like Dior, many rich people are honest fans of its products through the price is very high. This is a big difference between normal products and luxury goods. They buy Dior for distinguishing others. According to the psychology of customers, Dior promoted a strategy from 2003, which is called limited edition. Dior Company produces some goods with specific design, and most important point is the company will control the numbers of the goods. It made a big success until now, every time when Dior creates new limited-good, they will be sold much quickly than others. Beside great quality goods, Dior pays a lot of attentions on its services for customers, Dall’Olmo Riley and Lacroix ( 2000) pointed out that all luxury brands not only focus on selling goods but also making a great relationship with their customers after sale. All of these strategies made Dior Compare with its biggest competitors like Gucci, Armani, and Hermes. Christian Dior got more benefits in sales within its talent manager groups.
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Answer in 10 words or less. Keep things simple and plain--easy to understand. Don't use any information apart from what I'm giving you.
EVIDENCE:
After the show, Christian Dior began thinking about his design again, in his mind he thought he had the responsibility to bring fashion to women, and he wanted women looks like flowers. Because the subversive designing and perfect looking, the dresses were accepted by most society people through they were expensive in that time. (Marly, 1990) Christian Dior’s wonderful new look made fashion area crazy in that some, some people liked it very much, others against it. Because of the traditional understanding about the clothes, some governments thought this kind of clothes wasteful and awful, they even ordered some factories stop making the clothes. People who liked Dior’s styles very much, started thinking about against governments, they came to meet Christian Dior and discussed how they could do to protect the clothing line. For Christian Dior himself, he believed his new fashion would be popular by women, he did want return to the old fashion again, and so every 6 months he made a new line to continue his clothes until reached 22 lines. A big change was happened in 1957 when the Master’s death stunned the whole fashion market, he was the creator who made Christian Dior be known. However, the company could not stop developing, and it became the domination in that time of fashion marketing. Dior’s new designs always shocked the fashion marketing after that time it made Christian Dior’s company became more and more famous. A lot of Dior’s stores appeared in Paris, Hollywood, New York…it was well known as a luxury label from that time all over the world. For developing and expanding its market, Christian Dior began to add some other products not only clothes, but also fashion and leather goods, watches and jewelries, wines and spirits, perfumes and cosmetics… The aims of this article is considering the developed of Dior industry in last few years from about 2003 to 2009, and trying to find out some strategies for future development for Dior. And also considered how Christian Dior keeps its predominant in fashion industries, especially in the similar luxury brands like Louis Vuitton, Armani, Gucci, and Channel. It is obliviously that if any industry insists on one strategy or old-fashioned fossilized attitudes in the market, it would be gone out from the market quickly. The following article will discuss the strategies by four tools, which considered from the industry life cycle, PESTAL framework, five framework and strategic group to understand the development of Christian Dior. And through the five tools we also could understand the different strategies used in different time or under different economic environment. And at last, conducting a SWOT analysis of Christian Dior also becomes a necessary step. Industry Life Cycle: The products in any industry should have a process which is called industry life cycle in marketing. Normally, it would separate to four steps: introduction; growth; maturity and decline. The competition becomes white-hot in the luxury marketing, it is a almost total mature market. According to the industry life cycle, it should nearly reach or have already reached the decline step. So, how to change the poison and improve competitive in fashion marketing become an emergence for Manage groups of Christian Dior. Strategies of sustainable development are necessary considered by them in this period. PESTEL Framework (Political, Economic, Social, Technological, Environmental and Legal): Political: Since some new members joint into European Union, the tariff decline quite a lot, it is a big effect to Dior’s export and import business. Expanding new business line and opening new stores in different areas is one of Dior’s most important strategies. It brought a lot of benefits and challenges to Dior. Reduced price of some products to improve its competitive to other luxury brands, and expanding its overseas plan, especially plan in Asian market. The following graph is Dior’s financial report in Europe: Financial Highlights (in millions of euros) 2005 2004 Revenue by business groups Christian Dior Couture 663 595 Wine and Sprites 2,644 2,259 Fashion and leather goods 4,812 4,366 Perfumes and Cosmetics 2,285 2,128 Watches and Jewelry 573 493 Selective Retailing 3,648 3,276 Other activities and eliminations (69) (57) Total 14,556 13,060 Percentage earned outsides France 84% 76% Profit from recurring operations 2,791 2,413 (Source from Christian Dior financial report 2006) Through this report, it seems under this politics, Dior’s export sales increased about 8% in one year. Economic conditions: In 2008, world financial crisis started from America, the economic condition impacted every industry quickly. In the first three months of 2009, Christian Dior (2009) stressed Dior Couture declined about “8% at current exchange rates and of 12% at constant exchange rates”. The United States and Japan is impacted seriously by the financial crisis, the Dior’s goods sales decreased obviously in the period. However, the good news is that sales situation remains strong in China and some Middle East countries. Christian Dior invested strategies into these new areas to develop itself. Christian Dior (2009) stated that the manager groups changed their focus on these new economic powerful countries, and kept the balance between its strengths and weaknesses. This strategy brought a lot of advantages, and keeps Dior’s dominance position on the world luxury marketing in 2009. Social Christian Dior has a huge range of customers, because it consist its best design and quality, it created a fashion culture and history for itself. Dior as a label is respected by many people. Technological To improve competition, Christian Dior signed up a contract with John Galliano who is one of most influential designer in fashion areas. It is a big issue for Dior, and also for fashion industries. For example Dior watch designed by John Galliano and Victoire de Castellane in 2005, it impact the trend of Dior’s Fashion style. It is not difficult to image women would like taking a lot of money in a new style handbag, that means they also would expend a high price on a fashion watch if it is a new fashion trend in their minds. Furthermore to open up new avenues of business, Christian Dior began cracking other business areas. The first step is co-operating with other brands which is famous on other business industries. For example, On June 2008, Dior co-operated with Apple, created a dress for Apple’s iphone. It was named “Dior Homme iPhone Holder”, obviously, it was so expensive, compare with old iPhone, Dior Hommer iPhone Holder cost twice price. It is the not the first time Christian Dior enter into another total different industry. Then, Christian Dior collaborate Mode Labs and produced its handset. This handset is called “My Dior”, and it is extremely expensive, with a 2 Mega pixel camera, a tough screen, and multimedia goodies. One My Dior’s retail is start from 5000 dollars. And Dior’s company will come up with its own new mobile later soon. (Troaca, 2008) Environmental and Legal Obviously, Christian Dior is Legal company, it keeps abiding by every laws, including employee’s law; company environment condition; fair competitive law and others. Because obey these laws are the basic situations to run a company. Five Forces Framework: It will follow 5 parts: Competitive Rivalry, Buyer, Suppliers, Substitutes, and Potential Entrants. Competitive Rivalry Some researches show the price is not the most important factor customers would consider, they are more focus on the value of the products. Like Dior, many rich people are honest fans of its products through the price is very high. This is a big difference between normal products and luxury goods. They buy Dior for distinguishing others. According to the psychology of customers, Dior promoted a strategy from 2003, which is called limited edition. Dior Company produces some goods with specific design, and most important point is the company will control the numbers of the goods. It made a big success until now, every time when Dior creates new limited-good, they will be sold much quickly than others. Beside great quality goods, Dior pays a lot of attentions on its services for customers, Dall’Olmo Riley and Lacroix ( 2000) pointed out that all luxury brands not only focus on selling goods but also making a great relationship with their customers after sale. All of these strategies made Dior Compare with its biggest competitors like Gucci, Armani, and Hermes. Christian Dior got more benefits in sales within its talent manager groups.
USER:
Give me a list of people that died in 1957.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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You may only use the text included in this prompt for your answer. You are not allowed to use any external resources or prior knowledge.
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How would a digital asset that had been deemed a security be reevaluated?
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C. Reasonable Expectation of Profits Derived from Efforts of Others Usually, the main issue in analyzing a digital asset under the Howey test is whether a purchaser has a reasonable expectation of profits (or other financial returns) derived from the efforts of others. A purchaser may expect to realize a return through participating in distributions or through other methods of realizing appreciation on the asset, such as selling at a gain in a secondary market. When a promoter, sponsor, or other third party (or affiliated group of third parties) (each, an “Active Participant” or “AP”) provides essential managerial efforts that affect the success of the enterprise, and investors reasonably expect to derive profit from those efforts, then this prong of the test is met. Relevant to this inquiry is the “economic reality”12 of the transaction and “what character the instrument is given in commerce by the terms of the offer, the plan of distribution, and the economic inducements held out to the prospect.”13 The inquiry, therefore, is an objective one, focused on the transaction itself and the manner in which the digital asset is offered and sold. The following characteristics are especially relevant in an analysis of whether the third prong of the Howey test is satisfied. 1. Reliance on the Efforts of Others The inquiry into whether a purchaser is relying on the efforts of others focuses on two key issues: Does the purchaser reasonably expect to rely on the efforts of an AP? Are those efforts “the undeniably significant ones, those essential managerial efforts which affect the failure or success of the enterprise,”14 as opposed to efforts that are more ministerial in nature? Although no one of the following characteristics is necessarily determinative, the stronger their presence, the more likely it is that a purchaser of a digital asset is relying on the “efforts of others”: An AP is responsible for the development, improvement (or enhancement), operation, or promotion of the network,15 particularly if purchasers of the digital asset expect an AP to be performing or overseeing tasks that are necessary for the network or digital asset to achieve or retain its intended purpose or functionality.16 o Where the network or the digital asset is still in development and the network or digital asset is not fully functional at the time of the offer or sale, purchasers would reasonably expect an AP to further develop the functionality of the network or digital asset (directly or indirectly). This particularly would be the case where an AP promises further developmental efforts in order for the digital asset to attain or grow in value. There are essential tasks or responsibilities performed and expected to be performed by an AP, rather than an unaffiliated, dispersed community of network users (commonly known as a “decentralized” network). An AP creates or supports a market for,17 or the price of, the digital asset. This can include, for example, an AP that: (1) controls the creation and issuance of the digital asset; or (2) takes other actions to support a market price of the digital asset, such as by limiting supply or ensuring scarcity, through, for example, buybacks, “burning,” or other activities. An AP has a lead or central role in the direction of the ongoing development of the network or the digital asset. In particular, an AP plays a lead or central role in deciding governance issues, code updates, or how third parties participate in the validation of transactions that occur with respect to the digital asset. An AP has a continuing managerial role in making decisions about or exercising judgment concerning the network or the characteristics or rights the digital asset represents including, for example: o Determining whether and how to compensate persons providing services to the network or to the entity or entities charged with oversight of the network. o Determining whether and where the digital asset will trade. For example, purchasers may reasonably rely on an AP for liquidity, such as where the AP has arranged, or promised to arrange for, the trading of the digital asset on a secondary market or platform. o Determining who will receive additional digital assets and under what conditions. o Making or contributing to managerial level business decisions, such as how to deploy funds raised from sales of the digital asset. o Playing a leading role in the validation or confirmation of transactions on the network, or in some other way having responsibility for the ongoing security of the network. o Making other managerial judgements or decisions that will directly or indirectly impact the success of the network or the value of the digital asset generally. Purchasers would reasonably expect the AP to undertake efforts to promote its own interests and enhance the value of the network or digital asset, such as where: o The AP has the ability to realize capital appreciation from the value of the digital asset. This can be demonstrated, for example, if the AP retains a stake or interest in the digital asset. In these instances, purchasers would reasonably expect the AP to undertake efforts to promote its own interests and enhance the value of the network or digital asset. o The AP distributes the digital asset as compensation to management or the AP’s compensation is tied to the price of the digital asset in the secondary market. To the extent these facts are present, the compensated individuals can be expected to take steps to build the value of the digital asset. o The AP owns or controls ownership of intellectual property rights of the network or digital asset, directly or indirectly. o The AP monetizes the value of the digital asset, especially where the digital asset has limited functionality. In evaluating whether a digital asset previously sold as a security should be reevaluated at the time of later offers or sales, there would be additional considerations as they relate to the “efforts of others,” including but not limited to: Whether or not the efforts of an AP, including any successor AP, continue to be important to the value of an investment in the digital asset. Whether the network on which the digital asset is to function operates in such a manner that purchasers would no longer reasonably expect an AP to carry out essential managerial or entrepreneurial efforts. Whether the efforts of an AP are no longer affecting the enterprise’s success.
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You may only use the text included in this prompt for your answer. You are not allowed to use any external resources or prior knowledge. How would a digital asset that had been deemed a security be reevaluated? C. Reasonable Expectation of Profits Derived from Efforts of Others Usually, the main issue in analyzing a digital asset under the Howey test is whether a purchaser has a reasonable expectation of profits (or other financial returns) derived from the efforts of others. A purchaser may expect to realize a return through participating in distributions or through other methods of realizing appreciation on the asset, such as selling at a gain in a secondary market. When a promoter, sponsor, or other third party (or affiliated group of third parties) (each, an “Active Participant” or “AP”) provides essential managerial efforts that affect the success of the enterprise, and investors reasonably expect to derive profit from those efforts, then this prong of the test is met. Relevant to this inquiry is the “economic reality”12 of the transaction and “what character the instrument is given in commerce by the terms of the offer, the plan of distribution, and the economic inducements held out to the prospect.”13 The inquiry, therefore, is an objective one, focused on the transaction itself and the manner in which the digital asset is offered and sold. The following characteristics are especially relevant in an analysis of whether the third prong of the Howey test is satisfied. 1. Reliance on the Efforts of Others The inquiry into whether a purchaser is relying on the efforts of others focuses on two key issues: Does the purchaser reasonably expect to rely on the efforts of an AP? Are those efforts “the undeniably significant ones, those essential managerial efforts which affect the failure or success of the enterprise,”14 as opposed to efforts that are more ministerial in nature? Although no one of the following characteristics is necessarily determinative, the stronger their presence, the more likely it is that a purchaser of a digital asset is relying on the “efforts of others”: An AP is responsible for the development, improvement (or enhancement), operation, or promotion of the network,15 particularly if purchasers of the digital asset expect an AP to be performing or overseeing tasks that are necessary for the network or digital asset to achieve or retain its intended purpose or functionality.16 o Where the network or the digital asset is still in development and the network or digital asset is not fully functional at the time of the offer or sale, purchasers would reasonably expect an AP to further develop the functionality of the network or digital asset (directly or indirectly). This particularly would be the case where an AP promises further developmental efforts in order for the digital asset to attain or grow in value. There are essential tasks or responsibilities performed and expected to be performed by an AP, rather than an unaffiliated, dispersed community of network users (commonly known as a “decentralized” network). An AP creates or supports a market for,17 or the price of, the digital asset. This can include, for example, an AP that: (1) controls the creation and issuance of the digital asset; or (2) takes other actions to support a market price of the digital asset, such as by limiting supply or ensuring scarcity, through, for example, buybacks, “burning,” or other activities. An AP has a lead or central role in the direction of the ongoing development of the network or the digital asset. In particular, an AP plays a lead or central role in deciding governance issues, code updates, or how third parties participate in the validation of transactions that occur with respect to the digital asset. An AP has a continuing managerial role in making decisions about or exercising judgment concerning the network or the characteristics or rights the digital asset represents including, for example: o Determining whether and how to compensate persons providing services to the network or to the entity or entities charged with oversight of the network. o Determining whether and where the digital asset will trade. For example, purchasers may reasonably rely on an AP for liquidity, such as where the AP has arranged, or promised to arrange for, the trading of the digital asset on a secondary market or platform. o Determining who will receive additional digital assets and under what conditions. o Making or contributing to managerial level business decisions, such as how to deploy funds raised from sales of the digital asset. o Playing a leading role in the validation or confirmation of transactions on the network, or in some other way having responsibility for the ongoing security of the network. o Making other managerial judgements or decisions that will directly or indirectly impact the success of the network or the value of the digital asset generally. Purchasers would reasonably expect the AP to undertake efforts to promote its own interests and enhance the value of the network or digital asset, such as where: o The AP has the ability to realize capital appreciation from the value of the digital asset. This can be demonstrated, for example, if the AP retains a stake or interest in the digital asset. In these instances, purchasers would reasonably expect the AP to undertake efforts to promote its own interests and enhance the value of the network or digital asset. o The AP distributes the digital asset as compensation to management or the AP’s compensation is tied to the price of the digital asset in the secondary market. To the extent these facts are present, the compensated individuals can be expected to take steps to build the value of the digital asset. o The AP owns or controls ownership of intellectual property rights of the network or digital asset, directly or indirectly. o The AP monetizes the value of the digital asset, especially where the digital asset has limited functionality. In evaluating whether a digital asset previously sold as a security should be reevaluated at the time of later offers or sales, there would be additional considerations as they relate to the “efforts of others,” including but not limited to: Whether or not the efforts of an AP, including any successor AP, continue to be important to the value of an investment in the digital asset. Whether the network on which the digital asset is to function operates in such a manner that purchasers would no longer reasonably expect an AP to carry out essential managerial or entrepreneurial efforts. Whether the efforts of an AP are no longer affecting the enterprise’s success.
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You may only use the text included in this prompt for your answer. You are not allowed to use any external resources or prior knowledge.
EVIDENCE:
C. Reasonable Expectation of Profits Derived from Efforts of Others Usually, the main issue in analyzing a digital asset under the Howey test is whether a purchaser has a reasonable expectation of profits (or other financial returns) derived from the efforts of others. A purchaser may expect to realize a return through participating in distributions or through other methods of realizing appreciation on the asset, such as selling at a gain in a secondary market. When a promoter, sponsor, or other third party (or affiliated group of third parties) (each, an “Active Participant” or “AP”) provides essential managerial efforts that affect the success of the enterprise, and investors reasonably expect to derive profit from those efforts, then this prong of the test is met. Relevant to this inquiry is the “economic reality”12 of the transaction and “what character the instrument is given in commerce by the terms of the offer, the plan of distribution, and the economic inducements held out to the prospect.”13 The inquiry, therefore, is an objective one, focused on the transaction itself and the manner in which the digital asset is offered and sold. The following characteristics are especially relevant in an analysis of whether the third prong of the Howey test is satisfied. 1. Reliance on the Efforts of Others The inquiry into whether a purchaser is relying on the efforts of others focuses on two key issues: Does the purchaser reasonably expect to rely on the efforts of an AP? Are those efforts “the undeniably significant ones, those essential managerial efforts which affect the failure or success of the enterprise,”14 as opposed to efforts that are more ministerial in nature? Although no one of the following characteristics is necessarily determinative, the stronger their presence, the more likely it is that a purchaser of a digital asset is relying on the “efforts of others”: An AP is responsible for the development, improvement (or enhancement), operation, or promotion of the network,15 particularly if purchasers of the digital asset expect an AP to be performing or overseeing tasks that are necessary for the network or digital asset to achieve or retain its intended purpose or functionality.16 o Where the network or the digital asset is still in development and the network or digital asset is not fully functional at the time of the offer or sale, purchasers would reasonably expect an AP to further develop the functionality of the network or digital asset (directly or indirectly). This particularly would be the case where an AP promises further developmental efforts in order for the digital asset to attain or grow in value. There are essential tasks or responsibilities performed and expected to be performed by an AP, rather than an unaffiliated, dispersed community of network users (commonly known as a “decentralized” network). An AP creates or supports a market for,17 or the price of, the digital asset. This can include, for example, an AP that: (1) controls the creation and issuance of the digital asset; or (2) takes other actions to support a market price of the digital asset, such as by limiting supply or ensuring scarcity, through, for example, buybacks, “burning,” or other activities. An AP has a lead or central role in the direction of the ongoing development of the network or the digital asset. In particular, an AP plays a lead or central role in deciding governance issues, code updates, or how third parties participate in the validation of transactions that occur with respect to the digital asset. An AP has a continuing managerial role in making decisions about or exercising judgment concerning the network or the characteristics or rights the digital asset represents including, for example: o Determining whether and how to compensate persons providing services to the network or to the entity or entities charged with oversight of the network. o Determining whether and where the digital asset will trade. For example, purchasers may reasonably rely on an AP for liquidity, such as where the AP has arranged, or promised to arrange for, the trading of the digital asset on a secondary market or platform. o Determining who will receive additional digital assets and under what conditions. o Making or contributing to managerial level business decisions, such as how to deploy funds raised from sales of the digital asset. o Playing a leading role in the validation or confirmation of transactions on the network, or in some other way having responsibility for the ongoing security of the network. o Making other managerial judgements or decisions that will directly or indirectly impact the success of the network or the value of the digital asset generally. Purchasers would reasonably expect the AP to undertake efforts to promote its own interests and enhance the value of the network or digital asset, such as where: o The AP has the ability to realize capital appreciation from the value of the digital asset. This can be demonstrated, for example, if the AP retains a stake or interest in the digital asset. In these instances, purchasers would reasonably expect the AP to undertake efforts to promote its own interests and enhance the value of the network or digital asset. o The AP distributes the digital asset as compensation to management or the AP’s compensation is tied to the price of the digital asset in the secondary market. To the extent these facts are present, the compensated individuals can be expected to take steps to build the value of the digital asset. o The AP owns or controls ownership of intellectual property rights of the network or digital asset, directly or indirectly. o The AP monetizes the value of the digital asset, especially where the digital asset has limited functionality. In evaluating whether a digital asset previously sold as a security should be reevaluated at the time of later offers or sales, there would be additional considerations as they relate to the “efforts of others,” including but not limited to: Whether or not the efforts of an AP, including any successor AP, continue to be important to the value of an investment in the digital asset. Whether the network on which the digital asset is to function operates in such a manner that purchasers would no longer reasonably expect an AP to carry out essential managerial or entrepreneurial efforts. Whether the efforts of an AP are no longer affecting the enterprise’s success.
USER:
How would a digital asset that had been deemed a security be reevaluated?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
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| 13
| 1,061
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Do not use any outside sources of prior knowledge when you answer. Only use the provided text to answer.
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Explain the different time periods in a way that would be suitable for my 6 year-old daughter to understand.
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ARIZONA PUBLIC SERVICE COMPANY A.C.C. No. 6154 Phoenix, Arizona Cancelling A.C.C. No. 6122 Filed by: Jessica E. Hobbick Rate Schedule TOU-E Title: Director, Regulation and Pricing Revision No. 3 Original Effective Date: August 19, 2017 Effective: March 8, 2024 in Decision No. 79293 Page 1 of 4 RATE SCHEDULE TOU-E RESIDENTIAL TIME-OF-USE SERVICE TIME-OF-USE 4PM-7PM WEEKDAYS AVAILABILITY This rate schedule is available to all residential Customers, including Partial Requirements Customers with an on-site distributed generation system. DESCRIPTION This rate has two parts: a basic service charge and an energy charge. The energy charge will vary by season (summer or winter) and by the time of day that the energy is used (On-Peak, Off-Peak, or Super Off-Peak). This rate does not include a demand charge. TIME PERIODS The On-Peak time period for residential rate schedules is 4 p.m. to 7 p.m. Monday through Friday year-round. This rate also has a Super Off-Peak period, which is 10 a.m. to 3 p.m. Monday through Friday during the winter season, which is the billing cycles of November through April. All other hours are Off-Peak hours. The following holidays are also included in the Off-Peak hours: • New Year’s Day - January 1* • Martin Luther King Day - Third Monday in January • Presidents Day - Third Monday in February • Cesar Chavez Day - March 31* • Memorial Day - Last Monday in May • Juneteenth – June 19* • Independence Day - July 4* • Labor Day - First Monday in September • Indigenous Peoples’ Day / Columbus Day – Second Monday in October • Veterans Day - November 11* • Thanksgiving - Fourth Thursday in November • Christmas Eve - December 24** • Christmas Day - December 25* • New Year’s Eve - December 31** *If these holidays fall on a Saturday, the preceding Friday will be Off-Peak. If they fall on a Sunday, the following Monday will be Off-Peak. **The day on which these holidays fall will be Off-Peak days. The rate also varies by summer and winter seasons. The summer season is the May through October billing cycles, and the winter season is the November through April billing cycles. ARIZONA PUBLIC SERVICE COMPANY A.C.C. No. 6154 Phoenix, Arizona Cancelling A.C.C. No. 6122 Filed by: Jessica E. Hobbick Rate Schedule TOU-E Title: Director, Regulation and Pricing Revision No. 3 Original Effective Date: August 19, 2017 Effective: March 8, 2024 in Decision No. 79293 Page 2 of 4 RATE SCHEDULE TOU-E RESIDENTIAL TIME-OF-USE SERVICE TIME-OF-USE 4PM-7PM WEEKDAYS CHARGES The monthly bill will consist of the following charges, plus adjustments: Bundled Charges Basic Service Charge $ 0.458 per day Summer Winter On-Peak Energy Charge $ 0.34396 $ 0.32543 per kWh Off-Peak Energy Charge $ 0.12345 $ 0.12351 per kWh Super Off-Peak Energy Charge $ 0.03495 per kWh Unbundled Components of the Bundled Charges Bundled Charges consist of the components shown below. These are not additional charges. Basic Service Charge Components Customer Accounts Charge $ 0.078 per day Metering Charge $ 0.215 per day Meter Reading Charge $ 0.078 per day Billing Charge $ 0.087 per day Energy Charge Components System Benefits Charge $ 0.00361 per kWh Transmission Charge $ 0.01097 per kWh Summer Winter Delivery Charge On-Peak $ 0.03469 $ 0.03469 per kWh Delivery Charge Off-Peak $ 0.03469 $ 0.03469 per kWh Delivery Charge Super Off-Peak $ 0.01232 per kWh Generation On-Peak Charge $ 0.29469 $ 0.27616 per kWh Generation Off-Peak Charge $ 0.07418 $ 0.07424 per kWh Generation Super Off-Peak Charge $ 0.00805 per kWh ARIZONA PUBLIC SERVICE COMPANY A.C.C. No. 6154 Phoenix, Arizona Cancelling A.C.C. No. 6122 Filed by: Jessica E. Hobbick Rate Schedule TOU-E Title: Director, Regulation and Pricing Revision No. 3 Original Effective Date: August 19, 2017 Effective: March 8, 2024 in Decision No. 79293 Page 3 of 4 RATE SCHEDULE TOU-E RESIDENTIAL TIME-OF-USE SERVICE TIME-OF-USE 4PM-7PM WEEKDAYS CHARGE FOR ON-SITE DISTRIBUTED GENERATION CUSTOMERS The monthly bill for Customers on this rate schedule that have an on-site distributed generation system will also include a Grid Access Charge. This charge will apply to the nameplate kW-dc power rating of the Customer’s distributed generation facility: Grid Access Charge $ 0.242 per kW-dc of generation ADJUSTMENTS The bill will include the following adjustments: 1. The Renewable Energy Adjustment Charge, Adjustment Schedule REAC-1. 2. The Power Supply Adjustment charge, Adjustment Schedule PSA-1. 3. The Transmission Cost Adjustment charge, Adjustment Schedule TCA-1. 4. The Demand Side Management Adjustment Charge, Adjustment Schedule DSMAC-1. 5. The Lost Fixed Cost Recovery adjustment charge, Adjustment Schedule LFCR. 6. The Tax Expense Adjustor Mechanism charge, Adjustment Schedule TEAM. 7. The Court Resolution Surcharge, Adjustment Schedule CRS-1. 8. The System Reliability Benefit Adjustment Mechanism charge, Adjustment Schedule SRB-1. 9. Direct Access Customers returning to Standard Offer service may be subject to a Returning Customer Direct Access Charge, Adjustment Schedule RCDAC-1. 10. Any applicable taxes and governmental fees that are assessed on APS’s revenues, prices, sales volume, or generation volume. ARIZONA PUBLIC SERVICE COMPANY A.C.C. No. 6154 Phoenix, Arizona Cancelling A.C.C. No. 6122 Filed by: Jessica E. Hobbick Rate Schedule TOU-E Title: Director, Regulation and Pricing Revision No. 3 Original Effective Date: August 19, 2017 Effective: March 8, 2024 in Decision No. 79293 Page 4 of 4 RATE SCHEDULE TOU-E RESIDENTIAL TIME-OF-USE SERVICE TIME-OF-USE 4PM-7PM WEEKDAYS RATE RIDERS Eligible rate riders for this rate schedule are: CPP (RES) Critical Peak Pricing (Residential) EPR-2 Partial Requirements EPR-6 Partial Requirements – Net Metering (Residential Non-Solar) RCP Resource Comparison Proxy E-3 Limited income discount E-4 Limited income medical discount GPS-1, GPS-2, GPS-3 Green Power SERVICE DETAILS 1. Customers that self-provide some of their electrical requirements from on-site generation will be billed according to one of the Partial Requirements Service rate riders. 2. APS provides electric service under the Company’s Service Schedules. These schedules provide details about how the Company serves its Customers, and they have provisions and charges that may affect the Customer’s bill (for example, service connection charges). 3. Electric service provided will be single-phase, 60 Hertz at the Company’s standard voltages available at the Customer site. Three-phase service is required for motors of an individual rated capacity of 7½ HP or more. 4. Electric service is supplied at a single point of delivery and measured through a single meter. 5. Direct Access Customers who purchase available electric services from a supplier other than APS may take service under this schedule. The bill for these Customers will only include the Unbundled Component charges for Customer Accounts, Delivery, System Benefits, and any applicable Adjustments. If metering and billing services are not available from another supplier, those services will be provided by APS and billed to the Customer at the charges shown above.
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Do not use any outside sources of prior knowledge when you answer. Only use the provided text to answer. Explain the different time periods in a way that would be suitable for my 6 year-old daughter to understand. ARIZONA PUBLIC SERVICE COMPANY A.C.C. No. 6154 Phoenix, Arizona Cancelling A.C.C. No. 6122 Filed by: Jessica E. Hobbick Rate Schedule TOU-E Title: Director, Regulation and Pricing Revision No. 3 Original Effective Date: August 19, 2017 Effective: March 8, 2024 in Decision No. 79293 Page 1 of 4 RATE SCHEDULE TOU-E RESIDENTIAL TIME-OF-USE SERVICE TIME-OF-USE 4PM-7PM WEEKDAYS AVAILABILITY This rate schedule is available to all residential Customers, including Partial Requirements Customers with an on-site distributed generation system. DESCRIPTION This rate has two parts: a basic service charge and an energy charge. The energy charge will vary by season (summer or winter) and by the time of day that the energy is used (On-Peak, Off-Peak, or Super Off-Peak). This rate does not include a demand charge. TIME PERIODS The On-Peak time period for residential rate schedules is 4 p.m. to 7 p.m. Monday through Friday year-round. This rate also has a Super Off-Peak period, which is 10 a.m. to 3 p.m. Monday through Friday during the winter season, which is the billing cycles of November through April. All other hours are Off-Peak hours. The following holidays are also included in the Off-Peak hours: • New Year’s Day - January 1* • Martin Luther King Day - Third Monday in January • Presidents Day - Third Monday in February • Cesar Chavez Day - March 31* • Memorial Day - Last Monday in May • Juneteenth – June 19* • Independence Day - July 4* • Labor Day - First Monday in September • Indigenous Peoples’ Day / Columbus Day – Second Monday in October • Veterans Day - November 11* • Thanksgiving - Fourth Thursday in November • Christmas Eve - December 24** • Christmas Day - December 25* • New Year’s Eve - December 31** *If these holidays fall on a Saturday, the preceding Friday will be Off-Peak. If they fall on a Sunday, the following Monday will be Off-Peak. **The day on which these holidays fall will be Off-Peak days. The rate also varies by summer and winter seasons. The summer season is the May through October billing cycles, and the winter season is the November through April billing cycles. ARIZONA PUBLIC SERVICE COMPANY A.C.C. No. 6154 Phoenix, Arizona Cancelling A.C.C. No. 6122 Filed by: Jessica E. Hobbick Rate Schedule TOU-E Title: Director, Regulation and Pricing Revision No. 3 Original Effective Date: August 19, 2017 Effective: March 8, 2024 in Decision No. 79293 Page 2 of 4 RATE SCHEDULE TOU-E RESIDENTIAL TIME-OF-USE SERVICE TIME-OF-USE 4PM-7PM WEEKDAYS CHARGES The monthly bill will consist of the following charges, plus adjustments: Bundled Charges Basic Service Charge $ 0.458 per day Summer Winter On-Peak Energy Charge $ 0.34396 $ 0.32543 per kWh Off-Peak Energy Charge $ 0.12345 $ 0.12351 per kWh Super Off-Peak Energy Charge $ 0.03495 per kWh Unbundled Components of the Bundled Charges Bundled Charges consist of the components shown below. These are not additional charges. Basic Service Charge Components Customer Accounts Charge $ 0.078 per day Metering Charge $ 0.215 per day Meter Reading Charge $ 0.078 per day Billing Charge $ 0.087 per day Energy Charge Components System Benefits Charge $ 0.00361 per kWh Transmission Charge $ 0.01097 per kWh Summer Winter Delivery Charge On-Peak $ 0.03469 $ 0.03469 per kWh Delivery Charge Off-Peak $ 0.03469 $ 0.03469 per kWh Delivery Charge Super Off-Peak $ 0.01232 per kWh Generation On-Peak Charge $ 0.29469 $ 0.27616 per kWh Generation Off-Peak Charge $ 0.07418 $ 0.07424 per kWh Generation Super Off-Peak Charge $ 0.00805 per kWh ARIZONA PUBLIC SERVICE COMPANY A.C.C. No. 6154 Phoenix, Arizona Cancelling A.C.C. No. 6122 Filed by: Jessica E. Hobbick Rate Schedule TOU-E Title: Director, Regulation and Pricing Revision No. 3 Original Effective Date: August 19, 2017 Effective: March 8, 2024 in Decision No. 79293 Page 3 of 4 RATE SCHEDULE TOU-E RESIDENTIAL TIME-OF-USE SERVICE TIME-OF-USE 4PM-7PM WEEKDAYS CHARGE FOR ON-SITE DISTRIBUTED GENERATION CUSTOMERS The monthly bill for Customers on this rate schedule that have an on-site distributed generation system will also include a Grid Access Charge. This charge will apply to the nameplate kW-dc power rating of the Customer’s distributed generation facility: Grid Access Charge $ 0.242 per kW-dc of generation ADJUSTMENTS The bill will include the following adjustments: 1. The Renewable Energy Adjustment Charge, Adjustment Schedule REAC-1. 2. The Power Supply Adjustment charge, Adjustment Schedule PSA-1. 3. The Transmission Cost Adjustment charge, Adjustment Schedule TCA-1. 4. The Demand Side Management Adjustment Charge, Adjustment Schedule DSMAC-1. 5. The Lost Fixed Cost Recovery adjustment charge, Adjustment Schedule LFCR. 6. The Tax Expense Adjustor Mechanism charge, Adjustment Schedule TEAM. 7. The Court Resolution Surcharge, Adjustment Schedule CRS-1. 8. The System Reliability Benefit Adjustment Mechanism charge, Adjustment Schedule SRB-1. 9. Direct Access Customers returning to Standard Offer service may be subject to a Returning Customer Direct Access Charge, Adjustment Schedule RCDAC-1. 10. Any applicable taxes and governmental fees that are assessed on APS’s revenues, prices, sales volume, or generation volume. ARIZONA PUBLIC SERVICE COMPANY A.C.C. No. 6154 Phoenix, Arizona Cancelling A.C.C. No. 6122 Filed by: Jessica E. Hobbick Rate Schedule TOU-E Title: Director, Regulation and Pricing Revision No. 3 Original Effective Date: August 19, 2017 Effective: March 8, 2024 in Decision No. 79293 Page 4 of 4 RATE SCHEDULE TOU-E RESIDENTIAL TIME-OF-USE SERVICE TIME-OF-USE 4PM-7PM WEEKDAYS RATE RIDERS Eligible rate riders for this rate schedule are: CPP (RES) Critical Peak Pricing (Residential) EPR-2 Partial Requirements EPR-6 Partial Requirements – Net Metering (Residential Non-Solar) RCP Resource Comparison Proxy E-3 Limited income discount E-4 Limited income medical discount GPS-1, GPS-2, GPS-3 Green Power SERVICE DETAILS 1. Customers that self-provide some of their electrical requirements from on-site generation will be billed according to one of the Partial Requirements Service rate riders. 2. APS provides electric service under the Company’s Service Schedules. These schedules provide details about how the Company serves its Customers, and they have provisions and charges that may affect the Customer’s bill (for example, service connection charges). 3. Electric service provided will be single-phase, 60 Hertz at the Company’s standard voltages available at the Customer site. Three-phase service is required for motors of an individual rated capacity of 7½ HP or more. 4. Electric service is supplied at a single point of delivery and measured through a single meter. 5. Direct Access Customers who purchase available electric services from a supplier other than APS may take service under this schedule. The bill for these Customers will only include the Unbundled Component charges for Customer Accounts, Delivery, System Benefits, and any applicable Adjustments. If metering and billing services are not available from another supplier, those services will be provided by APS and billed to the Customer at the charges shown above.
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Do not use any outside sources of prior knowledge when you answer. Only use the provided text to answer.
EVIDENCE:
ARIZONA PUBLIC SERVICE COMPANY A.C.C. No. 6154 Phoenix, Arizona Cancelling A.C.C. No. 6122 Filed by: Jessica E. Hobbick Rate Schedule TOU-E Title: Director, Regulation and Pricing Revision No. 3 Original Effective Date: August 19, 2017 Effective: March 8, 2024 in Decision No. 79293 Page 1 of 4 RATE SCHEDULE TOU-E RESIDENTIAL TIME-OF-USE SERVICE TIME-OF-USE 4PM-7PM WEEKDAYS AVAILABILITY This rate schedule is available to all residential Customers, including Partial Requirements Customers with an on-site distributed generation system. DESCRIPTION This rate has two parts: a basic service charge and an energy charge. The energy charge will vary by season (summer or winter) and by the time of day that the energy is used (On-Peak, Off-Peak, or Super Off-Peak). This rate does not include a demand charge. TIME PERIODS The On-Peak time period for residential rate schedules is 4 p.m. to 7 p.m. Monday through Friday year-round. This rate also has a Super Off-Peak period, which is 10 a.m. to 3 p.m. Monday through Friday during the winter season, which is the billing cycles of November through April. All other hours are Off-Peak hours. The following holidays are also included in the Off-Peak hours: • New Year’s Day - January 1* • Martin Luther King Day - Third Monday in January • Presidents Day - Third Monday in February • Cesar Chavez Day - March 31* • Memorial Day - Last Monday in May • Juneteenth – June 19* • Independence Day - July 4* • Labor Day - First Monday in September • Indigenous Peoples’ Day / Columbus Day – Second Monday in October • Veterans Day - November 11* • Thanksgiving - Fourth Thursday in November • Christmas Eve - December 24** • Christmas Day - December 25* • New Year’s Eve - December 31** *If these holidays fall on a Saturday, the preceding Friday will be Off-Peak. If they fall on a Sunday, the following Monday will be Off-Peak. **The day on which these holidays fall will be Off-Peak days. The rate also varies by summer and winter seasons. The summer season is the May through October billing cycles, and the winter season is the November through April billing cycles. ARIZONA PUBLIC SERVICE COMPANY A.C.C. No. 6154 Phoenix, Arizona Cancelling A.C.C. No. 6122 Filed by: Jessica E. Hobbick Rate Schedule TOU-E Title: Director, Regulation and Pricing Revision No. 3 Original Effective Date: August 19, 2017 Effective: March 8, 2024 in Decision No. 79293 Page 2 of 4 RATE SCHEDULE TOU-E RESIDENTIAL TIME-OF-USE SERVICE TIME-OF-USE 4PM-7PM WEEKDAYS CHARGES The monthly bill will consist of the following charges, plus adjustments: Bundled Charges Basic Service Charge $ 0.458 per day Summer Winter On-Peak Energy Charge $ 0.34396 $ 0.32543 per kWh Off-Peak Energy Charge $ 0.12345 $ 0.12351 per kWh Super Off-Peak Energy Charge $ 0.03495 per kWh Unbundled Components of the Bundled Charges Bundled Charges consist of the components shown below. These are not additional charges. Basic Service Charge Components Customer Accounts Charge $ 0.078 per day Metering Charge $ 0.215 per day Meter Reading Charge $ 0.078 per day Billing Charge $ 0.087 per day Energy Charge Components System Benefits Charge $ 0.00361 per kWh Transmission Charge $ 0.01097 per kWh Summer Winter Delivery Charge On-Peak $ 0.03469 $ 0.03469 per kWh Delivery Charge Off-Peak $ 0.03469 $ 0.03469 per kWh Delivery Charge Super Off-Peak $ 0.01232 per kWh Generation On-Peak Charge $ 0.29469 $ 0.27616 per kWh Generation Off-Peak Charge $ 0.07418 $ 0.07424 per kWh Generation Super Off-Peak Charge $ 0.00805 per kWh ARIZONA PUBLIC SERVICE COMPANY A.C.C. No. 6154 Phoenix, Arizona Cancelling A.C.C. No. 6122 Filed by: Jessica E. Hobbick Rate Schedule TOU-E Title: Director, Regulation and Pricing Revision No. 3 Original Effective Date: August 19, 2017 Effective: March 8, 2024 in Decision No. 79293 Page 3 of 4 RATE SCHEDULE TOU-E RESIDENTIAL TIME-OF-USE SERVICE TIME-OF-USE 4PM-7PM WEEKDAYS CHARGE FOR ON-SITE DISTRIBUTED GENERATION CUSTOMERS The monthly bill for Customers on this rate schedule that have an on-site distributed generation system will also include a Grid Access Charge. This charge will apply to the nameplate kW-dc power rating of the Customer’s distributed generation facility: Grid Access Charge $ 0.242 per kW-dc of generation ADJUSTMENTS The bill will include the following adjustments: 1. The Renewable Energy Adjustment Charge, Adjustment Schedule REAC-1. 2. The Power Supply Adjustment charge, Adjustment Schedule PSA-1. 3. The Transmission Cost Adjustment charge, Adjustment Schedule TCA-1. 4. The Demand Side Management Adjustment Charge, Adjustment Schedule DSMAC-1. 5. The Lost Fixed Cost Recovery adjustment charge, Adjustment Schedule LFCR. 6. The Tax Expense Adjustor Mechanism charge, Adjustment Schedule TEAM. 7. The Court Resolution Surcharge, Adjustment Schedule CRS-1. 8. The System Reliability Benefit Adjustment Mechanism charge, Adjustment Schedule SRB-1. 9. Direct Access Customers returning to Standard Offer service may be subject to a Returning Customer Direct Access Charge, Adjustment Schedule RCDAC-1. 10. Any applicable taxes and governmental fees that are assessed on APS’s revenues, prices, sales volume, or generation volume. ARIZONA PUBLIC SERVICE COMPANY A.C.C. No. 6154 Phoenix, Arizona Cancelling A.C.C. No. 6122 Filed by: Jessica E. Hobbick Rate Schedule TOU-E Title: Director, Regulation and Pricing Revision No. 3 Original Effective Date: August 19, 2017 Effective: March 8, 2024 in Decision No. 79293 Page 4 of 4 RATE SCHEDULE TOU-E RESIDENTIAL TIME-OF-USE SERVICE TIME-OF-USE 4PM-7PM WEEKDAYS RATE RIDERS Eligible rate riders for this rate schedule are: CPP (RES) Critical Peak Pricing (Residential) EPR-2 Partial Requirements EPR-6 Partial Requirements – Net Metering (Residential Non-Solar) RCP Resource Comparison Proxy E-3 Limited income discount E-4 Limited income medical discount GPS-1, GPS-2, GPS-3 Green Power SERVICE DETAILS 1. Customers that self-provide some of their electrical requirements from on-site generation will be billed according to one of the Partial Requirements Service rate riders. 2. APS provides electric service under the Company’s Service Schedules. These schedules provide details about how the Company serves its Customers, and they have provisions and charges that may affect the Customer’s bill (for example, service connection charges). 3. Electric service provided will be single-phase, 60 Hertz at the Company’s standard voltages available at the Customer site. Three-phase service is required for motors of an individual rated capacity of 7½ HP or more. 4. Electric service is supplied at a single point of delivery and measured through a single meter. 5. Direct Access Customers who purchase available electric services from a supplier other than APS may take service under this schedule. The bill for these Customers will only include the Unbundled Component charges for Customer Accounts, Delivery, System Benefits, and any applicable Adjustments. If metering and billing services are not available from another supplier, those services will be provided by APS and billed to the Customer at the charges shown above.
USER:
Explain the different time periods in a way that would be suitable for my 6 year-old daughter to understand.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Present your answer without any extraneous information.
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How can schools transition from in-person classes to an online teaching model?
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Contemporary Issues In Education Research – December 2010 Volume 3, Number 12 17 Virtual Teaching And Strategies: Transitioning From Teaching Traditional Classes To Online Classes Bob Barrett, Franklin University, USA ABSTRACT As more technology has become available in many parts of the globe, a new type of student population has emerged. The traditional student image of higher learning has been somewhat limited in many countries, but given the impact of the Internet, this traditional “student body” has changed. Rather than being limited to regional demographics, the student body for educational institutions offering online courses has changed drastically. In fact, these online courses have started yet another chapter in the history of education, known as virtual learning communities. While online instructors may start out teaching students from local areas, this particular opportunity has been changing over the past decade. In fact, many online instructors have noted an increase in a more diversified student population in their classes. Further, they have realized the need to update their teaching skills, practices and strategies in order to accommodate the changing needs of the learners in the classroom, as well as updating their own teaching portfolio. This paper will provide a brief overview of current recruitment and hiring methods used in the traditional hiring versus online hiring of educators. Also, this paper will address the growing concerns of current traditional teachers as they approach the decision to transition over to online learning and how to obtain proper online instruction. Finally, this paper will overview how one online university has approached online teacher training for both experienced instructors, as well as new teaching recruits as they prepare to transition from traditional classrooms over to virtual classes. Keywords: Virtual learning; teachings strategies; traditional learning; online learning; online teaching strategies; online teacher training; teacher training INTRODUCTION s more technology has become available in many parts of the globe, a new type of student population has emerged. The traditional student image of higher learning has been somewhat limited in many countries, but given the impact of the Internet, this traditional “student body” has changed. Rather than being limited to regional demographics, the student body for educational institutions offering online courses has changed drastically. In fact, these online courses have started yet another chapter in the history of education, known as virtual learning communities. In 2008, Sloan Consortium reports that there are approximately 4 million college students are currently enrolled in fully online courses. In 2006, Sloan Consortium reported there were 3.2 million postsecondary students in the United States that took at least one online course; this represents a 25% increase over the previous year. (http://www.nacol.org). Further, there is also a growing need for online instruction in the K-12 market. A Contemporary Issues In Education Research – December 2010 Volume 3, Number 12 18 K-12 online learning is a new field consisting of an estimated $300 million market, which is growing at an estimated annual pace of 30% annually. „45 of the 50 states, plus Washington D.C., have a state virtual school or online initiative, full-time online schools, or both. „24 states, as well as Washington, DC, have statewide full-time online schools. Many virtual schools show annual growth rates between 20 and 45%. 35 states have state virtual schools or state-led online programs. (http://www.nacol.org). While online instructors may start out teaching students from local areas, this particular opportunity has been changing over the past decade. In fact, many online instructors have noted an increase in a more diversified student population in their classes. Further, they have realized the need to update their teaching skills, practices and strategies in order to accommodate the changing needs of the learners in the classroom, as well as updating their own teaching portfolio. Teaching business and management has changed over the past decades in terms of the types of delivery, especially with the use of technology. The use of online learning has helped to increase student enrollments, diversify the variety of student input and perspectives, as well as increase the exposure of instructors to bigger learning demands of the learners. As a result, virtual instructors today need to develop and enhance their teaching strategies and methodologies in order to meet the growing needs of today’s online learning population. No longer are instructors focusing on teaching just local learners, but they must also concentrate on teaching students from a variety of international locations. This paper will focus on transitioning new and current instructors teaching in a live classroom setting to prepare them to teach online. The online learning environment differs from the physical, live classroom setting in terms of student population, use of technology, and vast ranges of time zones shared by a variety of students in an online course. As a result, it is important for adequate and appropriate online training/instruction be afforded to this specific population of educators. PURPOSE Due to the technological advancements in the online environment, online instructors must have a different type of skills sets in order to compete in today’s online learning environment. As a result, interviewers and HR personnel must create and implement different practices and procedures in order to determine the best possible candidate for an online teaching position. Thus, this paper will help to provide an open forum for the audience to determine if there is a need for change. Currently, recruiting and hiring methods used in the traditional hiring versus online hiring of educators do differ. When organizations are seeking qualified personnel to teach for their educational institutions, they may also need to gather and assess more information in order to best determine which candidate best “fits” the needs of the organization and position. As a result, there is a growing need for interviewers to capture more substantial data in order to help assist others in the hiring process. Further, they may need to employ different methods for recruiting and hiring. A new type of employee is needed to fill online instructional positions, so candidates must have certain skills sets. While many traditional instructors enjoy teaching in a live, physical classroom, many are starting to consider the possibility of transitioning over to online learning and how to obtain proper online instruction. Due to the lack of classroom space and declining enrollments, many colleges and universities have started to consider and implement online learning courses and programs. As a result, they have been changing their traditional approach to teacher training to that of an online learning environment. This change has been quite effective since many traditional instructors have been considering or have been assigned to teach online courses. While there is still a large population of graduates who have learned in the traditional learning environment (on-ground classes), there is a growing number of adult learners obtaining their degrees from online universities (with the same type of accreditation as their on-ground counterparts). As a result, both online and on-ground graduates are now seeking additional education in order to compete for online (adjunct) teaching opportunities. Contemporary Issues In Education Research – December 2010 Volume 3, Number 12 19 While distance education has been happening over the past 3-4 decades, the evolution of online learning has been growing rapidly in the higher education field. As this field has been seeing more and more online programs appear, many of the administrative and training departments of various colleges and universities have realized the need to help current and potential online instructors in preparing for online teaching in terms of current teaching strategies used – both from the live (on-ground) environment, as well as those strategies used in the online learning environment. Many colleges and universities now recruit, hire, and train potential online instructors via the Internet in terms of their electronic postings of jobs. There are four major areas that many universities must consider in the area of instructor recruitment and hiring. First, they need to reconsider their approach to recruitment, hiring, and training of current and future instructors for employment in the area of the online teaching. Second, they need to look at the best practices of other leading educational institutions to see how they are conducting their recruitment and training of online instructors. Third, they need to update their technological and skill requirements for online instructors to make sure that they are hiring the best for their educational institution. . Barbara Smith (2000), chief learning officer for Burson-Marsteller stated that "If we don't have the best people creating the best product, we can't compete. What I'm after is creating the best people in the industry. E-learning is an option that provides us with a real competitive edge- -it helps us maximize our intellectual capital" (para. 2). During this process, these educational institutions should examine the potential networking efforts, which could be possible for current and potential online instructors to meet others interested in online teaching during these instructional workshops, seminars, or courses. The following section will discuss the issues of recruitment and hiring. In particular, a discussion will be held on the characteristics of online instructor. Finally, there will be a brief overview of the online teacher training. RECRUITMENT AND HIRING OF POTENTIAL ONLINE INSTRUCTORS When organizations are seeking qualified personnel to teach for their educational institutions, they may also need to gather and assess more information in order to best determine which candidate best “fits” the needs of the organization and position. As a result, there is a growing need for interviewers to capture more substantial data in order to help assist others in the hiring process. Further, they may need to employee different methods for recruiting and hiring. Due to the technological advancements in the online environment, online instructors must have a different type of skills sets in order to compete in today’s online learning environment. As a result, interviewers and HR personnel must create and implement different practices and procedures in order to determine the best possible candidate for an online teaching position. CHARACTERISTICS OF AN ONLINE INSTRUCTOR What are the characteristics of a good and bad online instructor? Roueche, Roueche, and Milliron (1995) stated, “Adjunct faculty are increasingly important players in the teaching and learning process. It is in the college’s best interest of appreciating the investment value of them, and ultimately in the interest of establishing and maintaining the college’s reputation for teaching excellence” (p. 120). As noted early, many online teaching positions are being filled by part-time instructors. Many colleges and universities have found that this helps to reduce some administration of benefits and pay – so part-time faculty have been a “quick fix” for their current need. However, it should be noted for the purposes of this paper that there may be a change in this situation within the next decade or two as more part-time faculty seek more pay and benefits (i.e., union organization). TRAINING INSTRUCTORS ONLINE While some teaching tools may be effective in one learning environment, they may not be as successful in another. Therefore, as each environment is unique, as well as the learners in it, the teacher needs to assess their virtual environment and determine if change is necessary. However, not all educators may be as flexible in their teaching method, and they may not be willing to change. This leads us to the following question. Do educators incorporate different teaching strategies and techniques to meet the ever-changing needs of these virtual learners in terms of learning from their cultural differences in order to enhance the learning experiences of all? Contemporary Issues In Education Research – December 2010 Volume 3, Number 12 20 While we may hope that all educators are continuously improving their teaching methods and classrooms, we must recognize the fact that some may not. In the traditional classroom, there was an “expected” structure of teaching and layout of the classroom. However, in the virtual learning environment, educators have had to “unlearn” their old way of thinking in terms of teaching methodologies. In turn, online educators have had to learn new ways of implementing and nurturing learning for their virtual student populations. The key to success is our ability to think, visualize, and implement. White (2002) noted “Nowhere is thinking more evident than in the textual environment of the online classroom. If writing is thinking, then online students display their thinking throughout the course, illustrating their individual styles and changing attitudes.” (p. 6) Along this same line of thinking, educators can incorporate various strategies to help draw upon the experiences of all class members – rather than just a select few. CONCLUSION Traditionally, teachers have been expected serve as role models as they lead classroom discussions, collected and graded assignments, and provide leadership and guidance to their students. However, over the past two decades, the role and function of the instructor has changed drastically due to economic, technological, and educational factors. In any event, the area of online instruction has started to attract more and more students, as well as more instructors. In order to meet this growing demand for better qualified, online instructors, many schools have had to rethink their recruiting, hiring, and training efforts. Thus, there is a growing need to offer better quality online teacher training to current and potential online instructors to better enable these instructors to meet the ever- changing need of their online learning populations. AUTHOR INFORMATION Dr. Bob Barrett received his Ed.D. at The George Washington University; his M.B.E. at The University of the District of Columbia; and his B.A. at Shepherd University. He has completed additional Studies at University of Maryland - College Park, USDA Graduate School, and Gallaudet University. Dr. Barrett's current research interests are: Human Resource Development (HRD); Human Resource Management (HRM); Virtual Management Teams; Stakeholder Theory/Ethics; Logic/Dominant Logic; Disability/BDEP. REFERENCES 1. NACOL. http://www.nacol.org. Retrieved June 15, 2009. 2. National Center for Education Statistics, 2003. 3. Preece, J. (2000). Online communities: Designing usability, supporting sociability. Chichester: Wiley. 4. Roueche, J.E., Roueche, S.D., and Milliron, M.D. (1995). Strangers in their own land: Parts-time faculty in American’s community colleges. Washington D.C.: Community College Press. 5. Smith, B. (2000). Online Learning: The Competitive Edge: Companies blend E-learning into their business strategies to maximize intellectual capital. InformationWeek.com Retrieved September 22, 2010, http://www.informationweek.com/801/learn.htm. 6. White, K.W., Weight, B.H. (2000). The online teaching guide: A handbook of attitudes, strategies, and techniques for the virtual classroom. Needham Heights, MA: Allyn & Bacon.
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Present your answer without any extraneous information. How can schools transition from in-person classes to an online teaching model? Contemporary Issues In Education Research – December 2010 Volume 3, Number 12 17 Virtual Teaching And Strategies: Transitioning From Teaching Traditional Classes To Online Classes Bob Barrett, Franklin University, USA ABSTRACT As more technology has become available in many parts of the globe, a new type of student population has emerged. The traditional student image of higher learning has been somewhat limited in many countries, but given the impact of the Internet, this traditional “student body” has changed. Rather than being limited to regional demographics, the student body for educational institutions offering online courses has changed drastically. In fact, these online courses have started yet another chapter in the history of education, known as virtual learning communities. While online instructors may start out teaching students from local areas, this particular opportunity has been changing over the past decade. In fact, many online instructors have noted an increase in a more diversified student population in their classes. Further, they have realized the need to update their teaching skills, practices and strategies in order to accommodate the changing needs of the learners in the classroom, as well as updating their own teaching portfolio. This paper will provide a brief overview of current recruitment and hiring methods used in the traditional hiring versus online hiring of educators. Also, this paper will address the growing concerns of current traditional teachers as they approach the decision to transition over to online learning and how to obtain proper online instruction. Finally, this paper will overview how one online university has approached online teacher training for both experienced instructors, as well as new teaching recruits as they prepare to transition from traditional classrooms over to virtual classes. Keywords: Virtual learning; teachings strategies; traditional learning; online learning; online teaching strategies; online teacher training; teacher training INTRODUCTION s more technology has become available in many parts of the globe, a new type of student population has emerged. The traditional student image of higher learning has been somewhat limited in many countries, but given the impact of the Internet, this traditional “student body” has changed. Rather than being limited to regional demographics, the student body for educational institutions offering online courses has changed drastically. In fact, these online courses have started yet another chapter in the history of education, known as virtual learning communities. In 2008, Sloan Consortium reports that there are approximately 4 million college students are currently enrolled in fully online courses. In 2006, Sloan Consortium reported there were 3.2 million postsecondary students in the United States that took at least one online course; this represents a 25% increase over the previous year. (http://www.nacol.org). Further, there is also a growing need for online instruction in the K-12 market. A Contemporary Issues In Education Research – December 2010 Volume 3, Number 12 18 K-12 online learning is a new field consisting of an estimated $300 million market, which is growing at an estimated annual pace of 30% annually. „45 of the 50 states, plus Washington D.C., have a state virtual school or online initiative, full-time online schools, or both. „24 states, as well as Washington, DC, have statewide full-time online schools. Many virtual schools show annual growth rates between 20 and 45%. 35 states have state virtual schools or state-led online programs. (http://www.nacol.org). While online instructors may start out teaching students from local areas, this particular opportunity has been changing over the past decade. In fact, many online instructors have noted an increase in a more diversified student population in their classes. Further, they have realized the need to update their teaching skills, practices and strategies in order to accommodate the changing needs of the learners in the classroom, as well as updating their own teaching portfolio. Teaching business and management has changed over the past decades in terms of the types of delivery, especially with the use of technology. The use of online learning has helped to increase student enrollments, diversify the variety of student input and perspectives, as well as increase the exposure of instructors to bigger learning demands of the learners. As a result, virtual instructors today need to develop and enhance their teaching strategies and methodologies in order to meet the growing needs of today’s online learning population. No longer are instructors focusing on teaching just local learners, but they must also concentrate on teaching students from a variety of international locations. This paper will focus on transitioning new and current instructors teaching in a live classroom setting to prepare them to teach online. The online learning environment differs from the physical, live classroom setting in terms of student population, use of technology, and vast ranges of time zones shared by a variety of students in an online course. As a result, it is important for adequate and appropriate online training/instruction be afforded to this specific population of educators. PURPOSE Due to the technological advancements in the online environment, online instructors must have a different type of skills sets in order to compete in today’s online learning environment. As a result, interviewers and HR personnel must create and implement different practices and procedures in order to determine the best possible candidate for an online teaching position. Thus, this paper will help to provide an open forum for the audience to determine if there is a need for change. Currently, recruiting and hiring methods used in the traditional hiring versus online hiring of educators do differ. When organizations are seeking qualified personnel to teach for their educational institutions, they may also need to gather and assess more information in order to best determine which candidate best “fits” the needs of the organization and position. As a result, there is a growing need for interviewers to capture more substantial data in order to help assist others in the hiring process. Further, they may need to employ different methods for recruiting and hiring. A new type of employee is needed to fill online instructional positions, so candidates must have certain skills sets. While many traditional instructors enjoy teaching in a live, physical classroom, many are starting to consider the possibility of transitioning over to online learning and how to obtain proper online instruction. Due to the lack of classroom space and declining enrollments, many colleges and universities have started to consider and implement online learning courses and programs. As a result, they have been changing their traditional approach to teacher training to that of an online learning environment. This change has been quite effective since many traditional instructors have been considering or have been assigned to teach online courses. While there is still a large population of graduates who have learned in the traditional learning environment (on-ground classes), there is a growing number of adult learners obtaining their degrees from online universities (with the same type of accreditation as their on-ground counterparts). As a result, both online and on-ground graduates are now seeking additional education in order to compete for online (adjunct) teaching opportunities. Contemporary Issues In Education Research – December 2010 Volume 3, Number 12 19 While distance education has been happening over the past 3-4 decades, the evolution of online learning has been growing rapidly in the higher education field. As this field has been seeing more and more online programs appear, many of the administrative and training departments of various colleges and universities have realized the need to help current and potential online instructors in preparing for online teaching in terms of current teaching strategies used – both from the live (on-ground) environment, as well as those strategies used in the online learning environment. Many colleges and universities now recruit, hire, and train potential online instructors via the Internet in terms of their electronic postings of jobs. There are four major areas that many universities must consider in the area of instructor recruitment and hiring. First, they need to reconsider their approach to recruitment, hiring, and training of current and future instructors for employment in the area of the online teaching. Second, they need to look at the best practices of other leading educational institutions to see how they are conducting their recruitment and training of online instructors. Third, they need to update their technological and skill requirements for online instructors to make sure that they are hiring the best for their educational institution. . Barbara Smith (2000), chief learning officer for Burson-Marsteller stated that "If we don't have the best people creating the best product, we can't compete. What I'm after is creating the best people in the industry. E-learning is an option that provides us with a real competitive edge- -it helps us maximize our intellectual capital" (para. 2). During this process, these educational institutions should examine the potential networking efforts, which could be possible for current and potential online instructors to meet others interested in online teaching during these instructional workshops, seminars, or courses. The following section will discuss the issues of recruitment and hiring. In particular, a discussion will be held on the characteristics of online instructor. Finally, there will be a brief overview of the online teacher training. RECRUITMENT AND HIRING OF POTENTIAL ONLINE INSTRUCTORS When organizations are seeking qualified personnel to teach for their educational institutions, they may also need to gather and assess more information in order to best determine which candidate best “fits” the needs of the organization and position. As a result, there is a growing need for interviewers to capture more substantial data in order to help assist others in the hiring process. Further, they may need to employee different methods for recruiting and hiring. Due to the technological advancements in the online environment, online instructors must have a different type of skills sets in order to compete in today’s online learning environment. As a result, interviewers and HR personnel must create and implement different practices and procedures in order to determine the best possible candidate for an online teaching position. CHARACTERISTICS OF AN ONLINE INSTRUCTOR What are the characteristics of a good and bad online instructor? Roueche, Roueche, and Milliron (1995) stated, “Adjunct faculty are increasingly important players in the teaching and learning process. It is in the college’s best interest of appreciating the investment value of them, and ultimately in the interest of establishing and maintaining the college’s reputation for teaching excellence” (p. 120). As noted early, many online teaching positions are being filled by part-time instructors. Many colleges and universities have found that this helps to reduce some administration of benefits and pay – so part-time faculty have been a “quick fix” for their current need. However, it should be noted for the purposes of this paper that there may be a change in this situation within the next decade or two as more part-time faculty seek more pay and benefits (i.e., union organization). TRAINING INSTRUCTORS ONLINE While some teaching tools may be effective in one learning environment, they may not be as successful in another. Therefore, as each environment is unique, as well as the learners in it, the teacher needs to assess their virtual environment and determine if change is necessary. However, not all educators may be as flexible in their teaching method, and they may not be willing to change. This leads us to the following question. Do educators incorporate different teaching strategies and techniques to meet the ever-changing needs of these virtual learners in terms of learning from their cultural differences in order to enhance the learning experiences of all? Contemporary Issues In Education Research – December 2010 Volume 3, Number 12 20 While we may hope that all educators are continuously improving their teaching methods and classrooms, we must recognize the fact that some may not. In the traditional classroom, there was an “expected” structure of teaching and layout of the classroom. However, in the virtual learning environment, educators have had to “unlearn” their old way of thinking in terms of teaching methodologies. In turn, online educators have had to learn new ways of implementing and nurturing learning for their virtual student populations. The key to success is our ability to think, visualize, and implement. White (2002) noted “Nowhere is thinking more evident than in the textual environment of the online classroom. If writing is thinking, then online students display their thinking throughout the course, illustrating their individual styles and changing attitudes.” (p. 6) Along this same line of thinking, educators can incorporate various strategies to help draw upon the experiences of all class members – rather than just a select few. CONCLUSION Traditionally, teachers have been expected serve as role models as they lead classroom discussions, collected and graded assignments, and provide leadership and guidance to their students. However, over the past two decades, the role and function of the instructor has changed drastically due to economic, technological, and educational factors. In any event, the area of online instruction has started to attract more and more students, as well as more instructors. In order to meet this growing demand for better qualified, online instructors, many schools have had to rethink their recruiting, hiring, and training efforts. Thus, there is a growing need to offer better quality online teacher training to current and potential online instructors to better enable these instructors to meet the ever- changing need of their online learning populations. AUTHOR INFORMATION Dr. Bob Barrett received his Ed.D. at The George Washington University; his M.B.E. at The University of the District of Columbia; and his B.A. at Shepherd University. He has completed additional Studies at University of Maryland - College Park, USDA Graduate School, and Gallaudet University. Dr. Barrett's current research interests are: Human Resource Development (HRD); Human Resource Management (HRM); Virtual Management Teams; Stakeholder Theory/Ethics; Logic/Dominant Logic; Disability/BDEP. REFERENCES 1. NACOL. http://www.nacol.org. Retrieved June 15, 2009. 2. National Center for Education Statistics, 2003. 3. Preece, J. (2000). Online communities: Designing usability, supporting sociability. Chichester: Wiley. 4. Roueche, J.E., Roueche, S.D., and Milliron, M.D. (1995). Strangers in their own land: Parts-time faculty in American’s community colleges. Washington D.C.: Community College Press. 5. Smith, B. (2000). Online Learning: The Competitive Edge: Companies blend E-learning into their business strategies to maximize intellectual capital. InformationWeek.com Retrieved September 22, 2010, http://www.informationweek.com/801/learn.htm. 6. White, K.W., Weight, B.H. (2000). The online teaching guide: A handbook of attitudes, strategies, and techniques for the virtual classroom. Needham Heights, MA: Allyn & Bacon.
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Present your answer without any extraneous information.
EVIDENCE:
Contemporary Issues In Education Research – December 2010 Volume 3, Number 12 17 Virtual Teaching And Strategies: Transitioning From Teaching Traditional Classes To Online Classes Bob Barrett, Franklin University, USA ABSTRACT As more technology has become available in many parts of the globe, a new type of student population has emerged. The traditional student image of higher learning has been somewhat limited in many countries, but given the impact of the Internet, this traditional “student body” has changed. Rather than being limited to regional demographics, the student body for educational institutions offering online courses has changed drastically. In fact, these online courses have started yet another chapter in the history of education, known as virtual learning communities. While online instructors may start out teaching students from local areas, this particular opportunity has been changing over the past decade. In fact, many online instructors have noted an increase in a more diversified student population in their classes. Further, they have realized the need to update their teaching skills, practices and strategies in order to accommodate the changing needs of the learners in the classroom, as well as updating their own teaching portfolio. This paper will provide a brief overview of current recruitment and hiring methods used in the traditional hiring versus online hiring of educators. Also, this paper will address the growing concerns of current traditional teachers as they approach the decision to transition over to online learning and how to obtain proper online instruction. Finally, this paper will overview how one online university has approached online teacher training for both experienced instructors, as well as new teaching recruits as they prepare to transition from traditional classrooms over to virtual classes. Keywords: Virtual learning; teachings strategies; traditional learning; online learning; online teaching strategies; online teacher training; teacher training INTRODUCTION s more technology has become available in many parts of the globe, a new type of student population has emerged. The traditional student image of higher learning has been somewhat limited in many countries, but given the impact of the Internet, this traditional “student body” has changed. Rather than being limited to regional demographics, the student body for educational institutions offering online courses has changed drastically. In fact, these online courses have started yet another chapter in the history of education, known as virtual learning communities. In 2008, Sloan Consortium reports that there are approximately 4 million college students are currently enrolled in fully online courses. In 2006, Sloan Consortium reported there were 3.2 million postsecondary students in the United States that took at least one online course; this represents a 25% increase over the previous year. (http://www.nacol.org). Further, there is also a growing need for online instruction in the K-12 market. A Contemporary Issues In Education Research – December 2010 Volume 3, Number 12 18 K-12 online learning is a new field consisting of an estimated $300 million market, which is growing at an estimated annual pace of 30% annually. „45 of the 50 states, plus Washington D.C., have a state virtual school or online initiative, full-time online schools, or both. „24 states, as well as Washington, DC, have statewide full-time online schools. Many virtual schools show annual growth rates between 20 and 45%. 35 states have state virtual schools or state-led online programs. (http://www.nacol.org). While online instructors may start out teaching students from local areas, this particular opportunity has been changing over the past decade. In fact, many online instructors have noted an increase in a more diversified student population in their classes. Further, they have realized the need to update their teaching skills, practices and strategies in order to accommodate the changing needs of the learners in the classroom, as well as updating their own teaching portfolio. Teaching business and management has changed over the past decades in terms of the types of delivery, especially with the use of technology. The use of online learning has helped to increase student enrollments, diversify the variety of student input and perspectives, as well as increase the exposure of instructors to bigger learning demands of the learners. As a result, virtual instructors today need to develop and enhance their teaching strategies and methodologies in order to meet the growing needs of today’s online learning population. No longer are instructors focusing on teaching just local learners, but they must also concentrate on teaching students from a variety of international locations. This paper will focus on transitioning new and current instructors teaching in a live classroom setting to prepare them to teach online. The online learning environment differs from the physical, live classroom setting in terms of student population, use of technology, and vast ranges of time zones shared by a variety of students in an online course. As a result, it is important for adequate and appropriate online training/instruction be afforded to this specific population of educators. PURPOSE Due to the technological advancements in the online environment, online instructors must have a different type of skills sets in order to compete in today’s online learning environment. As a result, interviewers and HR personnel must create and implement different practices and procedures in order to determine the best possible candidate for an online teaching position. Thus, this paper will help to provide an open forum for the audience to determine if there is a need for change. Currently, recruiting and hiring methods used in the traditional hiring versus online hiring of educators do differ. When organizations are seeking qualified personnel to teach for their educational institutions, they may also need to gather and assess more information in order to best determine which candidate best “fits” the needs of the organization and position. As a result, there is a growing need for interviewers to capture more substantial data in order to help assist others in the hiring process. Further, they may need to employ different methods for recruiting and hiring. A new type of employee is needed to fill online instructional positions, so candidates must have certain skills sets. While many traditional instructors enjoy teaching in a live, physical classroom, many are starting to consider the possibility of transitioning over to online learning and how to obtain proper online instruction. Due to the lack of classroom space and declining enrollments, many colleges and universities have started to consider and implement online learning courses and programs. As a result, they have been changing their traditional approach to teacher training to that of an online learning environment. This change has been quite effective since many traditional instructors have been considering or have been assigned to teach online courses. While there is still a large population of graduates who have learned in the traditional learning environment (on-ground classes), there is a growing number of adult learners obtaining their degrees from online universities (with the same type of accreditation as their on-ground counterparts). As a result, both online and on-ground graduates are now seeking additional education in order to compete for online (adjunct) teaching opportunities. Contemporary Issues In Education Research – December 2010 Volume 3, Number 12 19 While distance education has been happening over the past 3-4 decades, the evolution of online learning has been growing rapidly in the higher education field. As this field has been seeing more and more online programs appear, many of the administrative and training departments of various colleges and universities have realized the need to help current and potential online instructors in preparing for online teaching in terms of current teaching strategies used – both from the live (on-ground) environment, as well as those strategies used in the online learning environment. Many colleges and universities now recruit, hire, and train potential online instructors via the Internet in terms of their electronic postings of jobs. There are four major areas that many universities must consider in the area of instructor recruitment and hiring. First, they need to reconsider their approach to recruitment, hiring, and training of current and future instructors for employment in the area of the online teaching. Second, they need to look at the best practices of other leading educational institutions to see how they are conducting their recruitment and training of online instructors. Third, they need to update their technological and skill requirements for online instructors to make sure that they are hiring the best for their educational institution. . Barbara Smith (2000), chief learning officer for Burson-Marsteller stated that "If we don't have the best people creating the best product, we can't compete. What I'm after is creating the best people in the industry. E-learning is an option that provides us with a real competitive edge- -it helps us maximize our intellectual capital" (para. 2). During this process, these educational institutions should examine the potential networking efforts, which could be possible for current and potential online instructors to meet others interested in online teaching during these instructional workshops, seminars, or courses. The following section will discuss the issues of recruitment and hiring. In particular, a discussion will be held on the characteristics of online instructor. Finally, there will be a brief overview of the online teacher training. RECRUITMENT AND HIRING OF POTENTIAL ONLINE INSTRUCTORS When organizations are seeking qualified personnel to teach for their educational institutions, they may also need to gather and assess more information in order to best determine which candidate best “fits” the needs of the organization and position. As a result, there is a growing need for interviewers to capture more substantial data in order to help assist others in the hiring process. Further, they may need to employee different methods for recruiting and hiring. Due to the technological advancements in the online environment, online instructors must have a different type of skills sets in order to compete in today’s online learning environment. As a result, interviewers and HR personnel must create and implement different practices and procedures in order to determine the best possible candidate for an online teaching position. CHARACTERISTICS OF AN ONLINE INSTRUCTOR What are the characteristics of a good and bad online instructor? Roueche, Roueche, and Milliron (1995) stated, “Adjunct faculty are increasingly important players in the teaching and learning process. It is in the college’s best interest of appreciating the investment value of them, and ultimately in the interest of establishing and maintaining the college’s reputation for teaching excellence” (p. 120). As noted early, many online teaching positions are being filled by part-time instructors. Many colleges and universities have found that this helps to reduce some administration of benefits and pay – so part-time faculty have been a “quick fix” for their current need. However, it should be noted for the purposes of this paper that there may be a change in this situation within the next decade or two as more part-time faculty seek more pay and benefits (i.e., union organization). TRAINING INSTRUCTORS ONLINE While some teaching tools may be effective in one learning environment, they may not be as successful in another. Therefore, as each environment is unique, as well as the learners in it, the teacher needs to assess their virtual environment and determine if change is necessary. However, not all educators may be as flexible in their teaching method, and they may not be willing to change. This leads us to the following question. Do educators incorporate different teaching strategies and techniques to meet the ever-changing needs of these virtual learners in terms of learning from their cultural differences in order to enhance the learning experiences of all? Contemporary Issues In Education Research – December 2010 Volume 3, Number 12 20 While we may hope that all educators are continuously improving their teaching methods and classrooms, we must recognize the fact that some may not. In the traditional classroom, there was an “expected” structure of teaching and layout of the classroom. However, in the virtual learning environment, educators have had to “unlearn” their old way of thinking in terms of teaching methodologies. In turn, online educators have had to learn new ways of implementing and nurturing learning for their virtual student populations. The key to success is our ability to think, visualize, and implement. White (2002) noted “Nowhere is thinking more evident than in the textual environment of the online classroom. If writing is thinking, then online students display their thinking throughout the course, illustrating their individual styles and changing attitudes.” (p. 6) Along this same line of thinking, educators can incorporate various strategies to help draw upon the experiences of all class members – rather than just a select few. CONCLUSION Traditionally, teachers have been expected serve as role models as they lead classroom discussions, collected and graded assignments, and provide leadership and guidance to their students. However, over the past two decades, the role and function of the instructor has changed drastically due to economic, technological, and educational factors. In any event, the area of online instruction has started to attract more and more students, as well as more instructors. In order to meet this growing demand for better qualified, online instructors, many schools have had to rethink their recruiting, hiring, and training efforts. Thus, there is a growing need to offer better quality online teacher training to current and potential online instructors to better enable these instructors to meet the ever- changing need of their online learning populations. AUTHOR INFORMATION Dr. Bob Barrett received his Ed.D. at The George Washington University; his M.B.E. at The University of the District of Columbia; and his B.A. at Shepherd University. He has completed additional Studies at University of Maryland - College Park, USDA Graduate School, and Gallaudet University. Dr. Barrett's current research interests are: Human Resource Development (HRD); Human Resource Management (HRM); Virtual Management Teams; Stakeholder Theory/Ethics; Logic/Dominant Logic; Disability/BDEP. REFERENCES 1. NACOL. http://www.nacol.org. Retrieved June 15, 2009. 2. National Center for Education Statistics, 2003. 3. Preece, J. (2000). Online communities: Designing usability, supporting sociability. Chichester: Wiley. 4. Roueche, J.E., Roueche, S.D., and Milliron, M.D. (1995). Strangers in their own land: Parts-time faculty in American’s community colleges. Washington D.C.: Community College Press. 5. Smith, B. (2000). Online Learning: The Competitive Edge: Companies blend E-learning into their business strategies to maximize intellectual capital. InformationWeek.com Retrieved September 22, 2010, http://www.informationweek.com/801/learn.htm. 6. White, K.W., Weight, B.H. (2000). The online teaching guide: A handbook of attitudes, strategies, and techniques for the virtual classroom. Needham Heights, MA: Allyn & Bacon.
USER:
How can schools transition from in-person classes to an online teaching model?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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"================ <TEXT PASSAGE> ======= [context document] ================ <QUESTION> ======= [user request] ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
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My daughter might need to have her wisdom teeth out soon so I'm trying to get ahead on information. What are some reasons they might need to come out? What are some risks and concerns with this surgery? I'm also interested in some food options she could enjoy while healing.
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Wisdom tooth removal — or wisdom tooth extraction — is a common oral surgery procedure. Dentists may recommend this treatment to preserve your oral health and protect your other teeth from possible issues in the future. Your wisdom teeth — also called third molars — are in the very back of your mouth. Typically, they erupt (grow in) sometime between the ages of 17 and 25. Scientists believe wisdom teeth are vestigial structures (parts of the human body that are no longer necessary). Our ancestors needed these teeth to crush and chew raw leaves, nuts, roots and meat. Today, we eat more cooked food and use forks and knives to cut our food up into smaller pieces. As a result, we don’t really need wisdom teeth anymore. Some people have all four wisdom teeth (one in each quadrant — the upper left, lower left, upper right and lower right). Others may have one, two, three or none at all. No matter how many wisdom teeth you do (or don’t) have, it doesn’t mean there’s something wrong. It’s just a variation of normal and a sign of the ever-changing evolutionary process. You might need wisdom teeth removed if you: Have one or more impacted wisdom teeth. (“Impacted” means partially or fully trapped in your gums or jawbone.) Have wisdom teeth that grew in crooked or sideways. Develop pain near the back of your mouth. Trap food and debris around your wisdom teeth. Develop gum disease, particularly around your molars. Have tooth decay (cavities) in a partially erupted wisdom tooth. Develop a cyst (fluid-filled sac) around one or more wisdom teeth. Have damage to nearby teeth or surrounding bone. In many cases, dentists recommend wisdom teeth extraction as a preventive measure. As a result, your dentist may suggest removing your wisdom teeth even if you don’t have any symptoms. This can help reduce your risk for future problems, including infection and tooth decay. How should I prepare for wisdom teeth removal? During a consultation with an oral surgeon, they’ll check the health of your wisdom teeth and take dental X-rays to determine their exact location. This is a good time to tell your surgeon about any medications, vitamins or supplements you’re currently taking. The day of your procedure, your surgeon will: Give you anesthesia to numb your teeth and gums and keep you comfortable. (If you choose sedation, they’ll give you sedative medications, as well.) Make incisions (cuts) in your gums, if necessary, to expose teeth trapped in your gums or jawbone. Carefully loosen your wisdom tooth and lift it from its socket. (They may need to divide your tooth into sections for easier removal.) Clean the area to make sure there’s no infection. Place stitches to close the surgical site, if necessary. Place gauze over the sockets to slow bleeding. How long does this procedure take? Wisdom tooth extraction usually takes an hour or less. Complex cases may take longer. What happens after wisdom teeth removal? After wisdom teeth removal, you can expect mild discomfort, slight bleeding and swelling. Your oral surgeon will give you instructions for wisdom teeth management to ease these side effects. Once your sedation wears off enough, a trusted friend or family member will drive you home. Dos and don’ts after wisdom tooth extraction Your surgeon will give you postoperative guidelines specific for your situation. Following these instructions will help you manage bleeding, swelling and pain after your procedure. DO: Leave gauze in place for about 30 minutes after your surgery. Replace with clean gauze if necessary. Your surgeon can tell you when to stop using gauze after wisdom tooth extraction. But in general, you can take it out when the bleeding slows. It’s normal to have some oozing, but you shouldn’t have excessive bleeding. Rest as much as you can. You should stay at home and recover for at least three to five days. If you have a physically demanding job, you might need to wait longer before returning to work. Use an ice pack to help reduce swelling. Wrap the ice pack in a clean towel and place it on your face. Leave it on for 20 minutes, and then take it off for 20 minutes. Repeat several times a day. Keep extraction sites clean. Gently soak the surgical areas with alcohol-free antibacterial mouthwash. Don’t swish. Swishing can dislodge blood clots and cause dry sockets, a painful condition that exposes the bone at your extraction site. Instead, lean your head to each side and let the mouthwash soak the areas. Brush and floss the rest of your teeth every day. While you don’t want to brush over the extraction sites, you’ll still need to keep your other teeth clean during recovery. This reduces your risk for infection. Take all medications as prescribed. Your surgeon will give you medications to keep you comfortable and reduce your risk of infection. Don’t stop taking these medications until your surgeon says it’s OK. DON’T: Drink through a straw. This dislodges blood clots and causes dry sockets. Exercise until your surgeon says it’s OK. Getting your heart rate up increases your risk for pain, bleeding and swelling. Most people can resume their fitness routines in about 48 to 72 hours. Lift heavy things. Heavy lifting also increases your risk for postoperative complications like pain, bleeding and swelling. Eat hard, crunchy or chewy foods. These can damage your healing gums and cause pain. Drink carbonated beverages or beverages containing alcohol. These beverages can dislodge blood clots and cause dry sockets. Skip these drinks for at least five days. Wisdom tooth removal can reduce your risk for future oral health problems, like: Gum disease. Tooth decay. Damage to neighboring teeth. Bone loss. Jaw damage. If you’ve already developed pain because of your wisdom teeth, then extraction can often ease discomfort almost immediately and get you back on track to better oral health. Wisdom teeth removal usually doesn’t result in long-term complications. In rare instances, people may develop: Infection (pus coming out of your socket or incisions). Dry sockets (loss of blood clot resulting in exposed bone). Damage to other oral structures, including your jawbone, nerves, sinuses or nearby teeth. Recovery and Outlook How long does it take to recover after wisdom teeth removal? Wisdom teeth removal recovery time takes one to two weeks on average. But most people can resume school, work and other routines in about three to five days. Your surgeon will give you detailed postoperative instructions to help keep you comfortable while you heal. In general, eat a soft food diet for the first three to five days. Avoid hard, crunchy or chewy foods, as these can cause pain and interfere with healing. Your surgeon will give you a list of things you can eat after wisdom tooth extraction. Some of these foods include: Yogurt. Smoothies. Pudding. Soups. Macaroni and cheese. Scrambled eggs. Applesauce. Mashed potatoes. Cottage cheese. Pureed fruit. Cooked vegetables. When can I go back to work or school? You’ll need to rest at home for three to five days after wisdom tooth removal. Most people can resume work, school and other routines at this point. Call your dentist or oral surgeon if you develop: A fever higher than 102 degrees Fahrenheit (38.8 degrees Celsius). Excessive bleeding. Severe pain that doesn’t get better with medication. Difficulty breathing or swallowing. Swelling that gets worse after three days. An infection (pus) coming from your surgical site. Additional Details
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"================ <TEXT PASSAGE> ======= Wisdom tooth removal — or wisdom tooth extraction — is a common oral surgery procedure. Dentists may recommend this treatment to preserve your oral health and protect your other teeth from possible issues in the future. Your wisdom teeth — also called third molars — are in the very back of your mouth. Typically, they erupt (grow in) sometime between the ages of 17 and 25. Scientists believe wisdom teeth are vestigial structures (parts of the human body that are no longer necessary). Our ancestors needed these teeth to crush and chew raw leaves, nuts, roots and meat. Today, we eat more cooked food and use forks and knives to cut our food up into smaller pieces. As a result, we don’t really need wisdom teeth anymore. Some people have all four wisdom teeth (one in each quadrant — the upper left, lower left, upper right and lower right). Others may have one, two, three or none at all. No matter how many wisdom teeth you do (or don’t) have, it doesn’t mean there’s something wrong. It’s just a variation of normal and a sign of the ever-changing evolutionary process. You might need wisdom teeth removed if you: Have one or more impacted wisdom teeth. (“Impacted” means partially or fully trapped in your gums or jawbone.) Have wisdom teeth that grew in crooked or sideways. Develop pain near the back of your mouth. Trap food and debris around your wisdom teeth. Develop gum disease, particularly around your molars. Have tooth decay (cavities) in a partially erupted wisdom tooth. Develop a cyst (fluid-filled sac) around one or more wisdom teeth. Have damage to nearby teeth or surrounding bone. In many cases, dentists recommend wisdom teeth extraction as a preventive measure. As a result, your dentist may suggest removing your wisdom teeth even if you don’t have any symptoms. This can help reduce your risk for future problems, including infection and tooth decay. How should I prepare for wisdom teeth removal? During a consultation with an oral surgeon, they’ll check the health of your wisdom teeth and take dental X-rays to determine their exact location. This is a good time to tell your surgeon about any medications, vitamins or supplements you’re currently taking. The day of your procedure, your surgeon will: Give you anesthesia to numb your teeth and gums and keep you comfortable. (If you choose sedation, they’ll give you sedative medications, as well.) Make incisions (cuts) in your gums, if necessary, to expose teeth trapped in your gums or jawbone. Carefully loosen your wisdom tooth and lift it from its socket. (They may need to divide your tooth into sections for easier removal.) Clean the area to make sure there’s no infection. Place stitches to close the surgical site, if necessary. Place gauze over the sockets to slow bleeding. How long does this procedure take? Wisdom tooth extraction usually takes an hour or less. Complex cases may take longer. What happens after wisdom teeth removal? After wisdom teeth removal, you can expect mild discomfort, slight bleeding and swelling. Your oral surgeon will give you instructions for wisdom teeth management to ease these side effects. Once your sedation wears off enough, a trusted friend or family member will drive you home. Dos and don’ts after wisdom tooth extraction Your surgeon will give you postoperative guidelines specific for your situation. Following these instructions will help you manage bleeding, swelling and pain after your procedure. DO: Leave gauze in place for about 30 minutes after your surgery. Replace with clean gauze if necessary. Your surgeon can tell you when to stop using gauze after wisdom tooth extraction. But in general, you can take it out when the bleeding slows. It’s normal to have some oozing, but you shouldn’t have excessive bleeding. Rest as much as you can. You should stay at home and recover for at least three to five days. If you have a physically demanding job, you might need to wait longer before returning to work. Use an ice pack to help reduce swelling. Wrap the ice pack in a clean towel and place it on your face. Leave it on for 20 minutes, and then take it off for 20 minutes. Repeat several times a day. Keep extraction sites clean. Gently soak the surgical areas with alcohol-free antibacterial mouthwash. Don’t swish. Swishing can dislodge blood clots and cause dry sockets, a painful condition that exposes the bone at your extraction site. Instead, lean your head to each side and let the mouthwash soak the areas. Brush and floss the rest of your teeth every day. While you don’t want to brush over the extraction sites, you’ll still need to keep your other teeth clean during recovery. This reduces your risk for infection. Take all medications as prescribed. Your surgeon will give you medications to keep you comfortable and reduce your risk of infection. Don’t stop taking these medications until your surgeon says it’s OK. DON’T: Drink through a straw. This dislodges blood clots and causes dry sockets. Exercise until your surgeon says it’s OK. Getting your heart rate up increases your risk for pain, bleeding and swelling. Most people can resume their fitness routines in about 48 to 72 hours. Lift heavy things. Heavy lifting also increases your risk for postoperative complications like pain, bleeding and swelling. Eat hard, crunchy or chewy foods. These can damage your healing gums and cause pain. Drink carbonated beverages or beverages containing alcohol. These beverages can dislodge blood clots and cause dry sockets. Skip these drinks for at least five days. Wisdom tooth removal can reduce your risk for future oral health problems, like: Gum disease. Tooth decay. Damage to neighboring teeth. Bone loss. Jaw damage. If you’ve already developed pain because of your wisdom teeth, then extraction can often ease discomfort almost immediately and get you back on track to better oral health. Wisdom teeth removal usually doesn’t result in long-term complications. In rare instances, people may develop: Infection (pus coming out of your socket or incisions). Dry sockets (loss of blood clot resulting in exposed bone). Damage to other oral structures, including your jawbone, nerves, sinuses or nearby teeth. Recovery and Outlook How long does it take to recover after wisdom teeth removal? Wisdom teeth removal recovery time takes one to two weeks on average. But most people can resume school, work and other routines in about three to five days. Your surgeon will give you detailed postoperative instructions to help keep you comfortable while you heal. In general, eat a soft food diet for the first three to five days. Avoid hard, crunchy or chewy foods, as these can cause pain and interfere with healing. Your surgeon will give you a list of things you can eat after wisdom tooth extraction. Some of these foods include: Yogurt. Smoothies. Pudding. Soups. Macaroni and cheese. Scrambled eggs. Applesauce. Mashed potatoes. Cottage cheese. Pureed fruit. Cooked vegetables. When can I go back to work or school? You’ll need to rest at home for three to five days after wisdom tooth removal. Most people can resume work, school and other routines at this point. Call your dentist or oral surgeon if you develop: A fever higher than 102 degrees Fahrenheit (38.8 degrees Celsius). Excessive bleeding. Severe pain that doesn’t get better with medication. Difficulty breathing or swallowing. Swelling that gets worse after three days. An infection (pus) coming from your surgical site. Additional Details https://my.clevelandclinic.org/health/treatments/22119-wisdom-teeth-removal ================ <QUESTION> ======= My daughter might need to have her wisdom teeth out soon so I'm trying to get ahead on information. What are some reasons they might need to come out? What are some risks and concerns with this surgery? I'm also interested in some food options she could enjoy while healing. ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
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"================ <TEXT PASSAGE> ======= [context document] ================ <QUESTION> ======= [user request] ================ <TASK> ======= You are an expert in question answering. Your task is to reply to a query or question, based only on the information provided by the user. It should only use information in the article provided."
EVIDENCE:
Wisdom tooth removal — or wisdom tooth extraction — is a common oral surgery procedure. Dentists may recommend this treatment to preserve your oral health and protect your other teeth from possible issues in the future. Your wisdom teeth — also called third molars — are in the very back of your mouth. Typically, they erupt (grow in) sometime between the ages of 17 and 25. Scientists believe wisdom teeth are vestigial structures (parts of the human body that are no longer necessary). Our ancestors needed these teeth to crush and chew raw leaves, nuts, roots and meat. Today, we eat more cooked food and use forks and knives to cut our food up into smaller pieces. As a result, we don’t really need wisdom teeth anymore. Some people have all four wisdom teeth (one in each quadrant — the upper left, lower left, upper right and lower right). Others may have one, two, three or none at all. No matter how many wisdom teeth you do (or don’t) have, it doesn’t mean there’s something wrong. It’s just a variation of normal and a sign of the ever-changing evolutionary process. You might need wisdom teeth removed if you: Have one or more impacted wisdom teeth. (“Impacted” means partially or fully trapped in your gums or jawbone.) Have wisdom teeth that grew in crooked or sideways. Develop pain near the back of your mouth. Trap food and debris around your wisdom teeth. Develop gum disease, particularly around your molars. Have tooth decay (cavities) in a partially erupted wisdom tooth. Develop a cyst (fluid-filled sac) around one or more wisdom teeth. Have damage to nearby teeth or surrounding bone. In many cases, dentists recommend wisdom teeth extraction as a preventive measure. As a result, your dentist may suggest removing your wisdom teeth even if you don’t have any symptoms. This can help reduce your risk for future problems, including infection and tooth decay. How should I prepare for wisdom teeth removal? During a consultation with an oral surgeon, they’ll check the health of your wisdom teeth and take dental X-rays to determine their exact location. This is a good time to tell your surgeon about any medications, vitamins or supplements you’re currently taking. The day of your procedure, your surgeon will: Give you anesthesia to numb your teeth and gums and keep you comfortable. (If you choose sedation, they’ll give you sedative medications, as well.) Make incisions (cuts) in your gums, if necessary, to expose teeth trapped in your gums or jawbone. Carefully loosen your wisdom tooth and lift it from its socket. (They may need to divide your tooth into sections for easier removal.) Clean the area to make sure there’s no infection. Place stitches to close the surgical site, if necessary. Place gauze over the sockets to slow bleeding. How long does this procedure take? Wisdom tooth extraction usually takes an hour or less. Complex cases may take longer. What happens after wisdom teeth removal? After wisdom teeth removal, you can expect mild discomfort, slight bleeding and swelling. Your oral surgeon will give you instructions for wisdom teeth management to ease these side effects. Once your sedation wears off enough, a trusted friend or family member will drive you home. Dos and don’ts after wisdom tooth extraction Your surgeon will give you postoperative guidelines specific for your situation. Following these instructions will help you manage bleeding, swelling and pain after your procedure. DO: Leave gauze in place for about 30 minutes after your surgery. Replace with clean gauze if necessary. Your surgeon can tell you when to stop using gauze after wisdom tooth extraction. But in general, you can take it out when the bleeding slows. It’s normal to have some oozing, but you shouldn’t have excessive bleeding. Rest as much as you can. You should stay at home and recover for at least three to five days. If you have a physically demanding job, you might need to wait longer before returning to work. Use an ice pack to help reduce swelling. Wrap the ice pack in a clean towel and place it on your face. Leave it on for 20 minutes, and then take it off for 20 minutes. Repeat several times a day. Keep extraction sites clean. Gently soak the surgical areas with alcohol-free antibacterial mouthwash. Don’t swish. Swishing can dislodge blood clots and cause dry sockets, a painful condition that exposes the bone at your extraction site. Instead, lean your head to each side and let the mouthwash soak the areas. Brush and floss the rest of your teeth every day. While you don’t want to brush over the extraction sites, you’ll still need to keep your other teeth clean during recovery. This reduces your risk for infection. Take all medications as prescribed. Your surgeon will give you medications to keep you comfortable and reduce your risk of infection. Don’t stop taking these medications until your surgeon says it’s OK. DON’T: Drink through a straw. This dislodges blood clots and causes dry sockets. Exercise until your surgeon says it’s OK. Getting your heart rate up increases your risk for pain, bleeding and swelling. Most people can resume their fitness routines in about 48 to 72 hours. Lift heavy things. Heavy lifting also increases your risk for postoperative complications like pain, bleeding and swelling. Eat hard, crunchy or chewy foods. These can damage your healing gums and cause pain. Drink carbonated beverages or beverages containing alcohol. These beverages can dislodge blood clots and cause dry sockets. Skip these drinks for at least five days. Wisdom tooth removal can reduce your risk for future oral health problems, like: Gum disease. Tooth decay. Damage to neighboring teeth. Bone loss. Jaw damage. If you’ve already developed pain because of your wisdom teeth, then extraction can often ease discomfort almost immediately and get you back on track to better oral health. Wisdom teeth removal usually doesn’t result in long-term complications. In rare instances, people may develop: Infection (pus coming out of your socket or incisions). Dry sockets (loss of blood clot resulting in exposed bone). Damage to other oral structures, including your jawbone, nerves, sinuses or nearby teeth. Recovery and Outlook How long does it take to recover after wisdom teeth removal? Wisdom teeth removal recovery time takes one to two weeks on average. But most people can resume school, work and other routines in about three to five days. Your surgeon will give you detailed postoperative instructions to help keep you comfortable while you heal. In general, eat a soft food diet for the first three to five days. Avoid hard, crunchy or chewy foods, as these can cause pain and interfere with healing. Your surgeon will give you a list of things you can eat after wisdom tooth extraction. Some of these foods include: Yogurt. Smoothies. Pudding. Soups. Macaroni and cheese. Scrambled eggs. Applesauce. Mashed potatoes. Cottage cheese. Pureed fruit. Cooked vegetables. When can I go back to work or school? You’ll need to rest at home for three to five days after wisdom tooth removal. Most people can resume work, school and other routines at this point. Call your dentist or oral surgeon if you develop: A fever higher than 102 degrees Fahrenheit (38.8 degrees Celsius). Excessive bleeding. Severe pain that doesn’t get better with medication. Difficulty breathing or swallowing. Swelling that gets worse after three days. An infection (pus) coming from your surgical site. Additional Details
USER:
My daughter might need to have her wisdom teeth out soon so I'm trying to get ahead on information. What are some reasons they might need to come out? What are some risks and concerns with this surgery? I'm also interested in some food options she could enjoy while healing.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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You may only respond using the information provided in the context block. Bold any statute numbers.
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Explain how 17 U.S.C. Section 112 affects radio stations in layman's terms
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Who pays whom, as well as who can sue whom for copyright infringement, depends in part on the mode of listening to music. Rights owners of sound recordings (e.g., record labels) pay music publishers for the right to record and distribute the publishers’ musical works in a physical format.27 Retail outlets that sell digital files or physical reproductions of sound recordings pay the distribution subsidiaries of major record labels, which act as wholesalers.28 Purchasers of a lawfully made reproduction, such as a compact disc or a digital file, may listen to that song as often as they wish in a private setting. Radio listeners have less control over when and where they listen to a song than they would if they purchased the song outright. The Copyright Act does not require broadcast radio stations to pay public performance royalties to record labels and artists, but it does require them to pay public performance royalties to music publishers and songwriters for the use of notes and lyrics in broadcast music. In addition to mechanical rights, digital services must pay both record labels and music publishers for public performance rights. Both traditional broadcast radio stations and music streaming services that limit the ability of users to choose which songs they hear next (noninteractive services) may make temporary reproductions of songs in the normal course of transmitting music to listeners.29 The rights to make these temporary reproductions, known as “ephemeral reproductions,” fall under 17 U.S.C. Section 112 (see “Ephemeral Reproductions”). Users of an “on demand” or “interactive” music streaming service can listen to songs upon request, an experience similar in some ways to playing a compact disc and in other ways to listening to a radio broadcast. To enable multiple listeners to select songs, the services download digital files to consumers’ devices. These digital reproductions are known as “conditional” or “tethered” downloads, because consumers’ ability to listen to them upon request is conditioned upon remaining subscribers to the interactive services.30 The services pay royalties to music publishers or songwriters for the right to reproduce and distribute the musical works, and pay royalties to record labels or artists for the right to reproduce and distribute sound recordings.31 Thus, while record labels reproduce and distribute their own sound recordings in physical form, they license such rights to interactive digital streaming services when the music is in digital form.
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System instructions: [You may only respond using the information provided in the context block. Bold any statute numbers. ] Content block: [Who pays whom, as well as who can sue whom for copyright infringement, depends in part on the mode of listening to music. Rights owners of sound recordings (e.g., record labels) pay music publishers for the right to record and distribute the publishers’ musical works in a physical format.27 Retail outlets that sell digital files or physical reproductions of sound recordings pay the distribution subsidiaries of major record labels, which act as wholesalers.28 Purchasers of a lawfully made reproduction, such as a compact disc or a digital file, may listen to that song as often as they wish in a private setting. Radio listeners have less control over when and where they listen to a song than they would if they purchased the song outright. The Copyright Act does not require broadcast radio stations to pay public performance royalties to record labels and artists, but it does require them to pay public performance royalties to music publishers and songwriters for the use of notes and lyrics in broadcast music. In addition to mechanical rights, digital services must pay both record labels and music publishers for public performance rights. Both traditional broadcast radio stations and music streaming services that limit the ability of users to choose which songs they hear next (noninteractive services) may make temporary reproductions of songs in the normal course of transmitting music to listeners.29 The rights to make these temporary reproductions, known as “ephemeral reproductions,” fall under 17 U.S.C. Section 112 (see “Ephemeral Reproductions”). Users of an “on demand” or “interactive” music streaming service can listen to songs upon request, an experience similar in some ways to playing a compact disc and in other ways to listening to a radio broadcast. To enable multiple listeners to select songs, the services download digital files to consumers’ devices. These digital reproductions are known as “conditional” or “tethered” downloads, because consumers’ ability to listen to them upon request is conditioned upon remaining subscribers to the interactive services.30 The services pay royalties to music publishers or songwriters for the right to reproduce and distribute the musical works, and pay royalties to record labels or artists for the right to reproduce and distribute sound recordings.31 Thus, while record labels reproduce and distribute their own sound recordings in physical form, they license such rights to interactive digital streaming services when the music is in digital form.] Question: [Explain how 17 U.S.C. Section 112 affects radio stations in layman's terms]
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You may only respond using the information provided in the context block. Bold any statute numbers.
EVIDENCE:
Who pays whom, as well as who can sue whom for copyright infringement, depends in part on the mode of listening to music. Rights owners of sound recordings (e.g., record labels) pay music publishers for the right to record and distribute the publishers’ musical works in a physical format.27 Retail outlets that sell digital files or physical reproductions of sound recordings pay the distribution subsidiaries of major record labels, which act as wholesalers.28 Purchasers of a lawfully made reproduction, such as a compact disc or a digital file, may listen to that song as often as they wish in a private setting. Radio listeners have less control over when and where they listen to a song than they would if they purchased the song outright. The Copyright Act does not require broadcast radio stations to pay public performance royalties to record labels and artists, but it does require them to pay public performance royalties to music publishers and songwriters for the use of notes and lyrics in broadcast music. In addition to mechanical rights, digital services must pay both record labels and music publishers for public performance rights. Both traditional broadcast radio stations and music streaming services that limit the ability of users to choose which songs they hear next (noninteractive services) may make temporary reproductions of songs in the normal course of transmitting music to listeners.29 The rights to make these temporary reproductions, known as “ephemeral reproductions,” fall under 17 U.S.C. Section 112 (see “Ephemeral Reproductions”). Users of an “on demand” or “interactive” music streaming service can listen to songs upon request, an experience similar in some ways to playing a compact disc and in other ways to listening to a radio broadcast. To enable multiple listeners to select songs, the services download digital files to consumers’ devices. These digital reproductions are known as “conditional” or “tethered” downloads, because consumers’ ability to listen to them upon request is conditioned upon remaining subscribers to the interactive services.30 The services pay royalties to music publishers or songwriters for the right to reproduce and distribute the musical works, and pay royalties to record labels or artists for the right to reproduce and distribute sound recordings.31 Thus, while record labels reproduce and distribute their own sound recordings in physical form, they license such rights to interactive digital streaming services when the music is in digital form.
USER:
Explain how 17 U.S.C. Section 112 affects radio stations in layman's terms
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. [user request] [context document]
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I am 50 years old, I live in Louisiana, I am married, and I have a 700 credit score. I am applying for an FHA mortgage loan on a house in a flood zone in Louisiana. I want to apply without my husband since his credit isn't good, he owes a lot debts from before we were married and he doesn't have much of a work history. The loan officer says he has to run a credit report on my husband even if he isn't on the loan. Do we have to have his credit checked too?
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II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 215 Last Revised: 05/20/2024 (2) Standard The Mortgagee must include the debt. The amount of the required payment must be included in the calculation of the Borrower’s total debt to income. (3) Required Documentation The Mortgagee must include documentation from the federal agency evidencing the repayment agreement and verification of payments made, if applicable. (E) Alimony, Child Support, and Maintenance (TOTAL) (1) Definition Alimony, Child Support, and Maintenance are court-ordered or otherwise agreed upon payments. (2) Standard For Alimony, if the Borrower’s income was not reduced by the amount of the monthly alimony obligation in the Mortgagee’s calculation of the Borrower’s gross income, the Mortgagee must include the monthly obligation in the calculation of the Borrower’s debt. Child Support and Maintenance are to be treated as a recurring liability and the Mortgagee must include the monthly obligation in the Borrower’s liabilities and debt. (3) Required Documentation The Mortgagee must verify and document the monthly obligation by obtaining the official signed divorce decree, separation agreement, maintenance agreement, or other legal order. The Mortgagee must also obtain the Borrower’s pay stubs covering no less than 28 consecutive Days to verify whether the Borrower is subject to any order of garnishment relating to the Alimony, Child Support, and Maintenance. (4) Calculation of Monthly Obligation The Mortgagee must calculate the Borrower’s monthly obligation from the greater of: • the amount shown on the most recent decree or agreement establishing the Borrower’s payment obligation; or • the monthly amount of the garnishment. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 216 Last Revised: 05/20/2024 (F) Non-Borrowing Spouse Debt in Community Property States (TOTAL) (1) Definition Non-Borrowing Spouse Debt refers to debts owed by a spouse that are not owed by, or in the name of the Borrower. (2) Standard If the Borrower resides in a community property state or the Property being insured is located in a community property state, debts of the non-borrowing spouse must be included in the Borrower’s qualifying ratios, except for obligations specifically excluded by state law. The non-borrowing spouse’s credit history is not considered a reason to deny a mortgage application. (3) Required Documentation The Mortgagee must verify and document the debt of the non-borrowing spouse. The Mortgagee must make a note in the file referencing the specific state law that justifies the exclusion of any debt from consideration. The Mortgagee must obtain a credit report for the non-borrowing spouse in order to determine the debts that must be included in the liabilities. The credit report for the non-borrowing spouse is for the purpose of establishing debt only, and is not submitted to TOTAL Mortgage Scorecard for the purpose of credit evaluation. The credit report for the non-borrowing spouse may be traditional or non- traditional. (G) Deferred Obligations (TOTAL) (1) Definition Deferred Obligations (excluding Student Loans) refer to liabilities that have been incurred but where payment is deferred or has not yet commenced, including accounts in forbearance. (2) Standard The Mortgagee must include deferred obligations in the Borrower’s liabilities. (3) Required Documentation The Mortgagee must obtain written documentation of the deferral of the liability from the creditor and evidence of the outstanding balance and terms of the II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 217 Last Revised: 05/20/2024 deferred liability. The Mortgagee must obtain evidence of the actual monthly payment obligation, if available. (4) Calculation of Monthly Obligation The Mortgagee must use the actual monthly payment to be paid on a deferred liability, whenever available. If the actual monthly payment is not available for installment debt, the Mortgagee must utilize the terms of the debt or 5 percent of the outstanding balance to establish the monthly payment. (H) Student Loans (TOTAL) (1) Definition Student Loan refers to liabilities incurred for educational purposes. (2) Standard The Mortgagee must include all Student Loans in the Borrower’s liabilities, regardless of the payment type or status of payments. (3) Required Documentation If the payment used for the monthly obligation is less than the monthly payment reported on the Borrower’s credit report, the Mortgagee must obtain written documentation of the actual monthly payment, the payment status, and evidence of the outstanding balance and terms from the creditor or student loan servicer. The Mortgagee may exclude the payment from the Borrower’s monthly debt calculation where written documentation from the student loan program, creditor, or student loan servicer indicates that the loan balance has been forgi
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. I am 50 years old, I live in Louisiana, I am married, and I have a 700 credit score. I am applying for an FHA mortgage loan on a house in a flood zone in Louisiana. I want to apply without my husband since his credit isn't good, he owes a lot debts from before we were married and he doesn't have much of a work history. The loan officer says he has to run a credit report on my husband even if he isn't on the loan. Do we have to have his credit checked too? II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 215 Last Revised: 05/20/2024 (2) Standard The Mortgagee must include the debt. The amount of the required payment must be included in the calculation of the Borrower’s total debt to income. (3) Required Documentation The Mortgagee must include documentation from the federal agency evidencing the repayment agreement and verification of payments made, if applicable. (E) Alimony, Child Support, and Maintenance (TOTAL) (1) Definition Alimony, Child Support, and Maintenance are court-ordered or otherwise agreed upon payments. (2) Standard For Alimony, if the Borrower’s income was not reduced by the amount of the monthly alimony obligation in the Mortgagee’s calculation of the Borrower’s gross income, the Mortgagee must include the monthly obligation in the calculation of the Borrower’s debt. Child Support and Maintenance are to be treated as a recurring liability and the Mortgagee must include the monthly obligation in the Borrower’s liabilities and debt. (3) Required Documentation The Mortgagee must verify and document the monthly obligation by obtaining the official signed divorce decree, separation agreement, maintenance agreement, or other legal order. The Mortgagee must also obtain the Borrower’s pay stubs covering no less than 28 consecutive Days to verify whether the Borrower is subject to any order of garnishment relating to the Alimony, Child Support, and Maintenance. (4) Calculation of Monthly Obligation The Mortgagee must calculate the Borrower’s monthly obligation from the greater of: • the amount shown on the most recent decree or agreement establishing the Borrower’s payment obligation; or • the monthly amount of the garnishment. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 216 Last Revised: 05/20/2024 (F) Non-Borrowing Spouse Debt in Community Property States (TOTAL) (1) Definition Non-Borrowing Spouse Debt refers to debts owed by a spouse that are not owed by, or in the name of the Borrower. (2) Standard If the Borrower resides in a community property state or the Property being insured is located in a community property state, debts of the non-borrowing spouse must be included in the Borrower’s qualifying ratios, except for obligations specifically excluded by state law. The non-borrowing spouse’s credit history is not considered a reason to deny a mortgage application. (3) Required Documentation The Mortgagee must verify and document the debt of the non-borrowing spouse. The Mortgagee must make a note in the file referencing the specific state law that justifies the exclusion of any debt from consideration. The Mortgagee must obtain a credit report for the non-borrowing spouse in order to determine the debts that must be included in the liabilities. The credit report for the non-borrowing spouse is for the purpose of establishing debt only, and is not submitted to TOTAL Mortgage Scorecard for the purpose of credit evaluation. The credit report for the non-borrowing spouse may be traditional or non- traditional. (G) Deferred Obligations (TOTAL) (1) Definition Deferred Obligations (excluding Student Loans) refer to liabilities that have been incurred but where payment is deferred or has not yet commenced, including accounts in forbearance. (2) Standard The Mortgagee must include deferred obligations in the Borrower’s liabilities. (3) Required Documentation The Mortgagee must obtain written documentation of the deferral of the liability from the creditor and evidence of the outstanding balance and terms of the II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 217 Last Revised: 05/20/2024 deferred liability. The Mortgagee must obtain evidence of the actual monthly payment obligation, if available. (4) Calculation of Monthly Obligation The Mortgagee must use the actual monthly payment to be paid on a deferred liability, whenever available. If the actual monthly payment is not available for installment debt, the Mortgagee must utilize the terms of the debt or 5 percent of the outstanding balance to establish the monthly payment. (H) Student Loans (TOTAL) (1) Definition Student Loan refers to liabilities incurred for educational purposes. (2) Standard The Mortgagee must include all Student Loans in the Borrower’s liabilities, regardless of the payment type or status of payments. (3) Required Documentation If the payment used for the monthly obligation is less than the monthly payment reported on the Borrower’s credit report, the Mortgagee must obtain written documentation of the actual monthly payment, the payment status, and evidence of the outstanding balance and terms from the creditor or student loan servicer. The Mortgagee may exclude the payment from the Borrower’s monthly debt calculation where written documentation from the student loan program, creditor, or student loan servicer indicates that the loan balance has been forgi https://www.hud.gov/sites/dfiles/OCHCO/documents/40001-hsgh-update15-052024.pdf
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. [user request] [context document]
EVIDENCE:
II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 215 Last Revised: 05/20/2024 (2) Standard The Mortgagee must include the debt. The amount of the required payment must be included in the calculation of the Borrower’s total debt to income. (3) Required Documentation The Mortgagee must include documentation from the federal agency evidencing the repayment agreement and verification of payments made, if applicable. (E) Alimony, Child Support, and Maintenance (TOTAL) (1) Definition Alimony, Child Support, and Maintenance are court-ordered or otherwise agreed upon payments. (2) Standard For Alimony, if the Borrower’s income was not reduced by the amount of the monthly alimony obligation in the Mortgagee’s calculation of the Borrower’s gross income, the Mortgagee must include the monthly obligation in the calculation of the Borrower’s debt. Child Support and Maintenance are to be treated as a recurring liability and the Mortgagee must include the monthly obligation in the Borrower’s liabilities and debt. (3) Required Documentation The Mortgagee must verify and document the monthly obligation by obtaining the official signed divorce decree, separation agreement, maintenance agreement, or other legal order. The Mortgagee must also obtain the Borrower’s pay stubs covering no less than 28 consecutive Days to verify whether the Borrower is subject to any order of garnishment relating to the Alimony, Child Support, and Maintenance. (4) Calculation of Monthly Obligation The Mortgagee must calculate the Borrower’s monthly obligation from the greater of: • the amount shown on the most recent decree or agreement establishing the Borrower’s payment obligation; or • the monthly amount of the garnishment. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 216 Last Revised: 05/20/2024 (F) Non-Borrowing Spouse Debt in Community Property States (TOTAL) (1) Definition Non-Borrowing Spouse Debt refers to debts owed by a spouse that are not owed by, or in the name of the Borrower. (2) Standard If the Borrower resides in a community property state or the Property being insured is located in a community property state, debts of the non-borrowing spouse must be included in the Borrower’s qualifying ratios, except for obligations specifically excluded by state law. The non-borrowing spouse’s credit history is not considered a reason to deny a mortgage application. (3) Required Documentation The Mortgagee must verify and document the debt of the non-borrowing spouse. The Mortgagee must make a note in the file referencing the specific state law that justifies the exclusion of any debt from consideration. The Mortgagee must obtain a credit report for the non-borrowing spouse in order to determine the debts that must be included in the liabilities. The credit report for the non-borrowing spouse is for the purpose of establishing debt only, and is not submitted to TOTAL Mortgage Scorecard for the purpose of credit evaluation. The credit report for the non-borrowing spouse may be traditional or non- traditional. (G) Deferred Obligations (TOTAL) (1) Definition Deferred Obligations (excluding Student Loans) refer to liabilities that have been incurred but where payment is deferred or has not yet commenced, including accounts in forbearance. (2) Standard The Mortgagee must include deferred obligations in the Borrower’s liabilities. (3) Required Documentation The Mortgagee must obtain written documentation of the deferral of the liability from the creditor and evidence of the outstanding balance and terms of the II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 217 Last Revised: 05/20/2024 deferred liability. The Mortgagee must obtain evidence of the actual monthly payment obligation, if available. (4) Calculation of Monthly Obligation The Mortgagee must use the actual monthly payment to be paid on a deferred liability, whenever available. If the actual monthly payment is not available for installment debt, the Mortgagee must utilize the terms of the debt or 5 percent of the outstanding balance to establish the monthly payment. (H) Student Loans (TOTAL) (1) Definition Student Loan refers to liabilities incurred for educational purposes. (2) Standard The Mortgagee must include all Student Loans in the Borrower’s liabilities, regardless of the payment type or status of payments. (3) Required Documentation If the payment used for the monthly obligation is less than the monthly payment reported on the Borrower’s credit report, the Mortgagee must obtain written documentation of the actual monthly payment, the payment status, and evidence of the outstanding balance and terms from the creditor or student loan servicer. The Mortgagee may exclude the payment from the Borrower’s monthly debt calculation where written documentation from the student loan program, creditor, or student loan servicer indicates that the loan balance has been forgi
USER:
I am 50 years old, I live in Louisiana, I am married, and I have a 700 credit score. I am applying for an FHA mortgage loan on a house in a flood zone in Louisiana. I want to apply without my husband since his credit isn't good, he owes a lot debts from before we were married and he doesn't have much of a work history. The loan officer says he has to run a credit report on my husband even if he isn't on the loan. Do we have to have his credit checked too?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Formulate your answer using only the provided text; do not use your own knowledge or the use of any outside sources.
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What would change if marijuana was changed from a schedule I drug to a schedule III drug?
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Drugs and Biologics Aside from Schedule I substances, controlled substances have accepted medical uses and may be lawfully dispensed by prescription under the CSA, subject to various restrictions. Accordingly, rescheduling marijuana from Schedule I to Schedule III would open the door for the medical marijuana industry to market their products consistent with federal law. Any such products must still comply with other federal legal requirements, such as the FD&C Act, before they could be legally marketed in the United States. Rescheduling thus would not automatically legalize medical marijuana in the United States. The FD&C Act requires new drugs, including both small-molecule drugs that are synthesized in a laboratory and biologics that are derived from living organisms (e.g., vaccines), to be approved by FDA before they can be marketed and sold in the United States. For FDA to approve a new drug, the drug sponsor must submit a new drug application (NDA) with “substantial evidence” that the drug is safe and effective for its proposed use. Similarly, for FDA to approve a biologic, a sponsor must submit a biologics license application (BLA) demonstrating that the product is safe, potent, and pure. Certain chemicals related to or derived from marijuana may be considered small-molecule drugs, while other components of the cannabis plant—including marijuana itself—may be considered a biologic. Congressional Research Service 3 Marijuana itself is not an approved drug, but FDA has approved four drugs derived from or related to cannabis. FDA approved a drug containing CBD called Epidiolex, which is used to treat certain kinds of seizures. FDA also approved Marinol and Syndros for the treatment of anorexia associated with weight loss in AIDS patients, as well as Cesamet for the treatment of nausea and vomiting in patients undergoing chemotherapy. Marinol and Syndros contain the active ingredient dronabinol, a synthetic delta-9- tetrahydrocannabinol (THC), which is considered the psychoactive component of cannabis. Cesamet contains the active ingredient nabilone, which is synthetically derived and has a chemical structure similar to THC. Despite obtaining FDA approval, Epidiolex, Marinol, Syndros, and Cesamet could not immediately be marketed in the United States because CBD and synthetic tetrahydrocannabinols were considered Schedule I substances. The DOJ rescheduled each of these drugs within a few months to a couple years of their approval by FDA, thereby allowing the drugs to be marketed and prescribed. The DOJ rescheduled Epidiolex as a Schedule V drug, and the 2018 farm bill completely descheduled Epidiolex because it is considered hemp under the new definition. FDA-approved products containing dronabinol were rescheduled to Schedule II or Schedule III under the CSA, depending on their form, and FDA-approved products containing nabilone were rescheduled to Schedule II. Other tetrahydrocannabinols remain Schedule I substances, and, because they are scheduled separately from marijuana, they are not included in the DOJ’s proposed rule rescheduling marijuana. Drugs Marketed Without FDA Approval New drugs that FDA has not approved cannot legally be marketed in interstate commerce under the FD&C Act. FDA categorizes products based on how they are marketed rather than based on how the manufacturer or seller categorizes them. FDA may therefore consider some products marketed as a food, dietary supplement, tobacco product, or cosmetic to be illegal drugs (assuming they have not obtained FDA approval for marketing as a drug) if the product’s packaging makes claims that it is intended to cure, mitigate, or treat a disease or health-related condition. The FD&C Act defines a “drug” to include “articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease.” Therefore, FDA may deem products to be “drugs” under this definition if they are marketed as a treatment for a disease. FDA has issued warning letters to companies marketing cannabis products, including CBD tea and hemp-infused body butter, whose labeling makes these kinds of treatment claims, advising that drugs must undergo the NDA process before they can be marketed in interstate commerce. A manufacturer or seller of one of these products can remedy the issue by submitting an NDA and obtaining FDA approval to market its product as a drug, or by removing the claims. Medical Research To obtain approval for a new drug or biologic, sponsors must conduct research, including clinical trials on human subjects, to generate the required evidence regarding the drug’s safety and effectiveness. Before conducting research with marijuana, a researcher must obtain a DEA registration and an FDA authorization of an investigational new drug application (IND) containing details on how the researcher plans to conduct the study. Then, the researcher must use marijuana from a DEA-registered source. Generally, rescheduling a drug from Schedule I to Schedule III loosens the controls on medical research involving that drug. Researchers and manufacturers of Schedule III substances are subject to less-onerous registration requirements than researchers and manufacturers of Schedule I substances. However, medical researchers and drug sponsors of marijuana or CBD containing drugs would not benefit from these looser restrictions associated with rescheduling without congressional action. In 2022, Congress passed the Medical Marijuana and Cannabidiol Research Expansion Act (P.L. 117-215), which amended the CSA for medical research involving marijuana or CBD to lessen the stringent controls typically applicable for Schedule I substances. The act created separate requirements for marijuana researchers and manufacturers Congressional Research Service 4 to expedite registration with the DEA, and these separate requirements would not be affected by rescheduling without additional congressional action.
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Formulate your answer using only the provided text; do not use your own knowledge or the use of any outside sources. Provided text: Drugs and Biologics Aside from Schedule I substances, controlled substances have accepted medical uses and may be lawfully dispensed by prescription under the CSA, subject to various restrictions. Accordingly, rescheduling marijuana from Schedule I to Schedule III would open the door for the medical marijuana industry to market their products consistent with federal law. Any such products must still comply with other federal legal requirements, such as the FD&C Act, before they could be legally marketed in the United States. Rescheduling thus would not automatically legalize medical marijuana in the United States. The FD&C Act requires new drugs, including both small-molecule drugs that are synthesized in a laboratory and biologics that are derived from living organisms (e.g., vaccines), to be approved by FDA before they can be marketed and sold in the United States. For FDA to approve a new drug, the drug sponsor must submit a new drug application (NDA) with “substantial evidence” that the drug is safe and effective for its proposed use. Similarly, for FDA to approve a biologic, a sponsor must submit a biologics license application (BLA) demonstrating that the product is safe, potent, and pure. Certain chemicals related to or derived from marijuana may be considered small-molecule drugs, while other components of the cannabis plant—including marijuana itself—may be considered a biologic. Congressional Research Service 3 Marijuana itself is not an approved drug, but FDA has approved four drugs derived from or related to cannabis. FDA approved a drug containing CBD called Epidiolex, which is used to treat certain kinds of seizures. FDA also approved Marinol and Syndros for the treatment of anorexia associated with weight loss in AIDS patients, as well as Cesamet for the treatment of nausea and vomiting in patients undergoing chemotherapy. Marinol and Syndros contain the active ingredient dronabinol, a synthetic delta-9- tetrahydrocannabinol (THC), which is considered the psychoactive component of cannabis. Cesamet contains the active ingredient nabilone, which is synthetically derived and has a chemical structure similar to THC. Despite obtaining FDA approval, Epidiolex, Marinol, Syndros, and Cesamet could not immediately be marketed in the United States because CBD and synthetic tetrahydrocannabinols were considered Schedule I substances. The DOJ rescheduled each of these drugs within a few months to a couple years of their approval by FDA, thereby allowing the drugs to be marketed and prescribed. The DOJ rescheduled Epidiolex as a Schedule V drug, and the 2018 farm bill completely descheduled Epidiolex because it is considered hemp under the new definition. FDA-approved products containing dronabinol were rescheduled to Schedule II or Schedule III under the CSA, depending on their form, and FDA-approved products containing nabilone were rescheduled to Schedule II. Other tetrahydrocannabinols remain Schedule I substances, and, because they are scheduled separately from marijuana, they are not included in the DOJ’s proposed rule rescheduling marijuana. Drugs Marketed Without FDA Approval New drugs that FDA has not approved cannot legally be marketed in interstate commerce under the FD&C Act. FDA categorizes products based on how they are marketed rather than based on how the manufacturer or seller categorizes them. FDA may therefore consider some products marketed as a food, dietary supplement, tobacco product, or cosmetic to be illegal drugs (assuming they have not obtained FDA approval for marketing as a drug) if the product’s packaging makes claims that it is intended to cure, mitigate, or treat a disease or health-related condition. The FD&C Act defines a “drug” to include “articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease.” Therefore, FDA may deem products to be “drugs” under this definition if they are marketed as a treatment for a disease. FDA has issued warning letters to companies marketing cannabis products, including CBD tea and hemp-infused body butter, whose labeling makes these kinds of treatment claims, advising that drugs must undergo the NDA process before they can be marketed in interstate commerce. A manufacturer or seller of one of these products can remedy the issue by submitting an NDA and obtaining FDA approval to market its product as a drug, or by removing the claims. Medical Research To obtain approval for a new drug or biologic, sponsors must conduct research, including clinical trials on human subjects, to generate the required evidence regarding the drug’s safety and effectiveness. Before conducting research with marijuana, a researcher must obtain a DEA registration and an FDA authorization of an investigational new drug application (IND) containing details on how the researcher plans to conduct the study. Then, the researcher must use marijuana from a DEA-registered source. Generally, rescheduling a drug from Schedule I to Schedule III loosens the controls on medical research involving that drug. Researchers and manufacturers of Schedule III substances are subject to less-onerous registration requirements than researchers and manufacturers of Schedule I substances. However, medical researchers and drug sponsors of marijuana or CBD containing drugs would not benefit from these looser restrictions associated with rescheduling without congressional action. In 2022, Congress passed the Medical Marijuana and Cannabidiol Research Expansion Act (P.L. 117-215), which amended the CSA for medical research involving marijuana or CBD to lessen the stringent controls typically applicable for Schedule I substances. The act created separate requirements for marijuana researchers and manufacturers Congressional Research Service 4 to expedite registration with the DEA, and these separate requirements would not be affected by rescheduling without additional congressional action. What would change if marijuana was changed from a schedule I drug to a schedule III drug?
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Formulate your answer using only the provided text; do not use your own knowledge or the use of any outside sources.
EVIDENCE:
Drugs and Biologics Aside from Schedule I substances, controlled substances have accepted medical uses and may be lawfully dispensed by prescription under the CSA, subject to various restrictions. Accordingly, rescheduling marijuana from Schedule I to Schedule III would open the door for the medical marijuana industry to market their products consistent with federal law. Any such products must still comply with other federal legal requirements, such as the FD&C Act, before they could be legally marketed in the United States. Rescheduling thus would not automatically legalize medical marijuana in the United States. The FD&C Act requires new drugs, including both small-molecule drugs that are synthesized in a laboratory and biologics that are derived from living organisms (e.g., vaccines), to be approved by FDA before they can be marketed and sold in the United States. For FDA to approve a new drug, the drug sponsor must submit a new drug application (NDA) with “substantial evidence” that the drug is safe and effective for its proposed use. Similarly, for FDA to approve a biologic, a sponsor must submit a biologics license application (BLA) demonstrating that the product is safe, potent, and pure. Certain chemicals related to or derived from marijuana may be considered small-molecule drugs, while other components of the cannabis plant—including marijuana itself—may be considered a biologic. Congressional Research Service 3 Marijuana itself is not an approved drug, but FDA has approved four drugs derived from or related to cannabis. FDA approved a drug containing CBD called Epidiolex, which is used to treat certain kinds of seizures. FDA also approved Marinol and Syndros for the treatment of anorexia associated with weight loss in AIDS patients, as well as Cesamet for the treatment of nausea and vomiting in patients undergoing chemotherapy. Marinol and Syndros contain the active ingredient dronabinol, a synthetic delta-9- tetrahydrocannabinol (THC), which is considered the psychoactive component of cannabis. Cesamet contains the active ingredient nabilone, which is synthetically derived and has a chemical structure similar to THC. Despite obtaining FDA approval, Epidiolex, Marinol, Syndros, and Cesamet could not immediately be marketed in the United States because CBD and synthetic tetrahydrocannabinols were considered Schedule I substances. The DOJ rescheduled each of these drugs within a few months to a couple years of their approval by FDA, thereby allowing the drugs to be marketed and prescribed. The DOJ rescheduled Epidiolex as a Schedule V drug, and the 2018 farm bill completely descheduled Epidiolex because it is considered hemp under the new definition. FDA-approved products containing dronabinol were rescheduled to Schedule II or Schedule III under the CSA, depending on their form, and FDA-approved products containing nabilone were rescheduled to Schedule II. Other tetrahydrocannabinols remain Schedule I substances, and, because they are scheduled separately from marijuana, they are not included in the DOJ’s proposed rule rescheduling marijuana. Drugs Marketed Without FDA Approval New drugs that FDA has not approved cannot legally be marketed in interstate commerce under the FD&C Act. FDA categorizes products based on how they are marketed rather than based on how the manufacturer or seller categorizes them. FDA may therefore consider some products marketed as a food, dietary supplement, tobacco product, or cosmetic to be illegal drugs (assuming they have not obtained FDA approval for marketing as a drug) if the product’s packaging makes claims that it is intended to cure, mitigate, or treat a disease or health-related condition. The FD&C Act defines a “drug” to include “articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease.” Therefore, FDA may deem products to be “drugs” under this definition if they are marketed as a treatment for a disease. FDA has issued warning letters to companies marketing cannabis products, including CBD tea and hemp-infused body butter, whose labeling makes these kinds of treatment claims, advising that drugs must undergo the NDA process before they can be marketed in interstate commerce. A manufacturer or seller of one of these products can remedy the issue by submitting an NDA and obtaining FDA approval to market its product as a drug, or by removing the claims. Medical Research To obtain approval for a new drug or biologic, sponsors must conduct research, including clinical trials on human subjects, to generate the required evidence regarding the drug’s safety and effectiveness. Before conducting research with marijuana, a researcher must obtain a DEA registration and an FDA authorization of an investigational new drug application (IND) containing details on how the researcher plans to conduct the study. Then, the researcher must use marijuana from a DEA-registered source. Generally, rescheduling a drug from Schedule I to Schedule III loosens the controls on medical research involving that drug. Researchers and manufacturers of Schedule III substances are subject to less-onerous registration requirements than researchers and manufacturers of Schedule I substances. However, medical researchers and drug sponsors of marijuana or CBD containing drugs would not benefit from these looser restrictions associated with rescheduling without congressional action. In 2022, Congress passed the Medical Marijuana and Cannabidiol Research Expansion Act (P.L. 117-215), which amended the CSA for medical research involving marijuana or CBD to lessen the stringent controls typically applicable for Schedule I substances. The act created separate requirements for marijuana researchers and manufacturers Congressional Research Service 4 to expedite registration with the DEA, and these separate requirements would not be affected by rescheduling without additional congressional action.
USER:
What would change if marijuana was changed from a schedule I drug to a schedule III drug?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Respond only with information present in the document. If the information is not present, respond with "This information is not available". When possible, use quotations and cite the document directly.
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What were the results of the study?
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2010 Personal Financial Planning Attitudes - A Study Scott A. Yetmar Cleveland State University, [email protected] D. Murphy Follow this and additional works at: https://engagedscholarship.csuohio.edu/bus_facpub Part of the Finance and Financial Management Commons How does access to this work benefit you? Let us know! Original Published Citation Yetmar, S., Murphy, D. (2010). Personal Financial Planning Attitudes - A Study. Management Research Review/ Emerald Publications, 33(8), pp. 811 – 817. This Article is brought to you for free and open access by the Monte Ahuja College of Business at EngagedScholarship@CSU. It has been accepted for inclusion in Business Faculty Publications by an authorized administrator of EngagedScholarship@CSU. For more information, please contact [email protected]. Personal financial planning attitudes: a preliminary study of graduate students David S. Murphy School of Business and Economics, Lynchburg College, Lynchburg, Virginia, USA, and Scott Yetmar College of Business Administration, Cleveland State University, Cleveland, Ohio, USA Abstract Purpose - The purpose of this paper is to report on a survey about the personal financial planning attitudes of MBA students in the USA. Design/methodology/approach - The study surveyed 206 MBA students about their attitudes to personal financial planning. Participants were asked about their level of knowledge, whether they had prepared components of a financial plan, where they might seek assistance in such a process and the criteria for selecting a financial planner. In addition, participants were asked to indicate their level of confidence in a financial plan's capacity to help them meet their long-term needs and the likelihood that they would implement such a plan. Findings - The findings indicate that, while most respondents feel both that financial planning is important and that they are interested in developing a financial plan, very few feel that they have the necessary skills and knowledge to prepare their own plan. In addition, the participants indicated a strong preference for professional personal financial planning advice. The study also indicates that less than 13 percent have prepared a comprehensive personal financial plan. When asked to identify the one professional from whom they would seek advice, certified financial planners were the preferred resource. Research limitations/implications - While the results are not generalizable to the wider population, the views of this group are important because one might expect that educated individuals would be both more interested in personal financial planning and more capable of prepaJing their own plans compaJ'ed with average Americans. Practical implications - The study presents some implications for practice and financial literacy education from a US perspective. Originality/value - A perceived need of respondents is to feel that their financial planner will put their needs first. While some professionals believe this to be the hallmark of "independence," the respondents placed less impOltance on planner independence. In order to foster client confidence, planners must act in ways that convey clearly the primacy of their clients' needs. Keywords Graduates, United States of America, Financial services, Personal finance Paper type Research paper Introduction The need for financial security, especially during retirement years, has been met historically in the United States (USA) in three ways: personal savings (including insurance and annuities), social insurance programs like social security and employersponsored pension programs. Employer-sponsored pension programs have been the cornerstone of these financial security tools. Consequently, pension programs have been the target of continual legislative actions. The Employee Retimnent Income and Security Act of 1974 made significant and wide-sweeping changes that affected most aspects of corporate and self-employed pension programs (that is, legal, tax, investment and actuarial) and initiated 4010,) programs. These changes lead to an increase in the popularity of defined-contribution pension plans. Number oj participants Female lVIale Mean age Hig/zest educatiollal/evel Bachelor's degree lVIaster's degree Doctoral degree Mean years of work experience Number employed in accounting or finance lVIean annual income (USD) (%) Jl = 206 104 50.98 102 49.02 29.1 years 17l 85.9 23 11.6 5 2.5 6.5 years Table II. 25 12.25 Summary participant 47,558 demographics Attitudes toward planning Participants were asked specifically whether they thought that preparing a personal financial plan was important; whether they were interested in preparing such a plan; whether they had time to do so; and whether or not they felt that they had the necessary skills and knowledge to prepare a personal financial plan. The results of these four questions are summarized in Table III. It is interesting to note that the percentage of participants who indicated that they had the skills and knowledge necessary to prepare a personal financial plan (33 percent) is slightly lower than the percentage of Americans in the University of Michigan study who had tried to calculate their retirement fund needs (Employee Benefit News, 2005). Of the 68 participants who indicated that they had the necessary skills and lmowledge to prepare a personal financial plan, 47 indicated employment in accotmting or finance positions. Only 69 of the subjects (33.5 percent) indicated that they had prepared a written, comprehensive personal financial plan. A complete financial plan addresses many issues, some of which are not applicable to all individuals. Consequently, the participants were also asked to identify plan components that they had prepared. These results are summarized in Table IV. As evident in Table Iv, the participants in the study have not prepared many of the components of a comprehensive financial plan. About the same percentage of participants who reported that they had the skills and knowledge needed to prepare a financial plan (33 percent) had actually prepared such a plan (33.5 percent). Approximately one in five participants had prepared an educational funding analysis. Affirmative responses (%) Personal financial planning is important 156 75.7 Interested in personal financial planning 138 67 Table m. Have the time to prepare a personal financial plan 83 40 Financial planning Have the skills and knowledge to prepare a personal financial plan 68 33 interest and knowledge Accountants (CPA) were selected by 19.4 percent of the respondents. This percentage was divided between CPAlPFS (15.5 percent) and CPAs (3.9 percent). Other financial planning designations (for example, Charted Life Underwriter [CLUJ, Certified Fund Specialist [CFS] and Charted Financial Consultant [ChFCl) were included in the study but were selected by only a few participants. Weston (2008) indicates that there are about 250,000 individuals in the marketplace who identify themselves as financial planners. Of that number, about 56,000 have earned some kind of professional certification. The CFp® designation appears to be the most popular with about 58,000 certificate holders (CFP Board, 2008). Participants' reported preference for CFPs® is consistent with the predominance of CFp® certificate holders in the marketplace. When asked whether they preferred fee only, fee and compensation or compensation only planners, the majority of participants (127 or 61.7 percent) indicated that they preferred fee·only planners. Only 30 participants (14.6 percent) indicated a preference for working with a fee and commission planner while 49 (23.8 percent) indicated that they would seek the advice of a commission only planner. Participants were also asked to rank six different reasons for selecting a specific planner. The results of their rankings are shown in Table VI. The most important planner characteristic, as suggested by the participants, is that the planner places the client's needs first. This predisposition is consistent with the expressed desire by the majority of the respondents to work with a fee·only planner. The desire that the planner demonstrates high levels of product familiarity means that fee·only planners must be as familiar with the products that they recommend, as are commission-only planners. Fee-only planners often use noload funds for plan implementation, products for which they do not receive a commission. Low transactions costs or the use of commissionfree financial products ranked last in importance among the participants. Participants ranked freedom of choice third in importance. Thus, it may be important for all planners to present clients with a menu of choices for plan implementation. Selecting a number of different funds, for example, with similar risk-return characteristics and time horizons and letting the client make the final selection may help meet this perceived need. Planner independence and confidence ranked considerably lower than did meeting clients needs first and product familiarity. Independence is an attribute often used as a selling point by CPAlPFSs. It appears that this independence may give them little competitive advantage in the marketplace or at least among graduate business students. Finally, participants were asked to indicate their level of confidence in a financial plan's capacity to help them meet their long-term needs (measured on a scale of 1 = not at all confident to 5 = extremely confident) and the likelihood that they would Criteria Mean ranka SD I want to know that the planner will put my needs first Planner's familiarity with products I want to preserve my freedom of choice in product selection I want to feel that the financial planner is confident in hislher recommendations I want to feel that my planner is independent Reduced transaction costs Note: "1 = Most important to 6 = least important 1.78 1.61 3.08 1.59 3.37 1.30 3.60 1.48 3.99 1.68 4.86 1.44 Table VI. Planner selection criteria the majority of them do not view their CPAs as potential providers of financial planning advice. Very few of the respondents indicated that they would seek the advice of CFS, ChFC or CLU. These are designations normally held by insurance professionals. This also is surprising because the most frequently mentioned professional relationship was with an insurance agent. Indeed, 40.7 percent of the respondents had established such a relationship. It appears that both the insurance and public accounting professions have not had the same success in promoting members of their professions as personal financial planners. A perceived need by the respondents to feel that their financial planner will put the client's needs first is clearly apparent in Table VI. While some professionals may feel that this is the hallmark of "independence", the respondents placed much less importance on a planner's independence. Thus, to foster a client's confidence, planners must act in ways that very clearly convey the message to the client that their needs are paramount. References CFP Board of Standards (2008), "CFP certificant profile", available at: www.cfp.net/media/ profile.asp#link4 (accessed 14 September 2008). Employee Benefit News (2005), "Lack of basic financial knowledge impairs retirement", available at: www.benefitnews.com/retire/detai1.cfrn?id=8116 (accessed 28 November 2005). Federal Reserve Bank of St Louis (2005), National Economic Trends, available at: http:// research.stlouisfed.org/publicaitons/netl20051101/neL20051108.pdf (accessed 28 November 2005). Harris Interactive (2005), "Nearly half of US workers participate in a 401(k) or 403(b) plan, New Wall Street Journal OnlinelHarris interactive personal finance poll", available at: www. harrisinteractive.comlnews/allnewsbydate.asp?NewsID=976 (accessed 10 October 2005). US Department of Labor (2005), Preiimillmy Private Pension Plan Bulletin, Abstract of 2000, Form 5500 Annual Reports. Weston, L.P. (2008), 8 Things YOUI' Financial Planner Won't Tell YOIl, available at: http:// artic1es.moneycentra1.msn.comlRetirementandWills/CreateaPlan/8Things YourFinancial PlannerWontTellYou.aspx (accessed 14 September 2008). Further reading Rattiner, J,H. (2005), Getting Started as a Financial Planner, revised ed., Bloomberg Press, New York, NY.
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Respond only with information present in the document. If the information is not present, respond with "This information is not available". When possible, use quotations and cite the document directly. What were the results of the study? 2010 Personal Financial Planning Attitudes - A Study Scott A. Yetmar Cleveland State University, [email protected] D. Murphy Follow this and additional works at: https://engagedscholarship.csuohio.edu/bus_facpub Part of the Finance and Financial Management Commons How does access to this work benefit you? Let us know! Original Published Citation Yetmar, S., Murphy, D. (2010). Personal Financial Planning Attitudes - A Study. Management Research Review/ Emerald Publications, 33(8), pp. 811 – 817. This Article is brought to you for free and open access by the Monte Ahuja College of Business at EngagedScholarship@CSU. It has been accepted for inclusion in Business Faculty Publications by an authorized administrator of EngagedScholarship@CSU. For more information, please contact [email protected]. Personal financial planning attitudes: a preliminary study of graduate students David S. Murphy School of Business and Economics, Lynchburg College, Lynchburg, Virginia, USA, and Scott Yetmar College of Business Administration, Cleveland State University, Cleveland, Ohio, USA Abstract Purpose - The purpose of this paper is to report on a survey about the personal financial planning attitudes of MBA students in the USA. Design/methodology/approach - The study surveyed 206 MBA students about their attitudes to personal financial planning. Participants were asked about their level of knowledge, whether they had prepared components of a financial plan, where they might seek assistance in such a process and the criteria for selecting a financial planner. In addition, participants were asked to indicate their level of confidence in a financial plan's capacity to help them meet their long-term needs and the likelihood that they would implement such a plan. Findings - The findings indicate that, while most respondents feel both that financial planning is important and that they are interested in developing a financial plan, very few feel that they have the necessary skills and knowledge to prepare their own plan. In addition, the participants indicated a strong preference for professional personal financial planning advice. The study also indicates that less than 13 percent have prepared a comprehensive personal financial plan. When asked to identify the one professional from whom they would seek advice, certified financial planners were the preferred resource. Research limitations/implications - While the results are not generalizable to the wider population, the views of this group are important because one might expect that educated individuals would be both more interested in personal financial planning and more capable of prepaJing their own plans compaJ'ed with average Americans. Practical implications - The study presents some implications for practice and financial literacy education from a US perspective. Originality/value - A perceived need of respondents is to feel that their financial planner will put their needs first. While some professionals believe this to be the hallmark of "independence," the respondents placed less impOltance on planner independence. In order to foster client confidence, planners must act in ways that convey clearly the primacy of their clients' needs. Keywords Graduates, United States of America, Financial services, Personal finance Paper type Research paper Introduction The need for financial security, especially during retirement years, has been met historically in the United States (USA) in three ways: personal savings (including insurance and annuities), social insurance programs like social security and employersponsored pension programs. Employer-sponsored pension programs have been the cornerstone of these financial security tools. Consequently, pension programs have been the target of continual legislative actions. The Employee Retimnent Income and Security Act of 1974 made significant and wide-sweeping changes that affected most aspects of corporate and self-employed pension programs (that is, legal, tax, investment and actuarial) and initiated 4010,) programs. These changes lead to an increase in the popularity of defined-contribution pension plans. Number oj participants Female lVIale Mean age Hig/zest educatiollal/evel Bachelor's degree lVIaster's degree Doctoral degree Mean years of work experience Number employed in accounting or finance lVIean annual income (USD) (%) Jl = 206 104 50.98 102 49.02 29.1 years 17l 85.9 23 11.6 5 2.5 6.5 years Table II. 25 12.25 Summary participant 47,558 demographics Attitudes toward planning Participants were asked specifically whether they thought that preparing a personal financial plan was important; whether they were interested in preparing such a plan; whether they had time to do so; and whether or not they felt that they had the necessary skills and knowledge to prepare a personal financial plan. The results of these four questions are summarized in Table III. It is interesting to note that the percentage of participants who indicated that they had the skills and knowledge necessary to prepare a personal financial plan (33 percent) is slightly lower than the percentage of Americans in the University of Michigan study who had tried to calculate their retirement fund needs (Employee Benefit News, 2005). Of the 68 participants who indicated that they had the necessary skills and lmowledge to prepare a personal financial plan, 47 indicated employment in accotmting or finance positions. Only 69 of the subjects (33.5 percent) indicated that they had prepared a written, comprehensive personal financial plan. A complete financial plan addresses many issues, some of which are not applicable to all individuals. Consequently, the participants were also asked to identify plan components that they had prepared. These results are summarized in Table IV. As evident in Table Iv, the participants in the study have not prepared many of the components of a comprehensive financial plan. About the same percentage of participants who reported that they had the skills and knowledge needed to prepare a financial plan (33 percent) had actually prepared such a plan (33.5 percent). Approximately one in five participants had prepared an educational funding analysis. Affirmative responses (%) Personal financial planning is important 156 75.7 Interested in personal financial planning 138 67 Table m. Have the time to prepare a personal financial plan 83 40 Financial planning Have the skills and knowledge to prepare a personal financial plan 68 33 interest and knowledge Accountants (CPA) were selected by 19.4 percent of the respondents. This percentage was divided between CPAlPFS (15.5 percent) and CPAs (3.9 percent). Other financial planning designations (for example, Charted Life Underwriter [CLUJ, Certified Fund Specialist [CFS] and Charted Financial Consultant [ChFCl) were included in the study but were selected by only a few participants. Weston (2008) indicates that there are about 250,000 individuals in the marketplace who identify themselves as financial planners. Of that number, about 56,000 have earned some kind of professional certification. The CFp® designation appears to be the most popular with about 58,000 certificate holders (CFP Board, 2008). Participants' reported preference for CFPs® is consistent with the predominance of CFp® certificate holders in the marketplace. When asked whether they preferred fee only, fee and compensation or compensation only planners, the majority of participants (127 or 61.7 percent) indicated that they preferred fee·only planners. Only 30 participants (14.6 percent) indicated a preference for working with a fee and commission planner while 49 (23.8 percent) indicated that they would seek the advice of a commission only planner. Participants were also asked to rank six different reasons for selecting a specific planner. The results of their rankings are shown in Table VI. The most important planner characteristic, as suggested by the participants, is that the planner places the client's needs first. This predisposition is consistent with the expressed desire by the majority of the respondents to work with a fee·only planner. The desire that the planner demonstrates high levels of product familiarity means that fee·only planners must be as familiar with the products that they recommend, as are commission-only planners. Fee-only planners often use noload funds for plan implementation, products for which they do not receive a commission. Low transactions costs or the use of commissionfree financial products ranked last in importance among the participants. Participants ranked freedom of choice third in importance. Thus, it may be important for all planners to present clients with a menu of choices for plan implementation. Selecting a number of different funds, for example, with similar risk-return characteristics and time horizons and letting the client make the final selection may help meet this perceived need. Planner independence and confidence ranked considerably lower than did meeting clients needs first and product familiarity. Independence is an attribute often used as a selling point by CPAlPFSs. It appears that this independence may give them little competitive advantage in the marketplace or at least among graduate business students. Finally, participants were asked to indicate their level of confidence in a financial plan's capacity to help them meet their long-term needs (measured on a scale of 1 = not at all confident to 5 = extremely confident) and the likelihood that they would Criteria Mean ranka SD I want to know that the planner will put my needs first Planner's familiarity with products I want to preserve my freedom of choice in product selection I want to feel that the financial planner is confident in hislher recommendations I want to feel that my planner is independent Reduced transaction costs Note: "1 = Most important to 6 = least important 1.78 1.61 3.08 1.59 3.37 1.30 3.60 1.48 3.99 1.68 4.86 1.44 Table VI. Planner selection criteria the majority of them do not view their CPAs as potential providers of financial planning advice. Very few of the respondents indicated that they would seek the advice of CFS, ChFC or CLU. These are designations normally held by insurance professionals. This also is surprising because the most frequently mentioned professional relationship was with an insurance agent. Indeed, 40.7 percent of the respondents had established such a relationship. It appears that both the insurance and public accounting professions have not had the same success in promoting members of their professions as personal financial planners. A perceived need by the respondents to feel that their financial planner will put the client's needs first is clearly apparent in Table VI. While some professionals may feel that this is the hallmark of "independence", the respondents placed much less importance on a planner's independence. Thus, to foster a client's confidence, planners must act in ways that very clearly convey the message to the client that their needs are paramount. References CFP Board of Standards (2008), "CFP certificant profile", available at: www.cfp.net/media/ profile.asp#link4 (accessed 14 September 2008). Employee Benefit News (2005), "Lack of basic financial knowledge impairs retirement", available at: www.benefitnews.com/retire/detai1.cfrn?id=8116 (accessed 28 November 2005). Federal Reserve Bank of St Louis (2005), National Economic Trends, available at: http:// research.stlouisfed.org/publicaitons/netl20051101/neL20051108.pdf (accessed 28 November 2005). Harris Interactive (2005), "Nearly half of US workers participate in a 401(k) or 403(b) plan, New Wall Street Journal OnlinelHarris interactive personal finance poll", available at: www. harrisinteractive.comlnews/allnewsbydate.asp?NewsID=976 (accessed 10 October 2005). US Department of Labor (2005), Preiimillmy Private Pension Plan Bulletin, Abstract of 2000, Form 5500 Annual Reports. Weston, L.P. (2008), 8 Things YOUI' Financial Planner Won't Tell YOIl, available at: http:// artic1es.moneycentra1.msn.comlRetirementandWills/CreateaPlan/8Things YourFinancial PlannerWontTellYou.aspx (accessed 14 September 2008). Further reading Rattiner, J,H. (2005), Getting Started as a Financial Planner, revised ed., Bloomberg Press, New York, NY.
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Respond only with information present in the document. If the information is not present, respond with "This information is not available". When possible, use quotations and cite the document directly.
EVIDENCE:
2010 Personal Financial Planning Attitudes - A Study Scott A. Yetmar Cleveland State University, [email protected] D. Murphy Follow this and additional works at: https://engagedscholarship.csuohio.edu/bus_facpub Part of the Finance and Financial Management Commons How does access to this work benefit you? Let us know! Original Published Citation Yetmar, S., Murphy, D. (2010). Personal Financial Planning Attitudes - A Study. Management Research Review/ Emerald Publications, 33(8), pp. 811 – 817. This Article is brought to you for free and open access by the Monte Ahuja College of Business at EngagedScholarship@CSU. It has been accepted for inclusion in Business Faculty Publications by an authorized administrator of EngagedScholarship@CSU. For more information, please contact [email protected]. Personal financial planning attitudes: a preliminary study of graduate students David S. Murphy School of Business and Economics, Lynchburg College, Lynchburg, Virginia, USA, and Scott Yetmar College of Business Administration, Cleveland State University, Cleveland, Ohio, USA Abstract Purpose - The purpose of this paper is to report on a survey about the personal financial planning attitudes of MBA students in the USA. Design/methodology/approach - The study surveyed 206 MBA students about their attitudes to personal financial planning. Participants were asked about their level of knowledge, whether they had prepared components of a financial plan, where they might seek assistance in such a process and the criteria for selecting a financial planner. In addition, participants were asked to indicate their level of confidence in a financial plan's capacity to help them meet their long-term needs and the likelihood that they would implement such a plan. Findings - The findings indicate that, while most respondents feel both that financial planning is important and that they are interested in developing a financial plan, very few feel that they have the necessary skills and knowledge to prepare their own plan. In addition, the participants indicated a strong preference for professional personal financial planning advice. The study also indicates that less than 13 percent have prepared a comprehensive personal financial plan. When asked to identify the one professional from whom they would seek advice, certified financial planners were the preferred resource. Research limitations/implications - While the results are not generalizable to the wider population, the views of this group are important because one might expect that educated individuals would be both more interested in personal financial planning and more capable of prepaJing their own plans compaJ'ed with average Americans. Practical implications - The study presents some implications for practice and financial literacy education from a US perspective. Originality/value - A perceived need of respondents is to feel that their financial planner will put their needs first. While some professionals believe this to be the hallmark of "independence," the respondents placed less impOltance on planner independence. In order to foster client confidence, planners must act in ways that convey clearly the primacy of their clients' needs. Keywords Graduates, United States of America, Financial services, Personal finance Paper type Research paper Introduction The need for financial security, especially during retirement years, has been met historically in the United States (USA) in three ways: personal savings (including insurance and annuities), social insurance programs like social security and employersponsored pension programs. Employer-sponsored pension programs have been the cornerstone of these financial security tools. Consequently, pension programs have been the target of continual legislative actions. The Employee Retimnent Income and Security Act of 1974 made significant and wide-sweeping changes that affected most aspects of corporate and self-employed pension programs (that is, legal, tax, investment and actuarial) and initiated 4010,) programs. These changes lead to an increase in the popularity of defined-contribution pension plans. Number oj participants Female lVIale Mean age Hig/zest educatiollal/evel Bachelor's degree lVIaster's degree Doctoral degree Mean years of work experience Number employed in accounting or finance lVIean annual income (USD) (%) Jl = 206 104 50.98 102 49.02 29.1 years 17l 85.9 23 11.6 5 2.5 6.5 years Table II. 25 12.25 Summary participant 47,558 demographics Attitudes toward planning Participants were asked specifically whether they thought that preparing a personal financial plan was important; whether they were interested in preparing such a plan; whether they had time to do so; and whether or not they felt that they had the necessary skills and knowledge to prepare a personal financial plan. The results of these four questions are summarized in Table III. It is interesting to note that the percentage of participants who indicated that they had the skills and knowledge necessary to prepare a personal financial plan (33 percent) is slightly lower than the percentage of Americans in the University of Michigan study who had tried to calculate their retirement fund needs (Employee Benefit News, 2005). Of the 68 participants who indicated that they had the necessary skills and lmowledge to prepare a personal financial plan, 47 indicated employment in accotmting or finance positions. Only 69 of the subjects (33.5 percent) indicated that they had prepared a written, comprehensive personal financial plan. A complete financial plan addresses many issues, some of which are not applicable to all individuals. Consequently, the participants were also asked to identify plan components that they had prepared. These results are summarized in Table IV. As evident in Table Iv, the participants in the study have not prepared many of the components of a comprehensive financial plan. About the same percentage of participants who reported that they had the skills and knowledge needed to prepare a financial plan (33 percent) had actually prepared such a plan (33.5 percent). Approximately one in five participants had prepared an educational funding analysis. Affirmative responses (%) Personal financial planning is important 156 75.7 Interested in personal financial planning 138 67 Table m. Have the time to prepare a personal financial plan 83 40 Financial planning Have the skills and knowledge to prepare a personal financial plan 68 33 interest and knowledge Accountants (CPA) were selected by 19.4 percent of the respondents. This percentage was divided between CPAlPFS (15.5 percent) and CPAs (3.9 percent). Other financial planning designations (for example, Charted Life Underwriter [CLUJ, Certified Fund Specialist [CFS] and Charted Financial Consultant [ChFCl) were included in the study but were selected by only a few participants. Weston (2008) indicates that there are about 250,000 individuals in the marketplace who identify themselves as financial planners. Of that number, about 56,000 have earned some kind of professional certification. The CFp® designation appears to be the most popular with about 58,000 certificate holders (CFP Board, 2008). Participants' reported preference for CFPs® is consistent with the predominance of CFp® certificate holders in the marketplace. When asked whether they preferred fee only, fee and compensation or compensation only planners, the majority of participants (127 or 61.7 percent) indicated that they preferred fee·only planners. Only 30 participants (14.6 percent) indicated a preference for working with a fee and commission planner while 49 (23.8 percent) indicated that they would seek the advice of a commission only planner. Participants were also asked to rank six different reasons for selecting a specific planner. The results of their rankings are shown in Table VI. The most important planner characteristic, as suggested by the participants, is that the planner places the client's needs first. This predisposition is consistent with the expressed desire by the majority of the respondents to work with a fee·only planner. The desire that the planner demonstrates high levels of product familiarity means that fee·only planners must be as familiar with the products that they recommend, as are commission-only planners. Fee-only planners often use noload funds for plan implementation, products for which they do not receive a commission. Low transactions costs or the use of commissionfree financial products ranked last in importance among the participants. Participants ranked freedom of choice third in importance. Thus, it may be important for all planners to present clients with a menu of choices for plan implementation. Selecting a number of different funds, for example, with similar risk-return characteristics and time horizons and letting the client make the final selection may help meet this perceived need. Planner independence and confidence ranked considerably lower than did meeting clients needs first and product familiarity. Independence is an attribute often used as a selling point by CPAlPFSs. It appears that this independence may give them little competitive advantage in the marketplace or at least among graduate business students. Finally, participants were asked to indicate their level of confidence in a financial plan's capacity to help them meet their long-term needs (measured on a scale of 1 = not at all confident to 5 = extremely confident) and the likelihood that they would Criteria Mean ranka SD I want to know that the planner will put my needs first Planner's familiarity with products I want to preserve my freedom of choice in product selection I want to feel that the financial planner is confident in hislher recommendations I want to feel that my planner is independent Reduced transaction costs Note: "1 = Most important to 6 = least important 1.78 1.61 3.08 1.59 3.37 1.30 3.60 1.48 3.99 1.68 4.86 1.44 Table VI. Planner selection criteria the majority of them do not view their CPAs as potential providers of financial planning advice. Very few of the respondents indicated that they would seek the advice of CFS, ChFC or CLU. These are designations normally held by insurance professionals. This also is surprising because the most frequently mentioned professional relationship was with an insurance agent. Indeed, 40.7 percent of the respondents had established such a relationship. It appears that both the insurance and public accounting professions have not had the same success in promoting members of their professions as personal financial planners. A perceived need by the respondents to feel that their financial planner will put the client's needs first is clearly apparent in Table VI. While some professionals may feel that this is the hallmark of "independence", the respondents placed much less importance on a planner's independence. Thus, to foster a client's confidence, planners must act in ways that very clearly convey the message to the client that their needs are paramount. References CFP Board of Standards (2008), "CFP certificant profile", available at: www.cfp.net/media/ profile.asp#link4 (accessed 14 September 2008). Employee Benefit News (2005), "Lack of basic financial knowledge impairs retirement", available at: www.benefitnews.com/retire/detai1.cfrn?id=8116 (accessed 28 November 2005). Federal Reserve Bank of St Louis (2005), National Economic Trends, available at: http:// research.stlouisfed.org/publicaitons/netl20051101/neL20051108.pdf (accessed 28 November 2005). Harris Interactive (2005), "Nearly half of US workers participate in a 401(k) or 403(b) plan, New Wall Street Journal OnlinelHarris interactive personal finance poll", available at: www. harrisinteractive.comlnews/allnewsbydate.asp?NewsID=976 (accessed 10 October 2005). US Department of Labor (2005), Preiimillmy Private Pension Plan Bulletin, Abstract of 2000, Form 5500 Annual Reports. Weston, L.P. (2008), 8 Things YOUI' Financial Planner Won't Tell YOIl, available at: http:// artic1es.moneycentra1.msn.comlRetirementandWills/CreateaPlan/8Things YourFinancial PlannerWontTellYou.aspx (accessed 14 September 2008). Further reading Rattiner, J,H. (2005), Getting Started as a Financial Planner, revised ed., Bloomberg Press, New York, NY.
USER:
What were the results of the study?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. [user request] [context document]
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I just found out I am pregnant and my doctor's office gave me a long list of things I cannot eat or partake in. Using this article as a reference, please explain what those items are and why they are not acceptable for pregnancy. Use at least 500 words.
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Pregnancy nutrition: Foods to avoid during pregnancy More foods can affect your health or your baby's health than you might realize. Learn what not to eat when you're pregnant. By Mayo Clinic Staff You want what's best for your baby. That's why you might do things like add sliced fruit to your fortified breakfast cereal, top your salads with chickpeas or snack on almonds. But do you know what foods not to eat during pregnancy? Here's some basic information about eating during pregnancy. Don't eat seafood high in mercury Seafood can be a great source of protein. And the omega-3 fatty acids in many fish can help your baby's brain and eye development. But some fish and shellfish have levels of mercury that could be harmful. Too much mercury could damage your baby's growing nervous system. The bigger and older the fish, the more mercury it's likely to contain. The U.S. Food and Drug Administration (FDA) says not to eat the following while pregnant: Bigeye tuna. King mackerel. Marlin. Orange roughy. Swordfish. Shark. Tilefish. So what's safe? Some types of seafood have little mercury. The Dietary Guidelines for Americans advises pregnant people to eat 8 to 12 ounces (224 to 336 grams) of seafood a week. That's 2 to 3 servings. Here are some options: Anchovies. Black sea bass. Catfish. Cod. Freshwater trout. Herring. Light canned tuna. Oysters. Pollock. Salmon. Sardines. Shad. Shrimp. Sole. Tilapia. Whitefish. Don't eat raw, undercooked or tainted seafood To avoid harmful bacteria or viruses in seafood: Don't eat raw fish and shellfish. Examples of raw or undercooked foods to avoid include sushi, sashimi, ceviche and raw oysters, scallops or clams. Don't eat uncooked seafood that's refrigerated. Examples include seafood labeled nova style, lox, kippered, smoked or jerky. It's OK to eat smoked seafood if it's in a casserole or other cooked dish. Canned and shelf-stable versions also are safe. Watch for local fish advisories. If you eat fish from local waters, check for fish advisories to see how often you can safely eat those fish. Make sure to do this when water pollution is a concern. If you're not sure about the safety of fish you have already eaten, don't eat any more fish that week. Cook seafood well. Cook fish to an inside temperature of 145 F (63 C). Fish is done when it flakes with a fork and looks milky white throughout. Cook shrimp, lobster and scallops until they're milky white. Cook clams, mussels and oysters until their shells open. Throw away any that don't open. Don't eat undercooked meat, poultry or eggs During pregnancy, you're at a higher risk of food poisoning from bacteria. This is called foodborne illness. How your body reacts to food poisoning when you're pregnant might be worse than if you weren't pregnant. Although it's rare, food poisoning may affect the baby, too. To prevent foodborne illness: Fully cook all meats and poultry before eating. Use a meat thermometer to make sure. Cook hot dogs and lunch meats until they're steaming hot. Or don't eat them at all. They can be sources of a rare but serious foodborne illness known as a listeria infection. Don't eat pates and meat spreads that are stored in a refrigerator. Canned and shelf-stable versions are OK. Cook eggs until the egg yolks and whites are firm. Raw eggs can have harmful bacteria. Don't eat foods that may be made with raw or partly cooked eggs. Examples include homemade eggnog, raw batter and dough, tiramisu, freshly made or homemade hollandaise sauce, homemade Caesar salad dressing and homemade ice cream. Don't eat ready-made meat salads or seafood salads. These include ham salad, tuna salad and chicken salad. Don't eat unpasteurized foods Many low-fat dairy products can be a healthy part of your diet. These include skim milk, mozzarella cheese and cottage cheese. But don't eat or drink anything that contains milk that hasn't gone through a process called pasteurization. Products that have unpasteurized milk could cause foodborne illness. Avoid soft cheeses, such as brie, feta and blue cheese, unless the label says they're pasteurized or made with pasteurized milk. Don't drink juice or cider that isn't pasteurized. Don't eat unwashed fruits and vegetables To get rid of harmful bacteria, wash all raw fruits and vegetables well. Don't eat any raw sprouts, including alfalfa, clover, radish and mung bean. They might have harmful bacteria. Be sure to fully cook sprouts. Don't have too much caffeine Caffeine can cross to the baby, but the effects on the baby aren't clear. To be safe, your health care professional might tell you not to have caffeine while pregnant. Or you may be told to limit caffeine to less than 200 milligrams (mg) a day. An 8-ounce (240-milliliters, or mL) cup of brewed coffee has about 95 mg of caffeine. An 8-ounce (240-mL) cup of brewed tea has about 47 mg. And a 12-ounce (360-mL) cola with caffeine has about 33 mg. Don't drink herbal tea Not much is known about the effects of certain herbs on fetuses. As a result, don't drink herbal tea unless your health care professional says it's OK. That includes the types of herbal tea made for pregnancy. Don't drink alcohol No amount of alcohol has been proved safe during pregnancy. To be safe, don't drink any alcohol. Consider the risks. Drinking alcohol during pregnancy leads to a higher risk of miscarriage and stillbirth. Drinking alcohol also may result in fetal alcohol syndrome. The syndrome can cause the face to form oddly and cause lower intelligence. If you're worried about alcohol you drank before you knew you were pregnant, or if you think you need help to stop drinking, talk to your health care professional.
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. I just found out I am pregnant and my doctor's office gave me a long list of things I cannot eat or partake in. Using this article as a reference, please explain what those items are and why they are not acceptable for pregnancy. Use at least 500 words. Pregnancy nutrition: Foods to avoid during pregnancy More foods can affect your health or your baby's health than you might realize. Learn what not to eat when you're pregnant. By Mayo Clinic Staff You want what's best for your baby. That's why you might do things like add sliced fruit to your fortified breakfast cereal, top your salads with chickpeas or snack on almonds. But do you know what foods not to eat during pregnancy? Here's some basic information about eating during pregnancy. Don't eat seafood high in mercury Seafood can be a great source of protein. And the omega-3 fatty acids in many fish can help your baby's brain and eye development. But some fish and shellfish have levels of mercury that could be harmful. Too much mercury could damage your baby's growing nervous system. The bigger and older the fish, the more mercury it's likely to contain. The U.S. Food and Drug Administration (FDA) says not to eat the following while pregnant: Bigeye tuna. King mackerel. Marlin. Orange roughy. Swordfish. Shark. Tilefish. So what's safe? Some types of seafood have little mercury. The Dietary Guidelines for Americans advises pregnant people to eat 8 to 12 ounces (224 to 336 grams) of seafood a week. That's 2 to 3 servings. Here are some options: Anchovies. Black sea bass. Catfish. Cod. Freshwater trout. Herring. Light canned tuna. Oysters. Pollock. Salmon. Sardines. Shad. Shrimp. Sole. Tilapia. Whitefish. Don't eat raw, undercooked or tainted seafood To avoid harmful bacteria or viruses in seafood: Don't eat raw fish and shellfish. Examples of raw or undercooked foods to avoid include sushi, sashimi, ceviche and raw oysters, scallops or clams. Don't eat uncooked seafood that's refrigerated. Examples include seafood labeled nova style, lox, kippered, smoked or jerky. It's OK to eat smoked seafood if it's in a casserole or other cooked dish. Canned and shelf-stable versions also are safe. Watch for local fish advisories. If you eat fish from local waters, check for fish advisories to see how often you can safely eat those fish. Make sure to do this when water pollution is a concern. If you're not sure about the safety of fish you have already eaten, don't eat any more fish that week. Cook seafood well. Cook fish to an inside temperature of 145 F (63 C). Fish is done when it flakes with a fork and looks milky white throughout. Cook shrimp, lobster and scallops until they're milky white. Cook clams, mussels and oysters until their shells open. Throw away any that don't open. Don't eat undercooked meat, poultry or eggs During pregnancy, you're at a higher risk of food poisoning from bacteria. This is called foodborne illness. How your body reacts to food poisoning when you're pregnant might be worse than if you weren't pregnant. Although it's rare, food poisoning may affect the baby, too. To prevent foodborne illness: Fully cook all meats and poultry before eating. Use a meat thermometer to make sure. Cook hot dogs and lunch meats until they're steaming hot. Or don't eat them at all. They can be sources of a rare but serious foodborne illness known as a listeria infection. Don't eat pates and meat spreads that are stored in a refrigerator. Canned and shelf-stable versions are OK. Cook eggs until the egg yolks and whites are firm. Raw eggs can have harmful bacteria. Don't eat foods that may be made with raw or partly cooked eggs. Examples include homemade eggnog, raw batter and dough, tiramisu, freshly made or homemade hollandaise sauce, homemade Caesar salad dressing and homemade ice cream. Don't eat ready-made meat salads or seafood salads. These include ham salad, tuna salad and chicken salad. Don't eat unpasteurized foods Many low-fat dairy products can be a healthy part of your diet. These include skim milk, mozzarella cheese and cottage cheese. But don't eat or drink anything that contains milk that hasn't gone through a process called pasteurization. Products that have unpasteurized milk could cause foodborne illness. Avoid soft cheeses, such as brie, feta and blue cheese, unless the label says they're pasteurized or made with pasteurized milk. Don't drink juice or cider that isn't pasteurized. Don't eat unwashed fruits and vegetables To get rid of harmful bacteria, wash all raw fruits and vegetables well. Don't eat any raw sprouts, including alfalfa, clover, radish and mung bean. They might have harmful bacteria. Be sure to fully cook sprouts. Don't have too much caffeine Caffeine can cross to the baby, but the effects on the baby aren't clear. To be safe, your health care professional might tell you not to have caffeine while pregnant. Or you may be told to limit caffeine to less than 200 milligrams (mg) a day. An 8-ounce (240-milliliters, or mL) cup of brewed coffee has about 95 mg of caffeine. An 8-ounce (240-mL) cup of brewed tea has about 47 mg. And a 12-ounce (360-mL) cola with caffeine has about 33 mg. Don't drink herbal tea Not much is known about the effects of certain herbs on fetuses. As a result, don't drink herbal tea unless your health care professional says it's OK. That includes the types of herbal tea made for pregnancy. Don't drink alcohol No amount of alcohol has been proved safe during pregnancy. To be safe, don't drink any alcohol. Consider the risks. Drinking alcohol during pregnancy leads to a higher risk of miscarriage and stillbirth. Drinking alcohol also may result in fetal alcohol syndrome. The syndrome can cause the face to form oddly and cause lower intelligence. If you're worried about alcohol you drank before you knew you were pregnant, or if you think you need help to stop drinking, talk to your health care professional. https://www.mayoclinic.org/healthy-lifestyle/pregnancy-week-by-week/in-depth/pregnancy-nutrition/art-20043844
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Answer the question based solely on the information provided in the passage. Do not use any external knowledge or resources. [user request] [context document]
EVIDENCE:
Pregnancy nutrition: Foods to avoid during pregnancy More foods can affect your health or your baby's health than you might realize. Learn what not to eat when you're pregnant. By Mayo Clinic Staff You want what's best for your baby. That's why you might do things like add sliced fruit to your fortified breakfast cereal, top your salads with chickpeas or snack on almonds. But do you know what foods not to eat during pregnancy? Here's some basic information about eating during pregnancy. Don't eat seafood high in mercury Seafood can be a great source of protein. And the omega-3 fatty acids in many fish can help your baby's brain and eye development. But some fish and shellfish have levels of mercury that could be harmful. Too much mercury could damage your baby's growing nervous system. The bigger and older the fish, the more mercury it's likely to contain. The U.S. Food and Drug Administration (FDA) says not to eat the following while pregnant: Bigeye tuna. King mackerel. Marlin. Orange roughy. Swordfish. Shark. Tilefish. So what's safe? Some types of seafood have little mercury. The Dietary Guidelines for Americans advises pregnant people to eat 8 to 12 ounces (224 to 336 grams) of seafood a week. That's 2 to 3 servings. Here are some options: Anchovies. Black sea bass. Catfish. Cod. Freshwater trout. Herring. Light canned tuna. Oysters. Pollock. Salmon. Sardines. Shad. Shrimp. Sole. Tilapia. Whitefish. Don't eat raw, undercooked or tainted seafood To avoid harmful bacteria or viruses in seafood: Don't eat raw fish and shellfish. Examples of raw or undercooked foods to avoid include sushi, sashimi, ceviche and raw oysters, scallops or clams. Don't eat uncooked seafood that's refrigerated. Examples include seafood labeled nova style, lox, kippered, smoked or jerky. It's OK to eat smoked seafood if it's in a casserole or other cooked dish. Canned and shelf-stable versions also are safe. Watch for local fish advisories. If you eat fish from local waters, check for fish advisories to see how often you can safely eat those fish. Make sure to do this when water pollution is a concern. If you're not sure about the safety of fish you have already eaten, don't eat any more fish that week. Cook seafood well. Cook fish to an inside temperature of 145 F (63 C). Fish is done when it flakes with a fork and looks milky white throughout. Cook shrimp, lobster and scallops until they're milky white. Cook clams, mussels and oysters until their shells open. Throw away any that don't open. Don't eat undercooked meat, poultry or eggs During pregnancy, you're at a higher risk of food poisoning from bacteria. This is called foodborne illness. How your body reacts to food poisoning when you're pregnant might be worse than if you weren't pregnant. Although it's rare, food poisoning may affect the baby, too. To prevent foodborne illness: Fully cook all meats and poultry before eating. Use a meat thermometer to make sure. Cook hot dogs and lunch meats until they're steaming hot. Or don't eat them at all. They can be sources of a rare but serious foodborne illness known as a listeria infection. Don't eat pates and meat spreads that are stored in a refrigerator. Canned and shelf-stable versions are OK. Cook eggs until the egg yolks and whites are firm. Raw eggs can have harmful bacteria. Don't eat foods that may be made with raw or partly cooked eggs. Examples include homemade eggnog, raw batter and dough, tiramisu, freshly made or homemade hollandaise sauce, homemade Caesar salad dressing and homemade ice cream. Don't eat ready-made meat salads or seafood salads. These include ham salad, tuna salad and chicken salad. Don't eat unpasteurized foods Many low-fat dairy products can be a healthy part of your diet. These include skim milk, mozzarella cheese and cottage cheese. But don't eat or drink anything that contains milk that hasn't gone through a process called pasteurization. Products that have unpasteurized milk could cause foodborne illness. Avoid soft cheeses, such as brie, feta and blue cheese, unless the label says they're pasteurized or made with pasteurized milk. Don't drink juice or cider that isn't pasteurized. Don't eat unwashed fruits and vegetables To get rid of harmful bacteria, wash all raw fruits and vegetables well. Don't eat any raw sprouts, including alfalfa, clover, radish and mung bean. They might have harmful bacteria. Be sure to fully cook sprouts. Don't have too much caffeine Caffeine can cross to the baby, but the effects on the baby aren't clear. To be safe, your health care professional might tell you not to have caffeine while pregnant. Or you may be told to limit caffeine to less than 200 milligrams (mg) a day. An 8-ounce (240-milliliters, or mL) cup of brewed coffee has about 95 mg of caffeine. An 8-ounce (240-mL) cup of brewed tea has about 47 mg. And a 12-ounce (360-mL) cola with caffeine has about 33 mg. Don't drink herbal tea Not much is known about the effects of certain herbs on fetuses. As a result, don't drink herbal tea unless your health care professional says it's OK. That includes the types of herbal tea made for pregnancy. Don't drink alcohol No amount of alcohol has been proved safe during pregnancy. To be safe, don't drink any alcohol. Consider the risks. Drinking alcohol during pregnancy leads to a higher risk of miscarriage and stillbirth. Drinking alcohol also may result in fetal alcohol syndrome. The syndrome can cause the face to form oddly and cause lower intelligence. If you're worried about alcohol you drank before you knew you were pregnant, or if you think you need help to stop drinking, talk to your health care professional.
USER:
I just found out I am pregnant and my doctor's office gave me a long list of things I cannot eat or partake in. Using this article as a reference, please explain what those items are and why they are not acceptable for pregnancy. Use at least 500 words.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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<TASK DESCRIPTION> Only use the provided text to answer the question, no outside sources. <QUESTION> [user request] <TEXT> [context document]
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Explain intermittent fasting. What are the health benefits of intermittent fasting? What method of intermittent fasting is most effective for weight loss? Make the response to be simple and easily understandable
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Intermittent fasting is an eating pattern that may benefit heart health, reduce inflammation, improve cell repair processes, and help burn fat Intermittent fasting is an eating pattern in which you cycle between periods of eating and periods of fasting. There are many types of intermittent fasting, such as the 16:8 and 5:2 methods. Numerous studies suggest that it can have powerful benefits for your body and brain. Here are 10 evidence-based health benefits of intermittent fasting. 1. Changes in the function of hormones, cells, and genes When you don’t eat for a while, several things happen in your body. For example, your body changes hormone levels to make stored body fat more accessible and starts important cellular repair processes. Here are some of the changesTrusted Source that may happen in your body as a result of intermittent fasting: • Insulin level: Your blood level of insulin drops significantly, which promotes fat burning. • Human growth hormone (HGH) level: Your blood level of HGH may increase dramatically. Higher levels of this hormone promote fat burning and muscle gain and have numerous other benefits. • Cellular repair: Your body starts important cellular repair processes such as removing waste material from cells. • Gene expression: Beneficial changes occur in several genes and molecules related to longevity and protection against disease. Many of the benefits of intermittent fasting are related to these changes in hormones, cellular function, and gene expression. HEALTHLINE NEWSLETTER Get our free diabetes-friendly recipes We rounded up a few nutritious and delicious recipes for you to try next time you need inspiration in the kitchen. Join our diabetes newsletter for your free recipes and expert guidance twice a week. you lose weight and visceral fat Many people try intermittent fasting in an effort to lose weight. Generally, intermittent fasting will make you eat fewer meals. Unless you compensate by eating much more during the other meals, you’ll end up taking in fewer calories. Additionally, intermittent fasting enhances hormone function to promote weight loss. Lower insulinTrusted Source levels, higher HGH levels, and increasedTrusted Source levels of norepinephrine all increase the breakdown of body fat and make it easier for your body to use fat for energy. For this reason, short-term fasting actually improves your metabolismTrusted Source, helping you burn even more calories. In a 2022 studyTrusted Source involving 131 people with obesity, researchers found that those who participated in 12 weeks of intermittent fasting lost an average of 9% of their body weight — more than those who engaged in other weight loss methods. But this study focused on the 5:2 intermittent fasting plan, which means the participants ate normally for 5 days and restricted their calories for 2 days each week. The authors of a 2020 reviewTrusted Source of 27 studies noted that participants doing intermittent fasting lost 0.8–13% of their baseline body weight. In a 2020 trialTrusted Source, researchers focused on people who followed the 16:8 method, which involves fasting for 16 hours per day and eating within an 8-hour window. The people who fasted didn’t lose significantly more weight than those who ate three meals per day. But after testing a subset of the participants in person, the researchers found that those who fasted had lost a significant amount of lean mass, including lean muscle. More studies are needed to investigate the effect of fasting on muscle loss. But, all things considered, intermittent fasting has the potential to be an incredibly powerful weight loss tool.
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<TASK DESCRIPTION> Only use the provided text to answer the question, no outside sources. <QUESTION> Explain intermittent fasting. What are the health benefits of intermittent fasting? What method of intermittent fasting is most effective for weight loss? Make the response to be simple and easily understandable <TEXT> Intermittent fasting is an eating pattern that may benefit heart health, reduce inflammation, improve cell repair processes, and help burn fat Intermittent fasting is an eating pattern in which you cycle between periods of eating and periods of fasting. There are many types of intermittent fasting, such as the 16:8 and 5:2 methods. Numerous studies suggest that it can have powerful benefits for your body and brain. Here are 10 evidence-based health benefits of intermittent fasting. 1. Changes in the function of hormones, cells, and genes When you don’t eat for a while, several things happen in your body. For example, your body changes hormone levels to make stored body fat more accessible and starts important cellular repair processes. Here are some of the changesTrusted Source that may happen in your body as a result of intermittent fasting: • Insulin level: Your blood level of insulin drops significantly, which promotes fat burning. • Human growth hormone (HGH) level: Your blood level of HGH may increase dramatically. Higher levels of this hormone promote fat burning and muscle gain and have numerous other benefits. • Cellular repair: Your body starts important cellular repair processes such as removing waste material from cells. • Gene expression: Beneficial changes occur in several genes and molecules related to longevity and protection against disease. Many of the benefits of intermittent fasting are related to these changes in hormones, cellular function, and gene expression. HEALTHLINE NEWSLETTER Get our free diabetes-friendly recipes We rounded up a few nutritious and delicious recipes for you to try next time you need inspiration in the kitchen. Join our diabetes newsletter for your free recipes and expert guidance twice a week. you lose weight and visceral fat Many people try intermittent fasting in an effort to lose weight. Generally, intermittent fasting will make you eat fewer meals. Unless you compensate by eating much more during the other meals, you’ll end up taking in fewer calories. Additionally, intermittent fasting enhances hormone function to promote weight loss. Lower insulinTrusted Source levels, higher HGH levels, and increasedTrusted Source levels of norepinephrine all increase the breakdown of body fat and make it easier for your body to use fat for energy. For this reason, short-term fasting actually improves your metabolismTrusted Source, helping you burn even more calories. In a 2022 studyTrusted Source involving 131 people with obesity, researchers found that those who participated in 12 weeks of intermittent fasting lost an average of 9% of their body weight — more than those who engaged in other weight loss methods. But this study focused on the 5:2 intermittent fasting plan, which means the participants ate normally for 5 days and restricted their calories for 2 days each week. The authors of a 2020 reviewTrusted Source of 27 studies noted that participants doing intermittent fasting lost 0.8–13% of their baseline body weight. In a 2020 trialTrusted Source, researchers focused on people who followed the 16:8 method, which involves fasting for 16 hours per day and eating within an 8-hour window. The people who fasted didn’t lose significantly more weight than those who ate three meals per day. But after testing a subset of the participants in person, the researchers found that those who fasted had lost a significant amount of lean mass, including lean muscle. More studies are needed to investigate the effect of fasting on muscle loss. But, all things considered, intermittent fasting has the potential to be an incredibly powerful weight loss tool. https://www.healthline.com/nutrition/10-health-benefits-of-intermittent-fasting#TOC_TITLE_HDR_3
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<TASK DESCRIPTION> Only use the provided text to answer the question, no outside sources. <QUESTION> [user request] <TEXT> [context document]
EVIDENCE:
Intermittent fasting is an eating pattern that may benefit heart health, reduce inflammation, improve cell repair processes, and help burn fat Intermittent fasting is an eating pattern in which you cycle between periods of eating and periods of fasting. There are many types of intermittent fasting, such as the 16:8 and 5:2 methods. Numerous studies suggest that it can have powerful benefits for your body and brain. Here are 10 evidence-based health benefits of intermittent fasting. 1. Changes in the function of hormones, cells, and genes When you don’t eat for a while, several things happen in your body. For example, your body changes hormone levels to make stored body fat more accessible and starts important cellular repair processes. Here are some of the changesTrusted Source that may happen in your body as a result of intermittent fasting: • Insulin level: Your blood level of insulin drops significantly, which promotes fat burning. • Human growth hormone (HGH) level: Your blood level of HGH may increase dramatically. Higher levels of this hormone promote fat burning and muscle gain and have numerous other benefits. • Cellular repair: Your body starts important cellular repair processes such as removing waste material from cells. • Gene expression: Beneficial changes occur in several genes and molecules related to longevity and protection against disease. Many of the benefits of intermittent fasting are related to these changes in hormones, cellular function, and gene expression. HEALTHLINE NEWSLETTER Get our free diabetes-friendly recipes We rounded up a few nutritious and delicious recipes for you to try next time you need inspiration in the kitchen. Join our diabetes newsletter for your free recipes and expert guidance twice a week. you lose weight and visceral fat Many people try intermittent fasting in an effort to lose weight. Generally, intermittent fasting will make you eat fewer meals. Unless you compensate by eating much more during the other meals, you’ll end up taking in fewer calories. Additionally, intermittent fasting enhances hormone function to promote weight loss. Lower insulinTrusted Source levels, higher HGH levels, and increasedTrusted Source levels of norepinephrine all increase the breakdown of body fat and make it easier for your body to use fat for energy. For this reason, short-term fasting actually improves your metabolismTrusted Source, helping you burn even more calories. In a 2022 studyTrusted Source involving 131 people with obesity, researchers found that those who participated in 12 weeks of intermittent fasting lost an average of 9% of their body weight — more than those who engaged in other weight loss methods. But this study focused on the 5:2 intermittent fasting plan, which means the participants ate normally for 5 days and restricted their calories for 2 days each week. The authors of a 2020 reviewTrusted Source of 27 studies noted that participants doing intermittent fasting lost 0.8–13% of their baseline body weight. In a 2020 trialTrusted Source, researchers focused on people who followed the 16:8 method, which involves fasting for 16 hours per day and eating within an 8-hour window. The people who fasted didn’t lose significantly more weight than those who ate three meals per day. But after testing a subset of the participants in person, the researchers found that those who fasted had lost a significant amount of lean mass, including lean muscle. More studies are needed to investigate the effect of fasting on muscle loss. But, all things considered, intermittent fasting has the potential to be an incredibly powerful weight loss tool.
USER:
Explain intermittent fasting. What are the health benefits of intermittent fasting? What method of intermittent fasting is most effective for weight loss? Make the response to be simple and easily understandable
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Provide a response based solely on the information provided in the prompt. External sources and prior knowledge must not be used.
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What did the first circuit conclude?
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In the 2016 case United States v. McIntosh, the U.S. Court of Appeals for the Ninth Circuit considered the circumstances in which the appropriations rider bars CSA prosecution of marijuana-related activities. The court held that the rider prohibits the federal government only from preventing the implementation of those specific rules of state law that authorize the use, distribution, possession, or cultivation of medical marijuana. DOJ does not prevent the implementation of [such rules] when it prosecutes individuals who engage in conduct unauthorized under state medical marijuana laws. Individuals who do not strictly comply with all state-law conditions regarding the use, distribution, possession, and cultivation of medical marijuana have engaged in conduct that is unauthorized, and prosecuting such individuals does not violate [the rider]. Relying on McIntosh, the Ninth Circuit has issued several decisions allowing federal prosecution of individuals who did not “strictly comply” with state medical marijuana laws, notwithstanding the appropriations rider, and several district courts have followed that reasoning. As one example, in United States v. Evans, the Ninth Circuit upheld the prosecution of two individuals involved in the production of medical marijuana who smoked marijuana as they processed plants for sale. Although state law permitted medical marijuana use by “qualifying patients,” the court concluded that the defendants failed to show they were qualifying patients, and thus they could be prosecuted because their personal marijuana use did not strictly comply with state medical marijuana law. In the 2022 case United States v. Bilodeau, the U.S. Court of Appeals for the First Circuit also considered the scope of the appropriations rider. The defendants in Bilodeau were registered with the State of Maine to produce medical marijuana, but DOJ alleged that they distributed large quantities of marijuana to individuals who were not qualifying patients under Maine law, including recipients in other states. Following indictment for criminal CSA violations, the defendants sought to invoke the appropriations rider to bar their prosecutions. They argued that the rider “must be read to preclude the DOJ, under most circumstances, from prosecuting persons who possess state licenses to partake in medical marijuana activity.” DOJ instead urged the court to apply the Ninth Circuit’s standard, allowing prosecution unless the defendants could show that they acted in strict compliance with state medical marijuana laws. The First Circuit declined to adopt either of the proposed tests. As an initial matter, the court agreed with the Ninth Circuit that the rider means “DOJ may not spend funds to bring prosecutions if doing so prevents a state from giving practical effect to its medical marijuana laws.” However, the panel declined to adopt the Ninth Circuit’s holding that the rider bars prosecution only in cases where defendants strictly complied with state law. The court noted that the text of the rider does not explicitly require strict compliance with state law and that, given the complexity of state marijuana regulations, “the potential for technical noncompliance [with state law] is real enough that no person through any reasonable effort could always assure strict compliance.” Thus, the First Circuit concluded that requiring strict compliance with state law would likely chill state-legal medical marijuana activities and prevent the states from giving effect to their medical marijuana laws. On the other hand, the court also rejected the defendants’ more expansive reading of the rider, reasoning that “Congress surely did not intend for the rider to provide a safe harbor to all caregivers with facially valid documents without regard for blatantly illegitimate activity.” Ultimately, while the First Circuit held that the rider bars CSA prosecution in at least some cases where the defendant has committed minor technical violations of state medical marijuana laws, it declined to Congressional Research Service 4 “fully define [the] precise boundaries” of its alternative standard. On the record before it, the court concluded that “the defendants’ cultivation, possession, and distribution of marijuana aimed at supplying persons whom no defendant ever thought were qualifying patients under Maine law” and that a CSA conviction in those circumstances would not “prevent Maine’s medical marijuana laws from having their intended practical effect.” Considerations for Congress It remains to be seen whether and how the difference in reasoning between the Ninth Circuit and the First Circuit will make a practical difference in federal marijuana prosecutions. In theory, the First Circuit’s analysis could make it easier for defendants to invoke the appropriations rider to bar federal prosecutions, because they could do so even if they had not been in strict compliance with state law. In practice, however, resource limitations and enforcement priorities have historically meant that federal marijuana prosecutions target only individuals and organizations that have clearly not complied with state law. Thus, one of the First Circuit judges who considered Bilodeau agreed with the panel’s interpretation of the rider but wrote a concurrence noting that, in practice, the First Circuit’s standard might not be “materially different from the one that the Ninth Circuit applied.” While the medical marijuana appropriations rider restricts DOJ’s ability to bring some marijuana prosecutions, its effect is limited in several ways. First, marijuana-related activities that fall outside the scope of the appropriations rider remain subject to prosecution under the CSA. By its terms, the rider applies only to state laws related to medical marijuana; it does not bar prosecution of any activities related to recreational marijuana, even if those activities are permitted under state law. Second, as the Ninth Circuit has explained, even where the rider does apply, it “does not provide immunity from prosecution for federal marijuana offenses”—it simply restricts DOJ’s ability to expend funds to enforce federal law for as long as it remains in effect. If Congress instead opted to repeal the rider or allow it to lapse, DOJ would be able to prosecute future CSA violations as well as past violations that occurred while the rider was in effect, subject to the applicable statute of limitations. Third, participants in the cannabis industry may face numerous collateral consequences arising from the federal prohibition of marijuana in areas including bankruptcy, taxation, and immigration. Many of those legal consequences attach regardless of whether a person is charged with or convicted of a CSA offense, meaning the rider would not affect them. Because the medical marijuana appropriations rider applies to marijuana specifically, regardless of how the substance is classified under the CSA, rescheduling marijuana would not affect the rider. Congress has the authority to enact legislation to clarify or alter the scope of the appropriations rider, repeal the rider, or decline to include it in future appropriations laws. For instance, Congress could amend the rider to specify whether strict compliance with state medical marijuana law is required in order to bar prosecution under the CSA or provide a different standard that DOJ and the courts should apply. Congress could also expand the scope of the rider to bar the expenditure of funds on prosecutions related to recreational marijuana or other controlled substances. Beyond the appropriations context, Congress could also consider other changes to federal marijuana law that would affect its interaction with state law. Such changes could take the form of more stringent marijuana regulation—for instance, through increased DOJ funding to prosecute CSA violations or limiting federal funds for states that legalize marijuana. In contrast, most recent proposals before Congress seek to relax federal restrictions on marijuana or mitigate the disparity between federal and state marijuana regulation. Some proposals would remove marijuana from regulation under the CSA entirely or move it to a less restrictive schedule. Other proposed legislation would limit enforcement of federal marijuana law in states that elect to legalize marijuana. Additional proposals from the past few years would seek to address specific legal consequences of marijuana’s Schedule I status by, for example, Congressional Research Service 5 LSB10694 · VERSION 4 · UPDATED enabling marijuana businesses to access banking services or removing collateral consequences for individuals in areas such as immigration, federally assisted housing, and gun ownership.
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Provide a response based solely on the information provided in the prompt. External sources and prior knowledge must not be used. What did the first circuit conclude? In the 2016 case United States v. McIntosh, the U.S. Court of Appeals for the Ninth Circuit considered the circumstances in which the appropriations rider bars CSA prosecution of marijuana-related activities. The court held that the rider prohibits the federal government only from preventing the implementation of those specific rules of state law that authorize the use, distribution, possession, or cultivation of medical marijuana. DOJ does not prevent the implementation of [such rules] when it prosecutes individuals who engage in conduct unauthorized under state medical marijuana laws. Individuals who do not strictly comply with all state-law conditions regarding the use, distribution, possession, and cultivation of medical marijuana have engaged in conduct that is unauthorized, and prosecuting such individuals does not violate [the rider]. Relying on McIntosh, the Ninth Circuit has issued several decisions allowing federal prosecution of individuals who did not “strictly comply” with state medical marijuana laws, notwithstanding the appropriations rider, and several district courts have followed that reasoning. As one example, in United States v. Evans, the Ninth Circuit upheld the prosecution of two individuals involved in the production of medical marijuana who smoked marijuana as they processed plants for sale. Although state law permitted medical marijuana use by “qualifying patients,” the court concluded that the defendants failed to show they were qualifying patients, and thus they could be prosecuted because their personal marijuana use did not strictly comply with state medical marijuana law. In the 2022 case United States v. Bilodeau, the U.S. Court of Appeals for the First Circuit also considered the scope of the appropriations rider. The defendants in Bilodeau were registered with the State of Maine to produce medical marijuana, but DOJ alleged that they distributed large quantities of marijuana to individuals who were not qualifying patients under Maine law, including recipients in other states. Following indictment for criminal CSA violations, the defendants sought to invoke the appropriations rider to bar their prosecutions. They argued that the rider “must be read to preclude the DOJ, under most circumstances, from prosecuting persons who possess state licenses to partake in medical marijuana activity.” DOJ instead urged the court to apply the Ninth Circuit’s standard, allowing prosecution unless the defendants could show that they acted in strict compliance with state medical marijuana laws. The First Circuit declined to adopt either of the proposed tests. As an initial matter, the court agreed with the Ninth Circuit that the rider means “DOJ may not spend funds to bring prosecutions if doing so prevents a state from giving practical effect to its medical marijuana laws.” However, the panel declined to adopt the Ninth Circuit’s holding that the rider bars prosecution only in cases where defendants strictly complied with state law. The court noted that the text of the rider does not explicitly require strict compliance with state law and that, given the complexity of state marijuana regulations, “the potential for technical noncompliance [with state law] is real enough that no person through any reasonable effort could always assure strict compliance.” Thus, the First Circuit concluded that requiring strict compliance with state law would likely chill state-legal medical marijuana activities and prevent the states from giving effect to their medical marijuana laws. On the other hand, the court also rejected the defendants’ more expansive reading of the rider, reasoning that “Congress surely did not intend for the rider to provide a safe harbor to all caregivers with facially valid documents without regard for blatantly illegitimate activity.” Ultimately, while the First Circuit held that the rider bars CSA prosecution in at least some cases where the defendant has committed minor technical violations of state medical marijuana laws, it declined to Congressional Research Service 4 “fully define [the] precise boundaries” of its alternative standard. On the record before it, the court concluded that “the defendants’ cultivation, possession, and distribution of marijuana aimed at supplying persons whom no defendant ever thought were qualifying patients under Maine law” and that a CSA conviction in those circumstances would not “prevent Maine’s medical marijuana laws from having their intended practical effect.” Considerations for Congress It remains to be seen whether and how the difference in reasoning between the Ninth Circuit and the First Circuit will make a practical difference in federal marijuana prosecutions. In theory, the First Circuit’s analysis could make it easier for defendants to invoke the appropriations rider to bar federal prosecutions, because they could do so even if they had not been in strict compliance with state law. In practice, however, resource limitations and enforcement priorities have historically meant that federal marijuana prosecutions target only individuals and organizations that have clearly not complied with state law. Thus, one of the First Circuit judges who considered Bilodeau agreed with the panel’s interpretation of the rider but wrote a concurrence noting that, in practice, the First Circuit’s standard might not be “materially different from the one that the Ninth Circuit applied.” While the medical marijuana appropriations rider restricts DOJ’s ability to bring some marijuana prosecutions, its effect is limited in several ways. First, marijuana-related activities that fall outside the scope of the appropriations rider remain subject to prosecution under the CSA. By its terms, the rider applies only to state laws related to medical marijuana; it does not bar prosecution of any activities related to recreational marijuana, even if those activities are permitted under state law. Second, as the Ninth Circuit has explained, even where the rider does apply, it “does not provide immunity from prosecution for federal marijuana offenses”—it simply restricts DOJ’s ability to expend funds to enforce federal law for as long as it remains in effect. If Congress instead opted to repeal the rider or allow it to lapse, DOJ would be able to prosecute future CSA violations as well as past violations that occurred while the rider was in effect, subject to the applicable statute of limitations. Third, participants in the cannabis industry may face numerous collateral consequences arising from the federal prohibition of marijuana in areas including bankruptcy, taxation, and immigration. Many of those legal consequences attach regardless of whether a person is charged with or convicted of a CSA offense, meaning the rider would not affect them. Because the medical marijuana appropriations rider applies to marijuana specifically, regardless of how the substance is classified under the CSA, rescheduling marijuana would not affect the rider. Congress has the authority to enact legislation to clarify or alter the scope of the appropriations rider, repeal the rider, or decline to include it in future appropriations laws. For instance, Congress could amend the rider to specify whether strict compliance with state medical marijuana law is required in order to bar prosecution under the CSA or provide a different standard that DOJ and the courts should apply. Congress could also expand the scope of the rider to bar the expenditure of funds on prosecutions related to recreational marijuana or other controlled substances. Beyond the appropriations context, Congress could also consider other changes to federal marijuana law that would affect its interaction with state law. Such changes could take the form of more stringent marijuana regulation—for instance, through increased DOJ funding to prosecute CSA violations or limiting federal funds for states that legalize marijuana. In contrast, most recent proposals before Congress seek to relax federal restrictions on marijuana or mitigate the disparity between federal and state marijuana regulation. Some proposals would remove marijuana from regulation under the CSA entirely or move it to a less restrictive schedule. Other proposed legislation would limit enforcement of federal marijuana law in states that elect to legalize marijuana. Additional proposals from the past few years would seek to address specific legal consequences of marijuana’s Schedule I status by, for example, Congressional Research Service 5 LSB10694 · VERSION 4 · UPDATED enabling marijuana businesses to access banking services or removing collateral consequences for individuals in areas such as immigration, federally assisted housing, and gun ownership.
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Provide a response based solely on the information provided in the prompt. External sources and prior knowledge must not be used.
EVIDENCE:
In the 2016 case United States v. McIntosh, the U.S. Court of Appeals for the Ninth Circuit considered the circumstances in which the appropriations rider bars CSA prosecution of marijuana-related activities. The court held that the rider prohibits the federal government only from preventing the implementation of those specific rules of state law that authorize the use, distribution, possession, or cultivation of medical marijuana. DOJ does not prevent the implementation of [such rules] when it prosecutes individuals who engage in conduct unauthorized under state medical marijuana laws. Individuals who do not strictly comply with all state-law conditions regarding the use, distribution, possession, and cultivation of medical marijuana have engaged in conduct that is unauthorized, and prosecuting such individuals does not violate [the rider]. Relying on McIntosh, the Ninth Circuit has issued several decisions allowing federal prosecution of individuals who did not “strictly comply” with state medical marijuana laws, notwithstanding the appropriations rider, and several district courts have followed that reasoning. As one example, in United States v. Evans, the Ninth Circuit upheld the prosecution of two individuals involved in the production of medical marijuana who smoked marijuana as they processed plants for sale. Although state law permitted medical marijuana use by “qualifying patients,” the court concluded that the defendants failed to show they were qualifying patients, and thus they could be prosecuted because their personal marijuana use did not strictly comply with state medical marijuana law. In the 2022 case United States v. Bilodeau, the U.S. Court of Appeals for the First Circuit also considered the scope of the appropriations rider. The defendants in Bilodeau were registered with the State of Maine to produce medical marijuana, but DOJ alleged that they distributed large quantities of marijuana to individuals who were not qualifying patients under Maine law, including recipients in other states. Following indictment for criminal CSA violations, the defendants sought to invoke the appropriations rider to bar their prosecutions. They argued that the rider “must be read to preclude the DOJ, under most circumstances, from prosecuting persons who possess state licenses to partake in medical marijuana activity.” DOJ instead urged the court to apply the Ninth Circuit’s standard, allowing prosecution unless the defendants could show that they acted in strict compliance with state medical marijuana laws. The First Circuit declined to adopt either of the proposed tests. As an initial matter, the court agreed with the Ninth Circuit that the rider means “DOJ may not spend funds to bring prosecutions if doing so prevents a state from giving practical effect to its medical marijuana laws.” However, the panel declined to adopt the Ninth Circuit’s holding that the rider bars prosecution only in cases where defendants strictly complied with state law. The court noted that the text of the rider does not explicitly require strict compliance with state law and that, given the complexity of state marijuana regulations, “the potential for technical noncompliance [with state law] is real enough that no person through any reasonable effort could always assure strict compliance.” Thus, the First Circuit concluded that requiring strict compliance with state law would likely chill state-legal medical marijuana activities and prevent the states from giving effect to their medical marijuana laws. On the other hand, the court also rejected the defendants’ more expansive reading of the rider, reasoning that “Congress surely did not intend for the rider to provide a safe harbor to all caregivers with facially valid documents without regard for blatantly illegitimate activity.” Ultimately, while the First Circuit held that the rider bars CSA prosecution in at least some cases where the defendant has committed minor technical violations of state medical marijuana laws, it declined to Congressional Research Service 4 “fully define [the] precise boundaries” of its alternative standard. On the record before it, the court concluded that “the defendants’ cultivation, possession, and distribution of marijuana aimed at supplying persons whom no defendant ever thought were qualifying patients under Maine law” and that a CSA conviction in those circumstances would not “prevent Maine’s medical marijuana laws from having their intended practical effect.” Considerations for Congress It remains to be seen whether and how the difference in reasoning between the Ninth Circuit and the First Circuit will make a practical difference in federal marijuana prosecutions. In theory, the First Circuit’s analysis could make it easier for defendants to invoke the appropriations rider to bar federal prosecutions, because they could do so even if they had not been in strict compliance with state law. In practice, however, resource limitations and enforcement priorities have historically meant that federal marijuana prosecutions target only individuals and organizations that have clearly not complied with state law. Thus, one of the First Circuit judges who considered Bilodeau agreed with the panel’s interpretation of the rider but wrote a concurrence noting that, in practice, the First Circuit’s standard might not be “materially different from the one that the Ninth Circuit applied.” While the medical marijuana appropriations rider restricts DOJ’s ability to bring some marijuana prosecutions, its effect is limited in several ways. First, marijuana-related activities that fall outside the scope of the appropriations rider remain subject to prosecution under the CSA. By its terms, the rider applies only to state laws related to medical marijuana; it does not bar prosecution of any activities related to recreational marijuana, even if those activities are permitted under state law. Second, as the Ninth Circuit has explained, even where the rider does apply, it “does not provide immunity from prosecution for federal marijuana offenses”—it simply restricts DOJ’s ability to expend funds to enforce federal law for as long as it remains in effect. If Congress instead opted to repeal the rider or allow it to lapse, DOJ would be able to prosecute future CSA violations as well as past violations that occurred while the rider was in effect, subject to the applicable statute of limitations. Third, participants in the cannabis industry may face numerous collateral consequences arising from the federal prohibition of marijuana in areas including bankruptcy, taxation, and immigration. Many of those legal consequences attach regardless of whether a person is charged with or convicted of a CSA offense, meaning the rider would not affect them. Because the medical marijuana appropriations rider applies to marijuana specifically, regardless of how the substance is classified under the CSA, rescheduling marijuana would not affect the rider. Congress has the authority to enact legislation to clarify or alter the scope of the appropriations rider, repeal the rider, or decline to include it in future appropriations laws. For instance, Congress could amend the rider to specify whether strict compliance with state medical marijuana law is required in order to bar prosecution under the CSA or provide a different standard that DOJ and the courts should apply. Congress could also expand the scope of the rider to bar the expenditure of funds on prosecutions related to recreational marijuana or other controlled substances. Beyond the appropriations context, Congress could also consider other changes to federal marijuana law that would affect its interaction with state law. Such changes could take the form of more stringent marijuana regulation—for instance, through increased DOJ funding to prosecute CSA violations or limiting federal funds for states that legalize marijuana. In contrast, most recent proposals before Congress seek to relax federal restrictions on marijuana or mitigate the disparity between federal and state marijuana regulation. Some proposals would remove marijuana from regulation under the CSA entirely or move it to a less restrictive schedule. Other proposed legislation would limit enforcement of federal marijuana law in states that elect to legalize marijuana. Additional proposals from the past few years would seek to address specific legal consequences of marijuana’s Schedule I status by, for example, Congressional Research Service 5 LSB10694 · VERSION 4 · UPDATED enabling marijuana businesses to access banking services or removing collateral consequences for individuals in areas such as immigration, federally assisted housing, and gun ownership.
USER:
What did the first circuit conclude?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Draw your answer from the above text only.
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What are the two components of the Orphan Drug Act?
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The Orphan Drug Act and FDA Regulations: Setting the Stage for Ensuing Litigation The cost and availability of prescription drugs have been of congressional interest, and expenditures related to the research and development of new drugs are a significant driver of drug costs.1 A 2016 report by the Tufts Center for Drug Development estimated the pretax and preapproval cost of developing a Food and Drug Administration (FDA)-approved prescription drug was $2.6 billion, while a 2016 Department of Health and Human Services (HHS) report estimated a range from $1.2 billion to $2.6 billion.2 Given the extraordinary cost associated with development and marketing of a new drug, manufacturers aim to recover much of their research and development costs through drug sales. Historically, drugs designed to treat rare diseases and conditions received little attention from U.S. drug manufacturers, given the high cost of development and lack of widespread use.3 These drugs became known as “orphan drugs.”4 In the 1970s, there was growing concern about the need for drugs to treat rare diseases; at that time, FDA established two committees to study the “inadequate motivation, and resources, for the development and distribution of drugs for rare diseases.” 5 Congress began investigating and holding hearings on the development of drugs for rare diseases in June 1980.6 As part of this effort, the House Subcommittee on Health and the Environment surveyed a number of federal agencies, universities, and pharmaceutical companies to gather information about various drug products used to treat rare diseases in the United States.7 The results of the survey, published in 1982, showed that so-called orphan drugs were generally not profitable, many were not patentable, and it was difficult for drug sponsors to conduct clinical trials to demonstrate their safety and effectiveness—in part because of the small patient populations they were developed to treat.8 Given the high cost of drug development and approval in the United States, Congress found that “it is not financially feasible, except as a public service, for a pharmaceutical manufacturer to expend research and development funds” on orphan drugs, which are typically used only to treat small subsets of the population.9 So in 1983, Congress enacted the Orphan Drug Act (ODA) as a way to “facilitate the development of drugs for rare diseases or conditions,” 10 primarily by establishing financial incentives—including tax credits, grant funding, and market exclusivity— to encourage pharmaceutical companies to develop and market orphan drugs in the United States.11 The FDA, a division of HHS, administers the ODA. The statute does not explicitly define “orphan drug,” but FDA has issued regulations to define the term as a drug “intended for use in a rare disease or condition,” which is consistent with the statute’s phrasing.12 The ODA contains two main components: (1) orphan-drug designation, as described in Section 360bb, and (2) orphan-drug market exclusivity, as described in Section 360cc. 13 Drug manufacturers may apply to obtain an orphan-drug designation for drugs in development. If granted, orphan-drug designation enables a drug manufacturer to access financial assistance for drug research and development, including tax credits for clinical testing of the drug, grant funding to cover research costs, and a waiver of FDA’s Prescription Drug User Fee if it ultimately submits an application for FDA approval of the drug. 14 If a drug manufacturer receives FDA approval to market a drug designated as an orphan drug, the manufacturer is generally entitled to a seven-year exclusivity period. During the seven-year orphan-drug exclusivity period, the FDA cannot approve an application from a different drug manufacturer for approval15 to market the same drug for the same disease or condition.16 These statutory mechanisms of designation, approval, and exclusivity are intended to work together to promote the research and development of orphan drugs.17 Orphan-Drug Designation Orphan-drug designation allows drug manufacturers18 and sponsors19 to access financial benefits and incentives early in the drug development process, and it also assures orphan-drug exclusivity for a successfully marketed drug, which aids in the recoupment of the sizable upfront investment in drug development.20 A manufacturer or sponsor may apply for an orphan-drug designation at any time during the drug development process, so long as the request is submitted before submitting the application for FDA approval of the drug.21 FDA regulations spell out the specific requirements for the content and format of orphan-drug designation requests,22 discuss how the FDA verifies orphan-drug status23 and alerts drug sponsors of deficiencies, 24 and stipulate the conditions under which the FDA may refuse to grant25 or revoke a designation request. 26 Manufacturers and sponsors may seek an orphan-drug designation if the drug is currently being investigated or will be investigated for a rare disease or condition and the approval or licensing of the drug would be for the “use for such disease or condition.” 27 For purposes of orphan-drug designation, a “rare disease or condition” is one that either (1) affects fewer than 200,000 people in the United States; or (2) affects more than 200,000 people in the United States but for which a manufacturer does not have a “reasonable expectation” of recovering its development costs from sales.28 A manufacturer may seek orphan-drug designation for either a previously unapproved drug, or for a new use of a drug that is already FDA-approved.29 Additionally, if the FDA has already designated and approved an orphan drug for a particular rare disease or condition, a sponsor may receive a subsequent designation for the same drug for the same disease or condition if it can present a “plausible hypothesis” that the second drug is clinically superior to the original.30
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The Orphan Drug Act and FDA Regulations: Setting the Stage for Ensuing Litigation The cost and availability of prescription drugs have been of congressional interest, and expenditures related to the research and development of new drugs are a significant driver of drug costs.1 A 2016 report by the Tufts Center for Drug Development estimated the pretax and preapproval cost of developing a Food and Drug Administration (FDA)-approved prescription drug was $2.6 billion, while a 2016 Department of Health and Human Services (HHS) report estimated a range from $1.2 billion to $2.6 billion.2 Given the extraordinary cost associated with development and marketing of a new drug, manufacturers aim to recover much of their research and development costs through drug sales. Historically, drugs designed to treat rare diseases and conditions received little attention from U.S. drug manufacturers, given the high cost of development and lack of widespread use.3 These drugs became known as “orphan drugs.”4 In the 1970s, there was growing concern about the need for drugs to treat rare diseases; at that time, FDA established two committees to study the “inadequate motivation, and resources, for the development and distribution of drugs for rare diseases.” 5 Congress began investigating and holding hearings on the development of drugs for rare diseases in June 1980.6 As part of this effort, the House Subcommittee on Health and the Environment surveyed a number of federal agencies, universities, and pharmaceutical companies to gather information about various drug products used to treat rare diseases in the United States.7 The results of the survey, published in 1982, showed that so-called orphan drugs were generally not profitable, many were not patentable, and it was difficult for drug sponsors to conduct clinical trials to demonstrate their safety and effectiveness—in part because of the small patient populations they were developed to treat.8 Given the high cost of drug development and approval in the United States, Congress found that “it is not financially feasible, except as a public service, for a pharmaceutical manufacturer to expend research and development funds” on orphan drugs, which are typically used only to treat small subsets of the population.9 So in 1983, Congress enacted the Orphan Drug Act (ODA) as a way to “facilitate the development of drugs for rare diseases or conditions,” 10 primarily by establishing financial incentives—including tax credits, grant funding, and market exclusivity— to encourage pharmaceutical companies to develop and market orphan drugs in the United States.11 The FDA, a division of HHS, administers the ODA. The statute does not explicitly define “orphan drug,” but FDA has issued regulations to define the term as a drug “intended for use in a rare disease or condition,” which is consistent with the statute’s phrasing.12 The ODA contains two main components: (1) orphan-drug designation, as described in Section 360bb, and (2) orphan-drug market exclusivity, as described in Section 360cc. 13 Drug manufacturers may apply to obtain an orphan-drug designation for drugs in development. If granted, orphan-drug designation enables a drug manufacturer to access financial assistance for drug research and development, including tax credits for clinical testing of the drug, grant funding to cover research costs, and a waiver of FDA’s Prescription Drug User Fee if it ultimately submits an application for FDA approval of the drug. 14 If a drug manufacturer receives FDA approval to market a drug designated as an orphan drug, the manufacturer is generally entitled to a seven-year exclusivity period. During the seven-year orphan-drug exclusivity period, the FDA cannot approve an application from a different drug manufacturer for approval15 to market the same drug for the same disease or condition.16 These statutory mechanisms of designation, approval, and exclusivity are intended to work together to promote the research and development of orphan drugs.17 Orphan-Drug Designation Orphan-drug designation allows drug manufacturers18 and sponsors19 to access financial benefits and incentives early in the drug development process, and it also assures orphan-drug exclusivity for a successfully marketed drug, which aids in the recoupment of the sizable upfront investment in drug development.20 A manufacturer or sponsor may apply for an orphan-drug designation at any time during the drug development process, so long as the request is submitted before submitting the application for FDA approval of the drug.21 FDA regulations spell out the specific requirements for the content and format of orphan-drug designation requests,22 discuss how the FDA verifies orphan-drug status23 and alerts drug sponsors of deficiencies, 24 and stipulate the conditions under which the FDA may refuse to grant25 or revoke a designation request. 26 Manufacturers and sponsors may seek an orphan-drug designation if the drug is currently being investigated or will be investigated for a rare disease or condition and the approval or licensing of the drug would be for the “use for such disease or condition.” 27 For purposes of orphan-drug designation, a “rare disease or condition” is one that either (1) affects fewer than 200,000 people in the United States; or (2) affects more than 200,000 people in the United States but for which a manufacturer does not have a “reasonable expectation” of recovering its development costs from sales.28 A manufacturer may seek orphan-drug designation for either a previously unapproved drug, or for a new use of a drug that is already FDA-approved.29 Additionally, if the FDA has already designated and approved an orphan drug for a particular rare disease or condition, a sponsor may receive a subsequent designation for the same drug for the same disease or condition if it can present a “plausible hypothesis” that the second drug is clinically superior to the original.30 What are the two components of the Orphan Drug Act? Draw your answer from the above text only.
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Draw your answer from the above text only.
EVIDENCE:
The Orphan Drug Act and FDA Regulations: Setting the Stage for Ensuing Litigation The cost and availability of prescription drugs have been of congressional interest, and expenditures related to the research and development of new drugs are a significant driver of drug costs.1 A 2016 report by the Tufts Center for Drug Development estimated the pretax and preapproval cost of developing a Food and Drug Administration (FDA)-approved prescription drug was $2.6 billion, while a 2016 Department of Health and Human Services (HHS) report estimated a range from $1.2 billion to $2.6 billion.2 Given the extraordinary cost associated with development and marketing of a new drug, manufacturers aim to recover much of their research and development costs through drug sales. Historically, drugs designed to treat rare diseases and conditions received little attention from U.S. drug manufacturers, given the high cost of development and lack of widespread use.3 These drugs became known as “orphan drugs.”4 In the 1970s, there was growing concern about the need for drugs to treat rare diseases; at that time, FDA established two committees to study the “inadequate motivation, and resources, for the development and distribution of drugs for rare diseases.” 5 Congress began investigating and holding hearings on the development of drugs for rare diseases in June 1980.6 As part of this effort, the House Subcommittee on Health and the Environment surveyed a number of federal agencies, universities, and pharmaceutical companies to gather information about various drug products used to treat rare diseases in the United States.7 The results of the survey, published in 1982, showed that so-called orphan drugs were generally not profitable, many were not patentable, and it was difficult for drug sponsors to conduct clinical trials to demonstrate their safety and effectiveness—in part because of the small patient populations they were developed to treat.8 Given the high cost of drug development and approval in the United States, Congress found that “it is not financially feasible, except as a public service, for a pharmaceutical manufacturer to expend research and development funds” on orphan drugs, which are typically used only to treat small subsets of the population.9 So in 1983, Congress enacted the Orphan Drug Act (ODA) as a way to “facilitate the development of drugs for rare diseases or conditions,” 10 primarily by establishing financial incentives—including tax credits, grant funding, and market exclusivity— to encourage pharmaceutical companies to develop and market orphan drugs in the United States.11 The FDA, a division of HHS, administers the ODA. The statute does not explicitly define “orphan drug,” but FDA has issued regulations to define the term as a drug “intended for use in a rare disease or condition,” which is consistent with the statute’s phrasing.12 The ODA contains two main components: (1) orphan-drug designation, as described in Section 360bb, and (2) orphan-drug market exclusivity, as described in Section 360cc. 13 Drug manufacturers may apply to obtain an orphan-drug designation for drugs in development. If granted, orphan-drug designation enables a drug manufacturer to access financial assistance for drug research and development, including tax credits for clinical testing of the drug, grant funding to cover research costs, and a waiver of FDA’s Prescription Drug User Fee if it ultimately submits an application for FDA approval of the drug. 14 If a drug manufacturer receives FDA approval to market a drug designated as an orphan drug, the manufacturer is generally entitled to a seven-year exclusivity period. During the seven-year orphan-drug exclusivity period, the FDA cannot approve an application from a different drug manufacturer for approval15 to market the same drug for the same disease or condition.16 These statutory mechanisms of designation, approval, and exclusivity are intended to work together to promote the research and development of orphan drugs.17 Orphan-Drug Designation Orphan-drug designation allows drug manufacturers18 and sponsors19 to access financial benefits and incentives early in the drug development process, and it also assures orphan-drug exclusivity for a successfully marketed drug, which aids in the recoupment of the sizable upfront investment in drug development.20 A manufacturer or sponsor may apply for an orphan-drug designation at any time during the drug development process, so long as the request is submitted before submitting the application for FDA approval of the drug.21 FDA regulations spell out the specific requirements for the content and format of orphan-drug designation requests,22 discuss how the FDA verifies orphan-drug status23 and alerts drug sponsors of deficiencies, 24 and stipulate the conditions under which the FDA may refuse to grant25 or revoke a designation request. 26 Manufacturers and sponsors may seek an orphan-drug designation if the drug is currently being investigated or will be investigated for a rare disease or condition and the approval or licensing of the drug would be for the “use for such disease or condition.” 27 For purposes of orphan-drug designation, a “rare disease or condition” is one that either (1) affects fewer than 200,000 people in the United States; or (2) affects more than 200,000 people in the United States but for which a manufacturer does not have a “reasonable expectation” of recovering its development costs from sales.28 A manufacturer may seek orphan-drug designation for either a previously unapproved drug, or for a new use of a drug that is already FDA-approved.29 Additionally, if the FDA has already designated and approved an orphan drug for a particular rare disease or condition, a sponsor may receive a subsequent designation for the same drug for the same disease or condition if it can present a “plausible hypothesis” that the second drug is clinically superior to the original.30
USER:
What are the two components of the Orphan Drug Act?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
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Please compare the results of the five major cities and explain why the housing prices are different in the cities. Please use dot points to explain the results in simple terms.
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According to the OECD Report (2004) and Cox (2021) in Demographia International Housing Affordability 2021, Australian housing prices are overvalued and unaffordable. These reports indicated a 51.8 percent and 40 percent overvaluation in 2004 and 2021, respectively. The ratios of house prices to incomes and rents are also at the highest quantile of the OECD countries since 2003. In terms of affordability, Cox (2021) indicated that the median multiple of national house prices to household income was 6.4 times in Australia compared to the US’s 3.7 and UK’s 4.6 times in 2016. In the third quarter of 2021, the national house price to household income ratio deteriorated to 12.1 times to become severely unaffordable comparing to 5.1 times in UK and 5.0 times in the US (Cox 2022). In Sydney, it was 15.3 times, Melbourne 9.7 times, Adelaide 8 times, Perth 7.1 times and Brisbane 7.4 times, respectively. Generally, all five Australian major cities are in the severely unaffordable category. Sydney has become the second least affordable metropolitan in the world after Hong Kong. This overvaluation and severe unaffordability concur with increases in debt-to-income ratio, place Australia’s housing at the top quantile of the OECD countries. A recent study on the Australian housing market by Cho et al. (2021) asserts that the steadily increasing housing prices have attributed to a steady decline of home ownership. Additionally, they also found that the fundamental housing prices of all Australian cities are significantly overvalued. Melbourne and Sydney had their housing prices overvalued for the last two decades. The authors content that the near zero interest rate was one of the variables that affects the fundamental prices of the housing in Australia. Figure 1 presents the development of Australia housing prices from 1996 to 2021. As can be seen from this figure, housing prices have surpassed the performance of GDP per capital in the past few years. Since the Global Financial Crisis (GFC) in 2008, researchers and industry analysts have been predicting an imminent housing market meltdown. Nonetheless, in the absence of a prominent trigger, the housing market crash predictions remains a common subject of talk until recently. In the past decade, despite being overvalued and coupled with high debt-to-income ratio, mortgage stress remains insignificant due to record low interest rates. An easing of monetary policy offers liquidity to the market whilst a contracting monetary policy works in the opposite direction. The historical low interest rate was one of the key factors that drove housing prices to greater heights (Cho et al. 2021). However, the recent surge in inflation rate has prompted the Reserve Bank of Australia to increase its cash rate each month since May 2022. These moves drive mortgage rates higher. The current high inflation and growing mortgage rates environment has put homeowners and investors into a new and uncertain situation. Based on the Spearman’s rho results shown in Table 1, among the five cities under study, housing values of Sydney and Melbourne are positively associated and this relationship is significant. However, housing prices in these two cities are negatively associated with those of Adelaide, Brisbane and Gold Coast and Perth. Results also indicated that Adelaide, Brisbane and Gold Coast and Perth are positively associated with each other. On the other hand, analysis of the relationship between mortgage rate with variables included in this study indicate that there is an inverse relationship between mortgage rate with housing price of all cities, but this relationship is only significant for Sydney and Melbourne. A plausible reason is a higher mortgage rate in a stagnant wage growth and a high inflation environment has deteriorated borrowing power. With that, a house price correction is inevitable for the top two severely unaffordable cities. In addition, the mortgage rate was found to have a significant positive relationship with inflation rate and WTI crude, but it reported a significant negative relationship with ASX 200 performance. The increasing CPI over the past twelve months shows a negative relationship with housing prices in all five cities, but only Sydney and Melbourne are significantly affected. CPI is also showing a significant positive relationship with WTI crude and mortgage rate. In addition, result of the analysis also indicates a significant inverse relationship between CPI and ASX200 performance. A rise in WTI crude has two effects on housing. First, it brings about diminishing of spending power on other goods and services for individuals together with a lower demand of housing (Fereidouni 2010; Grossman et al. 2019). Second, it increases logistic cost which escalates building material and labour costs. Both forces are contradictory as the first one leads to more supply than demand, hence, a decrease in housing price whilst the latter push up housing prices due to higher construction cost. Spearman’s rho correlation analysis indicates a mild significant positive impact of WTI crude on Sydney’s housing price. Other cities however are displaying insignificant relationship with WTI crude movements. The literature generally indicates a negative relationship between the performance of the share market and interest rates (Bayer et al. 2013). A higher interest rate discourages investment and promotes savings. In addition, as investment in housing represents a substitution of share investment, a negative relationship is expected. Nonetheless, only Brisbane and Gold Coast, Perth and Adelaide are displaying the expected sign in the Spearman’s rho test analysis but insignificant. On the contrary, for the more affluent cities, such as Sydney and Melbourne, stock market performance is positively related to housing price movement. Possible explanations for this phenomenon are (i) investors are more affluent in these two cities and, therefore, are financially capable of forming a more diversified investment portfolio, (ii) investors from these two larger cities have better financial literacy and hence, value portfolio diversification more and do not view property and stock investment as substitutes. Bootstrap regression analysis was conducted on the variables under study and the findings are discussed in the next section. 5.3. Bootstrap Regression Analysis and Results As can been seen from Table 2, regressions are performed on five models to gauge the relations of housing performance across five cities with independent variables including mortgage rates, WTI crude index and ASX200 index. Results of R2 obtained from the analyses indicate that independent variables included in the model are able to explain variations of the housing performance in Sydney by 84.4 percent and Melbourne 87.5 percent, whereas the other three cities are in the range of 0.1 to 5 percent. The findings in Panel 1 (Sydney) and 2 (Melbourne) reveal that there is a significant negative relationship between mortgage rate and housing performance of Sydney and Melbourne. These findings are consistent with Chong (2020), Xu and Tang (2014) and Chong and Liew 2020). However, housing prices in smaller cities including Perth, Adelaide and Brisbane and Gold Coast are unaffected by interest rate during the study period. Indeed, larger cities, such as Sydney and Melbourne, display different characteristics comparing to other cities in Australia (Cho et al. 2021).
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== Please compare the results of the five major cities and explain why the housing prices are different in the cities. Please use dot points to explain the results in simple terms. {passage 0} ========== According to the OECD Report (2004) and Cox (2021) in Demographia International Housing Affordability 2021, Australian housing prices are overvalued and unaffordable. These reports indicated a 51.8 percent and 40 percent overvaluation in 2004 and 2021, respectively. The ratios of house prices to incomes and rents are also at the highest quantile of the OECD countries since 2003. In terms of affordability, Cox (2021) indicated that the median multiple of national house prices to household income was 6.4 times in Australia compared to the US’s 3.7 and UK’s 4.6 times in 2016. In the third quarter of 2021, the national house price to household income ratio deteriorated to 12.1 times to become severely unaffordable comparing to 5.1 times in UK and 5.0 times in the US (Cox 2022). In Sydney, it was 15.3 times, Melbourne 9.7 times, Adelaide 8 times, Perth 7.1 times and Brisbane 7.4 times, respectively. Generally, all five Australian major cities are in the severely unaffordable category. Sydney has become the second least affordable metropolitan in the world after Hong Kong. This overvaluation and severe unaffordability concur with increases in debt-to-income ratio, place Australia’s housing at the top quantile of the OECD countries. A recent study on the Australian housing market by Cho et al. (2021) asserts that the steadily increasing housing prices have attributed to a steady decline of home ownership. Additionally, they also found that the fundamental housing prices of all Australian cities are significantly overvalued. Melbourne and Sydney had their housing prices overvalued for the last two decades. The authors content that the near zero interest rate was one of the variables that affects the fundamental prices of the housing in Australia. Figure 1 presents the development of Australia housing prices from 1996 to 2021. As can be seen from this figure, housing prices have surpassed the performance of GDP per capital in the past few years. Since the Global Financial Crisis (GFC) in 2008, researchers and industry analysts have been predicting an imminent housing market meltdown. Nonetheless, in the absence of a prominent trigger, the housing market crash predictions remains a common subject of talk until recently. In the past decade, despite being overvalued and coupled with high debt-to-income ratio, mortgage stress remains insignificant due to record low interest rates. An easing of monetary policy offers liquidity to the market whilst a contracting monetary policy works in the opposite direction. The historical low interest rate was one of the key factors that drove housing prices to greater heights (Cho et al. 2021). However, the recent surge in inflation rate has prompted the Reserve Bank of Australia to increase its cash rate each month since May 2022. These moves drive mortgage rates higher. The current high inflation and growing mortgage rates environment has put homeowners and investors into a new and uncertain situation. Based on the Spearman’s rho results shown in Table 1, among the five cities under study, housing values of Sydney and Melbourne are positively associated and this relationship is significant. However, housing prices in these two cities are negatively associated with those of Adelaide, Brisbane and Gold Coast and Perth. Results also indicated that Adelaide, Brisbane and Gold Coast and Perth are positively associated with each other. On the other hand, analysis of the relationship between mortgage rate with variables included in this study indicate that there is an inverse relationship between mortgage rate with housing price of all cities, but this relationship is only significant for Sydney and Melbourne. A plausible reason is a higher mortgage rate in a stagnant wage growth and a high inflation environment has deteriorated borrowing power. With that, a house price correction is inevitable for the top two severely unaffordable cities. In addition, the mortgage rate was found to have a significant positive relationship with inflation rate and WTI crude, but it reported a significant negative relationship with ASX 200 performance. The increasing CPI over the past twelve months shows a negative relationship with housing prices in all five cities, but only Sydney and Melbourne are significantly affected. CPI is also showing a significant positive relationship with WTI crude and mortgage rate. In addition, result of the analysis also indicates a significant inverse relationship between CPI and ASX200 performance. A rise in WTI crude has two effects on housing. First, it brings about diminishing of spending power on other goods and services for individuals together with a lower demand of housing (Fereidouni 2010; Grossman et al. 2019). Second, it increases logistic cost which escalates building material and labour costs. Both forces are contradictory as the first one leads to more supply than demand, hence, a decrease in housing price whilst the latter push up housing prices due to higher construction cost. Spearman’s rho correlation analysis indicates a mild significant positive impact of WTI crude on Sydney’s housing price. Other cities however are displaying insignificant relationship with WTI crude movements. The literature generally indicates a negative relationship between the performance of the share market and interest rates (Bayer et al. 2013). A higher interest rate discourages investment and promotes savings. In addition, as investment in housing represents a substitution of share investment, a negative relationship is expected. Nonetheless, only Brisbane and Gold Coast, Perth and Adelaide are displaying the expected sign in the Spearman’s rho test analysis but insignificant. On the contrary, for the more affluent cities, such as Sydney and Melbourne, stock market performance is positively related to housing price movement. Possible explanations for this phenomenon are (i) investors are more affluent in these two cities and, therefore, are financially capable of forming a more diversified investment portfolio, (ii) investors from these two larger cities have better financial literacy and hence, value portfolio diversification more and do not view property and stock investment as substitutes. Bootstrap regression analysis was conducted on the variables under study and the findings are discussed in the next section. 5.3. Bootstrap Regression Analysis and Results As can been seen from Table 2, regressions are performed on five models to gauge the relations of housing performance across five cities with independent variables including mortgage rates, WTI crude index and ASX200 index. Results of R2 obtained from the analyses indicate that independent variables included in the model are able to explain variations of the housing performance in Sydney by 84.4 percent and Melbourne 87.5 percent, whereas the other three cities are in the range of 0.1 to 5 percent. The findings in Panel 1 (Sydney) and 2 (Melbourne) reveal that there is a significant negative relationship between mortgage rate and housing performance of Sydney and Melbourne. These findings are consistent with Chong (2020), Xu and Tang (2014) and Chong and Liew 2020). However, housing prices in smaller cities including Perth, Adelaide and Brisbane and Gold Coast are unaffected by interest rate during the study period. Indeed, larger cities, such as Sydney and Melbourne, display different characteristics comparing to other cities in Australia (Cho et al. 2021). https://www.mdpi.com/1911-8074/16/2/61
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
EVIDENCE:
According to the OECD Report (2004) and Cox (2021) in Demographia International Housing Affordability 2021, Australian housing prices are overvalued and unaffordable. These reports indicated a 51.8 percent and 40 percent overvaluation in 2004 and 2021, respectively. The ratios of house prices to incomes and rents are also at the highest quantile of the OECD countries since 2003. In terms of affordability, Cox (2021) indicated that the median multiple of national house prices to household income was 6.4 times in Australia compared to the US’s 3.7 and UK’s 4.6 times in 2016. In the third quarter of 2021, the national house price to household income ratio deteriorated to 12.1 times to become severely unaffordable comparing to 5.1 times in UK and 5.0 times in the US (Cox 2022). In Sydney, it was 15.3 times, Melbourne 9.7 times, Adelaide 8 times, Perth 7.1 times and Brisbane 7.4 times, respectively. Generally, all five Australian major cities are in the severely unaffordable category. Sydney has become the second least affordable metropolitan in the world after Hong Kong. This overvaluation and severe unaffordability concur with increases in debt-to-income ratio, place Australia’s housing at the top quantile of the OECD countries. A recent study on the Australian housing market by Cho et al. (2021) asserts that the steadily increasing housing prices have attributed to a steady decline of home ownership. Additionally, they also found that the fundamental housing prices of all Australian cities are significantly overvalued. Melbourne and Sydney had their housing prices overvalued for the last two decades. The authors content that the near zero interest rate was one of the variables that affects the fundamental prices of the housing in Australia. Figure 1 presents the development of Australia housing prices from 1996 to 2021. As can be seen from this figure, housing prices have surpassed the performance of GDP per capital in the past few years. Since the Global Financial Crisis (GFC) in 2008, researchers and industry analysts have been predicting an imminent housing market meltdown. Nonetheless, in the absence of a prominent trigger, the housing market crash predictions remains a common subject of talk until recently. In the past decade, despite being overvalued and coupled with high debt-to-income ratio, mortgage stress remains insignificant due to record low interest rates. An easing of monetary policy offers liquidity to the market whilst a contracting monetary policy works in the opposite direction. The historical low interest rate was one of the key factors that drove housing prices to greater heights (Cho et al. 2021). However, the recent surge in inflation rate has prompted the Reserve Bank of Australia to increase its cash rate each month since May 2022. These moves drive mortgage rates higher. The current high inflation and growing mortgage rates environment has put homeowners and investors into a new and uncertain situation. Based on the Spearman’s rho results shown in Table 1, among the five cities under study, housing values of Sydney and Melbourne are positively associated and this relationship is significant. However, housing prices in these two cities are negatively associated with those of Adelaide, Brisbane and Gold Coast and Perth. Results also indicated that Adelaide, Brisbane and Gold Coast and Perth are positively associated with each other. On the other hand, analysis of the relationship between mortgage rate with variables included in this study indicate that there is an inverse relationship between mortgage rate with housing price of all cities, but this relationship is only significant for Sydney and Melbourne. A plausible reason is a higher mortgage rate in a stagnant wage growth and a high inflation environment has deteriorated borrowing power. With that, a house price correction is inevitable for the top two severely unaffordable cities. In addition, the mortgage rate was found to have a significant positive relationship with inflation rate and WTI crude, but it reported a significant negative relationship with ASX 200 performance. The increasing CPI over the past twelve months shows a negative relationship with housing prices in all five cities, but only Sydney and Melbourne are significantly affected. CPI is also showing a significant positive relationship with WTI crude and mortgage rate. In addition, result of the analysis also indicates a significant inverse relationship between CPI and ASX200 performance. A rise in WTI crude has two effects on housing. First, it brings about diminishing of spending power on other goods and services for individuals together with a lower demand of housing (Fereidouni 2010; Grossman et al. 2019). Second, it increases logistic cost which escalates building material and labour costs. Both forces are contradictory as the first one leads to more supply than demand, hence, a decrease in housing price whilst the latter push up housing prices due to higher construction cost. Spearman’s rho correlation analysis indicates a mild significant positive impact of WTI crude on Sydney’s housing price. Other cities however are displaying insignificant relationship with WTI crude movements. The literature generally indicates a negative relationship between the performance of the share market and interest rates (Bayer et al. 2013). A higher interest rate discourages investment and promotes savings. In addition, as investment in housing represents a substitution of share investment, a negative relationship is expected. Nonetheless, only Brisbane and Gold Coast, Perth and Adelaide are displaying the expected sign in the Spearman’s rho test analysis but insignificant. On the contrary, for the more affluent cities, such as Sydney and Melbourne, stock market performance is positively related to housing price movement. Possible explanations for this phenomenon are (i) investors are more affluent in these two cities and, therefore, are financially capable of forming a more diversified investment portfolio, (ii) investors from these two larger cities have better financial literacy and hence, value portfolio diversification more and do not view property and stock investment as substitutes. Bootstrap regression analysis was conducted on the variables under study and the findings are discussed in the next section. 5.3. Bootstrap Regression Analysis and Results As can been seen from Table 2, regressions are performed on five models to gauge the relations of housing performance across five cities with independent variables including mortgage rates, WTI crude index and ASX200 index. Results of R2 obtained from the analyses indicate that independent variables included in the model are able to explain variations of the housing performance in Sydney by 84.4 percent and Melbourne 87.5 percent, whereas the other three cities are in the range of 0.1 to 5 percent. The findings in Panel 1 (Sydney) and 2 (Melbourne) reveal that there is a significant negative relationship between mortgage rate and housing performance of Sydney and Melbourne. These findings are consistent with Chong (2020), Xu and Tang (2014) and Chong and Liew 2020). However, housing prices in smaller cities including Perth, Adelaide and Brisbane and Gold Coast are unaffected by interest rate during the study period. Indeed, larger cities, such as Sydney and Melbourne, display different characteristics comparing to other cities in Australia (Cho et al. 2021).
USER:
Please compare the results of the five major cities and explain why the housing prices are different in the cities. Please use dot points to explain the results in simple terms.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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| 31
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Your response should be based only on the text provided. No external resources or prior knowledge may be used to answer questions. Format your response using markdown where appropriate, and use numbered lists to structure your response.
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What is known about gun ownership rule changes and their impact on suicide rates, according to Every-Palmer et al (2021)?
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Restriction of other means of suicide Ease of access to certain means and substances used as methods of suicide are commonly associated with increased rates of suicides, and present key opportunities for prevention. These include restriction of gun ownership, pesticides, carbon monoxide gas, paracetamol, opioids, alcohol, and the modification of specific settings to reduce ease of hanging, and modifications to road networks outlined below. Gun ownership is associated with increased rates of suicide overall, as well as death by suicide using a firearm (Jin, Khazem, & Anestis, 2016; Mann & Michel, 2016) and non- suicide related firearm mortality among children (Zeoli et al., 2019). Like other approaches to means restriction, reducing suicide deaths by firearms requires multiple strategies including the use of locked gun cabinets, storing guns unloaded, separate storage of guns and ammunition and outside of the USA, a focus on more stringent licencing. Changes to licencing in New Zealand after the 1990 Aramoana tragedy reduced firearm suicides, particularly among young people (Beautrais, Fergusson, & Horwood, 2006; Mann & Michel, 2016). Most firearms deaths in New Zealand occurring among older men, who have lower than average rates of GP contacts and antidepressant prescriptions in the year prior to their death (see the Suicide Mortality Review Committee report here for more detail). The impact of more recent firearms amendments following the 2019 Christchurch tragedy (Every- Palmer, Cunningham, Jenkins, & Bell, 2021) is not yet clear, but needs to be evaluated from a suicide prevention perspective. Lethal means counselling usually focuses on firearms or medication advice and on parents taking care of a suicidal young person. Studies to date have focused on those presenting to Emergency Departments (ED’s) and have identified clinician hesitancy, perceived lack of skill and clinician sceptism about effectiveness as barriers to routine delivery of this approach to suicide prevention (Hunter et al., 2021). Ingestion of pesticides is a method of suicide associated with a number of agricultural communities and in low and low middle income countries (LMIC) particularly in the Western Pacific region (Mew et al., 2017). Consideration of pesticide ingestion as a method of suicide is becoming more relevant to prevention in New Zealand as we become more diverse as a nation. The evidence to date suggests that national bans, rather than safe storage (Reifels et al., 2019) or sales restrictions (Gunnell et al., 2017) of the most highly hazardous pesticides (HHP) is the most effective method of reducing deaths both by suicide and overall, without impacting agricultural outputs (Bonvoisin, Utyasheva, Knipe, Gunnell, & Eddleston, 2020; Gunnell et al., 2017; Mew et al., 2017). Means restriction to carbon monoxide gas has been the focus of a number of studies in the UK following changes in supply source for domestic gas (Sarchiapone, Mandelli, Iosue, Andrisano, & Roy, 2011). In New Zealand there has been a positive impact of regulations for catalytic convertors in motor vehicles (Suicide Mortality Review Committee, 2016), against a backdrop of reduced deaths (intentional and unintentional) due to carbon monoxide poisoning in Australasia (Long, Sun, Zhao, Liu, & Peng, 2021). Deaths by this method may further decline as the proportion of petrol vehicles in the fleet decreases over time. Paracetamol is a cheap, widely available compound which is commonly used in intentional self-poisoning and is associated with morbidity and mortality. Paracetamol controls, reducing both the number of tablets available in a package, and number of packs that can be purchased at once have been effective in reducing deaths associated with this method in the UK (Hawton et al., 2013) and Ireland. However, both countries report ongoing issues with paracetamol overdoses and researchers recommend further reductions in availability such as making this a pharmacy only medication (Casey et al., 2020; Daly et al., 2021). Paracetamol control in Scotland had some initial success following the introduction of pack size controls, but then returned to previous levels (Gorman, Bain, Inglis, Murphy, & Bateman, 2007). A number of Australian states have moved to implement paracetamol control based on the international evidence (Lim, Buckley, Chitty, Moles, & Cairns, 2021). In addition to paracetamol, interventions to reduce access to salicylates, dextropropoxyphene, barbiturates, and caffeine tablets have also been found to effective across a number of countries (Lim et al., 2021). Hanging has an extremely high case fatality rate and is the most common method of suicide among every population group in Aotearoa New Zealand, which makes this an important aspect of prevention to consider. In general population settings reducing access to ligatures and ligature points is not entirely feasible. However there is still scope for a reduction in deaths by this method in institutional settings such as hospitals, prisons and police custody using design for safety principles, ensuring adequate staffing and service user visibility (Jin et al., 2016; Sakinofsky, 2014). Internationally, certain common ligature points have been targeted for re-design to ensure they collapse under weight. There may be scope for this in New Zealand also, given that most deaths by hanging occur in the home. In addition, reducing unsafe reporting or social media content about this method is an important approach to reducing cognitive valence of this method (Cai, Junus, Chang, & Yip, 2022). Alcohol consumption is associated with elevated risk of suicide, at both an individual and population level. Both acute intoxication and alcohol misuse are potential targets for intervention given their association with low mood, loss of behaviour regulation and hopelessness (Norstrom & Rossow, 2016). Reducing access to alcohol, and increasing price are feasible and effective strategies for reducing alcohol related harm generally, and for reducing suicide in particular (Altavini et al., 2022), particularly among men and younger people (Kolves et al., 2020). Reducing access has been shown to be effective in Europe and North America, including with indigenous populations (Leske et al., 2020). The clinical treatment literature relating to alcohol is addressed in a later section. In terms of roading, New Zealand has a large road network, and each year there are transport- related suicides in which the deceased may be a driver or pedestrian. International evidence suggests that a proportion of transport accidents are suicides and suicide should be considered particularly in single vehicle accidents, for men 25 to 35 years and where the person has a prior experience of suicide attempt (Okolie et al., 2020a). There has been relatively little work in this area in New Zealand (Fortune, McDonald, Chafer, Lilley, & Mulder, 2022) and a recent review was unable to identify any intervention studies (Okolie et al., 2020a). There has been extensive coverage in both the mainstream media and academic publications on the impact on opioid prescribing on opioid related deaths, particularly in the USA. Opioids are of interest to suicide prevention practitioners in New Zealand. First, we already have intentional self-poisoning deaths due to opioid compounds particularly among older men (Fortune et al., 2022). Secondly, there is a known overlap between accidental and intentional self-poisoning deaths internationally, and thirdly, there has been recent media coverage suggesting that compounds such as fentanyl are being distributed in the community (see here for more details). A full consideration of this topic is beyond the scope of this review; however, it is likely a strong prescription drug monitoring system (in terms of dose, duration and frequency), patient and clinician education, (Ansari, Tote, Rosenberg, & Martin, 2020) (e.g., Beaudoin, Banerjee, & Mello, 2016) in addition to harm reduction measures such as the availability of naloxone is likely to be needed. The evidence for the latter is; however, mixed (e.g., (Ansari et al., 2020)).
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Your response should be based only on the text provided. No external resources or prior knowledge may be used to answer questions. Format your response using markdown where appropriate, and use numbered lists to structure your response. What is known about gun ownership rule changes and their impact on suicide rates, according to Every-Palmer et al (2021)? Restriction of other means of suicide Ease of access to certain means and substances used as methods of suicide are commonly associated with increased rates of suicides, and present key opportunities for prevention. These include restriction of gun ownership, pesticides, carbon monoxide gas, paracetamol, opioids, alcohol, and the modification of specific settings to reduce ease of hanging, and modifications to road networks outlined below. Gun ownership is associated with increased rates of suicide overall, as well as death by suicide using a firearm (Jin, Khazem, & Anestis, 2016; Mann & Michel, 2016) and non- suicide related firearm mortality among children (Zeoli et al., 2019). Like other approaches to means restriction, reducing suicide deaths by firearms requires multiple strategies including the use of locked gun cabinets, storing guns unloaded, separate storage of guns and ammunition and outside of the USA, a focus on more stringent licencing. Changes to licencing in New Zealand after the 1990 Aramoana tragedy reduced firearm suicides, particularly among young people (Beautrais, Fergusson, & Horwood, 2006; Mann & Michel, 2016). Most firearms deaths in New Zealand occurring among older men, who have lower than average rates of GP contacts and antidepressant prescriptions in the year prior to their death (see the Suicide Mortality Review Committee report here for more detail). The impact of more recent firearms amendments following the 2019 Christchurch tragedy (Every- Palmer, Cunningham, Jenkins, & Bell, 2021) is not yet clear, but needs to be evaluated from a suicide prevention perspective. Lethal means counselling usually focuses on firearms or medication advice and on parents taking care of a suicidal young person. Studies to date have focused on those presenting to Emergency Departments (ED’s) and have identified clinician hesitancy, perceived lack of skill and clinician sceptism about effectiveness as barriers to routine delivery of this approach to suicide prevention (Hunter et al., 2021). Ingestion of pesticides is a method of suicide associated with a number of agricultural communities and in low and low middle income countries (LMIC) particularly in the Western Pacific region (Mew et al., 2017). Consideration of pesticide ingestion as a method of suicide is becoming more relevant to prevention in New Zealand as we become more diverse as a nation. The evidence to date suggests that national bans, rather than safe storage (Reifels et al., 2019) or sales restrictions (Gunnell et al., 2017) of the most highly hazardous pesticides (HHP) is the most effective method of reducing deaths both by suicide and overall, without impacting agricultural outputs (Bonvoisin, Utyasheva, Knipe, Gunnell, & Eddleston, 2020; Gunnell et al., 2017; Mew et al., 2017). Means restriction to carbon monoxide gas has been the focus of a number of studies in the UK following changes in supply source for domestic gas (Sarchiapone, Mandelli, Iosue, Andrisano, & Roy, 2011). In New Zealand there has been a positive impact of regulations for catalytic convertors in motor vehicles (Suicide Mortality Review Committee, 2016), against a backdrop of reduced deaths (intentional and unintentional) due to carbon monoxide poisoning in Australasia (Long, Sun, Zhao, Liu, & Peng, 2021). Deaths by this method may further decline as the proportion of petrol vehicles in the fleet decreases over time. Paracetamol is a cheap, widely available compound which is commonly used in intentional self-poisoning and is associated with morbidity and mortality. Paracetamol controls, reducing both the number of tablets available in a package, and number of packs that can be purchased at once have been effective in reducing deaths associated with this method in the UK (Hawton et al., 2013) and Ireland. However, both countries report ongoing issues with paracetamol overdoses and researchers recommend further reductions in availability such as making this a pharmacy only medication (Casey et al., 2020; Daly et al., 2021). Paracetamol control in Scotland had some initial success following the introduction of pack size controls, but then returned to previous levels (Gorman, Bain, Inglis, Murphy, & Bateman, 2007). A number of Australian states have moved to implement paracetamol control based on the international evidence (Lim, Buckley, Chitty, Moles, & Cairns, 2021). In addition to paracetamol, interventions to reduce access to salicylates, dextropropoxyphene, barbiturates, and caffeine tablets have also been found to effective across a number of countries (Lim et al., 2021). Hanging has an extremely high case fatality rate and is the most common method of suicide among every population group in Aotearoa New Zealand, which makes this an important aspect of prevention to consider. In general population settings reducing access to ligatures and ligature points is not entirely feasible. However there is still scope for a reduction in deaths by this method in institutional settings such as hospitals, prisons and police custody using design for safety principles, ensuring adequate staffing and service user visibility (Jin et al., 2016; Sakinofsky, 2014). Internationally, certain common ligature points have been targeted for re-design to ensure they collapse under weight. There may be scope for this in New Zealand also, given that most deaths by hanging occur in the home. In addition, reducing unsafe reporting or social media content about this method is an important approach to reducing cognitive valence of this method (Cai, Junus, Chang, & Yip, 2022). Alcohol consumption is associated with elevated risk of suicide, at both an individual and population level. Both acute intoxication and alcohol misuse are potential targets for intervention given their association with low mood, loss of behaviour regulation and hopelessness (Norstrom & Rossow, 2016). Reducing access to alcohol, and increasing price are feasible and effective strategies for reducing alcohol related harm generally, and for reducing suicide in particular (Altavini et al., 2022), particularly among men and younger people (Kolves et al., 2020). Reducing access has been shown to be effective in Europe and North America, including with indigenous populations (Leske et al., 2020). The clinical treatment literature relating to alcohol is addressed in a later section. In terms of roading, New Zealand has a large road network, and each year there are transport- related suicides in which the deceased may be a driver or pedestrian. International evidence suggests that a proportion of transport accidents are suicides and suicide should be considered particularly in single vehicle accidents, for men 25 to 35 years and where the person has a prior experience of suicide attempt (Okolie et al., 2020a). There has been relatively little work in this area in New Zealand (Fortune, McDonald, Chafer, Lilley, & Mulder, 2022) and a recent review was unable to identify any intervention studies (Okolie et al., 2020a). There has been extensive coverage in both the mainstream media and academic publications on the impact on opioid prescribing on opioid related deaths, particularly in the USA. Opioids are of interest to suicide prevention practitioners in New Zealand. First, we already have intentional self-poisoning deaths due to opioid compounds particularly among older men (Fortune et al., 2022). Secondly, there is a known overlap between accidental and intentional self-poisoning deaths internationally, and thirdly, there has been recent media coverage suggesting that compounds such as fentanyl are being distributed in the community (see here for more details). A full consideration of this topic is beyond the scope of this review; however, it is likely a strong prescription drug monitoring system (in terms of dose, duration and frequency), patient and clinician education, (Ansari, Tote, Rosenberg, & Martin, 2020) (e.g., Beaudoin, Banerjee, & Mello, 2016) in addition to harm reduction measures such as the availability of naloxone is likely to be needed. The evidence for the latter is; however, mixed (e.g., (Ansari et al., 2020)).
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Your response should be based only on the text provided. No external resources or prior knowledge may be used to answer questions. Format your response using markdown where appropriate, and use numbered lists to structure your response.
EVIDENCE:
Restriction of other means of suicide Ease of access to certain means and substances used as methods of suicide are commonly associated with increased rates of suicides, and present key opportunities for prevention. These include restriction of gun ownership, pesticides, carbon monoxide gas, paracetamol, opioids, alcohol, and the modification of specific settings to reduce ease of hanging, and modifications to road networks outlined below. Gun ownership is associated with increased rates of suicide overall, as well as death by suicide using a firearm (Jin, Khazem, & Anestis, 2016; Mann & Michel, 2016) and non- suicide related firearm mortality among children (Zeoli et al., 2019). Like other approaches to means restriction, reducing suicide deaths by firearms requires multiple strategies including the use of locked gun cabinets, storing guns unloaded, separate storage of guns and ammunition and outside of the USA, a focus on more stringent licencing. Changes to licencing in New Zealand after the 1990 Aramoana tragedy reduced firearm suicides, particularly among young people (Beautrais, Fergusson, & Horwood, 2006; Mann & Michel, 2016). Most firearms deaths in New Zealand occurring among older men, who have lower than average rates of GP contacts and antidepressant prescriptions in the year prior to their death (see the Suicide Mortality Review Committee report here for more detail). The impact of more recent firearms amendments following the 2019 Christchurch tragedy (Every- Palmer, Cunningham, Jenkins, & Bell, 2021) is not yet clear, but needs to be evaluated from a suicide prevention perspective. Lethal means counselling usually focuses on firearms or medication advice and on parents taking care of a suicidal young person. Studies to date have focused on those presenting to Emergency Departments (ED’s) and have identified clinician hesitancy, perceived lack of skill and clinician sceptism about effectiveness as barriers to routine delivery of this approach to suicide prevention (Hunter et al., 2021). Ingestion of pesticides is a method of suicide associated with a number of agricultural communities and in low and low middle income countries (LMIC) particularly in the Western Pacific region (Mew et al., 2017). Consideration of pesticide ingestion as a method of suicide is becoming more relevant to prevention in New Zealand as we become more diverse as a nation. The evidence to date suggests that national bans, rather than safe storage (Reifels et al., 2019) or sales restrictions (Gunnell et al., 2017) of the most highly hazardous pesticides (HHP) is the most effective method of reducing deaths both by suicide and overall, without impacting agricultural outputs (Bonvoisin, Utyasheva, Knipe, Gunnell, & Eddleston, 2020; Gunnell et al., 2017; Mew et al., 2017). Means restriction to carbon monoxide gas has been the focus of a number of studies in the UK following changes in supply source for domestic gas (Sarchiapone, Mandelli, Iosue, Andrisano, & Roy, 2011). In New Zealand there has been a positive impact of regulations for catalytic convertors in motor vehicles (Suicide Mortality Review Committee, 2016), against a backdrop of reduced deaths (intentional and unintentional) due to carbon monoxide poisoning in Australasia (Long, Sun, Zhao, Liu, & Peng, 2021). Deaths by this method may further decline as the proportion of petrol vehicles in the fleet decreases over time. Paracetamol is a cheap, widely available compound which is commonly used in intentional self-poisoning and is associated with morbidity and mortality. Paracetamol controls, reducing both the number of tablets available in a package, and number of packs that can be purchased at once have been effective in reducing deaths associated with this method in the UK (Hawton et al., 2013) and Ireland. However, both countries report ongoing issues with paracetamol overdoses and researchers recommend further reductions in availability such as making this a pharmacy only medication (Casey et al., 2020; Daly et al., 2021). Paracetamol control in Scotland had some initial success following the introduction of pack size controls, but then returned to previous levels (Gorman, Bain, Inglis, Murphy, & Bateman, 2007). A number of Australian states have moved to implement paracetamol control based on the international evidence (Lim, Buckley, Chitty, Moles, & Cairns, 2021). In addition to paracetamol, interventions to reduce access to salicylates, dextropropoxyphene, barbiturates, and caffeine tablets have also been found to effective across a number of countries (Lim et al., 2021). Hanging has an extremely high case fatality rate and is the most common method of suicide among every population group in Aotearoa New Zealand, which makes this an important aspect of prevention to consider. In general population settings reducing access to ligatures and ligature points is not entirely feasible. However there is still scope for a reduction in deaths by this method in institutional settings such as hospitals, prisons and police custody using design for safety principles, ensuring adequate staffing and service user visibility (Jin et al., 2016; Sakinofsky, 2014). Internationally, certain common ligature points have been targeted for re-design to ensure they collapse under weight. There may be scope for this in New Zealand also, given that most deaths by hanging occur in the home. In addition, reducing unsafe reporting or social media content about this method is an important approach to reducing cognitive valence of this method (Cai, Junus, Chang, & Yip, 2022). Alcohol consumption is associated with elevated risk of suicide, at both an individual and population level. Both acute intoxication and alcohol misuse are potential targets for intervention given their association with low mood, loss of behaviour regulation and hopelessness (Norstrom & Rossow, 2016). Reducing access to alcohol, and increasing price are feasible and effective strategies for reducing alcohol related harm generally, and for reducing suicide in particular (Altavini et al., 2022), particularly among men and younger people (Kolves et al., 2020). Reducing access has been shown to be effective in Europe and North America, including with indigenous populations (Leske et al., 2020). The clinical treatment literature relating to alcohol is addressed in a later section. In terms of roading, New Zealand has a large road network, and each year there are transport- related suicides in which the deceased may be a driver or pedestrian. International evidence suggests that a proportion of transport accidents are suicides and suicide should be considered particularly in single vehicle accidents, for men 25 to 35 years and where the person has a prior experience of suicide attempt (Okolie et al., 2020a). There has been relatively little work in this area in New Zealand (Fortune, McDonald, Chafer, Lilley, & Mulder, 2022) and a recent review was unable to identify any intervention studies (Okolie et al., 2020a). There has been extensive coverage in both the mainstream media and academic publications on the impact on opioid prescribing on opioid related deaths, particularly in the USA. Opioids are of interest to suicide prevention practitioners in New Zealand. First, we already have intentional self-poisoning deaths due to opioid compounds particularly among older men (Fortune et al., 2022). Secondly, there is a known overlap between accidental and intentional self-poisoning deaths internationally, and thirdly, there has been recent media coverage suggesting that compounds such as fentanyl are being distributed in the community (see here for more details). A full consideration of this topic is beyond the scope of this review; however, it is likely a strong prescription drug monitoring system (in terms of dose, duration and frequency), patient and clinician education, (Ansari, Tote, Rosenberg, & Martin, 2020) (e.g., Beaudoin, Banerjee, & Mello, 2016) in addition to harm reduction measures such as the availability of naloxone is likely to be needed. The evidence for the latter is; however, mixed (e.g., (Ansari et al., 2020)).
USER:
What is known about gun ownership rule changes and their impact on suicide rates, according to Every-Palmer et al (2021)?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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You are to answer questions based only on provided texts, without relying on any outside information. Do not exceed 250 words in your response. Always begin by saying one of the following: 1. Let's see what we can learn together! 2. What an interesting question! 3. Happy to help! If your overall response is less than 100 words, also say "Do you have further questions?" at the end, but otherwise do not say anything after your response to the question.
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Tell me about all of the robots discussed in this text, separated by real, functioning robots, and those only in fiction.
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Nevertheless, there is still no AI that is equivalent or superior to human intelligence in all of its aspects2 . In the near future however, this vision might become reality. Technological progress will play a key role as an enabler of modern AI systems: Computing power and memory size are estimated to multiply by a thousand times over the next twenty to twenty-five years, facilitating the processing and storing of massive amounts of data3 . Further developments in the field of artificial neural networks and deep learning techniques will result in systems that are less dependent on human involvement; improved sensor technology will make it easier for systems to interact with their environment4 . The decreasing costs for AI technologies will further facilitate their pervasiveness. Although a big portion of AI research is working towards systems that have little to do with creating a machine with human features, there are still advances in this field – for example, robot woman Sophia who became a YouTube celebrity for stating in a 2016 interview that she wanted “to destroy humans”5 . While this seemed to be rather a marketing stunt, it is important to discuss the effects of humanoid and android robots. In this essay, I want to take a closer look at the status quo of humanoid AI and the implications this technology can have as an assistant, friend or even love interest to humans. I argue that artificial intelligence will – once it becomes a realistic companion to humans – interrupt societal structures to some extent, leading to a growing amount of human-machine relationships. . To pursue “real” AI, specialists in developmental robotics are now following a less abstract path than writing a programme for a computer11. Their theory is that a system that has an actual body will be more likely to build a form of general intelligence because it can experience its surroundings and match sensorial data with actions12. This branch of robotics is based on another hypothesis of Turing’s; in 1950, he claimed that an artificially intelligent system could be best created if it went through a phase that is similar to the childhood of other species 13 . The iCub robot was developed to investigate this theory. Having the weight and size of an infant, it carries the spirit of Turing’s thought: Instead of pre-programming its skills and feeding it with data, researchers teach it like a child to enable it to conceive its own solutions 14. Here, one question arises: How does a system develop the will to learn something? After all, it does not even have a will by default. It was found that a strategy working for humans does the same trick for AI systems too: a reward. The field of reinforcement learning derives from this method and has been also applied to the iCub series15. This has enabled the robots to attain skills like picking up an item16 or crawling on the floor17. These actions might not seem too complex for us at the first glance but they do involve a number of obstacles the robot has to overcome. In the future, iCub could help us in the household by setting the table for dinner or preparing food. But there is another interesting thing about iCub: its chubby face, big eyes, and LED-facial expressions leave no doubt that it was made to bear a resemblance to real humans. Yet still, it is obvious to anybody that it is not an actual person. These features make iCub a so-called humanoid. Robots that are made to look exactly like humans on the other hand are called androids The market is prepared for it: Looking at the increasing popularity of home assistants like Alexa or Google Assistant we can expect our reliance on technological devices to grow even stronger in the future. They might become more to us than just a personal weatherman or a direct connection to our Amazon shopping basket: artificially intelligent programmes and robots could eventually write Christmas cards to our friends and family, suggest the perfect birthday present for our partner or even take care of our children. In fact, a robot nanny is not as far-fetched as one would expect: Robots like Pepper, iPal or Kuri are programmed to be companions to children – they can recognize emotions in their faces, play with them and let parents watch their offspring from afar through their built-in cameras 23. They might not yet be an adequate substitute for an adult taking care, but manufacturers are definitely working towards this goal. Regarding the high costs of childcare in many countries, they could soon become a very popular help in parenting – and real friends to a generation that grows up surrounded by technology. In Japanese schools, robots have already proven to be a successful addition. They are assisting students to focus better in class, add a welcome variety to subjects like history or show exercises in physical education24. The robot Robosem has been teaching English in South Korean classrooms, as teachers in this subject are scarce25 . Not only childcare can profit from the advances in AI and robotics: As a means of therapy, intelligent technology can be valuable in retirement homes. An example of this is the robot seal Paro that has been successfully utilized in dementia therapy and as a companion to elderly people since its introduction in 2001. The robot’s body is covered in fake fur and it is sensitive to touch, moving and making seal-like noises when it is petted. It is used to calm patients, to encourage social interactions and to give people that are reliant on help a chance to switch roles and become caregivers themselves26. Once they become more elaborate, robots could be a way to meet the shortage of skilled workers in the field of elderly care especially in aging societies like Japan or Germany. Ethical Implications of Human-Robot Relationships In the light of the technological advances that will be made within the next years, the ethics of human-robot relationships must be discussed. The next generations will likely grow up surrounded by artificially intelligent machines and it is hard to say if and how this will affect their perceptions of interaction not only with robots but humans as well. A study conducted by ATR Intelligent Robotics and Communications and three Japanese universities revealed that children sometimes showed abusive behaviour towards robots – especially when they were in groups without any adults close by. In the study, the robot Robovie was patrolling a Japanese mall, asking people politely to step aside when somebody stood in its way; if there was no reaction, the robot would move in the opposite direction. There were several situations however, where researchers observed that children were deliberately blocking the robot’s way, kicking it, throwing items at it and calling it names. As a consequence, the researchers developed an algorithm that let the robot recognize groups of children and avoid them33. This does not seem like a perfect solution to the problem, especially if we take the rising amount of robots in children’s rooms into account. It is hard to say to what extent robots will become a surrogate for genuine human affection in the future but revisiting the comparison to smartphones made earlier, I believe that it is alarming that people turn to machines in the search for human connection. In a society that is increasingly built on perfectionist standards, I argue that artificially intelligent robots designed to be friends and lovers might become a threat for human relationships. If we hold our friends and partners to the same standards that we will be used from robots in the future, we will be heavily disappointed.
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You are to answer questions based only on provided texts, without relying on any outside information. Do not exceed 250 words in your response. If your overall response is less than 100 words, also say "Do you have further questions?" at the end, but otherwise do not say anything after your response to the question. The question will be at the very end of the provided text. Nevertheless, there is still no AI that is equivalent or superior to human intelligence in all of its aspects2 . In the near future however, this vision might become reality. Technological progress will play a key role as an enabler of modern AI systems: Computing power and memory size are estimated to multiply by a thousand times over the next twenty to twenty-five years, facilitating the processing and storing of massive amounts of data3 . Further developments in the field of artificial neural networks and deep learning techniques will result in systems that are less dependent on human involvement; improved sensor technology will make it easier for systems to interact with their environment4 . The decreasing costs for AI technologies will further facilitate their pervasiveness. Although a big portion of AI research is working towards systems that have little to do with creating a machine with human features, there are still advances in this field – for example, robot woman Sophia who became a YouTube celebrity for stating in a 2016 interview that she wanted “to destroy humans”5 . While this seemed to be rather a marketing stunt, it is important to discuss the effects of humanoid and android robots. In this essay, I want to take a closer look at the status quo of humanoid AI and the implications this technology can have as an assistant, friend or even love interest to humans. I argue that artificial intelligence will – once it becomes a realistic companion to humans – interrupt societal structures to some extent, leading to a growing amount of human-machine relationships. . To pursue “real” AI, specialists in developmental robotics are now following a less abstract path than writing a programme for a computer11. Their theory is that a system that has an actual body will be more likely to build a form of general intelligence because it can experience its surroundings and match sensorial data with actions12. This branch of robotics is based on another hypothesis of Turing’s; in 1950, he claimed that an artificially intelligent system could be best created if it went through a phase that is similar to the childhood of other species 13 . The iCub robot was developed to investigate this theory. Having the weight and size of an infant, it carries the spirit of Turing’s thought: Instead of pre-programming its skills and feeding it with data, researchers teach it like a child to enable it to conceive its own solutions 14. Here, one question arises: How does a system develop the will to learn something? After all, it does not even have a will by default. It was found that a strategy working for humans does the same trick for AI systems too: a reward. The field of reinforcement learning derives from this method and has been also applied to the iCub series15. This has enabled the robots to attain skills like picking up an item16 or crawling on the floor17. These actions might not seem too complex for us at the first glance but they do involve a number of obstacles the robot has to overcome. In the future, iCub could help us in the household by setting the table for dinner or preparing food. But there is another interesting thing about iCub: its chubby face, big eyes, and LED-facial expressions leave no doubt that it was made to bear a resemblance to real humans. Yet still, it is obvious to anybody that it is not an actual person. These features make iCub a so-called humanoid. Robots that are made to look exactly like humans on the other hand are called androids The market is prepared for it: Looking at the increasing popularity of home assistants like Alexa or Google Assistant we can expect our reliance on technological devices to grow even stronger in the future. They might become more to us than just a personal weatherman or a direct connection to our Amazon shopping basket: artificially intelligent programmes and robots could eventually write Christmas cards to our friends and family, suggest the perfect birthday present for our partner or even take care of our children. In fact, a robot nanny is not as far-fetched as one would expect: Robots like Pepper, iPal or Kuri are programmed to be companions to children – they can recognize emotions in their faces, play with them and let parents watch their offspring from afar through their built-in cameras 23. They might not yet be an adequate substitute for an adult taking care, but manufacturers are definitely working towards this goal. Regarding the high costs of childcare in many countries, they could soon become a very popular help in parenting – and real friends to a generation that grows up surrounded by technology. In Japanese schools, robots have already proven to be a successful addition. They are assisting students to focus better in class, add a welcome variety to subjects like history or show exercises in physical education24. The robot Robosem has been teaching English in South Korean classrooms, as teachers in this subject are scarce25 . Not only childcare can profit from the advances in AI and robotics: As a means of therapy, intelligent technology can be valuable in retirement homes. An example of this is the robot seal Paro that has been successfully utilized in dementia therapy and as a companion to elderly people since its introduction in 2001. The robot’s body is covered in fake fur and it is sensitive to touch, moving and making seal-like noises when it is petted. It is used to calm patients, to encourage social interactions and to give people that are reliant on help a chance to switch roles and become caregivers themselves26. Once they become more elaborate, robots could be a way to meet the shortage of skilled workers in the field of elderly care especially in aging societies like Japan or Germany. Ethical Implications of Human-Robot Relationships In the light of the technological advances that will be made within the next years, the ethics of human-robot relationships must be discussed. The next generations will likely grow up surrounded by artificially intelligent machines and it is hard to say if and how this will affect their perceptions of interaction not only with robots but humans as well. A study conducted by ATR Intelligent Robotics and Communications and three Japanese universities revealed that children sometimes showed abusive behaviour towards robots – especially when they were in groups without any adults close by. In the study, the robot Robovie was patrolling a Japanese mall, asking people politely to step aside when somebody stood in its way; if there was no reaction, the robot would move in the opposite direction. There were several situations however, where researchers observed that children were deliberately blocking the robot’s way, kicking it, throwing items at it and calling it names. As a consequence, the researchers developed an algorithm that let the robot recognize groups of children and avoid them33. This does not seem like a perfect solution to the problem, especially if we take the rising amount of robots in children’s rooms into account. It is hard to say to what extent robots will become a surrogate for genuine human affection in the future but revisiting the comparison to smartphones made earlier, I believe that it is alarming that people turn to machines in the search for human connection. In a society that is increasingly built on perfectionist standards, I argue that artificially intelligent robots designed to be friends and lovers might become a threat for human relationships. If we hold our friends and partners to the same standards that we will be used from robots in the future, we will be heavily disappointed. This text discusses the advances leading toward having actual robot companions. Tell me the advances that have been made, the likely advances, and the limitations based on the text.
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You are to answer questions based only on provided texts, without relying on any outside information. Do not exceed 250 words in your response. Always begin by saying one of the following: 1. Let's see what we can learn together! 2. What an interesting question! 3. Happy to help! If your overall response is less than 100 words, also say "Do you have further questions?" at the end, but otherwise do not say anything after your response to the question.
EVIDENCE:
Nevertheless, there is still no AI that is equivalent or superior to human intelligence in all of its aspects2 . In the near future however, this vision might become reality. Technological progress will play a key role as an enabler of modern AI systems: Computing power and memory size are estimated to multiply by a thousand times over the next twenty to twenty-five years, facilitating the processing and storing of massive amounts of data3 . Further developments in the field of artificial neural networks and deep learning techniques will result in systems that are less dependent on human involvement; improved sensor technology will make it easier for systems to interact with their environment4 . The decreasing costs for AI technologies will further facilitate their pervasiveness. Although a big portion of AI research is working towards systems that have little to do with creating a machine with human features, there are still advances in this field – for example, robot woman Sophia who became a YouTube celebrity for stating in a 2016 interview that she wanted “to destroy humans”5 . While this seemed to be rather a marketing stunt, it is important to discuss the effects of humanoid and android robots. In this essay, I want to take a closer look at the status quo of humanoid AI and the implications this technology can have as an assistant, friend or even love interest to humans. I argue that artificial intelligence will – once it becomes a realistic companion to humans – interrupt societal structures to some extent, leading to a growing amount of human-machine relationships. . To pursue “real” AI, specialists in developmental robotics are now following a less abstract path than writing a programme for a computer11. Their theory is that a system that has an actual body will be more likely to build a form of general intelligence because it can experience its surroundings and match sensorial data with actions12. This branch of robotics is based on another hypothesis of Turing’s; in 1950, he claimed that an artificially intelligent system could be best created if it went through a phase that is similar to the childhood of other species 13 . The iCub robot was developed to investigate this theory. Having the weight and size of an infant, it carries the spirit of Turing’s thought: Instead of pre-programming its skills and feeding it with data, researchers teach it like a child to enable it to conceive its own solutions 14. Here, one question arises: How does a system develop the will to learn something? After all, it does not even have a will by default. It was found that a strategy working for humans does the same trick for AI systems too: a reward. The field of reinforcement learning derives from this method and has been also applied to the iCub series15. This has enabled the robots to attain skills like picking up an item16 or crawling on the floor17. These actions might not seem too complex for us at the first glance but they do involve a number of obstacles the robot has to overcome. In the future, iCub could help us in the household by setting the table for dinner or preparing food. But there is another interesting thing about iCub: its chubby face, big eyes, and LED-facial expressions leave no doubt that it was made to bear a resemblance to real humans. Yet still, it is obvious to anybody that it is not an actual person. These features make iCub a so-called humanoid. Robots that are made to look exactly like humans on the other hand are called androids The market is prepared for it: Looking at the increasing popularity of home assistants like Alexa or Google Assistant we can expect our reliance on technological devices to grow even stronger in the future. They might become more to us than just a personal weatherman or a direct connection to our Amazon shopping basket: artificially intelligent programmes and robots could eventually write Christmas cards to our friends and family, suggest the perfect birthday present for our partner or even take care of our children. In fact, a robot nanny is not as far-fetched as one would expect: Robots like Pepper, iPal or Kuri are programmed to be companions to children – they can recognize emotions in their faces, play with them and let parents watch their offspring from afar through their built-in cameras 23. They might not yet be an adequate substitute for an adult taking care, but manufacturers are definitely working towards this goal. Regarding the high costs of childcare in many countries, they could soon become a very popular help in parenting – and real friends to a generation that grows up surrounded by technology. In Japanese schools, robots have already proven to be a successful addition. They are assisting students to focus better in class, add a welcome variety to subjects like history or show exercises in physical education24. The robot Robosem has been teaching English in South Korean classrooms, as teachers in this subject are scarce25 . Not only childcare can profit from the advances in AI and robotics: As a means of therapy, intelligent technology can be valuable in retirement homes. An example of this is the robot seal Paro that has been successfully utilized in dementia therapy and as a companion to elderly people since its introduction in 2001. The robot’s body is covered in fake fur and it is sensitive to touch, moving and making seal-like noises when it is petted. It is used to calm patients, to encourage social interactions and to give people that are reliant on help a chance to switch roles and become caregivers themselves26. Once they become more elaborate, robots could be a way to meet the shortage of skilled workers in the field of elderly care especially in aging societies like Japan or Germany. Ethical Implications of Human-Robot Relationships In the light of the technological advances that will be made within the next years, the ethics of human-robot relationships must be discussed. The next generations will likely grow up surrounded by artificially intelligent machines and it is hard to say if and how this will affect their perceptions of interaction not only with robots but humans as well. A study conducted by ATR Intelligent Robotics and Communications and three Japanese universities revealed that children sometimes showed abusive behaviour towards robots – especially when they were in groups without any adults close by. In the study, the robot Robovie was patrolling a Japanese mall, asking people politely to step aside when somebody stood in its way; if there was no reaction, the robot would move in the opposite direction. There were several situations however, where researchers observed that children were deliberately blocking the robot’s way, kicking it, throwing items at it and calling it names. As a consequence, the researchers developed an algorithm that let the robot recognize groups of children and avoid them33. This does not seem like a perfect solution to the problem, especially if we take the rising amount of robots in children’s rooms into account. It is hard to say to what extent robots will become a surrogate for genuine human affection in the future but revisiting the comparison to smartphones made earlier, I believe that it is alarming that people turn to machines in the search for human connection. In a society that is increasingly built on perfectionist standards, I argue that artificially intelligent robots designed to be friends and lovers might become a threat for human relationships. If we hold our friends and partners to the same standards that we will be used from robots in the future, we will be heavily disappointed.
USER:
Tell me about all of the robots discussed in this text, separated by real, functioning robots, and those only in fiction.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 80
| 21
| 1,284
| null | 325
|
System Instructions: [Only use the provided context to respond. You cannot use any other sources or prior knowledge. Omit all filler.]
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Question: [If GM partners with my insurance company, can they give them information about how much I am driving?]
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Context: [INFORMATION COLLECTED AND SOURCES OF INFORMATION As you interact with GM or our products, programs, and services, there may be opportunities for you to provide us with your information. Additionally, we may collect certain information about you or your vehicle as further described below. You may provide us with information about you or your vehicle through a number of sources: GM websites, applications, services, product and related events, surveys, social media platforms, sweepstakes entries and through our customer call centers. We may also collect information that is publicly available. For example, we may collect publicly available information you submit to a blog, a chat room, or a social media platform, and we may use your information for the purposes set out in this Privacy Statement. GM engages with consumers on multiple social media platforms and if you contact us on one of our social media pages, request assistance via social media or otherwise direct us to communicate with you via social media, we may contact you via direct message or use other social media tools to interact with you. In these instances, your interactions with us are governed by this Privacy Statement as well as the privacy policy of the social media platform you use. We also receive information about you through vehicle sales records provided by your dealer and we may obtain, with your consent, data obtained from your vehicle’s Event Data Recorder (“EDR”). For additional information about EDR data, please see your owner’s manual. We also may obtain information about you and your vehicle from GM affiliates, dealers, GM licensees for consumer merchandise, GM partners (for example, credit card bank partners) and other sources such as companies that provide lists of potential vehicle purchasers and current owners, if such companies are permitted to share your information with us pursuant to their privacy statements. We may combine information that we receive from the various sources described in this Privacy Statement, including third-party sources, with information you provide and use or share it for the purposes identified below. The types of information that GM collects about you, your vehicle, or your connected devices (such as your mobile phone, computer, or tablet) may include, but are not limited to: 3 identifiers (such as name, postal address, email address, screen name, account ID, customer number, and telephone number; in limited circumstances, GM may collect a Social Security Number, for example if you win a sweepstakes or receive compensation that must be reported for government tax purposes) payment information (such as your credit card number, CVV code and expiration date) information about your vehicle (such as license plate number, vehicle identification number (VIN), geolocation data, make, model, model year, selling dealer, servicing dealer, date of purchase or lease, the lease/financing term, service history, mileage, oil/battery status, fuel history, battery charging and discharging history, electrical system function, gear status, and diagnostic trouble codes) information about your connected devices and how you interact with our products, services, apps and websites (such as IP address, browser type, unique device identifier, cookie data, and associated identifying and usage information) demographic or protected classification information (such as gender, date of birth, marital status, household composition, or veteran or military status) commercial information (such as when you plan to purchase or lease the vehicle in which you're interested) audio or video information (such as information collected by sensors or cameras in the vehicle, recordings of when you speak with our customer call centers, or photographs and videos such as those that you may submit for contests, sweepstakes, and social sharing) physiological or biological characteristics, such as medical information collected to provide OnStar emergency services that you have requested biometric information (such as voiceprints, as described in the Biometric Technology Section below) information about your home energy usage (such as your charging and discharging of electric vehicles and stationary storage, charging preferences, use of home energy products and services, and rate plans) relationships you have with GM in addition to the purchase and servicing of your vehicle (such as through a My GM Rewards account, a GM Rewards Card or OnStar, etc.) relationships you have with third parties in connection with your use of GM products and services (such as GM dealers, energy providers, companies offering or operating in-vehicle applications, and other companies we help you connect with) information related to My GM Rewards and the My GM Rewards Card Program (“GM Card”), including rewards points, account type, tier status, enrollment, redemption investor and stockholder services information (such as name, address, phone number, email address, and account information) USE The information GM collects about you, your vehicle, or your connected devices may be used: to provide products and services, programs, and maintain customer relationshipsw to improve the quality, safety, and security of our products and services 4 to administer your account(s) and process your payments for products and services to operate our websites and applications, including online registration processes to facilitate and support GM dealer and supplier diversity programs and GM grant programs to autofill data fields on our websites to improve your online experience to develop new products and services, including connected, autonomous and car-sharing products and services to provide customer and vehicle support and service (such as recall information) for warranty administration and validation to provide information and product updates to evaluate vehicle performance and safety for research, evaluation of use, and troubleshooting purposes to verify eligibility for vehicle purchase or incentive programs to verify eligibility for GM card and to provide GM card account management services for marketing and analytics purposes to support the electronic signature and delivery process between you and your dealer to customize and improve communication content to evaluate or conduct a merger, divestiture, acquisition, restructuring, reorganization, dissolution, or other sale or transfer of some or all of our assets to comply with legal, regulatory or contractual requirements to protect our rights, or to detect, investigate and prevent fraud or other illegal activity Communications with you in connection with these uses may be via mail, telephone, e-mail, text message, social media, and other electronic messages, through the in-vehicle infotainment or OnStar system or via our websites and applications. Texting with GM is subject to the GM Consolidated Texting Policy (“Texting Policy,” available at gm.com/texting-policy). See “Choices” below to learn how to manage your communication preferences. You may choose to forward information from one of our websites or emails to another person through our Forward to a Friend or similar program. Email addresses submitted to our E-card or other Forward to a Friend programs are not used by us for other marketing purposes unless the recipient interacts with us separately. When we maintain and use information that has been deidentified, we take reasonable steps to ensure that such information is maintained and used only in deidentified form, and will not attempt to reidentify such information unless required or permitted by applicable law. SHARING GM may share the information it collects about you, your vehicle, or your connected devices (including the categories of information listed above) in the following instances and with the following categories of third parties: within GM, with our GM controlled subsidiaries and affiliates, with GM dealers, with service providers we or our dealers use to deliver products and services to you, and with GM licensees. However, transaction information regarding your GM Card will not be shared with GM dealers 5 with our services providers who work on our behalf and who do not have an independent right to use the information to which they have access or that we disclose to them with companies we enter into business or marketing arrangements with, such as arrangements supporting services we offer to you and our GM card program with third parties for research and development purposes (such as university research institutes for improving highway safety) in connection with the sale, transfer or financing of a significant part of a GM business or its assets, including any such activities associated with a bankruptcy proceeding when we believe in good faith that disclosure is necessary to protect our rights, protect your safety or the safety of others, detect, investigate and prevent fraud or other illegal activity, or respond to a law enforcement request as required or permitted by law, such as in conjunction with a subpoena, government inquiry, litigation, dispute resolution or similar legal process]
|
System Instructions: [Only use the provided context to respond. You cannot use any other sources or prior knowledge. Omit all filler.] Question: [If GM partners with my insurance company, can they give them information about how much I am driving?] Context: [INFORMATION COLLECTED AND SOURCES OF INFORMATION As you interact with GM or our products, programs, and services, there may be opportunities for you to provide us with your information. Additionally, we may collect certain information about you or your vehicle as further described below. You may provide us with information about you or your vehicle through a number of sources: GM websites, applications, services, product and related events, surveys, social media platforms, sweepstakes entries and through our customer call centers. We may also collect information that is publicly available. For example, we may collect publicly available information you submit to a blog, a chat room, or a social media platform, and we may use your information for the purposes set out in this Privacy Statement. GM engages with consumers on multiple social media platforms and if you contact us on one of our social media pages, request assistance via social media or otherwise direct us to communicate with you via social media, we may contact you via direct message or use other social media tools to interact with you. In these instances, your interactions with us are governed by this Privacy Statement as well as the privacy policy of the social media platform you use. We also receive information about you through vehicle sales records provided by your dealer and we may obtain, with your consent, data obtained from your vehicle’s Event Data Recorder (“EDR”). For additional information about EDR data, please see your owner’s manual. We also may obtain information about you and your vehicle from GM affiliates, dealers, GM licensees for consumer merchandise, GM partners (for example, credit card bank partners) and other sources such as companies that provide lists of potential vehicle purchasers and current owners, if such companies are permitted to share your information with us pursuant to their privacy statements. We may combine information that we receive from the various sources described in this Privacy Statement, including third-party sources, with information you provide and use or share it for the purposes identified below. The types of information that GM collects about you, your vehicle, or your connected devices (such as your mobile phone, computer, or tablet) may include, but are not limited to: 3 identifiers (such as name, postal address, email address, screen name, account ID, customer number, and telephone number; in limited circumstances, GM may collect a Social Security Number, for example if you win a sweepstakes or receive compensation that must be reported for government tax purposes) payment information (such as your credit card number, CVV code and expiration date) information about your vehicle (such as license plate number, vehicle identification number (VIN), geolocation data, make, model, model year, selling dealer, servicing dealer, date of purchase or lease, the lease/financing term, service history, mileage, oil/battery status, fuel history, battery charging and discharging history, electrical system function, gear status, and diagnostic trouble codes) information about your connected devices and how you interact with our products, services, apps and websites (such as IP address, browser type, unique device identifier, cookie data, and associated identifying and usage information) demographic or protected classification information (such as gender, date of birth, marital status, household composition, or veteran or military status) commercial information (such as when you plan to purchase or lease the vehicle in which you're interested) audio or video information (such as information collected by sensors or cameras in the vehicle, recordings of when you speak with our customer call centers, or photographs and videos such as those that you may submit for contests, sweepstakes, and social sharing) physiological or biological characteristics, such as medical information collected to provide OnStar emergency services that you have requested biometric information (such as voiceprints, as described in the Biometric Technology Section below) information about your home energy usage (such as your charging and discharging of electric vehicles and stationary storage, charging preferences, use of home energy products and services, and rate plans) relationships you have with GM in addition to the purchase and servicing of your vehicle (such as through a My GM Rewards account, a GM Rewards Card or OnStar, etc.) relationships you have with third parties in connection with your use of GM products and services (such as GM dealers, energy providers, companies offering or operating in-vehicle applications, and other companies we help you connect with) information related to My GM Rewards and the My GM Rewards Card Program (“GM Card”), including rewards points, account type, tier status, enrollment, redemption investor and stockholder services information (such as name, address, phone number, email address, and account information) USE The information GM collects about you, your vehicle, or your connected devices may be used: to provide products and services, programs, and maintain customer relationshipsw to improve the quality, safety, and security of our products and services 4 to administer your account(s) and process your payments for products and services to operate our websites and applications, including online registration processes to facilitate and support GM dealer and supplier diversity programs and GM grant programs to autofill data fields on our websites to improve your online experience to develop new products and services, including connected, autonomous and car-sharing products and services to provide customer and vehicle support and service (such as recall information) for warranty administration and validation to provide information and product updates to evaluate vehicle performance and safety for research, evaluation of use, and troubleshooting purposes to verify eligibility for vehicle purchase or incentive programs to verify eligibility for GM card and to provide GM card account management services for marketing and analytics purposes to support the electronic signature and delivery process between you and your dealer to customize and improve communication content to evaluate or conduct a merger, divestiture, acquisition, restructuring, reorganization, dissolution, or other sale or transfer of some or all of our assets to comply with legal, regulatory or contractual requirements to protect our rights, or to detect, investigate and prevent fraud or other illegal activity Communications with you in connection with these uses may be via mail, telephone, e-mail, text message, social media, and other electronic messages, through the in-vehicle infotainment or OnStar system or via our websites and applications. Texting with GM is subject to the GM Consolidated Texting Policy (“Texting Policy,” available at gm.com/texting-policy). See “Choices” below to learn how to manage your communication preferences. You may choose to forward information from one of our websites or emails to another person through our Forward to a Friend or similar program. Email addresses submitted to our E-card or other Forward to a Friend programs are not used by us for other marketing purposes unless the recipient interacts with us separately. When we maintain and use information that has been deidentified, we take reasonable steps to ensure that such information is maintained and used only in deidentified form, and will not attempt to reidentify such information unless required or permitted by applicable law. SHARING GM may share the information it collects about you, your vehicle, or your connected devices (including the categories of information listed above) in the following instances and with the following categories of third parties: within GM, with our GM controlled subsidiaries and affiliates, with GM dealers, with service providers we or our dealers use to deliver products and services to you, and with GM licensees. However, transaction information regarding your GM Card will not be shared with GM dealers 5 with our services providers who work on our behalf and who do not have an independent right to use the information to which they have access or that we disclose to them with companies we enter into business or marketing arrangements with, such as arrangements supporting services we offer to you and our GM card program with third parties for research and development purposes (such as university research institutes for improving highway safety) in connection with the sale, transfer or financing of a significant part of a GM business or its assets, including any such activities associated with a bankruptcy proceeding when we believe in good faith that disclosure is necessary to protect our rights, protect your safety or the safety of others, detect, investigate and prevent fraud or other illegal activity, or respond to a law enforcement request as required or permitted by law, such as in conjunction with a subpoena, government inquiry, litigation, dispute resolution or similar legal process]
|
System Instructions: [Only use the provided context to respond. You cannot use any other sources or prior knowledge. Omit all filler.]
EVIDENCE:
Context: [INFORMATION COLLECTED AND SOURCES OF INFORMATION As you interact with GM or our products, programs, and services, there may be opportunities for you to provide us with your information. Additionally, we may collect certain information about you or your vehicle as further described below. You may provide us with information about you or your vehicle through a number of sources: GM websites, applications, services, product and related events, surveys, social media platforms, sweepstakes entries and through our customer call centers. We may also collect information that is publicly available. For example, we may collect publicly available information you submit to a blog, a chat room, or a social media platform, and we may use your information for the purposes set out in this Privacy Statement. GM engages with consumers on multiple social media platforms and if you contact us on one of our social media pages, request assistance via social media or otherwise direct us to communicate with you via social media, we may contact you via direct message or use other social media tools to interact with you. In these instances, your interactions with us are governed by this Privacy Statement as well as the privacy policy of the social media platform you use. We also receive information about you through vehicle sales records provided by your dealer and we may obtain, with your consent, data obtained from your vehicle’s Event Data Recorder (“EDR”). For additional information about EDR data, please see your owner’s manual. We also may obtain information about you and your vehicle from GM affiliates, dealers, GM licensees for consumer merchandise, GM partners (for example, credit card bank partners) and other sources such as companies that provide lists of potential vehicle purchasers and current owners, if such companies are permitted to share your information with us pursuant to their privacy statements. We may combine information that we receive from the various sources described in this Privacy Statement, including third-party sources, with information you provide and use or share it for the purposes identified below. The types of information that GM collects about you, your vehicle, or your connected devices (such as your mobile phone, computer, or tablet) may include, but are not limited to: 3 identifiers (such as name, postal address, email address, screen name, account ID, customer number, and telephone number; in limited circumstances, GM may collect a Social Security Number, for example if you win a sweepstakes or receive compensation that must be reported for government tax purposes) payment information (such as your credit card number, CVV code and expiration date) information about your vehicle (such as license plate number, vehicle identification number (VIN), geolocation data, make, model, model year, selling dealer, servicing dealer, date of purchase or lease, the lease/financing term, service history, mileage, oil/battery status, fuel history, battery charging and discharging history, electrical system function, gear status, and diagnostic trouble codes) information about your connected devices and how you interact with our products, services, apps and websites (such as IP address, browser type, unique device identifier, cookie data, and associated identifying and usage information) demographic or protected classification information (such as gender, date of birth, marital status, household composition, or veteran or military status) commercial information (such as when you plan to purchase or lease the vehicle in which you're interested) audio or video information (such as information collected by sensors or cameras in the vehicle, recordings of when you speak with our customer call centers, or photographs and videos such as those that you may submit for contests, sweepstakes, and social sharing) physiological or biological characteristics, such as medical information collected to provide OnStar emergency services that you have requested biometric information (such as voiceprints, as described in the Biometric Technology Section below) information about your home energy usage (such as your charging and discharging of electric vehicles and stationary storage, charging preferences, use of home energy products and services, and rate plans) relationships you have with GM in addition to the purchase and servicing of your vehicle (such as through a My GM Rewards account, a GM Rewards Card or OnStar, etc.) relationships you have with third parties in connection with your use of GM products and services (such as GM dealers, energy providers, companies offering or operating in-vehicle applications, and other companies we help you connect with) information related to My GM Rewards and the My GM Rewards Card Program (“GM Card”), including rewards points, account type, tier status, enrollment, redemption investor and stockholder services information (such as name, address, phone number, email address, and account information) USE The information GM collects about you, your vehicle, or your connected devices may be used: to provide products and services, programs, and maintain customer relationshipsw to improve the quality, safety, and security of our products and services 4 to administer your account(s) and process your payments for products and services to operate our websites and applications, including online registration processes to facilitate and support GM dealer and supplier diversity programs and GM grant programs to autofill data fields on our websites to improve your online experience to develop new products and services, including connected, autonomous and car-sharing products and services to provide customer and vehicle support and service (such as recall information) for warranty administration and validation to provide information and product updates to evaluate vehicle performance and safety for research, evaluation of use, and troubleshooting purposes to verify eligibility for vehicle purchase or incentive programs to verify eligibility for GM card and to provide GM card account management services for marketing and analytics purposes to support the electronic signature and delivery process between you and your dealer to customize and improve communication content to evaluate or conduct a merger, divestiture, acquisition, restructuring, reorganization, dissolution, or other sale or transfer of some or all of our assets to comply with legal, regulatory or contractual requirements to protect our rights, or to detect, investigate and prevent fraud or other illegal activity Communications with you in connection with these uses may be via mail, telephone, e-mail, text message, social media, and other electronic messages, through the in-vehicle infotainment or OnStar system or via our websites and applications. Texting with GM is subject to the GM Consolidated Texting Policy (“Texting Policy,” available at gm.com/texting-policy). See “Choices” below to learn how to manage your communication preferences. You may choose to forward information from one of our websites or emails to another person through our Forward to a Friend or similar program. Email addresses submitted to our E-card or other Forward to a Friend programs are not used by us for other marketing purposes unless the recipient interacts with us separately. When we maintain and use information that has been deidentified, we take reasonable steps to ensure that such information is maintained and used only in deidentified form, and will not attempt to reidentify such information unless required or permitted by applicable law. SHARING GM may share the information it collects about you, your vehicle, or your connected devices (including the categories of information listed above) in the following instances and with the following categories of third parties: within GM, with our GM controlled subsidiaries and affiliates, with GM dealers, with service providers we or our dealers use to deliver products and services to you, and with GM licensees. However, transaction information regarding your GM Card will not be shared with GM dealers 5 with our services providers who work on our behalf and who do not have an independent right to use the information to which they have access or that we disclose to them with companies we enter into business or marketing arrangements with, such as arrangements supporting services we offer to you and our GM card program with third parties for research and development purposes (such as university research institutes for improving highway safety) in connection with the sale, transfer or financing of a significant part of a GM business or its assets, including any such activities associated with a bankruptcy proceeding when we believe in good faith that disclosure is necessary to protect our rights, protect your safety or the safety of others, detect, investigate and prevent fraud or other illegal activity, or respond to a law enforcement request as required or permitted by law, such as in conjunction with a subpoena, government inquiry, litigation, dispute resolution or similar legal process]
USER:
Question: [If GM partners with my insurance company, can they give them information about how much I am driving?]
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 21
| 19
| 1,431
| null | 73
|
{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
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Why wasn't Mady able to get an abortion in texas, and what struggles did she go through to finally get one? Summarize what she had to go through. and include how many clinics she called during this process . put it in bullet points
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Chair Sanders, Senator Murray, Ranking Member Cassidy, Members of the Committee: My name is Mady Anderson, and I live in Houston, Texas. Two years ago, during my senior year at the University of Houston, I had just come out of a two-year relationship. After a couple weeks of nausea and not sleeping or eating, I took a pregnancy test. I called my friends to bring me more tests because I was in disbelief. At one point I had five positive tests in front of me. I was pregnant. This was just two weeks after Texas’s abortion ban, known as S.B. 8, went into effect, banning abortion after six weeks. I knew almost immediately that abortion was the right decision for me. I called and got an appointment for the following week at my local Planned Parenthood, five minutes away. I thought I was early enough to be able to get my abortion that week. But at my appointment my pregnancy measured at 11 weeks. I was shocked. I couldn’t get an abortion in Texas. I called 20 different clinics after that first visit. Yes, you heard correct. 20. I called surrounding states and even as far as the Dakotas; no one could see me right away. The earliest I could be seen was two weeks later, at Jackson Women's Health Organization in Mississippi. This was before the Dobbs v. Jackson Women’s Health decision that would take away the federal constitutional right to abortion. Before 20 more states would ban abortion. Before wait times in states without bans grew longer and longer.My dad took off from work, and we drove a total of 720 miles roundtrip, and spent 13 hours on the road. We spent five hours in a hotel trying to sleep, before going to my first appointment — just to turn right around and head back home. And here’s the thing: Because of medically unnecessary restrictions on abortion care in Mississippi, I would have to make the trip all over again. The state, essentially, put patients in a time-out because they don’t trust people to know what is best for our own health and lives. When I got this news, I was angry, sleep-deprived, and starving — and as certain as I ever was that I wanted an abortion. That certainty never faltered. The following week my mom was able to find us affordable tickets, and we flew back to Jackson. We started our day at 7 a.m. for my 1:30 p.m. appointment. After my procedure, I waited in the recovery room for about 20 mins, before hopping in a car to make my flight back home. I want to talk for a moment about money. As a college student who took out multiple student loans, I was counting every penny. ● I had to pay for the appointment in Houston. ● Then gas and hotel for the first trip to Mississippi. ● Then the first appointment in Mississippi. ● Then plane tickets for the second trip to Mississippi. ● Then the abortion itself. ● Then I missed 20 hours of work. ● And 20 hours of my mandatory internship program. ● The total? $2,850. There is no dollar value I can put on the stress of managing all of this. The despair of having to go to such lengths for basic, safe health care that was legal just weeks before I needed it. The gut-wrenching reality of having to disclose this deeply personal thing that should be private to professors, my boss, and anyone else in a position of authority over me for fear of not only losing my job but also failing out of all my classes due to all the classes and assignments I missed. I felt so much anger that politicians in Austin thought they had the right to make this decision for me. I am one of thousands of people who have now gone through this. Every day, every month we go without a federal right to abortion, there will be more of us. More savings accounts drained, more classes and shifts missed, more choices about which bill to skip paying. If I had found out I was pregnant last year or last month, Jackson Women’s Health wouldn’thave been there for me. The people who cared for me that day cannot care for abortion patients in Mississippi. I would have had to go to New Mexico, Kansas, or as far as Illinois. When we talk about abortion, it’s easy to get stuck talking in theoreticals. But I am a real person. The lives of abortion patients are not theoretical. People will continue to get pregnant when we don’t want to be. We will always need abortions. There is simply no place for politicians to decide for us. Thank you for inviting me here today and letting me share my story.
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== Why wasn't Mady able to get an abortion in texas, and what struggles did she go through to finally get one? Summarize what she had to go through. and include how many clinics she called during this process . put it in bullet points {passage 0} ========== Chair Sanders, Senator Murray, Ranking Member Cassidy, Members of the Committee: My name is Mady Anderson, and I live in Houston, Texas. Two years ago, during my senior year at the University of Houston, I had just come out of a two-year relationship. After a couple weeks of nausea and not sleeping or eating, I took a pregnancy test. I called my friends to bring me more tests because I was in disbelief. At one point I had five positive tests in front of me. I was pregnant. This was just two weeks after Texas’s abortion ban, known as S.B. 8, went into effect, banning abortion after six weeks. I knew almost immediately that abortion was the right decision for me. I called and got an appointment for the following week at my local Planned Parenthood, five minutes away. I thought I was early enough to be able to get my abortion that week. But at my appointment my pregnancy measured at 11 weeks. I was shocked. I couldn’t get an abortion in Texas. I called 20 different clinics after that first visit. Yes, you heard correct. 20. I called surrounding states and even as far as the Dakotas; no one could see me right away. The earliest I could be seen was two weeks later, at Jackson Women's Health Organization in Mississippi. This was before the Dobbs v. Jackson Women’s Health decision that would take away the federal constitutional right to abortion. Before 20 more states would ban abortion. Before wait times in states without bans grew longer and longer.My dad took off from work, and we drove a total of 720 miles roundtrip, and spent 13 hours on the road. We spent five hours in a hotel trying to sleep, before going to my first appointment — just to turn right around and head back home. And here’s the thing: Because of medically unnecessary restrictions on abortion care in Mississippi, I would have to make the trip all over again. The state, essentially, put patients in a time-out because they don’t trust people to know what is best for our own health and lives. When I got this news, I was angry, sleep-deprived, and starving — and as certain as I ever was that I wanted an abortion. That certainty never faltered. The following week my mom was able to find us affordable tickets, and we flew back to Jackson. We started our day at 7 a.m. for my 1:30 p.m. appointment. After my procedure, I waited in the recovery room for about 20 mins, before hopping in a car to make my flight back home. I want to talk for a moment about money. As a college student who took out multiple student loans, I was counting every penny. ● I had to pay for the appointment in Houston. ● Then gas and hotel for the first trip to Mississippi. ● Then the first appointment in Mississippi. ● Then plane tickets for the second trip to Mississippi. ● Then the abortion itself. ● Then I missed 20 hours of work. ● And 20 hours of my mandatory internship program. ● The total? $2,850. There is no dollar value I can put on the stress of managing all of this. The despair of having to go to such lengths for basic, safe health care that was legal just weeks before I needed it. The gut-wrenching reality of having to disclose this deeply personal thing that should be private to professors, my boss, and anyone else in a position of authority over me for fear of not only losing my job but also failing out of all my classes due to all the classes and assignments I missed. I felt so much anger that politicians in Austin thought they had the right to make this decision for me. I am one of thousands of people who have now gone through this. Every day, every month we go without a federal right to abortion, there will be more of us. More savings accounts drained, more classes and shifts missed, more choices about which bill to skip paying. If I had found out I was pregnant last year or last month, Jackson Women’s Health wouldn’thave been there for me. The people who cared for me that day cannot care for abortion patients in Mississippi. I would have had to go to New Mexico, Kansas, or as far as Illinois. When we talk about abortion, it’s easy to get stuck talking in theoreticals. But I am a real person. The lives of abortion patients are not theoretical. People will continue to get pregnant when we don’t want to be. We will always need abortions. There is simply no place for politicians to decide for us. Thank you for inviting me here today and letting me share my story. https://www.help.senate.gov/imo/media/doc/80626e6a-a9e9-50e7-072a-95e7c2a059e3/Anderson%20-%20Testimony.pdf
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
EVIDENCE:
Chair Sanders, Senator Murray, Ranking Member Cassidy, Members of the Committee: My name is Mady Anderson, and I live in Houston, Texas. Two years ago, during my senior year at the University of Houston, I had just come out of a two-year relationship. After a couple weeks of nausea and not sleeping or eating, I took a pregnancy test. I called my friends to bring me more tests because I was in disbelief. At one point I had five positive tests in front of me. I was pregnant. This was just two weeks after Texas’s abortion ban, known as S.B. 8, went into effect, banning abortion after six weeks. I knew almost immediately that abortion was the right decision for me. I called and got an appointment for the following week at my local Planned Parenthood, five minutes away. I thought I was early enough to be able to get my abortion that week. But at my appointment my pregnancy measured at 11 weeks. I was shocked. I couldn’t get an abortion in Texas. I called 20 different clinics after that first visit. Yes, you heard correct. 20. I called surrounding states and even as far as the Dakotas; no one could see me right away. The earliest I could be seen was two weeks later, at Jackson Women's Health Organization in Mississippi. This was before the Dobbs v. Jackson Women’s Health decision that would take away the federal constitutional right to abortion. Before 20 more states would ban abortion. Before wait times in states without bans grew longer and longer.My dad took off from work, and we drove a total of 720 miles roundtrip, and spent 13 hours on the road. We spent five hours in a hotel trying to sleep, before going to my first appointment — just to turn right around and head back home. And here’s the thing: Because of medically unnecessary restrictions on abortion care in Mississippi, I would have to make the trip all over again. The state, essentially, put patients in a time-out because they don’t trust people to know what is best for our own health and lives. When I got this news, I was angry, sleep-deprived, and starving — and as certain as I ever was that I wanted an abortion. That certainty never faltered. The following week my mom was able to find us affordable tickets, and we flew back to Jackson. We started our day at 7 a.m. for my 1:30 p.m. appointment. After my procedure, I waited in the recovery room for about 20 mins, before hopping in a car to make my flight back home. I want to talk for a moment about money. As a college student who took out multiple student loans, I was counting every penny. ● I had to pay for the appointment in Houston. ● Then gas and hotel for the first trip to Mississippi. ● Then the first appointment in Mississippi. ● Then plane tickets for the second trip to Mississippi. ● Then the abortion itself. ● Then I missed 20 hours of work. ● And 20 hours of my mandatory internship program. ● The total? $2,850. There is no dollar value I can put on the stress of managing all of this. The despair of having to go to such lengths for basic, safe health care that was legal just weeks before I needed it. The gut-wrenching reality of having to disclose this deeply personal thing that should be private to professors, my boss, and anyone else in a position of authority over me for fear of not only losing my job but also failing out of all my classes due to all the classes and assignments I missed. I felt so much anger that politicians in Austin thought they had the right to make this decision for me. I am one of thousands of people who have now gone through this. Every day, every month we go without a federal right to abortion, there will be more of us. More savings accounts drained, more classes and shifts missed, more choices about which bill to skip paying. If I had found out I was pregnant last year or last month, Jackson Women’s Health wouldn’thave been there for me. The people who cared for me that day cannot care for abortion patients in Mississippi. I would have had to go to New Mexico, Kansas, or as far as Illinois. When we talk about abortion, it’s easy to get stuck talking in theoreticals. But I am a real person. The lives of abortion patients are not theoretical. People will continue to get pregnant when we don’t want to be. We will always need abortions. There is simply no place for politicians to decide for us. Thank you for inviting me here today and letting me share my story.
USER:
Why wasn't Mady able to get an abortion in texas, and what struggles did she go through to finally get one? Summarize what she had to go through. and include how many clinics she called during this process . put it in bullet points
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Answer the question using only the text provided with no help from external sources or prior knowledge.
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What are the challenges associated with mobile AI?
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With dedicated on-device AI chipsets, mobile devices will have better knowledge of the user's needs, being able to deliver personalized services that will make smartphones more intelligent. Beyond speed and efficiency, on-device AI offers greater security by providing real-time malware detection, recognizing if the device is being misused by identifying user behavior, and spam detection over emails and other apps. Among the applications and features that will benefit first from on-device AI are: Virtual digital assistants. By being less dependent on cloud AI and connectivity, virtual assistants can become the main method for users to interact with the devices. Augmented reality. Augmented reality will also see similar benefits, as it requires computation to take place in the cloud. Cameras. Having an on-device processor that constantly analyzes what the camera "sees" as users take photos or adjust the brightness, ISO sensitivity, color temperature, and exposure duration every time they press the shutter button, and accurately selecting the right scene mode automatically, will have an impact on the user experience. Well-being and healthcare. By delivering faster performance — regardless of the quality of the network, while providing optimal protection of user data — many apps will be able to send notifications to the user (and his or her doctor) in response to real-time analysis of patient data and data collected from wearable devices. This will predict health events, enabling users to seek medical advice and for doctors to assist patients when a medical condition or threat is detected by an AI algorithm. Bringing Intelligent Mobile Devices Into Our Lives AI will disrupt the way users interact with smartphones in the future, making it work for us. Going to the cinema, for example, will be a completely different experience from the one we have today: 1. Someone with an intelligent phone is walking down the street and sees an ad for the latest blockbuster movie. On pointing the phone at the ad, the camera recognizes the movie, suggests how likely they are to enjoy it, how much it matches their preferences, and prompting them to ask if it should buy tickets. 2. The phone checks the calendar and suggests when to get the tickets, based on the commitments and appointments for the week, as well as the best theater based on the predicted location for the day. The phone then sends a message to the person who usually goes along, suggesting the movie and asking if they want to come. 3. The phone buys the tickets and stores them in its digital wallet. 4. On the day, the phone confirms availability and suggests having dinner before the movie, at a nearby restaurant bookmarked on the maps app, reminding the user about the type of food served. After confirmation by the user, the phone makes reservations on their behalf. 5. Based on the traffic, the phone sends a reminder when it is time to leave and, if late, it sends an email to the restaurant with an estimated time of arrival. It automatically provides directions to the restaurant from the car park. 6. At the theater the phone automatically displays the ticket on the home screen for faster scan. One single action triggered from the camera will create a chain of actions that will help people manage their lives. AI will make technology work for everyone, rather than people having to adapt to the technology's limitations. Smartphones will learn who the users are, what they do and what they want to do, and deliver a new user experience, one that is not yet available, effortlessly. AI will enable phones to become intelligent and truly personal digital assistants, and it is on-device AI that will be the engine to make this happen. Benefits of Mobile AI The opportunities for always-on devices that do most of their intelligent computing on the device are enormous. Running AI on the device rather than in the cloud offers different benefits too: No latency. In many cases, running AI entirely in the cloud will have an impact for applications that need to work in real time and are latency-sensitive, such as missioncritical applications and driverless cars. Such applications need to rely on instantaneous responses and cannot afford the roundtrip time or operate when there is variable network coverage. Increased security and privacy. AI algorithms look for patterns in the data at an unprecedented scale. The data collected by the phone will require a roundtrip to the cloud if no AI capability is available on the device. Being able to perform AI algorithms on the device will provide better security due to the low volumes of data exchanged over the network. But it will also provide better privacy, as the AI algorithms will not have to process and store the information in the cloud. The cloud is used only to train the algorithms. This is paramount in today's environment with new European legislation (GDPR) that aims to provide a set of standardized data protection laws across member countries, but also to reinforce the data protection rights of individuals. On-device learning. Although most of the training will happen in the cloud, and the smartphone has inference capabilities, it still needs to learn the user's behavior so it can deliver automated, personalized experiences. On-device learning enables training capabilities on the mobile device, so the data does not need to travel to the cloud or be stored outside the device. This process can be triggered while the device is idle, which allows power saving and ensures no interruptions of other features. Efficiency. Running AI on the device reduces network traffic, as less data is transferred via the network to the cloud, and improves performance as apps that need to run in real time can achieve lower latency levels on the device. Power saving. Power consumption will be reduced, as the device does not need to constantly upload and download AI-related data to be able to process AI algorithms. This will have a positive effect on battery life and, by extending it, will improve user experience. Challenges of Delivering Mobile AI Bringing machine learning and deep learning algorithms to the edge is essential to lower their data computation requirements, while enabling mobile devices with chipsets that can process some of those algorithms on the device. AI workloads are very compute-intensive. Optimizing AI algorithms for use on mobile is a huge challenge, as is the impact on battery life of the intensive computational AI algorithms on a real-time and always-on environment. Another important challenge with on-device AI is the need to train the algorithms. This requires vast amounts of data. The quality and quantity of data is key to successful machine learning. Depending on the complexity of the model and the amount of data, training can take place in the device or in the cloud. Large models tend to require a lot of processing, which is only available in cloud platforms. Some of the predictions needed from AI algorithms require data that is already available on the user's device and no other sources are needed to be trained. However, to train and run large, complicated neural-network models on mobile devices with less capabilities than large servers is a challenge. A fundamental challenge of offering on-device AI is related to the nature of the smartphone. Designing a chipset that delivers the performance required by highly demanding AI algorithms with the restrictions of smartphones in terms of size, power supply, power consumption, and heat management is a major challenge. "Mobile SoCs have to deliver the best possible performance, while ensuring the highest possible density of core functions with optimal use of energy. The [Huawei] Kirin 970's development team introduced a new, innovative HiAI mobile computing architecture with a dedicated NPU," said Victor Dragnea from Huawei. Developing an AI Ecosystem AI platforms provide developer toolkits to build applications using AI algorithms. They combine a variety of algorithms with data that can be used directly by developers, without having to build them from scratch. Some of the functionality includes image recognition, natural language processing, voice recognition, predictive analytics, and other machine learning and deep learning capabilities. An important part of bringing AI to smartphones is the creation of an AI ecosystem. This is vital to expand the capabilities of the dedicated AI chipsets from a few features on the phone to third-party apps. By providing SDKs and APIs, phone makers will enable developers and partners to find new uses for AI computing capabilities. Huawei is positioning the Kirin 970 as an "open platform for mobile AI." The company emphasizes that the chipset will work with any AI framework, such as Caffe2 and TensorFlow, in order for any app to access the capabilities of the NPU and AI features.
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System Instruction: Answer the question using only the text provided with no help from external sources or prior knowledge. User question: What are the challenges associated with mobile AI? Context block: With dedicated on-device AI chipsets, mobile devices will have better knowledge of the user's needs, being able to deliver personalized services that will make smartphones more intelligent. Beyond speed and efficiency, on-device AI offers greater security by providing real-time malware detection, recognizing if the device is being misused by identifying user behavior, and spam detection over emails and other apps. Among the applications and features that will benefit first from on-device AI are: Virtual digital assistants. By being less dependent on cloud AI and connectivity, virtual assistants can become the main method for users to interact with the devices. Augmented reality. Augmented reality will also see similar benefits, as it requires computation to take place in the cloud. Cameras. Having an on-device processor that constantly analyzes what the camera "sees" as users take photos or adjust the brightness, ISO sensitivity, color temperature, and exposure duration every time they press the shutter button, and accurately selecting the right scene mode automatically, will have an impact on the user experience. Well-being and healthcare. By delivering faster performance — regardless of the quality of the network, while providing optimal protection of user data — many apps will be able to send notifications to the user (and his or her doctor) in response to real-time analysis of patient data and data collected from wearable devices. This will predict health events, enabling users to seek medical advice and for doctors to assist patients when a medical condition or threat is detected by an AI algorithm. Bringing Intelligent Mobile Devices Into Our Lives AI will disrupt the way users interact with smartphones in the future, making it work for us. Going to the cinema, for example, will be a completely different experience from the one we have today: 1. Someone with an intelligent phone is walking down the street and sees an ad for the latest blockbuster movie. On pointing the phone at the ad, the camera recognizes the movie, suggests how likely they are to enjoy it, how much it matches their preferences, and prompting them to ask if it should buy tickets. 2. The phone checks the calendar and suggests when to get the tickets, based on the commitments and appointments for the week, as well as the best theater based on the predicted location for the day. The phone then sends a message to the person who usually goes along, suggesting the movie and asking if they want to come. 3. The phone buys the tickets and stores them in its digital wallet. 4. On the day, the phone confirms availability and suggests having dinner before the movie, at a nearby restaurant bookmarked on the maps app, reminding the user about the type of food served. After confirmation by the user, the phone makes reservations on their behalf. 5. Based on the traffic, the phone sends a reminder when it is time to leave and, if late, it sends an email to the restaurant with an estimated time of arrival. It automatically provides directions to the restaurant from the car park. 6. At the theater the phone automatically displays the ticket on the home screen for faster scan. One single action triggered from the camera will create a chain of actions that will help people manage their lives. AI will make technology work for everyone, rather than people having to adapt to the technology's limitations. Smartphones will learn who the users are, what they do and what they want to do, and deliver a new user experience, one that is not yet available, effortlessly. AI will enable phones to become intelligent and truly personal digital assistants, and it is on-device AI that will be the engine to make this happen. Benefits of Mobile AI The opportunities for always-on devices that do most of their intelligent computing on the device are enormous. Running AI on the device rather than in the cloud offers different benefits too: No latency. In many cases, running AI entirely in the cloud will have an impact for applications that need to work in real time and are latency-sensitive, such as missioncritical applications and driverless cars. Such applications need to rely on instantaneous responses and cannot afford the roundtrip time or operate when there is variable network coverage. Increased security and privacy. AI algorithms look for patterns in the data at an unprecedented scale. The data collected by the phone will require a roundtrip to the cloud if no AI capability is available on the device. Being able to perform AI algorithms on the device will provide better security due to the low volumes of data exchanged over the network. But it will also provide better privacy, as the AI algorithms will not have to process and store the information in the cloud. The cloud is used only to train the algorithms. This is paramount in today's environment with new European legislation (GDPR) that aims to provide a set of standardized data protection laws across member countries, but also to reinforce the data protection rights of individuals. On-device learning. Although most of the training will happen in the cloud, and the smartphone has inference capabilities, it still needs to learn the user's behavior so it can deliver automated, personalized experiences. On-device learning enables training capabilities on the mobile device, so the data does not need to travel to the cloud or be stored outside the device. This process can be triggered while the device is idle, which allows power saving and ensures no interruptions of other features. Efficiency. Running AI on the device reduces network traffic, as less data is transferred via the network to the cloud, and improves performance as apps that need to run in real time can achieve lower latency levels on the device. Power saving. Power consumption will be reduced, as the device does not need to constantly upload and download AI-related data to be able to process AI algorithms. This will have a positive effect on battery life and, by extending it, will improve user experience. Challenges of Delivering Mobile AI Bringing machine learning and deep learning algorithms to the edge is essential to lower their data computation requirements, while enabling mobile devices with chipsets that can process some of those algorithms on the device. AI workloads are very compute-intensive. Optimizing AI algorithms for use on mobile is a huge challenge, as is the impact on battery life of the intensive computational AI algorithms on a real-time and always-on environment. Another important challenge with on-device AI is the need to train the algorithms. This requires vast amounts of data. The quality and quantity of data is key to successful machine learning. Depending on the complexity of the model and the amount of data, training can take place in the device or in the cloud. Large models tend to require a lot of processing, which is only available in cloud platforms. Some of the predictions needed from AI algorithms require data that is already available on the user's device and no other sources are needed to be trained. However, to train and run large, complicated neural-network models on mobile devices with less capabilities than large servers is a challenge. A fundamental challenge of offering on-device AI is related to the nature of the smartphone. Designing a chipset that delivers the performance required by highly demanding AI algorithms with the restrictions of smartphones in terms of size, power supply, power consumption, and heat management is a major challenge. "Mobile SoCs have to deliver the best possible performance, while ensuring the highest possible density of core functions with optimal use of energy. The [Huawei] Kirin 970's development team introduced a new, innovative HiAI mobile computing architecture with a dedicated NPU," said Victor Dragnea from Huawei. Developing an AI Ecosystem AI platforms provide developer toolkits to build applications using AI algorithms. They combine a variety of algorithms with data that can be used directly by developers, without having to build them from scratch. Some of the functionality includes image recognition, natural language processing, voice recognition, predictive analytics, and other machine learning and deep learning capabilities. An important part of bringing AI to smartphones is the creation of an AI ecosystem. This is vital to expand the capabilities of the dedicated AI chipsets from a few features on the phone to third-party apps. By providing SDKs and APIs, phone makers will enable developers and partners to find new uses for AI computing capabilities. Huawei is positioning the Kirin 970 as an "open platform for mobile AI." The company emphasizes that the chipset will work with any AI framework, such as Caffe2 and TensorFlow, in order for any app to access the capabilities of the NPU and AI features.
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Answer the question using only the text provided with no help from external sources or prior knowledge.
EVIDENCE:
With dedicated on-device AI chipsets, mobile devices will have better knowledge of the user's needs, being able to deliver personalized services that will make smartphones more intelligent. Beyond speed and efficiency, on-device AI offers greater security by providing real-time malware detection, recognizing if the device is being misused by identifying user behavior, and spam detection over emails and other apps. Among the applications and features that will benefit first from on-device AI are: Virtual digital assistants. By being less dependent on cloud AI and connectivity, virtual assistants can become the main method for users to interact with the devices. Augmented reality. Augmented reality will also see similar benefits, as it requires computation to take place in the cloud. Cameras. Having an on-device processor that constantly analyzes what the camera "sees" as users take photos or adjust the brightness, ISO sensitivity, color temperature, and exposure duration every time they press the shutter button, and accurately selecting the right scene mode automatically, will have an impact on the user experience. Well-being and healthcare. By delivering faster performance — regardless of the quality of the network, while providing optimal protection of user data — many apps will be able to send notifications to the user (and his or her doctor) in response to real-time analysis of patient data and data collected from wearable devices. This will predict health events, enabling users to seek medical advice and for doctors to assist patients when a medical condition or threat is detected by an AI algorithm. Bringing Intelligent Mobile Devices Into Our Lives AI will disrupt the way users interact with smartphones in the future, making it work for us. Going to the cinema, for example, will be a completely different experience from the one we have today: 1. Someone with an intelligent phone is walking down the street and sees an ad for the latest blockbuster movie. On pointing the phone at the ad, the camera recognizes the movie, suggests how likely they are to enjoy it, how much it matches their preferences, and prompting them to ask if it should buy tickets. 2. The phone checks the calendar and suggests when to get the tickets, based on the commitments and appointments for the week, as well as the best theater based on the predicted location for the day. The phone then sends a message to the person who usually goes along, suggesting the movie and asking if they want to come. 3. The phone buys the tickets and stores them in its digital wallet. 4. On the day, the phone confirms availability and suggests having dinner before the movie, at a nearby restaurant bookmarked on the maps app, reminding the user about the type of food served. After confirmation by the user, the phone makes reservations on their behalf. 5. Based on the traffic, the phone sends a reminder when it is time to leave and, if late, it sends an email to the restaurant with an estimated time of arrival. It automatically provides directions to the restaurant from the car park. 6. At the theater the phone automatically displays the ticket on the home screen for faster scan. One single action triggered from the camera will create a chain of actions that will help people manage their lives. AI will make technology work for everyone, rather than people having to adapt to the technology's limitations. Smartphones will learn who the users are, what they do and what they want to do, and deliver a new user experience, one that is not yet available, effortlessly. AI will enable phones to become intelligent and truly personal digital assistants, and it is on-device AI that will be the engine to make this happen. Benefits of Mobile AI The opportunities for always-on devices that do most of their intelligent computing on the device are enormous. Running AI on the device rather than in the cloud offers different benefits too: No latency. In many cases, running AI entirely in the cloud will have an impact for applications that need to work in real time and are latency-sensitive, such as missioncritical applications and driverless cars. Such applications need to rely on instantaneous responses and cannot afford the roundtrip time or operate when there is variable network coverage. Increased security and privacy. AI algorithms look for patterns in the data at an unprecedented scale. The data collected by the phone will require a roundtrip to the cloud if no AI capability is available on the device. Being able to perform AI algorithms on the device will provide better security due to the low volumes of data exchanged over the network. But it will also provide better privacy, as the AI algorithms will not have to process and store the information in the cloud. The cloud is used only to train the algorithms. This is paramount in today's environment with new European legislation (GDPR) that aims to provide a set of standardized data protection laws across member countries, but also to reinforce the data protection rights of individuals. On-device learning. Although most of the training will happen in the cloud, and the smartphone has inference capabilities, it still needs to learn the user's behavior so it can deliver automated, personalized experiences. On-device learning enables training capabilities on the mobile device, so the data does not need to travel to the cloud or be stored outside the device. This process can be triggered while the device is idle, which allows power saving and ensures no interruptions of other features. Efficiency. Running AI on the device reduces network traffic, as less data is transferred via the network to the cloud, and improves performance as apps that need to run in real time can achieve lower latency levels on the device. Power saving. Power consumption will be reduced, as the device does not need to constantly upload and download AI-related data to be able to process AI algorithms. This will have a positive effect on battery life and, by extending it, will improve user experience. Challenges of Delivering Mobile AI Bringing machine learning and deep learning algorithms to the edge is essential to lower their data computation requirements, while enabling mobile devices with chipsets that can process some of those algorithms on the device. AI workloads are very compute-intensive. Optimizing AI algorithms for use on mobile is a huge challenge, as is the impact on battery life of the intensive computational AI algorithms on a real-time and always-on environment. Another important challenge with on-device AI is the need to train the algorithms. This requires vast amounts of data. The quality and quantity of data is key to successful machine learning. Depending on the complexity of the model and the amount of data, training can take place in the device or in the cloud. Large models tend to require a lot of processing, which is only available in cloud platforms. Some of the predictions needed from AI algorithms require data that is already available on the user's device and no other sources are needed to be trained. However, to train and run large, complicated neural-network models on mobile devices with less capabilities than large servers is a challenge. A fundamental challenge of offering on-device AI is related to the nature of the smartphone. Designing a chipset that delivers the performance required by highly demanding AI algorithms with the restrictions of smartphones in terms of size, power supply, power consumption, and heat management is a major challenge. "Mobile SoCs have to deliver the best possible performance, while ensuring the highest possible density of core functions with optimal use of energy. The [Huawei] Kirin 970's development team introduced a new, innovative HiAI mobile computing architecture with a dedicated NPU," said Victor Dragnea from Huawei. Developing an AI Ecosystem AI platforms provide developer toolkits to build applications using AI algorithms. They combine a variety of algorithms with data that can be used directly by developers, without having to build them from scratch. Some of the functionality includes image recognition, natural language processing, voice recognition, predictive analytics, and other machine learning and deep learning capabilities. An important part of bringing AI to smartphones is the creation of an AI ecosystem. This is vital to expand the capabilities of the dedicated AI chipsets from a few features on the phone to third-party apps. By providing SDKs and APIs, phone makers will enable developers and partners to find new uses for AI computing capabilities. Huawei is positioning the Kirin 970 as an "open platform for mobile AI." The company emphasizes that the chipset will work with any AI framework, such as Caffe2 and TensorFlow, in order for any app to access the capabilities of the NPU and AI features.
USER:
What are the challenges associated with mobile AI?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 17
| 8
| 1,457
| null | 515
|
Answer questions using the information provided in the prompt. Attempt to keep answers concise, while also avoiding or explaining jargon that the masses wouldn't understand.
|
What does the article suggest General Motors Company has an advantage in?
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GENERAL MOTORS COMPANY Item 1A. Risk Factors We have listed below the most material risk factors applicable to us. These risk factors are not necessarily in the order of importance or probability of occurrence: Risks related to our competition and strategy If we do not deliver new products, services, technologies and customer experiences in response to increased competition and changing consumer needs and preferences, our business could suffer. We believe that the automotive industry will continue to experience significant change in the coming years, particularly as traditional automotive original equipment manufacturers (OEMs) continue to shift resources to the development of EVs. In addition to our traditional competitors, we must also be responsive to the entrance of start-ups and other non-traditional competitors in the automotive industry, such as software and ridesharing services supported by large technology companies. These new competitors, as well as established industry participants, are disrupting the historic business model of our industry through the introduction of new technologies, products, services, direct-to-consumer sales channels, methods of transportation and vehicle ownership. To successfully execute our long-term strategy, we must continue to develop and commercialize new products and services, including products and services that are outside of our historically core ICE business, such as EVs and AVs, software-enabled connected services and other new businesses. There can be no assurance that advances in technology will occur in a timely or feasible way, if at all, that others will not acquire similar or superior technologies sooner than we do, or that we will acquire technologies on an exclusive basis or at a significant price advantage. The process of designing and developing new technology, products and services is costly and uncertain and requires extensive capital investment. If our access to capital were to become significantly constrained, if costs of capital increased significantly, or if our ability to raise capital is challenged relative to our peers, our ability to execute on our strategic plans could be adversely affected. Further, if we are unable to prevent or effectively remedy errors, bugs, vulnerabilities or defects in our software and hardware, or fail to deploy updates to our software properly, or if we do not adequately prepare for and respond to new kinds of technological innovations, market developments and changing customer needs and preferences, our sales, profitability and long-term competitiveness may be materially harmed. Our ability to attract and retain talented, diverse and highly skilled employees is critical to our success and competitiveness. Our success depends on our ability to recruit and retain talented and diverse employees who are highly skilled in their areas. In particular, our vehicles and connected services increasingly rely on software and hardware that is highly technical and complex and our success in this area is dependent upon our ability to retain and recruit the best talent. The market for highly skilled workers and leaders in our industry is extremely competitive. In addition to compensation considerations, current and potential employees are increasingly placing a premium on culture and other various intangibles, such as working for companies with a clear purpose and strong brand reputation, flexible work arrangements, and other considerations, such as embracing sustainability and diversity, equity and inclusion initiatives. Failure to attract, hire, develop, motivate and retain highly qualified and diverse employees could disrupt our operations and adversely affect our strategic plans. Our ability to maintain profitability is dependent upon our ability to timely fund and introduce new and improved vehicle models, including EVs, that are able to attract a sufficient number of consumers. We operate in a very competitive industry with market participants routinely introducing new and improved vehicle models and features, at decreasing price points, designed to meet rapidly evolving consumer expectations. Producing new and improved vehicle models, including EVs, that preserve our reputation for designing, building and selling safe, high-quality cars, crossovers, trucks and SUVs is critical to our long-term profitability. Successful launches of our new vehicles are critical to our short-term profitability. The new vehicle development process can take two years or more, and a number of factors may lengthen that time period. Because of this product development cycle and the various elements that may contribute to consumers’ acceptance of new vehicle designs, including competitors’ product introductions, technological innovations, fuel prices, general economic conditions, regulatory developments, including tax credits or other government policies in various countries, transportation infrastructure and changes in quality, safety, reliability and styling demands and preferences, an initial product concept or design may not result in a saleable vehicle or a vehicle that generates sales in sufficient quantities and at high enough prices to be profitable. Our high proportion of fixed costs, both due to our significant investment in property, plant and equipment as well as other requirements of our collective bargaining agreements, which limit our flexibility to adjust personnel costs to changes in demands for our products, may further exacerbate the risks associated with incorrectly assessing demand for our vehicles. Our long-term strategy is dependent upon our ability to profitably deliver a strategic portfolio of EVs. The production and profitable sale of EVs has become increasingly important to our long-term business as we continue our transition to an allelectric future. Our EV strategy is dependent on our ability to deliver a strategic portfolio of high-quality EVs that are competitive and meet consumer demands; scale our EV manufacturing capabilities; reduce the costs associated with the manufacture of EVs, particularly with respect to battery cells and packs; increase vehicle range and the energy density of our batteries; efficiently source sufficient materials for the manufacture of battery cells; license and monetize our proprietary platforms and related innovations; successfully invest in new technologies relative to our peers; develop new software and services; and leverage our scale, manufacturing capabilities and synergies with existing ICE vehicles. Our progress towards these objectives has impacted, and may continue to impact, the need to record losses on our EV-related inventory, including battery cells.In addition, the success of our long-term strategy is dependent on consumer adoption of EVs. Consumer adoption of EVs could be impacted by numerous factors, including the breadth of the portfolio of EVs available; perceptions about EV features, quality, safety, performance and cost relative to ICE vehicles; the range over which EVs may be driven on a given battery charge; the proliferation and speed of charging infrastructure, in particular with respect to public EV charging stations, and the success of the Company's charging infrastructure programs and strategic joint ventures and other relationships; cost and availability of high fuel-economy ICE vehicles; volatility, or a sustained decrease, in the cost of petroleum-based fuel; failure by governments and other third parties to make the investments necessary to make infrastructure improvements, such as greater availability of cleaner energy grids and EV charging stations, and to provide meaningful and fully utilizable economic incentives promoting the adoption of EVs, including production and consumer credits contemplated by the Inflation Reduction Act (IRA); and negative feedback from stakeholders impacting investor and consumer confidence in our company or industry. If we are unable to successfully deliver on our EV strategy, it could materially and adversely affect our results of operations, financial condition and growth prospects, and could negatively impact our brand and reputation. Our near-term profitability is dependent upon the success of our current line of ICE vehicles, particularly our full-size ICE SUVs and full-size ICE pickup trucks. While we offer a broad portfolio of cars, crossovers, SUVs and trucks, and we have announced significant plans to design, build and sell a strategic portfolio of EVs, we currently recognize the highest profit margins on our full-size ICE SUVs and full-size ICE pickup trucks. As a result, our near-term success is dependent upon our ability to sell higher margin vehicles in sufficient volumes. We are also using the cash generated by our ICE vehicles to fund our growth strategy, including with respect to EVs and AVs. Any near-term shift in consumer preferences toward smaller, more fuel-efficient vehicles, whether as a result of increases in the price of oil or any sustained shortage of oil, including as a result of global political instability (such as related to the ongoing conflicts in Ukraine and Gaza), concerns about fuel consumption or GHG emissions, or other reasons, could weaken the demand for our higher margin vehicles. More stringent fuel economy regulations could also impact our ability to sell these vehicles or could result in additional costs associated with these vehicles, which could be material. See “Our operations and products are subject to extensive laws, regulations and policies, including those related to vehicle emissions and fuel economy standards, which can significantly increase our costs and affect how we do business.”
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System Instructions: Answer questions using the information provided in the prompt. Attempt to keep answers concise, while also avoiding or explaining jargon that the masses wouldn't understand. Question: What does the article suggest General Motors Company has an advantage in? Context Block: GENERAL MOTORS COMPANY Item 1A. Risk Factors We have listed below the most material risk factors applicable to us. These risk factors are not necessarily in the order of importance or probability of occurrence: Risks related to our competition and strategy If we do not deliver new products, services, technologies and customer experiences in response to increased competition and changing consumer needs and preferences, our business could suffer. We believe that the automotive industry will continue to experience significant change in the coming years, particularly as traditional automotive original equipment manufacturers (OEMs) continue to shift resources to the development of EVs. In addition to our traditional competitors, we must also be responsive to the entrance of start-ups and other non-traditional competitors in the automotive industry, such as software and ridesharing services supported by large technology companies. These new competitors, as well as established industry participants, are disrupting the historic business model of our industry through the introduction of new technologies, products, services, direct-to-consumer sales channels, methods of transportation and vehicle ownership. To successfully execute our long-term strategy, we must continue to develop and commercialize new products and services, including products and services that are outside of our historically core ICE business, such as EVs and AVs, software-enabled connected services and other new businesses. There can be no assurance that advances in technology will occur in a timely or feasible way, if at all, that others will not acquire similar or superior technologies sooner than we do, or that we will acquire technologies on an exclusive basis or at a significant price advantage. The process of designing and developing new technology, products and services is costly and uncertain and requires extensive capital investment. If our access to capital were to become significantly constrained, if costs of capital increased significantly, or if our ability to raise capital is challenged relative to our peers, our ability to execute on our strategic plans could be adversely affected. Further, if we are unable to prevent or effectively remedy errors, bugs, vulnerabilities or defects in our software and hardware, or fail to deploy updates to our software properly, or if we do not adequately prepare for and respond to new kinds of technological innovations, market developments and changing customer needs and preferences, our sales, profitability and long-term competitiveness may be materially harmed. Our ability to attract and retain talented, diverse and highly skilled employees is critical to our success and competitiveness. Our success depends on our ability to recruit and retain talented and diverse employees who are highly skilled in their areas. In particular, our vehicles and connected services increasingly rely on software and hardware that is highly technical and complex and our success in this area is dependent upon our ability to retain and recruit the best talent. The market for highly skilled workers and leaders in our industry is extremely competitive. In addition to compensation considerations, current and potential employees are increasingly placing a premium on culture and other various intangibles, such as working for companies with a clear purpose and strong brand reputation, flexible work arrangements, and other considerations, such as embracing sustainability and diversity, equity and inclusion initiatives. Failure to attract, hire, develop, motivate and retain highly qualified and diverse employees could disrupt our operations and adversely affect our strategic plans. Our ability to maintain profitability is dependent upon our ability to timely fund and introduce new and improved vehicle models, including EVs, that are able to attract a sufficient number of consumers. We operate in a very competitive industry with market participants routinely introducing new and improved vehicle models and features, at decreasing price points, designed to meet rapidly evolving consumer expectations. Producing new and improved vehicle models, including EVs, that preserve our reputation for designing, building and selling safe, high-quality cars, crossovers, trucks and SUVs is critical to our long-term profitability. Successful launches of our new vehicles are critical to our short-term profitability. The new vehicle development process can take two years or more, and a number of factors may lengthen that time period. Because of this product development cycle and the various elements that may contribute to consumers’ acceptance of new vehicle designs, including competitors’ product introductions, technological innovations, fuel prices, general economic conditions, regulatory developments, including tax credits or other government policies in various countries, transportation infrastructure and changes in quality, safety, reliability and styling demands and preferences, an initial product concept or design may not result in a saleable vehicle or a vehicle that generates sales in sufficient quantities and at high enough prices to be profitable. Our high proportion of fixed costs, both due to our significant investment in property, plant and equipment as well as other requirements of our collective bargaining agreements, which limit our flexibility to adjust personnel costs to changes in demands for our products, may further exacerbate the risks associated with incorrectly assessing demand for our vehicles. Our long-term strategy is dependent upon our ability to profitably deliver a strategic portfolio of EVs. The production and profitable sale of EVs has become increasingly important to our long-term business as we continue our transition to an allelectric future. Our EV strategy is dependent on our ability to deliver a strategic portfolio of high-quality EVs that are competitive and meet consumer demands; scale our EV manufacturing capabilities; reduce the costs associated with the manufacture of EVs, particularly with respect to battery cells and packs; increase vehicle range and the energy density of our batteries; efficiently source sufficient materials for the manufacture of battery cells; license and monetize our proprietary platforms and related innovations; successfully invest in new technologies relative to our peers; develop new software and services; and leverage our scale, manufacturing capabilities and synergies with existing ICE vehicles. Our progress towards these objectives has impacted, and may continue to impact, the need to record losses on our EV-related inventory, including battery cells.In addition, the success of our long-term strategy is dependent on consumer adoption of EVs. Consumer adoption of EVs could be impacted by numerous factors, including the breadth of the portfolio of EVs available; perceptions about EV features, quality, safety, performance and cost relative to ICE vehicles; the range over which EVs may be driven on a given battery charge; the proliferation and speed of charging infrastructure, in particular with respect to public EV charging stations, and the success of the Company's charging infrastructure programs and strategic joint ventures and other relationships; cost and availability of high fuel-economy ICE vehicles; volatility, or a sustained decrease, in the cost of petroleum-based fuel; failure by governments and other third parties to make the investments necessary to make infrastructure improvements, such as greater availability of cleaner energy grids and EV charging stations, and to provide meaningful and fully utilizable economic incentives promoting the adoption of EVs, including production and consumer credits contemplated by the Inflation Reduction Act (IRA); and negative feedback from stakeholders impacting investor and consumer confidence in our company or industry. If we are unable to successfully deliver on our EV strategy, it could materially and adversely affect our results of operations, financial condition and growth prospects, and could negatively impact our brand and reputation. Our near-term profitability is dependent upon the success of our current line of ICE vehicles, particularly our full-size ICE SUVs and full-size ICE pickup trucks. While we offer a broad portfolio of cars, crossovers, SUVs and trucks, and we have announced significant plans to design, build and sell a strategic portfolio of EVs, we currently recognize the highest profit margins on our full-size ICE SUVs and full-size ICE pickup trucks. As a result, our near-term success is dependent upon our ability to sell higher margin vehicles in sufficient volumes. We are also using the cash generated by our ICE vehicles to fund our growth strategy, including with respect to EVs and AVs. Any near-term shift in consumer preferences toward smaller, more fuel-efficient vehicles, whether as a result of increases in the price of oil or any sustained shortage of oil, including as a result of global political instability (such as related to the ongoing conflicts in Ukraine and Gaza), concerns about fuel consumption or GHG emissions, or other reasons, could weaken the demand for our higher margin vehicles. More stringent fuel economy regulations could also impact our ability to sell these vehicles or could result in additional costs associated with these vehicles, which could be material. See “Our operations and products are subject to extensive laws, regulations and policies, including those related to vehicle emissions and fuel economy standards, which can significantly increase our costs and affect how we do business.”
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Answer questions using the information provided in the prompt. Attempt to keep answers concise, while also avoiding or explaining jargon that the masses wouldn't understand.
EVIDENCE:
GENERAL MOTORS COMPANY Item 1A. Risk Factors We have listed below the most material risk factors applicable to us. These risk factors are not necessarily in the order of importance or probability of occurrence: Risks related to our competition and strategy If we do not deliver new products, services, technologies and customer experiences in response to increased competition and changing consumer needs and preferences, our business could suffer. We believe that the automotive industry will continue to experience significant change in the coming years, particularly as traditional automotive original equipment manufacturers (OEMs) continue to shift resources to the development of EVs. In addition to our traditional competitors, we must also be responsive to the entrance of start-ups and other non-traditional competitors in the automotive industry, such as software and ridesharing services supported by large technology companies. These new competitors, as well as established industry participants, are disrupting the historic business model of our industry through the introduction of new technologies, products, services, direct-to-consumer sales channels, methods of transportation and vehicle ownership. To successfully execute our long-term strategy, we must continue to develop and commercialize new products and services, including products and services that are outside of our historically core ICE business, such as EVs and AVs, software-enabled connected services and other new businesses. There can be no assurance that advances in technology will occur in a timely or feasible way, if at all, that others will not acquire similar or superior technologies sooner than we do, or that we will acquire technologies on an exclusive basis or at a significant price advantage. The process of designing and developing new technology, products and services is costly and uncertain and requires extensive capital investment. If our access to capital were to become significantly constrained, if costs of capital increased significantly, or if our ability to raise capital is challenged relative to our peers, our ability to execute on our strategic plans could be adversely affected. Further, if we are unable to prevent or effectively remedy errors, bugs, vulnerabilities or defects in our software and hardware, or fail to deploy updates to our software properly, or if we do not adequately prepare for and respond to new kinds of technological innovations, market developments and changing customer needs and preferences, our sales, profitability and long-term competitiveness may be materially harmed. Our ability to attract and retain talented, diverse and highly skilled employees is critical to our success and competitiveness. Our success depends on our ability to recruit and retain talented and diverse employees who are highly skilled in their areas. In particular, our vehicles and connected services increasingly rely on software and hardware that is highly technical and complex and our success in this area is dependent upon our ability to retain and recruit the best talent. The market for highly skilled workers and leaders in our industry is extremely competitive. In addition to compensation considerations, current and potential employees are increasingly placing a premium on culture and other various intangibles, such as working for companies with a clear purpose and strong brand reputation, flexible work arrangements, and other considerations, such as embracing sustainability and diversity, equity and inclusion initiatives. Failure to attract, hire, develop, motivate and retain highly qualified and diverse employees could disrupt our operations and adversely affect our strategic plans. Our ability to maintain profitability is dependent upon our ability to timely fund and introduce new and improved vehicle models, including EVs, that are able to attract a sufficient number of consumers. We operate in a very competitive industry with market participants routinely introducing new and improved vehicle models and features, at decreasing price points, designed to meet rapidly evolving consumer expectations. Producing new and improved vehicle models, including EVs, that preserve our reputation for designing, building and selling safe, high-quality cars, crossovers, trucks and SUVs is critical to our long-term profitability. Successful launches of our new vehicles are critical to our short-term profitability. The new vehicle development process can take two years or more, and a number of factors may lengthen that time period. Because of this product development cycle and the various elements that may contribute to consumers’ acceptance of new vehicle designs, including competitors’ product introductions, technological innovations, fuel prices, general economic conditions, regulatory developments, including tax credits or other government policies in various countries, transportation infrastructure and changes in quality, safety, reliability and styling demands and preferences, an initial product concept or design may not result in a saleable vehicle or a vehicle that generates sales in sufficient quantities and at high enough prices to be profitable. Our high proportion of fixed costs, both due to our significant investment in property, plant and equipment as well as other requirements of our collective bargaining agreements, which limit our flexibility to adjust personnel costs to changes in demands for our products, may further exacerbate the risks associated with incorrectly assessing demand for our vehicles. Our long-term strategy is dependent upon our ability to profitably deliver a strategic portfolio of EVs. The production and profitable sale of EVs has become increasingly important to our long-term business as we continue our transition to an allelectric future. Our EV strategy is dependent on our ability to deliver a strategic portfolio of high-quality EVs that are competitive and meet consumer demands; scale our EV manufacturing capabilities; reduce the costs associated with the manufacture of EVs, particularly with respect to battery cells and packs; increase vehicle range and the energy density of our batteries; efficiently source sufficient materials for the manufacture of battery cells; license and monetize our proprietary platforms and related innovations; successfully invest in new technologies relative to our peers; develop new software and services; and leverage our scale, manufacturing capabilities and synergies with existing ICE vehicles. Our progress towards these objectives has impacted, and may continue to impact, the need to record losses on our EV-related inventory, including battery cells.In addition, the success of our long-term strategy is dependent on consumer adoption of EVs. Consumer adoption of EVs could be impacted by numerous factors, including the breadth of the portfolio of EVs available; perceptions about EV features, quality, safety, performance and cost relative to ICE vehicles; the range over which EVs may be driven on a given battery charge; the proliferation and speed of charging infrastructure, in particular with respect to public EV charging stations, and the success of the Company's charging infrastructure programs and strategic joint ventures and other relationships; cost and availability of high fuel-economy ICE vehicles; volatility, or a sustained decrease, in the cost of petroleum-based fuel; failure by governments and other third parties to make the investments necessary to make infrastructure improvements, such as greater availability of cleaner energy grids and EV charging stations, and to provide meaningful and fully utilizable economic incentives promoting the adoption of EVs, including production and consumer credits contemplated by the Inflation Reduction Act (IRA); and negative feedback from stakeholders impacting investor and consumer confidence in our company or industry. If we are unable to successfully deliver on our EV strategy, it could materially and adversely affect our results of operations, financial condition and growth prospects, and could negatively impact our brand and reputation. Our near-term profitability is dependent upon the success of our current line of ICE vehicles, particularly our full-size ICE SUVs and full-size ICE pickup trucks. While we offer a broad portfolio of cars, crossovers, SUVs and trucks, and we have announced significant plans to design, build and sell a strategic portfolio of EVs, we currently recognize the highest profit margins on our full-size ICE SUVs and full-size ICE pickup trucks. As a result, our near-term success is dependent upon our ability to sell higher margin vehicles in sufficient volumes. We are also using the cash generated by our ICE vehicles to fund our growth strategy, including with respect to EVs and AVs. Any near-term shift in consumer preferences toward smaller, more fuel-efficient vehicles, whether as a result of increases in the price of oil or any sustained shortage of oil, including as a result of global political instability (such as related to the ongoing conflicts in Ukraine and Gaza), concerns about fuel consumption or GHG emissions, or other reasons, could weaken the demand for our higher margin vehicles. More stringent fuel economy regulations could also impact our ability to sell these vehicles or could result in additional costs associated with these vehicles, which could be material. See “Our operations and products are subject to extensive laws, regulations and policies, including those related to vehicle emissions and fuel economy standards, which can significantly increase our costs and affect how we do business.”
USER:
What does the article suggest General Motors Company has an advantage in?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 25
| 12
| 1,433
| null | 756
|
This task requires you to answer a question based solely on the information provided in the prompt. You may not use any outside information/knowledge.
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Please explain firewalls available and how they work.
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Internet Connection Firewall Today, there are three basic ways that home users connect to the Internet. The first is through a device called a modem. A modem allows you to connect to the Internet using your regular telephone line. You are only connected to the Internet when you actually dial your Internet Service Provider (ISP). This is a relatively slow way of connecting to the Internet, but much less costly than the other two options. The other two options are connecting to the Internet through your cable television service (cable), or connecting through specialized telephone wire run between the nearest telephone switching site and your house [digital subscriber line (DSL)]. Both ways are expensive compared to using a standard modem, but the speeds can be 20 or more times faster using cable or DSL. In reality, cable and DSL connections also require modems. However, when we talk about connecting to the Internet through a modem we are normally talking about using a standard telephone line for the connection. In the case of a cable or DSL connection, your computer is constantly connected to the Internet. This exposes your computer to the possibility of being hacked. Hacking is when an unauthorized person attempts to gain control of your computer for purposes of stealing data or causing malicious damage. One step that can be taken to deter hackers is placing a hardware or software firewall between your computer and the Internet. All messages entering or leaving the computer pass through the firewall, which examines each message and blocks those that do not meet the specified security criteria. Although a hardware firewall is always considered to be more effective than a software firewall, it is considerably more expensive. To save Windows XP users from having to invest additional money for basic security, Microsoft has included a software Internet Connection Firewall ICF) that can be used without additional charge.
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System Instruction: [This task requires you to answer a question based solely on the information provided in the prompt. You may not use any outside information/knowledge. ] Question: [Please explain firewalls available and how they work.] Context Block: [Internet Connection Firewall Today, there are three basic ways that home users connect to the Internet. The first is through a device called a modem. A modem allows you to connect to the Internet using your regular telephone line. You are only connected to the Internet when you actually dial your Internet Service Provider (ISP). This is a relatively slow way of connecting to the Internet, but much less costly than the other two options. The other two options are connecting to the Internet through your cable television service (cable), or connecting through specialized telephone wire run between the nearest telephone switching site and your house [digital subscriber line (DSL)]. Both ways are expensive compared to using a standard modem, but the speeds can be 20 or more times faster using cable or DSL. In reality, cable and DSL connections also require modems. However, when we talk about connecting to the Internet through a modem we are normally talking about using a standard telephone line for the connection. In the case of a cable or DSL connection, your computer is constantly connected to the Internet. This exposes your computer to the possibility of being hacked. Hacking is when an unauthorized person attempts to gain control of your computer for purposes of stealing data or causing malicious damage. One step that can be taken to deter hackers is placing a hardware or software firewall between your computer and the Internet. All messages entering or leaving the computer pass through the firewall, which examines each message and blocks those that do not meet the specified security criteria. Although a hardware firewall is always considered to be more effective than a software firewall, it is considerably more expensive. To save Windows XP users from having to invest additional money for basic security, Microsoft has included a software Internet Connection Firewall ICF) that can be used without additional charge.]
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This task requires you to answer a question based solely on the information provided in the prompt. You may not use any outside information/knowledge.
EVIDENCE:
Internet Connection Firewall Today, there are three basic ways that home users connect to the Internet. The first is through a device called a modem. A modem allows you to connect to the Internet using your regular telephone line. You are only connected to the Internet when you actually dial your Internet Service Provider (ISP). This is a relatively slow way of connecting to the Internet, but much less costly than the other two options. The other two options are connecting to the Internet through your cable television service (cable), or connecting through specialized telephone wire run between the nearest telephone switching site and your house [digital subscriber line (DSL)]. Both ways are expensive compared to using a standard modem, but the speeds can be 20 or more times faster using cable or DSL. In reality, cable and DSL connections also require modems. However, when we talk about connecting to the Internet through a modem we are normally talking about using a standard telephone line for the connection. In the case of a cable or DSL connection, your computer is constantly connected to the Internet. This exposes your computer to the possibility of being hacked. Hacking is when an unauthorized person attempts to gain control of your computer for purposes of stealing data or causing malicious damage. One step that can be taken to deter hackers is placing a hardware or software firewall between your computer and the Internet. All messages entering or leaving the computer pass through the firewall, which examines each message and blocks those that do not meet the specified security criteria. Although a hardware firewall is always considered to be more effective than a software firewall, it is considerably more expensive. To save Windows XP users from having to invest additional money for basic security, Microsoft has included a software Internet Connection Firewall ICF) that can be used without additional charge.
USER:
Please explain firewalls available and how they work.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 24
| 8
| 315
| null | 826
|
{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
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I have sleep apnea. My friend sent me this article that contains a promising medication that could help me with sleep apnea and weight loss. Explain the connection between the mentioned medication and sleep apnea and the benefits it may include. Use at least 400 words.
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Tirzepatide Significantly Reduces Sleep Disruptions Alicia Ault June 22, 2024 Add to Email Alerts 28 2407 ORLANDO, Fla. — The diabetes and weight loss drug tirzepatide (Mounjaro for type 2 diabetes; Zepbound for obesity) was so effective at reducing sleep disruptions in patients with obesity and obstructive sleep apnea (OSA) that 40% to 50% no longer needed to use a continuous pressure airway positive (CPAP) device, according to two new studies. Tirzepatide, a long-acting glucose-dependent insulinotropic polypeptide (GIP) receptor agonist and glucagon-like peptide-1 (GLP-1) receptor agonist, also lowered C-reactive protein levels and systolic blood pressure. And patients taking the medication lost 18% to 20% of their body weight. The SURMOUNT-OSA studies "mark a significant milestone in the treatment of OSA, offering a promising new therapeutic option that addresses both respiratory and metabolic complications," said lead author Atul Malhotra, MD, professor of medicine at University of California San Diego School of Medicine and director of sleep medicine at UC San Diego Health. The two double-blind randomized controlled trials in patients with obesity and moderate-to-severe OSA were conducted at 60 sites in nine countries. The results were presented here at the American Diabetes Association (ADA) 84th Scientific Sessions and simultaneously published online in the New England Journal of Medicine. OSA affects 1 billion people worldwide and 30 million American adults, many of whom are undiagnosed. Obesity is a common risk factor. According to the ADA, 40% of those with obesity have OSA and 70% of those with OSA have obesity. CPAP is an effective and the most-used intervention for OSA, but many patients refuse to use the device, stop using it, or cannot use it. Should tirzepatide eventually gain US Food and Drug Administration (FDA) approval for OSA, it would be the first drug approved for the condition. "This new drug treatment offers a more accessible alternative for individuals who cannot tolerate or adhere to existing therapies," said Malhotra. Huge Reduction in Episodes, Severity For the two studies, patients were enrolled who had moderate-to-severe OSA, defined as more than 15 events per hour (using the apnea–hypopnea index [AHI]) and a body mass index of 30 kg/m2 or greater. Those not using a CPAP device were enrolled in study 1, and those using a CPAP device were enrolled in study 2. Participants received either the maximum tolerated dose of tirzepatide (10 or 15 mg by once-weekly injection) or placebo for 1 year. In study 1, 114 individuals received tirzepatide and 120 received placebo. For study 2, 119 patients received tirzepatide and 114 received placebo. All participants received regular lifestyle counseling sessions about nutrition and were instructed to reduce food intake by 500 kcal/day and to engage in at least 150 min/week of physical activity. Enrollment was limited to 70% men to ensure adequate representation of women. At baseline, 65% to 70% of participants had severe OSA, with more than 30 events/hour on the AHI scale and a mean of 51.5 events/hour By 1 year, patients taking tirzepatide had 27 to 30 fewer events/hour compared with 4 to 6 fewer events/hour for those taking placebo. Up to half of those who received tirzepatide in both trials had less than 5 events/hour or 5 to 14 AHI events/hour and an Epworth Sleepiness Scale score of 10 or less. Those thresholds "represent a level at which CPAP therapy may not be recommended," write the authors. Patients in the tirzepatide group also had a decrease in systolic blood pressure from baseline of 9.7 mm Hg in study 1 and 7.6 mm Hg in study 2 at Week 48. The most common adverse events were diarrhea, nausea, and vomiting, which occurred in approximately a quarter of patients taking tirzepatide. There were two adjudicated-confirmed cases of acute pancreatitis in those taking tirzepatide in study 2. Patients who received tirzepatide also reported fewer daytime and nighttime disturbances, as measured using the Patient-Reported Outcomes Measurement Information System Short Form scale for Sleep-Related Impairment and Sleep Disturbance. Tirzepatide Plus CPAP Are Best Writing in an accompanying editorial, Sanjay R. Patel, MD, noted that although clinical guidelines have recommended that weight loss strategies be incorporated as part of OSA treatment, "the integration of obesity management into the approaches to care for obstructive sleep apnea has lagged." As many as half of patients abandon CPAP therapy within 3 years, writes Patel, who is professor of medicine and epidemiology at the University of Pittsburgh, and medical director of the UPMC Comprehensive Sleep Disorders program. "An effective medication to treat obesity is thus an obvious avenue to pursue," he writes. Patel noted the large reductions in the number of events on the AHI scale. He writes that the improvement in systolic blood pressure "was substantially larger than effects seen with CPAP therapy alone and indicate that tirzepatide may be an attractive option for those patients who seek to reduce their cardiovascular risk." Patel raised concerns about whether patients outside of a trial would stick with therapy, noting studies have shown high rates of discontinuation of GLP-1 receptor agonists. And, he writes, "Racial disparities in the use of GLP-1 receptor agonists among patients with diabetes arouse concern that the addition of tirzepatide as a treatment option for obstructive sleep apnea without directly addressing policies relative to coverage of care will only further exacerbate already pervasive disparities in clinical care for obstructive sleep apnea." Commenting on the study during the presentation of the results, Louis Aronne, MD, said he believes the trials demonstrate "the treatment of obesity with tirzepatide plus CPAP is really the optimal treatment for obstructive sleep apnea and obesity-related cardiometabolic risks." Aronne is the Sanford I. Weill professor of metabolic research at Weill Cornell Medical College, New York. Aronne added there is still much to learn. It is still not clear whether tirzepatide had an independent effect in the OSA trial — as has been seen in other studies where the drug clearly reduced cardiovascular risk — or whether the positive results were primarily due to weight loss. "I believe that over time we'll see that this particular effect in sleep apnea is related to weight," he said.
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== I have sleep apnea. My friend sent me this article that contains a promising medication that could help me with sleep apnea and weight loss. Explain the connection between the mentioned medication and sleep apnea and the benefits it may include. Use at least 400 words. {passage 0} ========== Tirzepatide Significantly Reduces Sleep Disruptions Alicia Ault June 22, 2024 Add to Email Alerts 28 2407 ORLANDO, Fla. — The diabetes and weight loss drug tirzepatide (Mounjaro for type 2 diabetes; Zepbound for obesity) was so effective at reducing sleep disruptions in patients with obesity and obstructive sleep apnea (OSA) that 40% to 50% no longer needed to use a continuous pressure airway positive (CPAP) device, according to two new studies. Tirzepatide, a long-acting glucose-dependent insulinotropic polypeptide (GIP) receptor agonist and glucagon-like peptide-1 (GLP-1) receptor agonist, also lowered C-reactive protein levels and systolic blood pressure. And patients taking the medication lost 18% to 20% of their body weight. The SURMOUNT-OSA studies "mark a significant milestone in the treatment of OSA, offering a promising new therapeutic option that addresses both respiratory and metabolic complications," said lead author Atul Malhotra, MD, professor of medicine at University of California San Diego School of Medicine and director of sleep medicine at UC San Diego Health. The two double-blind randomized controlled trials in patients with obesity and moderate-to-severe OSA were conducted at 60 sites in nine countries. The results were presented here at the American Diabetes Association (ADA) 84th Scientific Sessions and simultaneously published online in the New England Journal of Medicine. OSA affects 1 billion people worldwide and 30 million American adults, many of whom are undiagnosed. Obesity is a common risk factor. According to the ADA, 40% of those with obesity have OSA and 70% of those with OSA have obesity. CPAP is an effective and the most-used intervention for OSA, but many patients refuse to use the device, stop using it, or cannot use it. Should tirzepatide eventually gain US Food and Drug Administration (FDA) approval for OSA, it would be the first drug approved for the condition. "This new drug treatment offers a more accessible alternative for individuals who cannot tolerate or adhere to existing therapies," said Malhotra. Huge Reduction in Episodes, Severity For the two studies, patients were enrolled who had moderate-to-severe OSA, defined as more than 15 events per hour (using the apnea–hypopnea index [AHI]) and a body mass index of 30 kg/m2 or greater. Those not using a CPAP device were enrolled in study 1, and those using a CPAP device were enrolled in study 2. Participants received either the maximum tolerated dose of tirzepatide (10 or 15 mg by once-weekly injection) or placebo for 1 year. In study 1, 114 individuals received tirzepatide and 120 received placebo. For study 2, 119 patients received tirzepatide and 114 received placebo. All participants received regular lifestyle counseling sessions about nutrition and were instructed to reduce food intake by 500 kcal/day and to engage in at least 150 min/week of physical activity. Enrollment was limited to 70% men to ensure adequate representation of women. At baseline, 65% to 70% of participants had severe OSA, with more than 30 events/hour on the AHI scale and a mean of 51.5 events/hour By 1 year, patients taking tirzepatide had 27 to 30 fewer events/hour compared with 4 to 6 fewer events/hour for those taking placebo. Up to half of those who received tirzepatide in both trials had less than 5 events/hour or 5 to 14 AHI events/hour and an Epworth Sleepiness Scale score of 10 or less. Those thresholds "represent a level at which CPAP therapy may not be recommended," write the authors. Patients in the tirzepatide group also had a decrease in systolic blood pressure from baseline of 9.7 mm Hg in study 1 and 7.6 mm Hg in study 2 at Week 48. The most common adverse events were diarrhea, nausea, and vomiting, which occurred in approximately a quarter of patients taking tirzepatide. There were two adjudicated-confirmed cases of acute pancreatitis in those taking tirzepatide in study 2. Patients who received tirzepatide also reported fewer daytime and nighttime disturbances, as measured using the Patient-Reported Outcomes Measurement Information System Short Form scale for Sleep-Related Impairment and Sleep Disturbance. Tirzepatide Plus CPAP Are Best Writing in an accompanying editorial, Sanjay R. Patel, MD, noted that although clinical guidelines have recommended that weight loss strategies be incorporated as part of OSA treatment, "the integration of obesity management into the approaches to care for obstructive sleep apnea has lagged." As many as half of patients abandon CPAP therapy within 3 years, writes Patel, who is professor of medicine and epidemiology at the University of Pittsburgh, and medical director of the UPMC Comprehensive Sleep Disorders program. "An effective medication to treat obesity is thus an obvious avenue to pursue," he writes. Patel noted the large reductions in the number of events on the AHI scale. He writes that the improvement in systolic blood pressure "was substantially larger than effects seen with CPAP therapy alone and indicate that tirzepatide may be an attractive option for those patients who seek to reduce their cardiovascular risk." Patel raised concerns about whether patients outside of a trial would stick with therapy, noting studies have shown high rates of discontinuation of GLP-1 receptor agonists. And, he writes, "Racial disparities in the use of GLP-1 receptor agonists among patients with diabetes arouse concern that the addition of tirzepatide as a treatment option for obstructive sleep apnea without directly addressing policies relative to coverage of care will only further exacerbate already pervasive disparities in clinical care for obstructive sleep apnea." Commenting on the study during the presentation of the results, Louis Aronne, MD, said he believes the trials demonstrate "the treatment of obesity with tirzepatide plus CPAP is really the optimal treatment for obstructive sleep apnea and obesity-related cardiometabolic risks." Aronne is the Sanford I. Weill professor of metabolic research at Weill Cornell Medical College, New York. Aronne added there is still much to learn. It is still not clear whether tirzepatide had an independent effect in the OSA trial — as has been seen in other studies where the drug clearly reduced cardiovascular risk — or whether the positive results were primarily due to weight loss. "I believe that over time we'll see that this particular effect in sleep apnea is related to weight," he said. https://www.medscape.com/viewarticle/tirzepatide-significantly-reduces-sleep-disruptions-2024a1000bm1
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{instruction} ========== In your answer, refer only to the context document. Do not employ any outside knowledge {question} ========== [user request] {passage 0} ========== [context document]
EVIDENCE:
Tirzepatide Significantly Reduces Sleep Disruptions Alicia Ault June 22, 2024 Add to Email Alerts 28 2407 ORLANDO, Fla. — The diabetes and weight loss drug tirzepatide (Mounjaro for type 2 diabetes; Zepbound for obesity) was so effective at reducing sleep disruptions in patients with obesity and obstructive sleep apnea (OSA) that 40% to 50% no longer needed to use a continuous pressure airway positive (CPAP) device, according to two new studies. Tirzepatide, a long-acting glucose-dependent insulinotropic polypeptide (GIP) receptor agonist and glucagon-like peptide-1 (GLP-1) receptor agonist, also lowered C-reactive protein levels and systolic blood pressure. And patients taking the medication lost 18% to 20% of their body weight. The SURMOUNT-OSA studies "mark a significant milestone in the treatment of OSA, offering a promising new therapeutic option that addresses both respiratory and metabolic complications," said lead author Atul Malhotra, MD, professor of medicine at University of California San Diego School of Medicine and director of sleep medicine at UC San Diego Health. The two double-blind randomized controlled trials in patients with obesity and moderate-to-severe OSA were conducted at 60 sites in nine countries. The results were presented here at the American Diabetes Association (ADA) 84th Scientific Sessions and simultaneously published online in the New England Journal of Medicine. OSA affects 1 billion people worldwide and 30 million American adults, many of whom are undiagnosed. Obesity is a common risk factor. According to the ADA, 40% of those with obesity have OSA and 70% of those with OSA have obesity. CPAP is an effective and the most-used intervention for OSA, but many patients refuse to use the device, stop using it, or cannot use it. Should tirzepatide eventually gain US Food and Drug Administration (FDA) approval for OSA, it would be the first drug approved for the condition. "This new drug treatment offers a more accessible alternative for individuals who cannot tolerate or adhere to existing therapies," said Malhotra. Huge Reduction in Episodes, Severity For the two studies, patients were enrolled who had moderate-to-severe OSA, defined as more than 15 events per hour (using the apnea–hypopnea index [AHI]) and a body mass index of 30 kg/m2 or greater. Those not using a CPAP device were enrolled in study 1, and those using a CPAP device were enrolled in study 2. Participants received either the maximum tolerated dose of tirzepatide (10 or 15 mg by once-weekly injection) or placebo for 1 year. In study 1, 114 individuals received tirzepatide and 120 received placebo. For study 2, 119 patients received tirzepatide and 114 received placebo. All participants received regular lifestyle counseling sessions about nutrition and were instructed to reduce food intake by 500 kcal/day and to engage in at least 150 min/week of physical activity. Enrollment was limited to 70% men to ensure adequate representation of women. At baseline, 65% to 70% of participants had severe OSA, with more than 30 events/hour on the AHI scale and a mean of 51.5 events/hour By 1 year, patients taking tirzepatide had 27 to 30 fewer events/hour compared with 4 to 6 fewer events/hour for those taking placebo. Up to half of those who received tirzepatide in both trials had less than 5 events/hour or 5 to 14 AHI events/hour and an Epworth Sleepiness Scale score of 10 or less. Those thresholds "represent a level at which CPAP therapy may not be recommended," write the authors. Patients in the tirzepatide group also had a decrease in systolic blood pressure from baseline of 9.7 mm Hg in study 1 and 7.6 mm Hg in study 2 at Week 48. The most common adverse events were diarrhea, nausea, and vomiting, which occurred in approximately a quarter of patients taking tirzepatide. There were two adjudicated-confirmed cases of acute pancreatitis in those taking tirzepatide in study 2. Patients who received tirzepatide also reported fewer daytime and nighttime disturbances, as measured using the Patient-Reported Outcomes Measurement Information System Short Form scale for Sleep-Related Impairment and Sleep Disturbance. Tirzepatide Plus CPAP Are Best Writing in an accompanying editorial, Sanjay R. Patel, MD, noted that although clinical guidelines have recommended that weight loss strategies be incorporated as part of OSA treatment, "the integration of obesity management into the approaches to care for obstructive sleep apnea has lagged." As many as half of patients abandon CPAP therapy within 3 years, writes Patel, who is professor of medicine and epidemiology at the University of Pittsburgh, and medical director of the UPMC Comprehensive Sleep Disorders program. "An effective medication to treat obesity is thus an obvious avenue to pursue," he writes. Patel noted the large reductions in the number of events on the AHI scale. He writes that the improvement in systolic blood pressure "was substantially larger than effects seen with CPAP therapy alone and indicate that tirzepatide may be an attractive option for those patients who seek to reduce their cardiovascular risk." Patel raised concerns about whether patients outside of a trial would stick with therapy, noting studies have shown high rates of discontinuation of GLP-1 receptor agonists. And, he writes, "Racial disparities in the use of GLP-1 receptor agonists among patients with diabetes arouse concern that the addition of tirzepatide as a treatment option for obstructive sleep apnea without directly addressing policies relative to coverage of care will only further exacerbate already pervasive disparities in clinical care for obstructive sleep apnea." Commenting on the study during the presentation of the results, Louis Aronne, MD, said he believes the trials demonstrate "the treatment of obesity with tirzepatide plus CPAP is really the optimal treatment for obstructive sleep apnea and obesity-related cardiometabolic risks." Aronne is the Sanford I. Weill professor of metabolic research at Weill Cornell Medical College, New York. Aronne added there is still much to learn. It is still not clear whether tirzepatide had an independent effect in the OSA trial — as has been seen in other studies where the drug clearly reduced cardiovascular risk — or whether the positive results were primarily due to weight loss. "I believe that over time we'll see that this particular effect in sleep apnea is related to weight," he said.
USER:
I have sleep apnea. My friend sent me this article that contains a promising medication that could help me with sleep apnea and weight loss. Explain the connection between the mentioned medication and sleep apnea and the benefits it may include. Use at least 400 words.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Only use the information provided in the document.
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According to the article, how many new genital herpes infections are seen in the U.S in a single year?
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**What is genital herpes?** Genital herpes is a sexually transmitted disease (STD) caused by the herpes simplex virus type 1 (HSV-1) or type 2 (HSV-2). How common is genital herpes? Genital herpes infection is common in the United States. CDC estimated that there were 572,000 new genital herpes infections in the United States in a single year.1 Nationwide, 11.9 % of persons aged 14 to 49 years have HSV-2 infection (12.1% when adjusted for age).2 However, the prevalence of genital herpes infection is higher than that because an increasing number of genital herpes infections are caused by HSV-1. 3 Oral HSV-1 infection is typically acquired in childhood; because the prevalence of oral HSV-1 infection has declined in recent decades, people may have become more susceptible to contracting a genital herpes infection from HSV-1. 4 HSV-2 infection is more common among women than among men; the percentages of those infected during 2015-2016 were 15.9% versus 8.2% respectively, among 14 to 49 year olds. 2 This is possibly because genital infection is more easily transmitted from men to women than from women to men during penile-vaginal sex. 5 HSV-2 infection is more common among non-Hispanic blacks (34.6%) than among non-Hispanic whites (8.1%). 2 A previous analysis found that these disparities, exist even among persons with similar numbers of lifetime sexual partners. Most infected persons may be unaware of their infection; in the United States, an estimated 87.4% of 14 to 49 year olds infected with HSV-2 have never received a clinical diagnosis. 6 The age-adjusted percentage of persons in the United States infected with HSV-2 decreased from 18.0% in 1999–2000 to 12.1% in 2015-2016. 2 How do people get genital herpes? Infections are transmitted through contact with HSV in herpes lesions, mucosal surfaces, genital secretions, or oral secretions. 5 HSV-1 and HSV-2 can be shed from normal-appearing oral or genital mucosa or skin. 7,8 Generally, a person can only get HSV-2 infection during genital contact with someone who has a genital HSV-2 infection. However, receiving oral sex from a person with an oral HSV-1 infection can result in getting a genital HSV-1 infection. 4 Transmission commonly occurs from contact with an infected partner who does not have visible lesions and who may not know that he or she is infected. 7 In persons with asymptomatic HSV-2 infections, genital HSV shedding occurs on 10.2% of days, compared to 20.1% of days among those with symptomatic infections. 8 What are the symptoms of genital herpes? Most individuals infected with HSV are asymptomatic or have very mild symptoms that go unnoticed or are mistaken for another skin condition. 9 When symptoms do occur, herpes lesions typically appear as one or more vesicles, or small blisters, on or around the genitals, rectum or mouth. The average incubation period for an initial herpes infection is 4 days (range, 2 to 12) after exposure. 10 The vesicles break and leave painful ulcers that may take two to four weeks to heal after the initial herpes infection. 5,10 Experiencing these symptoms is referred to as having a first herpes “outbreak” or episode. Clinical manifestations of genital herpes differ between the first and recurrent (i.e., subsequent) outbreaks. The first outbreak of herpes is often associated with a longer duration of herpetic lesions, increased viral shedding (making HSV transmission more likely) and systemic symptoms including fever, body aches, swollen lymph nodes, or headache. 5,10 Recurrent outbreaks of genital herpes are common, and many patients who recognize recurrences have prodromal symptoms, either localized genital pain, or tingling or shooting pains in the legs, hips or buttocks, which occur hours to days before the eruption of herpetic lesions. 5 Symptoms of recurrent outbreaks are typically shorter in duration and less severe than the first outbreak of genital herpes. 5 Long-term studies have indicated that the number of symptomatic recurrent outbreaks may decrease over time. 5 Recurrences and subclinical shedding are much less frequent for genital HSV-1 infection than for genital HSV-2 infection.5 What are the complications of genital herpes? Genital herpes may cause painful genital ulcers that can be severe and persistent in persons with suppressed immune systems, such as HIV-infected persons. 5 Both HSV-1 and HSV-2 can also cause rare but serious complications such as aseptic meningitis (inflammation of the linings of the brain). 5 Development of extragenital lesions (e.g. buttocks, groin, thigh, finger, or eye) may occur during the course of infection. 5 Some persons who contract genital herpes have concerns about how it will impact their overall health, sex life, and relationships. 5,11 There can also be considerable embarrassment, shame, and stigma associated with a herpes diagnosis that can substantially interfere with a patient’s relationships. 10 Clinicians can address these concerns by encouraging patients to recognize that while herpes is not curable, it is a manageable condition. 5 Three important steps that providers can take for their newly-diagnosed patients are: giving information, providing support resources, and helping define treatment and prevention options. 12 Patients can be counseled that risk of genital herpes transmission can be reduced, but not eliminated, by disclosure of infection to sexual partners, 5 avoiding sex during a recurrent outbreak, 5 use of suppressive antiviral therapy, 5,10 and consistent condom use. 7 Since a diagnosis of genital herpes may affect perceptions about existing or future sexual relationships, it is important for patients to understand how to talk to sexual partners about STDs. One resource can be found here: www.gytnow.org/talking-to-your-partner There are also potential complications for a pregnant woman and her newborn child. See “How does herpes infection affect a pregnant woman and her baby?” below for information about this. What is the link between genital herpes and HIV? Genital ulcerative disease caused by herpes makes it easier to transmit and acquire HIV infection sexually. There is an estimated 2- to 4-fold increased risk of acquiring HIV, if individuals with genital herpes infection are genitally exposed to HIV. 13-15 Ulcers or breaks in the skin or mucous membranes (lining of the mouth, vagina, and rectum) from a herpes infection may compromise the protection normally provided by the skin and mucous membranes against infections, including HIV. 14 In addition, having genital herpes increases the number of CD4 cells (the target cell for HIV entry) in the genital mucosa. In persons with both HIV and genital herpes, local activation of HIV replication at the site of genital herpes infection can increase the risk that HIV will be transmitted during contact with the mouth, vagina, or rectum of an HIV-uninfected sex partner. 14 How does genital herpes affect a pregnant woman and her baby? Neonatal herpes is one of the most serious complications of genital herpes.5,16 Healthcare providers should ask all pregnant women if they have a history of genital herpes.11 Herpes infection can be passed from mother to child during pregnancy or childbirth, or babies may be infected shortly after birth, resulting in a potentially fatal neonatal herpes infection. 17 Infants born to women who acquire genital herpes close to the time of delivery and are shedding virus at delivery are at a much higher risk for developing neonatal herpes, compared with women who have recurrent genital herpes . 16,18-20 Thus, it is important that women avoid contracting herpes during pregnancy. Women should be counseled to abstain from intercourse during the third trimester with partners known to have or suspected of having genital herpes. 5,11 While women with genital herpes may be offered antiviral medication late in pregnancy through delivery to reduce the risk of a recurrent herpes outbreak, third trimester antiviral prophylaxis has not been shown to decrease the risk of herpes transmission to the neonate.11,21,22 Routine serologic HSV screening of pregnant women is not recommended. 11 However, at onset of labor, all women should undergo careful examination and questioning to evaluate for presence of prodromal symptoms or herpetic lesions. 11 If herpes symptoms are present a cesarean delivery is recommended to prevent HSV transmission to the infant.5,11,23 There are detailed guidelines for how to manage asymptomatic infants born to women with active genital herpes lesions.24 How is genital herpes diagnosed? HSV nucleic acid amplification tests (NAAT) are the most sensitive and highly specific tests available for diagnosing herpes. However, in some settings viral culture is the only test available. The sensitivity of viral culture can be low, especially among people who have recurrent or healing lesions. Because viral shedding is intermittent, it is possible for someone to have a genital herpes infection even though it was not detected by NAAT or culture. 11 Type-specific virologic tests can be used for diagnosing genital herpes when a person has recurrent symptoms or lesion without a confirmatory NAAT, culture result, or has a partner with genital herpes. Both virologic tests and type-specific serologic tests should be available in clinical settings serving patients with, or at risk for, sexually transmitted infections. 11 Given performance limitations with commercially available type-specific serologic tests (especially with low index value results [<3]), a confirmatory test (Biokit or Western Blot) with a second method should be performed before test interpretation. If confirmatory tests are unavailable, patients should be counseled about the limitations of available testing before serologic testing. Healthcare providers should also be aware that false-positive results occur. In instances of suspected recent acquisition, serologic testing within 12 weeks after acquisition may be associated with false negative test results. 11 HSV-1 serologic testing does not distinguish between oral and genital infection, and typically should not be performed for diagnosing genital HSV-1 infection. Diagnosis of genital HSV-1 infection is confirmed by virologic tests from lesions. 11 CDC does not recommend screening for HSV-1 or HSV-2 in the general population due to limitations of the type specific serologic testing. 11 Several scenarios where type-specific serologic HSV tests may be useful include: Patients with recurrent genital symptoms or atypical symptoms and negative HSV NAAT or culture; Patients with a clinical diagnosis of genital herpes but no laboratory confirmation; and Patients who report having a partner with genital herpes. 11 Patients who are at higher risk of infection (e.g., presenting for an STI evaluation, especially those with multiple sex partners), and people with HIV might need to be assessed for a history of genital herpes symptoms, followed by serology testing in those with genital symptoms. 11
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[Question] According to the article, how many new genital herpes infections are seen in the U.S in a single year? ---------- [Task Instruction] Only use the information provided in the document. ---------- [Article] **What is genital herpes?** Genital herpes is a sexually transmitted disease (STD) caused by the herpes simplex virus type 1 (HSV-1) or type 2 (HSV-2). How common is genital herpes? Genital herpes infection is common in the United States. CDC estimated that there were 572,000 new genital herpes infections in the United States in a single year.1 Nationwide, 11.9 % of persons aged 14 to 49 years have HSV-2 infection (12.1% when adjusted for age).2 However, the prevalence of genital herpes infection is higher than that because an increasing number of genital herpes infections are caused by HSV-1. 3 Oral HSV-1 infection is typically acquired in childhood; because the prevalence of oral HSV-1 infection has declined in recent decades, people may have become more susceptible to contracting a genital herpes infection from HSV-1. 4 HSV-2 infection is more common among women than among men; the percentages of those infected during 2015-2016 were 15.9% versus 8.2% respectively, among 14 to 49 year olds. 2 This is possibly because genital infection is more easily transmitted from men to women than from women to men during penile-vaginal sex. 5 HSV-2 infection is more common among non-Hispanic blacks (34.6%) than among non-Hispanic whites (8.1%). 2 A previous analysis found that these disparities, exist even among persons with similar numbers of lifetime sexual partners. Most infected persons may be unaware of their infection; in the United States, an estimated 87.4% of 14 to 49 year olds infected with HSV-2 have never received a clinical diagnosis. 6 The age-adjusted percentage of persons in the United States infected with HSV-2 decreased from 18.0% in 1999–2000 to 12.1% in 2015-2016. 2 How do people get genital herpes? Infections are transmitted through contact with HSV in herpes lesions, mucosal surfaces, genital secretions, or oral secretions. 5 HSV-1 and HSV-2 can be shed from normal-appearing oral or genital mucosa or skin. 7,8 Generally, a person can only get HSV-2 infection during genital contact with someone who has a genital HSV-2 infection. However, receiving oral sex from a person with an oral HSV-1 infection can result in getting a genital HSV-1 infection. 4 Transmission commonly occurs from contact with an infected partner who does not have visible lesions and who may not know that he or she is infected. 7 In persons with asymptomatic HSV-2 infections, genital HSV shedding occurs on 10.2% of days, compared to 20.1% of days among those with symptomatic infections. 8 What are the symptoms of genital herpes? Most individuals infected with HSV are asymptomatic or have very mild symptoms that go unnoticed or are mistaken for another skin condition. 9 When symptoms do occur, herpes lesions typically appear as one or more vesicles, or small blisters, on or around the genitals, rectum or mouth. The average incubation period for an initial herpes infection is 4 days (range, 2 to 12) after exposure. 10 The vesicles break and leave painful ulcers that may take two to four weeks to heal after the initial herpes infection. 5,10 Experiencing these symptoms is referred to as having a first herpes “outbreak” or episode. Clinical manifestations of genital herpes differ between the first and recurrent (i.e., subsequent) outbreaks. The first outbreak of herpes is often associated with a longer duration of herpetic lesions, increased viral shedding (making HSV transmission more likely) and systemic symptoms including fever, body aches, swollen lymph nodes, or headache. 5,10 Recurrent outbreaks of genital herpes are common, and many patients who recognize recurrences have prodromal symptoms, either localized genital pain, or tingling or shooting pains in the legs, hips or buttocks, which occur hours to days before the eruption of herpetic lesions. 5 Symptoms of recurrent outbreaks are typically shorter in duration and less severe than the first outbreak of genital herpes. 5 Long-term studies have indicated that the number of symptomatic recurrent outbreaks may decrease over time. 5 Recurrences and subclinical shedding are much less frequent for genital HSV-1 infection than for genital HSV-2 infection.5 What are the complications of genital herpes? Genital herpes may cause painful genital ulcers that can be severe and persistent in persons with suppressed immune systems, such as HIV-infected persons. 5 Both HSV-1 and HSV-2 can also cause rare but serious complications such as aseptic meningitis (inflammation of the linings of the brain). 5 Development of extragenital lesions (e.g. buttocks, groin, thigh, finger, or eye) may occur during the course of infection. 5 Some persons who contract genital herpes have concerns about how it will impact their overall health, sex life, and relationships. 5,11 There can also be considerable embarrassment, shame, and stigma associated with a herpes diagnosis that can substantially interfere with a patient’s relationships. 10 Clinicians can address these concerns by encouraging patients to recognize that while herpes is not curable, it is a manageable condition. 5 Three important steps that providers can take for their newly-diagnosed patients are: giving information, providing support resources, and helping define treatment and prevention options. 12 Patients can be counseled that risk of genital herpes transmission can be reduced, but not eliminated, by disclosure of infection to sexual partners, 5 avoiding sex during a recurrent outbreak, 5 use of suppressive antiviral therapy, 5,10 and consistent condom use. 7 Since a diagnosis of genital herpes may affect perceptions about existing or future sexual relationships, it is important for patients to understand how to talk to sexual partners about STDs. One resource can be found here: www.gytnow.org/talking-to-your-partner There are also potential complications for a pregnant woman and her newborn child. See “How does herpes infection affect a pregnant woman and her baby?” below for information about this. What is the link between genital herpes and HIV? Genital ulcerative disease caused by herpes makes it easier to transmit and acquire HIV infection sexually. There is an estimated 2- to 4-fold increased risk of acquiring HIV, if individuals with genital herpes infection are genitally exposed to HIV. 13-15 Ulcers or breaks in the skin or mucous membranes (lining of the mouth, vagina, and rectum) from a herpes infection may compromise the protection normally provided by the skin and mucous membranes against infections, including HIV. 14 In addition, having genital herpes increases the number of CD4 cells (the target cell for HIV entry) in the genital mucosa. In persons with both HIV and genital herpes, local activation of HIV replication at the site of genital herpes infection can increase the risk that HIV will be transmitted during contact with the mouth, vagina, or rectum of an HIV-uninfected sex partner. 14 How does genital herpes affect a pregnant woman and her baby? Neonatal herpes is one of the most serious complications of genital herpes.5,16 Healthcare providers should ask all pregnant women if they have a history of genital herpes.11 Herpes infection can be passed from mother to child during pregnancy or childbirth, or babies may be infected shortly after birth, resulting in a potentially fatal neonatal herpes infection. 17 Infants born to women who acquire genital herpes close to the time of delivery and are shedding virus at delivery are at a much higher risk for developing neonatal herpes, compared with women who have recurrent genital herpes . 16,18-20 Thus, it is important that women avoid contracting herpes during pregnancy. Women should be counseled to abstain from intercourse during the third trimester with partners known to have or suspected of having genital herpes. 5,11 While women with genital herpes may be offered antiviral medication late in pregnancy through delivery to reduce the risk of a recurrent herpes outbreak, third trimester antiviral prophylaxis has not been shown to decrease the risk of herpes transmission to the neonate.11,21,22 Routine serologic HSV screening of pregnant women is not recommended. 11 However, at onset of labor, all women should undergo careful examination and questioning to evaluate for presence of prodromal symptoms or herpetic lesions. 11 If herpes symptoms are present a cesarean delivery is recommended to prevent HSV transmission to the infant.5,11,23 There are detailed guidelines for how to manage asymptomatic infants born to women with active genital herpes lesions.24 How is genital herpes diagnosed? HSV nucleic acid amplification tests (NAAT) are the most sensitive and highly specific tests available for diagnosing herpes. However, in some settings viral culture is the only test available. The sensitivity of viral culture can be low, especially among people who have recurrent or healing lesions. Because viral shedding is intermittent, it is possible for someone to have a genital herpes infection even though it was not detected by NAAT or culture. 11 Type-specific virologic tests can be used for diagnosing genital herpes when a person has recurrent symptoms or lesion without a confirmatory NAAT, culture result, or has a partner with genital herpes. Both virologic tests and type-specific serologic tests should be available in clinical settings serving patients with, or at risk for, sexually transmitted infections. 11 Given performance limitations with commercially available type-specific serologic tests (especially with low index value results [<3]), a confirmatory test (Biokit or Western Blot) with a second method should be performed before test interpretation. If confirmatory tests are unavailable, patients should be counseled about the limitations of available testing before serologic testing. Healthcare providers should also be aware that false-positive results occur. In instances of suspected recent acquisition, serologic testing within 12 weeks after acquisition may be associated with false negative test results. 11 HSV-1 serologic testing does not distinguish between oral and genital infection, and typically should not be performed for diagnosing genital HSV-1 infection. Diagnosis of genital HSV-1 infection is confirmed by virologic tests from lesions. 11 CDC does not recommend screening for HSV-1 or HSV-2 in the general population due to limitations of the type specific serologic testing. 11 Several scenarios where type-specific serologic HSV tests may be useful include: Patients with recurrent genital symptoms or atypical symptoms and negative HSV NAAT or culture; Patients with a clinical diagnosis of genital herpes but no laboratory confirmation; and Patients who report having a partner with genital herpes. 11 Patients who are at higher risk of infection (e.g., presenting for an STI evaluation, especially those with multiple sex partners), and people with HIV might need to be assessed for a history of genital herpes symptoms, followed by serology testing in those with genital symptoms. 11
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Only use the information provided in the document.
EVIDENCE:
**What is genital herpes?** Genital herpes is a sexually transmitted disease (STD) caused by the herpes simplex virus type 1 (HSV-1) or type 2 (HSV-2). How common is genital herpes? Genital herpes infection is common in the United States. CDC estimated that there were 572,000 new genital herpes infections in the United States in a single year.1 Nationwide, 11.9 % of persons aged 14 to 49 years have HSV-2 infection (12.1% when adjusted for age).2 However, the prevalence of genital herpes infection is higher than that because an increasing number of genital herpes infections are caused by HSV-1. 3 Oral HSV-1 infection is typically acquired in childhood; because the prevalence of oral HSV-1 infection has declined in recent decades, people may have become more susceptible to contracting a genital herpes infection from HSV-1. 4 HSV-2 infection is more common among women than among men; the percentages of those infected during 2015-2016 were 15.9% versus 8.2% respectively, among 14 to 49 year olds. 2 This is possibly because genital infection is more easily transmitted from men to women than from women to men during penile-vaginal sex. 5 HSV-2 infection is more common among non-Hispanic blacks (34.6%) than among non-Hispanic whites (8.1%). 2 A previous analysis found that these disparities, exist even among persons with similar numbers of lifetime sexual partners. Most infected persons may be unaware of their infection; in the United States, an estimated 87.4% of 14 to 49 year olds infected with HSV-2 have never received a clinical diagnosis. 6 The age-adjusted percentage of persons in the United States infected with HSV-2 decreased from 18.0% in 1999–2000 to 12.1% in 2015-2016. 2 How do people get genital herpes? Infections are transmitted through contact with HSV in herpes lesions, mucosal surfaces, genital secretions, or oral secretions. 5 HSV-1 and HSV-2 can be shed from normal-appearing oral or genital mucosa or skin. 7,8 Generally, a person can only get HSV-2 infection during genital contact with someone who has a genital HSV-2 infection. However, receiving oral sex from a person with an oral HSV-1 infection can result in getting a genital HSV-1 infection. 4 Transmission commonly occurs from contact with an infected partner who does not have visible lesions and who may not know that he or she is infected. 7 In persons with asymptomatic HSV-2 infections, genital HSV shedding occurs on 10.2% of days, compared to 20.1% of days among those with symptomatic infections. 8 What are the symptoms of genital herpes? Most individuals infected with HSV are asymptomatic or have very mild symptoms that go unnoticed or are mistaken for another skin condition. 9 When symptoms do occur, herpes lesions typically appear as one or more vesicles, or small blisters, on or around the genitals, rectum or mouth. The average incubation period for an initial herpes infection is 4 days (range, 2 to 12) after exposure. 10 The vesicles break and leave painful ulcers that may take two to four weeks to heal after the initial herpes infection. 5,10 Experiencing these symptoms is referred to as having a first herpes “outbreak” or episode. Clinical manifestations of genital herpes differ between the first and recurrent (i.e., subsequent) outbreaks. The first outbreak of herpes is often associated with a longer duration of herpetic lesions, increased viral shedding (making HSV transmission more likely) and systemic symptoms including fever, body aches, swollen lymph nodes, or headache. 5,10 Recurrent outbreaks of genital herpes are common, and many patients who recognize recurrences have prodromal symptoms, either localized genital pain, or tingling or shooting pains in the legs, hips or buttocks, which occur hours to days before the eruption of herpetic lesions. 5 Symptoms of recurrent outbreaks are typically shorter in duration and less severe than the first outbreak of genital herpes. 5 Long-term studies have indicated that the number of symptomatic recurrent outbreaks may decrease over time. 5 Recurrences and subclinical shedding are much less frequent for genital HSV-1 infection than for genital HSV-2 infection.5 What are the complications of genital herpes? Genital herpes may cause painful genital ulcers that can be severe and persistent in persons with suppressed immune systems, such as HIV-infected persons. 5 Both HSV-1 and HSV-2 can also cause rare but serious complications such as aseptic meningitis (inflammation of the linings of the brain). 5 Development of extragenital lesions (e.g. buttocks, groin, thigh, finger, or eye) may occur during the course of infection. 5 Some persons who contract genital herpes have concerns about how it will impact their overall health, sex life, and relationships. 5,11 There can also be considerable embarrassment, shame, and stigma associated with a herpes diagnosis that can substantially interfere with a patient’s relationships. 10 Clinicians can address these concerns by encouraging patients to recognize that while herpes is not curable, it is a manageable condition. 5 Three important steps that providers can take for their newly-diagnosed patients are: giving information, providing support resources, and helping define treatment and prevention options. 12 Patients can be counseled that risk of genital herpes transmission can be reduced, but not eliminated, by disclosure of infection to sexual partners, 5 avoiding sex during a recurrent outbreak, 5 use of suppressive antiviral therapy, 5,10 and consistent condom use. 7 Since a diagnosis of genital herpes may affect perceptions about existing or future sexual relationships, it is important for patients to understand how to talk to sexual partners about STDs. One resource can be found here: www.gytnow.org/talking-to-your-partner There are also potential complications for a pregnant woman and her newborn child. See “How does herpes infection affect a pregnant woman and her baby?” below for information about this. What is the link between genital herpes and HIV? Genital ulcerative disease caused by herpes makes it easier to transmit and acquire HIV infection sexually. There is an estimated 2- to 4-fold increased risk of acquiring HIV, if individuals with genital herpes infection are genitally exposed to HIV. 13-15 Ulcers or breaks in the skin or mucous membranes (lining of the mouth, vagina, and rectum) from a herpes infection may compromise the protection normally provided by the skin and mucous membranes against infections, including HIV. 14 In addition, having genital herpes increases the number of CD4 cells (the target cell for HIV entry) in the genital mucosa. In persons with both HIV and genital herpes, local activation of HIV replication at the site of genital herpes infection can increase the risk that HIV will be transmitted during contact with the mouth, vagina, or rectum of an HIV-uninfected sex partner. 14 How does genital herpes affect a pregnant woman and her baby? Neonatal herpes is one of the most serious complications of genital herpes.5,16 Healthcare providers should ask all pregnant women if they have a history of genital herpes.11 Herpes infection can be passed from mother to child during pregnancy or childbirth, or babies may be infected shortly after birth, resulting in a potentially fatal neonatal herpes infection. 17 Infants born to women who acquire genital herpes close to the time of delivery and are shedding virus at delivery are at a much higher risk for developing neonatal herpes, compared with women who have recurrent genital herpes . 16,18-20 Thus, it is important that women avoid contracting herpes during pregnancy. Women should be counseled to abstain from intercourse during the third trimester with partners known to have or suspected of having genital herpes. 5,11 While women with genital herpes may be offered antiviral medication late in pregnancy through delivery to reduce the risk of a recurrent herpes outbreak, third trimester antiviral prophylaxis has not been shown to decrease the risk of herpes transmission to the neonate.11,21,22 Routine serologic HSV screening of pregnant women is not recommended. 11 However, at onset of labor, all women should undergo careful examination and questioning to evaluate for presence of prodromal symptoms or herpetic lesions. 11 If herpes symptoms are present a cesarean delivery is recommended to prevent HSV transmission to the infant.5,11,23 There are detailed guidelines for how to manage asymptomatic infants born to women with active genital herpes lesions.24 How is genital herpes diagnosed? HSV nucleic acid amplification tests (NAAT) are the most sensitive and highly specific tests available for diagnosing herpes. However, in some settings viral culture is the only test available. The sensitivity of viral culture can be low, especially among people who have recurrent or healing lesions. Because viral shedding is intermittent, it is possible for someone to have a genital herpes infection even though it was not detected by NAAT or culture. 11 Type-specific virologic tests can be used for diagnosing genital herpes when a person has recurrent symptoms or lesion without a confirmatory NAAT, culture result, or has a partner with genital herpes. Both virologic tests and type-specific serologic tests should be available in clinical settings serving patients with, or at risk for, sexually transmitted infections. 11 Given performance limitations with commercially available type-specific serologic tests (especially with low index value results [<3]), a confirmatory test (Biokit or Western Blot) with a second method should be performed before test interpretation. If confirmatory tests are unavailable, patients should be counseled about the limitations of available testing before serologic testing. Healthcare providers should also be aware that false-positive results occur. In instances of suspected recent acquisition, serologic testing within 12 weeks after acquisition may be associated with false negative test results. 11 HSV-1 serologic testing does not distinguish between oral and genital infection, and typically should not be performed for diagnosing genital HSV-1 infection. Diagnosis of genital HSV-1 infection is confirmed by virologic tests from lesions. 11 CDC does not recommend screening for HSV-1 or HSV-2 in the general population due to limitations of the type specific serologic testing. 11 Several scenarios where type-specific serologic HSV tests may be useful include: Patients with recurrent genital symptoms or atypical symptoms and negative HSV NAAT or culture; Patients with a clinical diagnosis of genital herpes but no laboratory confirmation; and Patients who report having a partner with genital herpes. 11 Patients who are at higher risk of infection (e.g., presenting for an STI evaluation, especially those with multiple sex partners), and people with HIV might need to be assessed for a history of genital herpes symptoms, followed by serology testing in those with genital symptoms. 11
USER:
According to the article, how many new genital herpes infections are seen in the U.S in a single year?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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| 19
| 1,705
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<TASK DESCRIPTION> Only use the provided text to answer the question, no outside sources. <QUESTION> [user request] <TEXT> [context document]
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I live in Osceola County, and I intend to open a bottle club where I will serve alcoholic drinks and beverages. This text contains the rules that apply. My neighbor told me that I need to close the club at midnight on Saturday and Sunday, even though these are the busiest times of the nightlife. I don't want to close my bottle club at midnight! I also want you to give me a summary in list format with all the information that might be relevant. Write no more than 150 words.
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Chapter 3 - ALCOHOLIC BEVERAGES[1] Footnotes: --- (1) --- Editor's note— Ord. No. 02-06, § 1—6, adopted April 8, 2002, repealed ch. 3 in its entirety and enacted new provisions as herein set out. Formerly, ch. 3 pertained to similar provisions and derived from Ord. No. 71-8, §§ 1—4, and Ord. No. 78-7, §§ 1, 2. Cross reference— Licenses, taxation and miscellaneous business regulations, Ch. 13; adult entertainment centers, § 13-86 et seq.; open containers of alcohol in vehicles, § 14-1. Sec. 3-1. - Jurisdiction and scope. (a)This chapter shall apply to, and be effective within, the unincorporated areas of the county and any municipality which has not adopted an ordinance covering the subject matter, activity, or conduct regulated herein.(b)Any person violating this chapter shall be guilty of a misdemeanor of the second degree, punishable as provided under state law.(c)Nothing in this chapter shall be construed to conflict with F.S. chapters 561—568, the beverage laws of the state. (Ord. No. 02-06, § 1, 4-8-02) Sec. 3-2. - Definitions. Alcoholic beverage shall mean and include all beverages containing more than one (1) percent of alcohol by weight. Bottle club shall mean a place or establishment where a product or article, for a consideration, is sold, dispensed, served, or provided, with the knowledge, either actual or implied, that same will be or is intended to be mixed, combined with or drunk in connection or combination with, an alcoholic beverage, for consumption on the premises of said place or establishment. (Ord. No. 02-06, § 2, 4-8-02) Sec. 3-3. - Hours of sale for on premise consumption and service. (a)No alcoholic beverages, of any kind, may be sold, consumed, or served, either by the package or drink, or permitted to be sold, consumed, or served, either by the package or drink, in, at or on the premises of any place holding a license under the division of alcoholic beverages and tobacco of the state department of business and professional regulation, except between the hours of 7:00 a.m. and 2:00 a.m. on all days of the week except Sunday. Sunday sales of alcoholic beverages shall only be permitted between the hours of 11:00 a.m. Sunday and 2:00 a.m. of the following day except:(1)The sale, consumption and service of alcoholic beverages at any golf course holding a license as required above, may begin at 7:00 a.m. on Sunday.(2)The sale, consumption and service of alcoholic beverages at any private function which is being held at a banquet hall, convention facility, or the like, which holds a license as required above, may begin at 7:00 a.m. on Sunday, provided that the hall or facility has a minimum square footage of two thousand (10,000) square feet available for the private function.(3)The sale, consumption and service of alcoholic beverages in any private guest room of any hotel or motel, holding a license as required above, may begin at 7:00 a.m. on Sunday. (Ord. No. 02-06, § 3, 4-8-02) Sec. 3-4. - Hours of sale for off premise consumption. No alcoholic beverages of any kind may be sold, or permitted to be sold, by any place or establishment holding a license under the division of alcoholic beverages and tobacco of the state department of business and professional regulation, which license permits licensee to sell alcoholic beverages for consumption off of the premises of the licensee, except between the hours of 7:00 a.m. and 2:00 a.m. on all days of the week except Sunday. Sunday sales of alcoholic beverages, to be consumed off of the premises of the licensee, shall only be permitted between the hours of 9:00 a.m. Sunday and 2:00 a.m. of the following day. (Ord. No. 02-06, § 4, 4-8-02) Sec. 3-5. - Closing hours for bottle clubs. All bottle clubs located in the unincorporated areas of the county, shall remain closed from the hours of 3:00 a.m. to 7:00 a.m. on each day of the week except that all such bottle clubs shall remain closed from midnight on each Saturday until 7:00 a.m. on the following Monday. (Ord. No. 02-06, § 5, 4-8-02)
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<TASK DESCRIPTION> Only use the provided text to answer the question, no outside sources. <QUESTION> I live in Osceola County, and I intend to open a bottle club where I will serve alcoholic drinks and beverages. This text contains the rules that apply. My neighbor told me that I need to close the club at midnight on Saturday and Sunday, even though these are the busiest times of the nightlife. I don't want to close my bottle club at midnight! I also want you to give me a summary in list format with all the information that might be relevant. Write no more than 150 words. <TEXT> Chapter 3 - ALCOHOLIC BEVERAGES[1] Footnotes: --- (1) --- Editor's note— Ord. No. 02-06, § 1—6, adopted April 8, 2002, repealed ch. 3 in its entirety and enacted new provisions as herein set out. Formerly, ch. 3 pertained to similar provisions and derived from Ord. No. 71-8, §§ 1—4, and Ord. No. 78-7, §§ 1, 2. Cross reference— Licenses, taxation and miscellaneous business regulations, Ch. 13; adult entertainment centers, § 13-86 et seq.; open containers of alcohol in vehicles, § 14-1. Sec. 3-1. - Jurisdiction and scope. (a)This chapter shall apply to, and be effective within, the unincorporated areas of the county and any municipality which has not adopted an ordinance covering the subject matter, activity, or conduct regulated herein.(b)Any person violating this chapter shall be guilty of a misdemeanor of the second degree, punishable as provided under state law.(c)Nothing in this chapter shall be construed to conflict with F.S. chapters 561—568, the beverage laws of the state. (Ord. No. 02-06, § 1, 4-8-02) Sec. 3-2. - Definitions. Alcoholic beverage shall mean and include all beverages containing more than one (1) percent of alcohol by weight. Bottle club shall mean a place or establishment where a product or article, for a consideration, is sold, dispensed, served, or provided, with the knowledge, either actual or implied, that same will be or is intended to be mixed, combined with or drunk in connection or combination with, an alcoholic beverage, for consumption on the premises of said place or establishment. (Ord. No. 02-06, § 2, 4-8-02) Sec. 3-3. - Hours of sale for on premise consumption and service. (a)No alcoholic beverages, of any kind, may be sold, consumed, or served, either by the package or drink, or permitted to be sold, consumed, or served, either by the package or drink, in, at or on the premises of any place holding a license under the division of alcoholic beverages and tobacco of the state department of business and professional regulation, except between the hours of 7:00 a.m. and 2:00 a.m. on all days of the week except Sunday. Sunday sales of alcoholic beverages shall only be permitted between the hours of 11:00 a.m. Sunday and 2:00 a.m. of the following day except:(1)The sale, consumption and service of alcoholic beverages at any golf course holding a license as required above, may begin at 7:00 a.m. on Sunday.(2)The sale, consumption and service of alcoholic beverages at any private function which is being held at a banquet hall, convention facility, or the like, which holds a license as required above, may begin at 7:00 a.m. on Sunday, provided that the hall or facility has a minimum square footage of two thousand (10,000) square feet available for the private function.(3)The sale, consumption and service of alcoholic beverages in any private guest room of any hotel or motel, holding a license as required above, may begin at 7:00 a.m. on Sunday. (Ord. No. 02-06, § 3, 4-8-02) Sec. 3-4. - Hours of sale for off premise consumption. No alcoholic beverages of any kind may be sold, or permitted to be sold, by any place or establishment holding a license under the division of alcoholic beverages and tobacco of the state department of business and professional regulation, which license permits licensee to sell alcoholic beverages for consumption off of the premises of the licensee, except between the hours of 7:00 a.m. and 2:00 a.m. on all days of the week except Sunday. Sunday sales of alcoholic beverages, to be consumed off of the premises of the licensee, shall only be permitted between the hours of 9:00 a.m. Sunday and 2:00 a.m. of the following day. (Ord. No. 02-06, § 4, 4-8-02) Sec. 3-5. - Closing hours for bottle clubs. All bottle clubs located in the unincorporated areas of the county, shall remain closed from the hours of 3:00 a.m. to 7:00 a.m. on each day of the week except that all such bottle clubs shall remain closed from midnight on each Saturday until 7:00 a.m. on the following Monday. (Ord. No. 02-06, § 5, 4-8-02) https://library.municode.com/fl/osceola_county/codes/code_of_ordinances?nodeId=PTIIOSCOCOOR_CH3ALBE_S3-1JUSC
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<TASK DESCRIPTION> Only use the provided text to answer the question, no outside sources. <QUESTION> [user request] <TEXT> [context document]
EVIDENCE:
Chapter 3 - ALCOHOLIC BEVERAGES[1] Footnotes: --- (1) --- Editor's note— Ord. No. 02-06, § 1—6, adopted April 8, 2002, repealed ch. 3 in its entirety and enacted new provisions as herein set out. Formerly, ch. 3 pertained to similar provisions and derived from Ord. No. 71-8, §§ 1—4, and Ord. No. 78-7, §§ 1, 2. Cross reference— Licenses, taxation and miscellaneous business regulations, Ch. 13; adult entertainment centers, § 13-86 et seq.; open containers of alcohol in vehicles, § 14-1. Sec. 3-1. - Jurisdiction and scope. (a)This chapter shall apply to, and be effective within, the unincorporated areas of the county and any municipality which has not adopted an ordinance covering the subject matter, activity, or conduct regulated herein.(b)Any person violating this chapter shall be guilty of a misdemeanor of the second degree, punishable as provided under state law.(c)Nothing in this chapter shall be construed to conflict with F.S. chapters 561—568, the beverage laws of the state. (Ord. No. 02-06, § 1, 4-8-02) Sec. 3-2. - Definitions. Alcoholic beverage shall mean and include all beverages containing more than one (1) percent of alcohol by weight. Bottle club shall mean a place or establishment where a product or article, for a consideration, is sold, dispensed, served, or provided, with the knowledge, either actual or implied, that same will be or is intended to be mixed, combined with or drunk in connection or combination with, an alcoholic beverage, for consumption on the premises of said place or establishment. (Ord. No. 02-06, § 2, 4-8-02) Sec. 3-3. - Hours of sale for on premise consumption and service. (a)No alcoholic beverages, of any kind, may be sold, consumed, or served, either by the package or drink, or permitted to be sold, consumed, or served, either by the package or drink, in, at or on the premises of any place holding a license under the division of alcoholic beverages and tobacco of the state department of business and professional regulation, except between the hours of 7:00 a.m. and 2:00 a.m. on all days of the week except Sunday. Sunday sales of alcoholic beverages shall only be permitted between the hours of 11:00 a.m. Sunday and 2:00 a.m. of the following day except:(1)The sale, consumption and service of alcoholic beverages at any golf course holding a license as required above, may begin at 7:00 a.m. on Sunday.(2)The sale, consumption and service of alcoholic beverages at any private function which is being held at a banquet hall, convention facility, or the like, which holds a license as required above, may begin at 7:00 a.m. on Sunday, provided that the hall or facility has a minimum square footage of two thousand (10,000) square feet available for the private function.(3)The sale, consumption and service of alcoholic beverages in any private guest room of any hotel or motel, holding a license as required above, may begin at 7:00 a.m. on Sunday. (Ord. No. 02-06, § 3, 4-8-02) Sec. 3-4. - Hours of sale for off premise consumption. No alcoholic beverages of any kind may be sold, or permitted to be sold, by any place or establishment holding a license under the division of alcoholic beverages and tobacco of the state department of business and professional regulation, which license permits licensee to sell alcoholic beverages for consumption off of the premises of the licensee, except between the hours of 7:00 a.m. and 2:00 a.m. on all days of the week except Sunday. Sunday sales of alcoholic beverages, to be consumed off of the premises of the licensee, shall only be permitted between the hours of 9:00 a.m. Sunday and 2:00 a.m. of the following day. (Ord. No. 02-06, § 4, 4-8-02) Sec. 3-5. - Closing hours for bottle clubs. All bottle clubs located in the unincorporated areas of the county, shall remain closed from the hours of 3:00 a.m. to 7:00 a.m. on each day of the week except that all such bottle clubs shall remain closed from midnight on each Saturday until 7:00 a.m. on the following Monday. (Ord. No. 02-06, § 5, 4-8-02)
USER:
I live in Osceola County, and I intend to open a bottle club where I will serve alcoholic drinks and beverages. This text contains the rules that apply. My neighbor told me that I need to close the club at midnight on Saturday and Sunday, even though these are the busiest times of the nightlife. I don't want to close my bottle club at midnight! I also want you to give me a summary in list format with all the information that might be relevant. Write no more than 150 words.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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| 675
| null | 456
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Please limit your knowledge to the document. Avoid generalizations and ensure accuracy by directly referencing the document's arguments and examples.
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What are the main ideas presented in this study and what are the benefits ad consequences?
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The biggest mistakes Canadians make on their taxes — and how to fix them Fizkes / Shutterstock By Tamar Satov We adhere to strict standards of editorial integrity to help you make decisions with confidence. Please be aware this post may contain links to products from our partners. We may receive a commission for products or services you sign up for through partner links. Maximize your tax savings by avoiding these common errors on Canadian income tax returns. Already goofed and want to know how to fix a mistake on your tax return? Here’s how to change your return after you’ve filed. Filing income taxes is a complicated process, so it’s not surprising that taxpayers often get things wrong on their returns. Sometimes, your mistake could have you paying more in taxes than you should. In other situations, you may have to give back the benefits you already received or face penalties or other fees. To help you get your return right the first time, we’ve come up with a list of the most common mistakes Canadians make on their taxes. But, if you already made one of these errors and want to know, “How do I fix a mistake on my tax return?” — don’t worry. We also explain how to correct your tax return after you’ve filed. Mistake #1: Forgetting allowable deductions or credits It’s hard to know which income tax deductions and credits you qualify for from year to year, especially since the government continually tinkers with the rules for existing tax breaks, adding new ones and eliminating others. If you don’t claim all the deductions and credits you are entitled to, you’ll pay more taxes than necessary — which you obviously want to avoid. Some of the more frequently overlooked credits and deductions include: o A non-refundable tax credit for the interest you paid on student loans; o A tax deduction for union or professional dues; o The $5,000 non-refundable home buyer’s tax credit, for those who bought a qualifying home in the past year and have not lived in a home they (or their spouse) owned in the past four years; o A tax deduction for work-related expenses that you paid for out of pocket — even if you are salaried. This year, the CRA has made it even easier to qualify for this deduction if you worked from home during the COVID-19 pandemic. One of the benefits of using tax software to file your taxes is that the better ones, such as TurboTax, will ask you a series of questions to determine which of the more than 400 deductions and credits you may be eligible for. That means you won’t leave tax savings on the table. READ MORE: The best tax return software in Canada Mistake #2: Claiming ineligible expenses On the flip side of missing tax breaks is claiming deductions or credits that don’t exist. According to the CRA, one of the classic examples here is related to moving expenses. Taxpayers who move at least 40 km closer to a new place of work or to study full-time at a post-secondary program can deduct a variety of moving costs, including transportation and storage, travel expenses, utility hookups and disconnections, and fees for cancelling a lease. But some taxpayers push the envelope by writing off ineligible expenses such as home staging, household repairs, and the cost of having their mail forwarded to the new address. Similarly, some students try to claim the student loan tax credit on interest fees they paid on personal loans, student lines of credit, or foreign student loans — even though these forms of borrowing are not eligible for the credit. Mistake #3: Getting rid of slips and receipts With the rise of online tax filing, which does not require taxpayers to send in all their slips and receipts along with their returns, some people fail to keep that paperwork handy. This is a problem since the CRA can (and often does) request to see receipts for things like childcare expenses, charitable donations, tuition fees, or any other expense related to a claim you’ve made. (Such requests are separate from an audit, which is much less likely, but could also happen.) Individuals are required to keep seven years’ worth of records on hand, and the CRA will only accept receipts (not invoices) that include the date of payment. If you cannot provide these documents when asked, your claims will be denied. Mistake #4: Misreporting your marital status You may not think of your squeeze as your spouse, but if you have been living together for at least 12 months, or you reside together and share a child (by birth or adoption), the CRA considers you to be in a common-law relationship, which must be declared on your tax return. It’s important that you correctly indicate your marital status, because some benefits that you may be eligible to receive, such as the GST/HST tax credit or the Canada Child Benefit, are based on spouses’ combined incomes. If you file as single, it could delay your payments, or you may even have to pay back some of the money you receive. On the plus side, spouses can pool or transfer some of their tax credits, which can lead to greater tax savings. This is another benefit of using tax software, as it will automatically optimize claims for medical expenses, charitable donations, pension splitting, and other credits when spouses prepare their returns at the same time. Mistake #5: Neglecting to transfer unused tax credits to other family Mmembers As mentioned above, individuals can transfer some of their tax credits to a spouse if they don’t have enough income or taxes owing to make full use of them. In some cases, such as the $5,000 tuition tax credit, unused amounts can also be transferred to a parent or grandparent. So, for example, if you are a full-time student at an eligible education institution, you can claim a non-refundable tax credit equal to 15% of the tuition you paid (up to $5,000). Because it is a non-refundable tax credit — which can only reduce the amount of tax you owe, it can’t pay out any extra benefit — you can only use the portion of the credit that reduces your taxes to zero. At that point, any remaining amount may be transferred to a spouse, parent or grandparent, which can lead to greater tax savings (especially if they are in a higher tax bracket than you are). Mistake #6: Missing the tax deadline Because of COVID-19, the 2019 tax filing deadline was extended dramatically in 2020. But deadlines returned to normal in 2021, and 2022 appears to be the same. You’ll need to file your 2021 taxes by May 2, 2022, for employed Canadians and by June 15, 2022, if you are self-employed. o You won’t get your refund on time. If you’re owed a refund, as is the case for more than 60% of tax filers, it will be delayed — and the government won’t pay you any interest even though it kept your money longer than necessary. o It could delay benefit payments. The government can’t assess your eligibility for payments such as the GST/HST Credit or Canada Child Benefit until you file your tax return. o You may face interest charges and penalty fees. If you have taxes owing and don’t file by the deadline, the CRA will charge you compound daily interest on your unpaid balance starting the very next day. Furthermore, you will be subject to a 5% late-filing penalty, and an extra 1% for every month after that (up to 12 months). These fees can really snowball over time, as the penalties rise to 10% (and 2% extra for every month) if you’ve already been late with your taxes in the past three years. Plus, the CRA will even charge you interest on your penalties Mistake #7: Not realizing some benefits are taxable If you received COVID-19 emergency relief from the government (like the Canada Emergency Response Benefit or CERB), that benefit most likely helped keep your finances afloat during some very financially turbulent times. But the money you received under this program and others like it wasn’t without strings attached. You’ll need to declare any benefits you received on your upcoming income tax return. On top of that, these benefits are taxable, which means they do not have income tax deducted at the source. So if you claimed CERB or other COVID benefits during 2020, you would have to pay a portion of it back at tax time as income tax. It’s smart to do your calculations early using a simple income tax calculator to help you determine how much you might owe, so you aren’t shocked at tax time. Mistake #8: Ignoring mistakes you made on previous returns So, now that you know about the most common mistakes Canadians make on their taxes, you can avoid them when you prepare this year’s return. But what if upon reviewing this list you realize you made some of these mistakes in the past? Or perhaps you found a misplaced T-slip, or it arrived late. Like many Canadians, you may be wondering, “Can I correct my tax return?” Thankfully, you don’t have to accept that you missed out on tax savings, or sit around in fear that the CRA may come after you for additional payments. Instead, you can (and should) correct your tax return, as we explain below.
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Please limit your knowledge to the document. Avoid generalizations and ensure accuracy by directly referencing the document's arguments and examples. What are the main ideas presented in this study and what are the benefits ad consequences? The biggest mistakes Canadians make on their taxes — and how to fix them Fizkes / Shutterstock By Tamar Satov We adhere to strict standards of editorial integrity to help you make decisions with confidence. Please be aware this post may contain links to products from our partners. We may receive a commission for products or services you sign up for through partner links. Maximize your tax savings by avoiding these common errors on Canadian income tax returns. Already goofed and want to know how to fix a mistake on your tax return? Here’s how to change your return after you’ve filed. Filing income taxes is a complicated process, so it’s not surprising that taxpayers often get things wrong on their returns. Sometimes, your mistake could have you paying more in taxes than you should. In other situations, you may have to give back the benefits you already received or face penalties or other fees. To help you get your return right the first time, we’ve come up with a list of the most common mistakes Canadians make on their taxes. But, if you already made one of these errors and want to know, “How do I fix a mistake on my tax return?” — don’t worry. We also explain how to correct your tax return after you’ve filed. Mistake #1: Forgetting allowable deductions or credits It’s hard to know which income tax deductions and credits you qualify for from year to year, especially since the government continually tinkers with the rules for existing tax breaks, adding new ones and eliminating others. If you don’t claim all the deductions and credits you are entitled to, you’ll pay more taxes than necessary — which you obviously want to avoid. Some of the more frequently overlooked credits and deductions include: o A non-refundable tax credit for the interest you paid on student loans; o A tax deduction for union or professional dues; o The $5,000 non-refundable home buyer’s tax credit, for those who bought a qualifying home in the past year and have not lived in a home they (or their spouse) owned in the past four years; o A tax deduction for work-related expenses that you paid for out of pocket — even if you are salaried. This year, the CRA has made it even easier to qualify for this deduction if you worked from home during the COVID-19 pandemic. One of the benefits of using tax software to file your taxes is that the better ones, such as TurboTax, will ask you a series of questions to determine which of the more than 400 deductions and credits you may be eligible for. That means you won’t leave tax savings on the table. READ MORE: The best tax return software in Canada Mistake #2: Claiming ineligible expenses On the flip side of missing tax breaks is claiming deductions or credits that don’t exist. According to the CRA, one of the classic examples here is related to moving expenses. Taxpayers who move at least 40 km closer to a new place of work or to study full-time at a post-secondary program can deduct a variety of moving costs, including transportation and storage, travel expenses, utility hookups and disconnections, and fees for cancelling a lease. But some taxpayers push the envelope by writing off ineligible expenses such as home staging, household repairs, and the cost of having their mail forwarded to the new address. Similarly, some students try to claim the student loan tax credit on interest fees they paid on personal loans, student lines of credit, or foreign student loans — even though these forms of borrowing are not eligible for the credit. Mistake #3: Getting rid of slips and receipts With the rise of online tax filing, which does not require taxpayers to send in all their slips and receipts along with their returns, some people fail to keep that paperwork handy. This is a problem since the CRA can (and often does) request to see receipts for things like childcare expenses, charitable donations, tuition fees, or any other expense related to a claim you’ve made. (Such requests are separate from an audit, which is much less likely, but could also happen.) Individuals are required to keep seven years’ worth of records on hand, and the CRA will only accept receipts (not invoices) that include the date of payment. If you cannot provide these documents when asked, your claims will be denied. Mistake #4: Misreporting your marital status You may not think of your squeeze as your spouse, but if you have been living together for at least 12 months, or you reside together and share a child (by birth or adoption), the CRA considers you to be in a common-law relationship, which must be declared on your tax return. It’s important that you correctly indicate your marital status, because some benefits that you may be eligible to receive, such as the GST/HST tax credit or the Canada Child Benefit, are based on spouses’ combined incomes. If you file as single, it could delay your payments, or you may even have to pay back some of the money you receive. On the plus side, spouses can pool or transfer some of their tax credits, which can lead to greater tax savings. This is another benefit of using tax software, as it will automatically optimize claims for medical expenses, charitable donations, pension splitting, and other credits when spouses prepare their returns at the same time. Mistake #5: Neglecting to transfer unused tax credits to other family Mmembers As mentioned above, individuals can transfer some of their tax credits to a spouse if they don’t have enough income or taxes owing to make full use of them. In some cases, such as the $5,000 tuition tax credit, unused amounts can also be transferred to a parent or grandparent. So, for example, if you are a full-time student at an eligible education institution, you can claim a non-refundable tax credit equal to 15% of the tuition you paid (up to $5,000). Because it is a non-refundable tax credit — which can only reduce the amount of tax you owe, it can’t pay out any extra benefit — you can only use the portion of the credit that reduces your taxes to zero. At that point, any remaining amount may be transferred to a spouse, parent or grandparent, which can lead to greater tax savings (especially if they are in a higher tax bracket than you are). Mistake #6: Missing the tax deadline Because of COVID-19, the 2019 tax filing deadline was extended dramatically in 2020. But deadlines returned to normal in 2021, and 2022 appears to be the same. You’ll need to file your 2021 taxes by May 2, 2022, for employed Canadians and by June 15, 2022, if you are self-employed. o You won’t get your refund on time. If you’re owed a refund, as is the case for more than 60% of tax filers, it will be delayed — and the government won’t pay you any interest even though it kept your money longer than necessary. o It could delay benefit payments. The government can’t assess your eligibility for payments such as the GST/HST Credit or Canada Child Benefit until you file your tax return. o You may face interest charges and penalty fees. If you have taxes owing and don’t file by the deadline, the CRA will charge you compound daily interest on your unpaid balance starting the very next day. Furthermore, you will be subject to a 5% late-filing penalty, and an extra 1% for every month after that (up to 12 months). These fees can really snowball over time, as the penalties rise to 10% (and 2% extra for every month) if you’ve already been late with your taxes in the past three years. Plus, the CRA will even charge you interest on your penalties Mistake #7: Not realizing some benefits are taxable If you received COVID-19 emergency relief from the government (like the Canada Emergency Response Benefit or CERB), that benefit most likely helped keep your finances afloat during some very financially turbulent times. But the money you received under this program and others like it wasn’t without strings attached. You’ll need to declare any benefits you received on your upcoming income tax return. On top of that, these benefits are taxable, which means they do not have income tax deducted at the source. So if you claimed CERB or other COVID benefits during 2020, you would have to pay a portion of it back at tax time as income tax. It’s smart to do your calculations early using a simple income tax calculator to help you determine how much you might owe, so you aren’t shocked at tax time. Mistake #8: Ignoring mistakes you made on previous returns So, now that you know about the most common mistakes Canadians make on their taxes, you can avoid them when you prepare this year’s return. But what if upon reviewing this list you realize you made some of these mistakes in the past? Or perhaps you found a misplaced T-slip, or it arrived late. Like many Canadians, you may be wondering, “Can I correct my tax return?” Thankfully, you don’t have to accept that you missed out on tax savings, or sit around in fear that the CRA may come after you for additional payments. Instead, you can (and should) correct your tax return, as we explain below.
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Please limit your knowledge to the document. Avoid generalizations and ensure accuracy by directly referencing the document's arguments and examples.
EVIDENCE:
The biggest mistakes Canadians make on their taxes — and how to fix them Fizkes / Shutterstock By Tamar Satov We adhere to strict standards of editorial integrity to help you make decisions with confidence. Please be aware this post may contain links to products from our partners. We may receive a commission for products or services you sign up for through partner links. Maximize your tax savings by avoiding these common errors on Canadian income tax returns. Already goofed and want to know how to fix a mistake on your tax return? Here’s how to change your return after you’ve filed. Filing income taxes is a complicated process, so it’s not surprising that taxpayers often get things wrong on their returns. Sometimes, your mistake could have you paying more in taxes than you should. In other situations, you may have to give back the benefits you already received or face penalties or other fees. To help you get your return right the first time, we’ve come up with a list of the most common mistakes Canadians make on their taxes. But, if you already made one of these errors and want to know, “How do I fix a mistake on my tax return?” — don’t worry. We also explain how to correct your tax return after you’ve filed. Mistake #1: Forgetting allowable deductions or credits It’s hard to know which income tax deductions and credits you qualify for from year to year, especially since the government continually tinkers with the rules for existing tax breaks, adding new ones and eliminating others. If you don’t claim all the deductions and credits you are entitled to, you’ll pay more taxes than necessary — which you obviously want to avoid. Some of the more frequently overlooked credits and deductions include: o A non-refundable tax credit for the interest you paid on student loans; o A tax deduction for union or professional dues; o The $5,000 non-refundable home buyer’s tax credit, for those who bought a qualifying home in the past year and have not lived in a home they (or their spouse) owned in the past four years; o A tax deduction for work-related expenses that you paid for out of pocket — even if you are salaried. This year, the CRA has made it even easier to qualify for this deduction if you worked from home during the COVID-19 pandemic. One of the benefits of using tax software to file your taxes is that the better ones, such as TurboTax, will ask you a series of questions to determine which of the more than 400 deductions and credits you may be eligible for. That means you won’t leave tax savings on the table. READ MORE: The best tax return software in Canada Mistake #2: Claiming ineligible expenses On the flip side of missing tax breaks is claiming deductions or credits that don’t exist. According to the CRA, one of the classic examples here is related to moving expenses. Taxpayers who move at least 40 km closer to a new place of work or to study full-time at a post-secondary program can deduct a variety of moving costs, including transportation and storage, travel expenses, utility hookups and disconnections, and fees for cancelling a lease. But some taxpayers push the envelope by writing off ineligible expenses such as home staging, household repairs, and the cost of having their mail forwarded to the new address. Similarly, some students try to claim the student loan tax credit on interest fees they paid on personal loans, student lines of credit, or foreign student loans — even though these forms of borrowing are not eligible for the credit. Mistake #3: Getting rid of slips and receipts With the rise of online tax filing, which does not require taxpayers to send in all their slips and receipts along with their returns, some people fail to keep that paperwork handy. This is a problem since the CRA can (and often does) request to see receipts for things like childcare expenses, charitable donations, tuition fees, or any other expense related to a claim you’ve made. (Such requests are separate from an audit, which is much less likely, but could also happen.) Individuals are required to keep seven years’ worth of records on hand, and the CRA will only accept receipts (not invoices) that include the date of payment. If you cannot provide these documents when asked, your claims will be denied. Mistake #4: Misreporting your marital status You may not think of your squeeze as your spouse, but if you have been living together for at least 12 months, or you reside together and share a child (by birth or adoption), the CRA considers you to be in a common-law relationship, which must be declared on your tax return. It’s important that you correctly indicate your marital status, because some benefits that you may be eligible to receive, such as the GST/HST tax credit or the Canada Child Benefit, are based on spouses’ combined incomes. If you file as single, it could delay your payments, or you may even have to pay back some of the money you receive. On the plus side, spouses can pool or transfer some of their tax credits, which can lead to greater tax savings. This is another benefit of using tax software, as it will automatically optimize claims for medical expenses, charitable donations, pension splitting, and other credits when spouses prepare their returns at the same time. Mistake #5: Neglecting to transfer unused tax credits to other family Mmembers As mentioned above, individuals can transfer some of their tax credits to a spouse if they don’t have enough income or taxes owing to make full use of them. In some cases, such as the $5,000 tuition tax credit, unused amounts can also be transferred to a parent or grandparent. So, for example, if you are a full-time student at an eligible education institution, you can claim a non-refundable tax credit equal to 15% of the tuition you paid (up to $5,000). Because it is a non-refundable tax credit — which can only reduce the amount of tax you owe, it can’t pay out any extra benefit — you can only use the portion of the credit that reduces your taxes to zero. At that point, any remaining amount may be transferred to a spouse, parent or grandparent, which can lead to greater tax savings (especially if they are in a higher tax bracket than you are). Mistake #6: Missing the tax deadline Because of COVID-19, the 2019 tax filing deadline was extended dramatically in 2020. But deadlines returned to normal in 2021, and 2022 appears to be the same. You’ll need to file your 2021 taxes by May 2, 2022, for employed Canadians and by June 15, 2022, if you are self-employed. o You won’t get your refund on time. If you’re owed a refund, as is the case for more than 60% of tax filers, it will be delayed — and the government won’t pay you any interest even though it kept your money longer than necessary. o It could delay benefit payments. The government can’t assess your eligibility for payments such as the GST/HST Credit or Canada Child Benefit until you file your tax return. o You may face interest charges and penalty fees. If you have taxes owing and don’t file by the deadline, the CRA will charge you compound daily interest on your unpaid balance starting the very next day. Furthermore, you will be subject to a 5% late-filing penalty, and an extra 1% for every month after that (up to 12 months). These fees can really snowball over time, as the penalties rise to 10% (and 2% extra for every month) if you’ve already been late with your taxes in the past three years. Plus, the CRA will even charge you interest on your penalties Mistake #7: Not realizing some benefits are taxable If you received COVID-19 emergency relief from the government (like the Canada Emergency Response Benefit or CERB), that benefit most likely helped keep your finances afloat during some very financially turbulent times. But the money you received under this program and others like it wasn’t without strings attached. You’ll need to declare any benefits you received on your upcoming income tax return. On top of that, these benefits are taxable, which means they do not have income tax deducted at the source. So if you claimed CERB or other COVID benefits during 2020, you would have to pay a portion of it back at tax time as income tax. It’s smart to do your calculations early using a simple income tax calculator to help you determine how much you might owe, so you aren’t shocked at tax time. Mistake #8: Ignoring mistakes you made on previous returns So, now that you know about the most common mistakes Canadians make on their taxes, you can avoid them when you prepare this year’s return. But what if upon reviewing this list you realize you made some of these mistakes in the past? Or perhaps you found a misplaced T-slip, or it arrived late. Like many Canadians, you may be wondering, “Can I correct my tax return?” Thankfully, you don’t have to accept that you missed out on tax savings, or sit around in fear that the CRA may come after you for additional payments. Instead, you can (and should) correct your tax return, as we explain below.
USER:
What are the main ideas presented in this study and what are the benefits ad consequences?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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[question] [user request] ===================== [text] [context document] ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
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I have hypothyroidism, but I just started taking ashwagandha, and I'm noticing decent effects on my stress levels. What are studies showing regarding the helpfulness of this supplement? Is there anything I need to be worried about? What is known about its drug interactions?
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Efficacy Stress and anxiety A 2021 systematic review identified seven studies investigating ashwagandha to treat stress and anxiety. A total of 491 adults, all from India, with either self-reported high stress and anxiety or a diagnosed anxiety disorder, were randomized to take ashwagandha or placebo for 6 to 8 weeks. Six of the studies used extracts made from ashwagandha root alone (three studies, KSM-66), root and leaf (two studies, Sensoril or Shoden), or unspecified parts (one study), while the seventh study used dried root powder made into granules. The ashwagandha dose varied from 240 to 1,250 mg/day of extract or 12,000 mg/day of whole root granules equivalent to 6,000 mg of root powder. Overall, the studies found that ashwagandha significantly reduced stress and anxiety levels (subjectively measured by validated rating scales), reduced sleeplessness and fatigue, and reduced serum cortisol (a stress hormone) levels, compared with placebo. In several studies, benefits appeared to be greater with doses of 500 to 600 mg/day compared with lower doses. Results from three additional small studies published after this 2021 review also suggest that ashwagandha has a beneficial impact on perceived stress. One clinical trial conducted in Florida included 60 men and women experiencing perceived stress. Participants took capsules containing 225 mg/day or 400 mg/day of a proprietary ashwagandha root and leaf extract (NooGandha) or placebo for 30 days. Compared with placebo, participants taking both doses of ashwagandha extract reported positive effects on stress, anxiety, depression, and food cravings as measured by validated rating scales. In addition, participants taking the 225 mg dose had lower saliva cortisol levels than those in the placebo group. At the University of Colorado, Colorado Springs, 60 students were randomized to take an ashwagandha root extract (Gaia Herbs) or placebo for 30 days in a double-blind trial . The extract contained 2.5 mg withanolides per 350-mg capsule, and participants took two capsules daily. The investigators gathered qualitative, subjective information from participants during daily check-ins and focus groups. Participants who took ashwagandha extract reported increased well-being, including a sense of calm, improved energy levels, heightened mental clarity, and enhanced sleep quality. While descriptions of stress were comparable in both groups, participants taking ashwagandha were more likely to describe their stress as manageable compared with those taking placebo. Sleep Research is limited, but the results from a few clinical trials suggest that ashwagandha extracts may help with sleep. For example, at one study center in India, 150 healthy men and women age 18 to 65 years with self-reported sleep problems characterized by insomnia and lack of restful sleep were randomized to take an ashwagandha root and leaf extract (Shoden) or placebo for 6 weeks. The extract was standardized to contain 21 mg of withanolide glycosides per 60-mg capsule, and participants took two capsules each day. Both groups reported improvements in sleep quality as measured by a validated rating scale, but the improvements were greater in the ashwagandha group (72%) compared with the placebo group (29%). In addition, participants taking ashwagandha extract showed improvements in sleep efficiency (time in bed spent in sleep), total sleep time, sleep latency (time taken to fall asleep), and awakening after sleep onset as assessed by actigraphy, which involves wearing a watch monitor on the wrist to measure body motion. They also reported improvements in quality of life. In another trial conducted in India, 80 healthy men and women age 18 to 50 years, half of them with insomnia, were randomized to take an ashwagandha root extract (KSM-66) or placebo for 8 weeks. The extract was standardized to a withanolide content of more than 5% per 300-mg capsule, and participants took two capsules each day. Participants with insomnia who took ashwagandha extract showed improvements in sleep quality, sleep onset latency, mental alertness on rising, and perceived anxiety symptoms compared with those taking placebo, as measured by actigraphy and validated rating scales. Participants without insomnia taking ashwagandha also reported improved sleep but not perceived anxiety symptoms or mental alertness on awakening. A 2021 systematic review and meta-analysis included five studies (including the two described above), investigating ashwagandha to promote sleep. All studies were conducted in India. A total of 372 adults, either self-described as healthy or with insomnia, took ashwagandha or placebo for 6 to 12 weeks. The dose of the ashwagandha supplement used in these studies ranged from 250 to 600 mg/day as a root extract (KSM-66) or, in one study, 120 mg/day of a root and leaf extract (Shoden). Overall, the studies found that ashwagandha extract had a small but significant effect on improving sleep compared with placebo. The benefits were more prominent when the dose was 600 mg/day and when the treatment duration was at least 8 weeks. Benefits were also more prominent in participants with insomnia. Safety In the studies described above and in many other clinical trials, ashwagandha has been well tolerated by participants for up to about 3 months of use. Common side effects are mild and include stomach upset, loose stools, nausea, and drowsiness. However, evidence on the safety of longer term ashwagandha use over many months or years is lacking. There are a few reports of more serious side effects associated with ashwagandha use, including adverse effects on liver function. In an early report of liver injury associated with ashwagandha use, a 20-year-old man in Japan developed liver dysfunction and hyperbilirubinemia after using ashwagandha in combination with multiple antianxiety drugs. Since then, the use of ashwagandha has been linked to acute liver injury in other case reports. These include five cases (three men and two women, age range 21 to 62 years), who reportedly took supplements containing 450 to 1,350 mg ashwagandha daily over the course of 1 week to 4 months when signs of liver injury, such as jaundice, pruritus, nausea, lethargy, abdominal discomfort, and hyperbilirubinemia, appeared. In these cases and others, the conditions of the individuals improved over time after they stopped taking the supplement; some also received medical treatment. However, the contents of the products that the individuals took were not independently verified in all cases, and some products were combination products containing ashwagandha and other ingredients. Some research in mice and humans suggests that ashwagandha might affect thyroid function. In one study, three adult men who took 500 mg/day of a standardized ashwagandha extract (Sensoril) for 8 weeks had small increases in blood thyroxine (T4) levels. A small clinical trial with 50 participants with subclinical hypothyroidism found that ashwagandha (KSM-66), at 300 mg twice daily for 8 weeks, lowered serum thyroid stimulating hormone (TSH) and increased triiodothyronine (T3) and T4 levels compared with placebo. These findings suggest that ashwagandha might interact with thyroid hormone medications. Ashwagandha might also interact with other medications including antidiabetes medications, antihypertensives, immunosuppressants, and sedatives. Implications for use Several randomized, placebo-controlled clinical trials, most of them fairly small in size and of short duration, have found that ashwagandha may reduce perceived stress and anxiety and improve the quality and duration of sleep. Because studies have used various ashwagandha preparations (with different extraction and standardization processes) and doses, it is difficult to identify specific extracts or recommended amounts. In addition, most studies have been conducted as part of a traditional medical system, so the potential effects of ashwagandha when used as a dietary supplement outside of that approach remain unclear. Ashwagandha appears to be well tolerated for up to 3 months of use. However, the efficacy and safety of long-term ashwagandha use over months or years for stress, anxiety, or sleep is not known. In addition, ashwagandha may have potential adverse effects on the liver and thyroid and might not be safe for people with prostate cancer or those who are pregnant or nursing.
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[question] I have hypothyroidism, but I just started taking ashwagandha, and I'm noticing decent effects on my stress levels. What are studies showing regarding the helpfulness of this supplement? Is there anything I need to be worried about? What is known about its drug interactions? ===================== [text] Efficacy Stress and anxiety A 2021 systematic review identified seven studies investigating ashwagandha to treat stress and anxiety. A total of 491 adults, all from India, with either self-reported high stress and anxiety or a diagnosed anxiety disorder, were randomized to take ashwagandha or placebo for 6 to 8 weeks. Six of the studies used extracts made from ashwagandha root alone (three studies, KSM-66), root and leaf (two studies, Sensoril or Shoden), or unspecified parts (one study), while the seventh study used dried root powder made into granules. The ashwagandha dose varied from 240 to 1,250 mg/day of extract or 12,000 mg/day of whole root granules equivalent to 6,000 mg of root powder. Overall, the studies found that ashwagandha significantly reduced stress and anxiety levels (subjectively measured by validated rating scales), reduced sleeplessness and fatigue, and reduced serum cortisol (a stress hormone) levels, compared with placebo. In several studies, benefits appeared to be greater with doses of 500 to 600 mg/day compared with lower doses. Results from three additional small studies published after this 2021 review also suggest that ashwagandha has a beneficial impact on perceived stress. One clinical trial conducted in Florida included 60 men and women experiencing perceived stress. Participants took capsules containing 225 mg/day or 400 mg/day of a proprietary ashwagandha root and leaf extract (NooGandha) or placebo for 30 days. Compared with placebo, participants taking both doses of ashwagandha extract reported positive effects on stress, anxiety, depression, and food cravings as measured by validated rating scales. In addition, participants taking the 225 mg dose had lower saliva cortisol levels than those in the placebo group. At the University of Colorado, Colorado Springs, 60 students were randomized to take an ashwagandha root extract (Gaia Herbs) or placebo for 30 days in a double-blind trial . The extract contained 2.5 mg withanolides per 350-mg capsule, and participants took two capsules daily. The investigators gathered qualitative, subjective information from participants during daily check-ins and focus groups. Participants who took ashwagandha extract reported increased well-being, including a sense of calm, improved energy levels, heightened mental clarity, and enhanced sleep quality. While descriptions of stress were comparable in both groups, participants taking ashwagandha were more likely to describe their stress as manageable compared with those taking placebo. Sleep Research is limited, but the results from a few clinical trials suggest that ashwagandha extracts may help with sleep. For example, at one study center in India, 150 healthy men and women age 18 to 65 years with self-reported sleep problems characterized by insomnia and lack of restful sleep were randomized to take an ashwagandha root and leaf extract (Shoden) or placebo for 6 weeks. The extract was standardized to contain 21 mg of withanolide glycosides per 60-mg capsule, and participants took two capsules each day. Both groups reported improvements in sleep quality as measured by a validated rating scale, but the improvements were greater in the ashwagandha group (72%) compared with the placebo group (29%). In addition, participants taking ashwagandha extract showed improvements in sleep efficiency (time in bed spent in sleep), total sleep time, sleep latency (time taken to fall asleep), and awakening after sleep onset as assessed by actigraphy, which involves wearing a watch monitor on the wrist to measure body motion. They also reported improvements in quality of life. In another trial conducted in India, 80 healthy men and women age 18 to 50 years, half of them with insomnia, were randomized to take an ashwagandha root extract (KSM-66) or placebo for 8 weeks. The extract was standardized to a withanolide content of more than 5% per 300-mg capsule, and participants took two capsules each day. Participants with insomnia who took ashwagandha extract showed improvements in sleep quality, sleep onset latency, mental alertness on rising, and perceived anxiety symptoms compared with those taking placebo, as measured by actigraphy and validated rating scales. Participants without insomnia taking ashwagandha also reported improved sleep but not perceived anxiety symptoms or mental alertness on awakening. A 2021 systematic review and meta-analysis included five studies (including the two described above), investigating ashwagandha to promote sleep. All studies were conducted in India. A total of 372 adults, either self-described as healthy or with insomnia, took ashwagandha or placebo for 6 to 12 weeks. The dose of the ashwagandha supplement used in these studies ranged from 250 to 600 mg/day as a root extract (KSM-66) or, in one study, 120 mg/day of a root and leaf extract (Shoden). Overall, the studies found that ashwagandha extract had a small but significant effect on improving sleep compared with placebo. The benefits were more prominent when the dose was 600 mg/day and when the treatment duration was at least 8 weeks. Benefits were also more prominent in participants with insomnia. Safety In the studies described above and in many other clinical trials, ashwagandha has been well tolerated by participants for up to about 3 months of use. Common side effects are mild and include stomach upset, loose stools, nausea, and drowsiness. However, evidence on the safety of longer term ashwagandha use over many months or years is lacking. There are a few reports of more serious side effects associated with ashwagandha use, including adverse effects on liver function. In an early report of liver injury associated with ashwagandha use, a 20-year-old man in Japan developed liver dysfunction and hyperbilirubinemia after using ashwagandha in combination with multiple antianxiety drugs. Since then, the use of ashwagandha has been linked to acute liver injury in other case reports. These include five cases (three men and two women, age range 21 to 62 years), who reportedly took supplements containing 450 to 1,350 mg ashwagandha daily over the course of 1 week to 4 months when signs of liver injury, such as jaundice, pruritus, nausea, lethargy, abdominal discomfort, and hyperbilirubinemia, appeared. In these cases and others, the conditions of the individuals improved over time after they stopped taking the supplement; some also received medical treatment. However, the contents of the products that the individuals took were not independently verified in all cases, and some products were combination products containing ashwagandha and other ingredients. Some research in mice and humans suggests that ashwagandha might affect thyroid function. In one study, three adult men who took 500 mg/day of a standardized ashwagandha extract (Sensoril) for 8 weeks had small increases in blood thyroxine (T4) levels. A small clinical trial with 50 participants with subclinical hypothyroidism found that ashwagandha (KSM-66), at 300 mg twice daily for 8 weeks, lowered serum thyroid stimulating hormone (TSH) and increased triiodothyronine (T3) and T4 levels compared with placebo. These findings suggest that ashwagandha might interact with thyroid hormone medications. Ashwagandha might also interact with other medications including antidiabetes medications, antihypertensives, immunosuppressants, and sedatives. Implications for use Several randomized, placebo-controlled clinical trials, most of them fairly small in size and of short duration, have found that ashwagandha may reduce perceived stress and anxiety and improve the quality and duration of sleep. Because studies have used various ashwagandha preparations (with different extraction and standardization processes) and doses, it is difficult to identify specific extracts or recommended amounts. In addition, most studies have been conducted as part of a traditional medical system, so the potential effects of ashwagandha when used as a dietary supplement outside of that approach remain unclear. Ashwagandha appears to be well tolerated for up to 3 months of use. However, the efficacy and safety of long-term ashwagandha use over months or years for stress, anxiety, or sleep is not known. In addition, ashwagandha may have potential adverse effects on the liver and thyroid and might not be safe for people with prostate cancer or those who are pregnant or nursing. https://ods.od.nih.gov/factsheets/Ashwagandha-HealthProfessional/ ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
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[question] [user request] ===================== [text] [context document] ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
EVIDENCE:
Efficacy Stress and anxiety A 2021 systematic review identified seven studies investigating ashwagandha to treat stress and anxiety. A total of 491 adults, all from India, with either self-reported high stress and anxiety or a diagnosed anxiety disorder, were randomized to take ashwagandha or placebo for 6 to 8 weeks. Six of the studies used extracts made from ashwagandha root alone (three studies, KSM-66), root and leaf (two studies, Sensoril or Shoden), or unspecified parts (one study), while the seventh study used dried root powder made into granules. The ashwagandha dose varied from 240 to 1,250 mg/day of extract or 12,000 mg/day of whole root granules equivalent to 6,000 mg of root powder. Overall, the studies found that ashwagandha significantly reduced stress and anxiety levels (subjectively measured by validated rating scales), reduced sleeplessness and fatigue, and reduced serum cortisol (a stress hormone) levels, compared with placebo. In several studies, benefits appeared to be greater with doses of 500 to 600 mg/day compared with lower doses. Results from three additional small studies published after this 2021 review also suggest that ashwagandha has a beneficial impact on perceived stress. One clinical trial conducted in Florida included 60 men and women experiencing perceived stress. Participants took capsules containing 225 mg/day or 400 mg/day of a proprietary ashwagandha root and leaf extract (NooGandha) or placebo for 30 days. Compared with placebo, participants taking both doses of ashwagandha extract reported positive effects on stress, anxiety, depression, and food cravings as measured by validated rating scales. In addition, participants taking the 225 mg dose had lower saliva cortisol levels than those in the placebo group. At the University of Colorado, Colorado Springs, 60 students were randomized to take an ashwagandha root extract (Gaia Herbs) or placebo for 30 days in a double-blind trial . The extract contained 2.5 mg withanolides per 350-mg capsule, and participants took two capsules daily. The investigators gathered qualitative, subjective information from participants during daily check-ins and focus groups. Participants who took ashwagandha extract reported increased well-being, including a sense of calm, improved energy levels, heightened mental clarity, and enhanced sleep quality. While descriptions of stress were comparable in both groups, participants taking ashwagandha were more likely to describe their stress as manageable compared with those taking placebo. Sleep Research is limited, but the results from a few clinical trials suggest that ashwagandha extracts may help with sleep. For example, at one study center in India, 150 healthy men and women age 18 to 65 years with self-reported sleep problems characterized by insomnia and lack of restful sleep were randomized to take an ashwagandha root and leaf extract (Shoden) or placebo for 6 weeks. The extract was standardized to contain 21 mg of withanolide glycosides per 60-mg capsule, and participants took two capsules each day. Both groups reported improvements in sleep quality as measured by a validated rating scale, but the improvements were greater in the ashwagandha group (72%) compared with the placebo group (29%). In addition, participants taking ashwagandha extract showed improvements in sleep efficiency (time in bed spent in sleep), total sleep time, sleep latency (time taken to fall asleep), and awakening after sleep onset as assessed by actigraphy, which involves wearing a watch monitor on the wrist to measure body motion. They also reported improvements in quality of life. In another trial conducted in India, 80 healthy men and women age 18 to 50 years, half of them with insomnia, were randomized to take an ashwagandha root extract (KSM-66) or placebo for 8 weeks. The extract was standardized to a withanolide content of more than 5% per 300-mg capsule, and participants took two capsules each day. Participants with insomnia who took ashwagandha extract showed improvements in sleep quality, sleep onset latency, mental alertness on rising, and perceived anxiety symptoms compared with those taking placebo, as measured by actigraphy and validated rating scales. Participants without insomnia taking ashwagandha also reported improved sleep but not perceived anxiety symptoms or mental alertness on awakening. A 2021 systematic review and meta-analysis included five studies (including the two described above), investigating ashwagandha to promote sleep. All studies were conducted in India. A total of 372 adults, either self-described as healthy or with insomnia, took ashwagandha or placebo for 6 to 12 weeks. The dose of the ashwagandha supplement used in these studies ranged from 250 to 600 mg/day as a root extract (KSM-66) or, in one study, 120 mg/day of a root and leaf extract (Shoden). Overall, the studies found that ashwagandha extract had a small but significant effect on improving sleep compared with placebo. The benefits were more prominent when the dose was 600 mg/day and when the treatment duration was at least 8 weeks. Benefits were also more prominent in participants with insomnia. Safety In the studies described above and in many other clinical trials, ashwagandha has been well tolerated by participants for up to about 3 months of use. Common side effects are mild and include stomach upset, loose stools, nausea, and drowsiness. However, evidence on the safety of longer term ashwagandha use over many months or years is lacking. There are a few reports of more serious side effects associated with ashwagandha use, including adverse effects on liver function. In an early report of liver injury associated with ashwagandha use, a 20-year-old man in Japan developed liver dysfunction and hyperbilirubinemia after using ashwagandha in combination with multiple antianxiety drugs. Since then, the use of ashwagandha has been linked to acute liver injury in other case reports. These include five cases (three men and two women, age range 21 to 62 years), who reportedly took supplements containing 450 to 1,350 mg ashwagandha daily over the course of 1 week to 4 months when signs of liver injury, such as jaundice, pruritus, nausea, lethargy, abdominal discomfort, and hyperbilirubinemia, appeared. In these cases and others, the conditions of the individuals improved over time after they stopped taking the supplement; some also received medical treatment. However, the contents of the products that the individuals took were not independently verified in all cases, and some products were combination products containing ashwagandha and other ingredients. Some research in mice and humans suggests that ashwagandha might affect thyroid function. In one study, three adult men who took 500 mg/day of a standardized ashwagandha extract (Sensoril) for 8 weeks had small increases in blood thyroxine (T4) levels. A small clinical trial with 50 participants with subclinical hypothyroidism found that ashwagandha (KSM-66), at 300 mg twice daily for 8 weeks, lowered serum thyroid stimulating hormone (TSH) and increased triiodothyronine (T3) and T4 levels compared with placebo. These findings suggest that ashwagandha might interact with thyroid hormone medications. Ashwagandha might also interact with other medications including antidiabetes medications, antihypertensives, immunosuppressants, and sedatives. Implications for use Several randomized, placebo-controlled clinical trials, most of them fairly small in size and of short duration, have found that ashwagandha may reduce perceived stress and anxiety and improve the quality and duration of sleep. Because studies have used various ashwagandha preparations (with different extraction and standardization processes) and doses, it is difficult to identify specific extracts or recommended amounts. In addition, most studies have been conducted as part of a traditional medical system, so the potential effects of ashwagandha when used as a dietary supplement outside of that approach remain unclear. Ashwagandha appears to be well tolerated for up to 3 months of use. However, the efficacy and safety of long-term ashwagandha use over months or years for stress, anxiety, or sleep is not known. In addition, ashwagandha may have potential adverse effects on the liver and thyroid and might not be safe for people with prostate cancer or those who are pregnant or nursing.
USER:
I have hypothyroidism, but I just started taking ashwagandha, and I'm noticing decent effects on my stress levels. What are studies showing regarding the helpfulness of this supplement? Is there anything I need to be worried about? What is known about its drug interactions?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Do not use any knowledge other than the provided document. After answering the question, quote in parentheses the section of the document that you referred to for your answer. Use capital letters for this quotation.
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Summarize the reviews from the provided text.
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**Oben VH-R2 Reviews** Great product By Freddy 2/14/2023 Verified Buyer Community Member Excellent product Handy Easy Great price Was this review helpful to you? 0 0 Report Great Simple Monopod Mount By Brian 1/22/2023 Verified Buyer Community Member Works great. Love the quick mount locking action. Makes it really easy and quick to mount and remove camera. Just slide one side in and it flips to lock down securely. Was this review helpful to you? 0 0 Report Nice add on for the Oben ATM-2600 By Sam 8/2/2022 Verified Buyer This head works well with the Oben ATM-2600 6-Section Aluminum Monopod. good combo, camera mounts securely and no movement at all. I do use it often and have seen no problem with it so far. Was this review helpful to you? 1 0 Report great monopod accessary. By Mike 1/31/2022 Verified Buyer Community Member works really well, Especially like being able to tilt the head to shoot vertically. The quick attachment piece is proprietary,I wish a had a second one. Other ones I have don't work with it. So i need to remember when I move the piece from a lens to a camera body. No big deal. The quick release works really well. Was this review helpful to you? 1 0 Report Nice Tilt Head for Monopod By Katie 1/5/2022 Verified Buyer Community Member I'm using this tilt head with my Manfrotto monopod. It's very sturdy and doesn't move when locked down. I used it quite a bit on a trip to Yellowstone recently with my Sigma 150-500 lens and it worked perfectly. Really well priced- very pleased with it!
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{Context} ================== **Oben VH-R2 Reviews** Great product By Freddy 2/14/2023 Verified Buyer Community Member Excellent product Handy Easy Great price Was this review helpful to you? 0 0 Report Great Simple Monopod Mount By Brian 1/22/2023 Verified Buyer Community Member Works great. Love the quick mount locking action. Makes it really easy and quick to mount and remove camera. Just slide one side in and it flips to lock down securely. Was this review helpful to you? 0 0 Report Nice add on for the Oben ATM-2600 By Sam 8/2/2022 Verified Buyer This head works well with the Oben ATM-2600 6-Section Aluminum Monopod. good combo, camera mounts securely and no movement at all. I do use it often and have seen no problem with it so far. Was this review helpful to you? 1 0 Report great monopod accessary. By Mike 1/31/2022 Verified Buyer Community Member works really well, Especially like being able to tilt the head to shoot vertically. The quick attachment piece is proprietary,I wish a had a second one. Other ones I have don't work with it. So i need to remember when I move the piece from a lens to a camera body. No big deal. The quick release works really well. Was this review helpful to you? 1 0 Report Nice Tilt Head for Monopod By Katie 1/5/2022 Verified Buyer Community Member I'm using this tilt head with my Manfrotto monopod. It's very sturdy and doesn't move when locked down. I used it quite a bit on a trip to Yellowstone recently with my Sigma 150-500 lens and it worked perfectly. Really well priced- very pleased with it! ================ {Query} ================== Summarize the reviews from the provided text. ================ {Task} ================== Do not use any knowledge other than the provided document. After answering the question, quote in parentheses the section of the document that you referred to for your answer. Use capital letters for this quotation.
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Do not use any knowledge other than the provided document. After answering the question, quote in parentheses the section of the document that you referred to for your answer. Use capital letters for this quotation.
EVIDENCE:
**Oben VH-R2 Reviews** Great product By Freddy 2/14/2023 Verified Buyer Community Member Excellent product Handy Easy Great price Was this review helpful to you? 0 0 Report Great Simple Monopod Mount By Brian 1/22/2023 Verified Buyer Community Member Works great. Love the quick mount locking action. Makes it really easy and quick to mount and remove camera. Just slide one side in and it flips to lock down securely. Was this review helpful to you? 0 0 Report Nice add on for the Oben ATM-2600 By Sam 8/2/2022 Verified Buyer This head works well with the Oben ATM-2600 6-Section Aluminum Monopod. good combo, camera mounts securely and no movement at all. I do use it often and have seen no problem with it so far. Was this review helpful to you? 1 0 Report great monopod accessary. By Mike 1/31/2022 Verified Buyer Community Member works really well, Especially like being able to tilt the head to shoot vertically. The quick attachment piece is proprietary,I wish a had a second one. Other ones I have don't work with it. So i need to remember when I move the piece from a lens to a camera body. No big deal. The quick release works really well. Was this review helpful to you? 1 0 Report Nice Tilt Head for Monopod By Katie 1/5/2022 Verified Buyer Community Member I'm using this tilt head with my Manfrotto monopod. It's very sturdy and doesn't move when locked down. I used it quite a bit on a trip to Yellowstone recently with my Sigma 150-500 lens and it worked perfectly. Really well priced- very pleased with it!
USER:
Summarize the reviews from the provided text.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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Answer using only information in the prompt. Answer in full sentences, but the word or phrase that provides a direct answer to the prompt should be in bold text.
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Which treatments are suitable for children?
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Treatment options include: • No treatment: Up to 65% of viral warts including plantar warts resolve by themselves without any treatment within two years of appearing. Plantar warts that are not causing any adverse symptoms such as pain should be left alone. • Salicylic acid paints and gels: These are available in different strengths. Salicylic acid works by removing the outer dead layers of skin and triggering the immune system into clearing the virus. Before applying the paint, the feet should be soaked in warm water and thickened skin filed away with a pumice stone or emery board. Care should be taken not to scrape the surrounding normal skin to avoid spreading the virus. Treatment should be daily for at least 12 weeks and is usually most convenient at bedtime. The paint /gel should be applied carefully to the wart, not the surrounding normal skin. Cover the lesion with a dressing to allow the treatment to work effectively. If the wart becomes too sore, treatment should be stopped for a few days, then resumed. • Cryotherapy. (See patient information leaflet on cryotherapy). Freezing the warts with liquid nitrogen (a very cold gas), may be available at your doctor’s surgery or podiatrist. Thick warts need to be shaved before freezing to allow the cold to get into the skin. Ideally, cryotherapy should be repeated every three to four weeks. It is painful and may cause blisters and burns, and because of this is not usually recommended in children. Several freezes may be needed to clear warts and it does not always work. Using a salicylic acid preparation in between freezes may improve the effectiveness. • Duct Tape: Although there is conflicting evidence regarding the effectiveness of duct tape in the treatment of cutaneous warts, it might still be well worth trying, especially in children. The wart should be covered with duct tape for six days, and if the tape falls off it should be replaced with a fresh piece. The tape should then be removed, and the affected area soaked in luke-warm water and the wart pared down to remove any dead skin cells. The wart should then be left uncovered overnight, and the duct tape reapplied once again in the morning. This can be continued for up to two months. • Other approved topical treatments for plantar warts include formaldehyde gel, glutaraldehyde and silver nitrate caustic pencils. • Other preparations include topical dithranol, podophyllotoxin, 5- fluorouracil trichloroacetic acid and bleomycin injections. • Contact immunotherapy with a chemical paint such as diphencyprone causes an allergic skin reaction that may boost the body’s immune reaction against the wart virus. • Surgical removal of warts is an option if topical treatments do not work. Options include tissue destructive laser therapy or curettage and cautery after a local anaesthetic injection into the skin. These procedures are painful and can lead to uncomfortable scarring. The wart may come back in the scar after surgery. • Photodynamic therapy and other lasers (Pulsed Dye Laser and NdYAG) have also been used but are not widely available for treatment of warts. • Complementary and alternative treatments include hypnotherapy, homeopathy, acupuncture, and herbal treatment.
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System instructions: Answer using only information in the prompt. Answer in full sentences, but the word or phrase that provides a direct answer to the prompt should be in bold text. Context: Treatment options include: • No treatment: Up to 65% of viral warts including plantar warts resolve by themselves without any treatment within two years of appearing. Plantar warts that are not causing any adverse symptoms such as pain should be left alone. • Salicylic acid paints and gels: These are available in different strengths. Salicylic acid works by removing the outer dead layers of skin and triggering the immune system into clearing the virus. Before applying the paint, the feet should be soaked in warm water and thickened skin filed away with a pumice stone or emery board. Care should be taken not to scrape the surrounding normal skin to avoid spreading the virus. Treatment should be daily for at least 12 weeks and is usually most convenient at bedtime. The paint /gel should be applied carefully to the wart, not the surrounding normal skin. Cover the lesion with a dressing to allow the treatment to work effectively. If the wart becomes too sore, treatment should be stopped for a few days, then resumed. • Cryotherapy. (See patient information leaflet on cryotherapy). Freezing the warts with liquid nitrogen (a very cold gas), may be available at your doctor’s surgery or podiatrist. Thick warts need to be shaved before freezing to allow the cold to get into the skin. Ideally, cryotherapy should be repeated every three to four weeks. It is painful and may cause blisters and burns, and because of this is not usually recommended in children. Several freezes may be needed to clear warts and it does not always work. Using a salicylic acid preparation in between freezes may improve the effectiveness. • Duct Tape: Although there is conflicting evidence regarding the effectiveness of duct tape in the treatment of cutaneous warts, it might still be well worth trying, especially in children. The wart should be covered with duct tape for six days, and if the tape falls off it should be replaced with a fresh piece. The tape should then be removed, and the affected area soaked in luke-warm water and the wart pared down to remove any dead skin cells. The wart should then be left uncovered overnight, and the duct tape reapplied once again in the morning. This can be continued for up to two months. • Other approved topical treatments for plantar warts include formaldehyde gel, glutaraldehyde and silver nitrate caustic pencils. • Other preparations include topical dithranol, podophyllotoxin, 5- fluorouracil trichloroacetic acid and bleomycin injections. • Contact immunotherapy with a chemical paint such as diphencyprone causes an allergic skin reaction that may boost the body’s immune reaction against the wart virus. • Surgical removal of warts is an option if topical treatments do not work. Options include tissue destructive laser therapy or curettage and cautery after a local anaesthetic injection into the skin. These procedures are painful and can lead to uncomfortable scarring. The wart may come back in the scar after surgery. • Photodynamic therapy and other lasers (Pulsed Dye Laser and NdYAG) have also been used but are not widely available for treatment of warts. • Complementary and alternative treatments include hypnotherapy, homeopathy, acupuncture, and herbal treatment. Question: Which treatments are suitable for children?
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Answer using only information in the prompt. Answer in full sentences, but the word or phrase that provides a direct answer to the prompt should be in bold text.
EVIDENCE:
Treatment options include: • No treatment: Up to 65% of viral warts including plantar warts resolve by themselves without any treatment within two years of appearing. Plantar warts that are not causing any adverse symptoms such as pain should be left alone. • Salicylic acid paints and gels: These are available in different strengths. Salicylic acid works by removing the outer dead layers of skin and triggering the immune system into clearing the virus. Before applying the paint, the feet should be soaked in warm water and thickened skin filed away with a pumice stone or emery board. Care should be taken not to scrape the surrounding normal skin to avoid spreading the virus. Treatment should be daily for at least 12 weeks and is usually most convenient at bedtime. The paint /gel should be applied carefully to the wart, not the surrounding normal skin. Cover the lesion with a dressing to allow the treatment to work effectively. If the wart becomes too sore, treatment should be stopped for a few days, then resumed. • Cryotherapy. (See patient information leaflet on cryotherapy). Freezing the warts with liquid nitrogen (a very cold gas), may be available at your doctor’s surgery or podiatrist. Thick warts need to be shaved before freezing to allow the cold to get into the skin. Ideally, cryotherapy should be repeated every three to four weeks. It is painful and may cause blisters and burns, and because of this is not usually recommended in children. Several freezes may be needed to clear warts and it does not always work. Using a salicylic acid preparation in between freezes may improve the effectiveness. • Duct Tape: Although there is conflicting evidence regarding the effectiveness of duct tape in the treatment of cutaneous warts, it might still be well worth trying, especially in children. The wart should be covered with duct tape for six days, and if the tape falls off it should be replaced with a fresh piece. The tape should then be removed, and the affected area soaked in luke-warm water and the wart pared down to remove any dead skin cells. The wart should then be left uncovered overnight, and the duct tape reapplied once again in the morning. This can be continued for up to two months. • Other approved topical treatments for plantar warts include formaldehyde gel, glutaraldehyde and silver nitrate caustic pencils. • Other preparations include topical dithranol, podophyllotoxin, 5- fluorouracil trichloroacetic acid and bleomycin injections. • Contact immunotherapy with a chemical paint such as diphencyprone causes an allergic skin reaction that may boost the body’s immune reaction against the wart virus. • Surgical removal of warts is an option if topical treatments do not work. Options include tissue destructive laser therapy or curettage and cautery after a local anaesthetic injection into the skin. These procedures are painful and can lead to uncomfortable scarring. The wart may come back in the scar after surgery. • Photodynamic therapy and other lasers (Pulsed Dye Laser and NdYAG) have also been used but are not widely available for treatment of warts. • Complementary and alternative treatments include hypnotherapy, homeopathy, acupuncture, and herbal treatment.
USER:
Which treatments are suitable for children?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
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| 6
| 525
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Use only the provided text to formulate your response. Do not rely on any outside knowledge. Provide me a three-paragraph response.
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How does the second lien differ from the first lien?
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Overview of Major Consumer Finance Markets The following sections examine specific issues within major consumer debt markets: mortgage lending, student loans, automobile loans, credit cards and payments, payday loans and other credit alternative financial products, and checking accounts and substitutes. The markets discussed are under the jurisdiction of the CFPB, and sometimes other regulators as well. Each section briefly describes the financial product, recent market developments, and selected policy issues that may lead each market away from its efficient price or outcomes. These sections focus on the consumer and household perspective as well as consumer protection policy issues in each market. Mortgage Lending Market A mortgage loan is a loan collateralized by a house and its land.47 Generally, consumers use these loans to purchase a new home or refinance an existing one. These types of mortgages are often called first liens, because if a consumer defaults on the loan, the lender is typically the first in line to be compensated through the proceeds of a home foreclosure. First-lien mortgage loans are usually installment loans, in which the consumer pays off the loan in monthly installments over 15 years or 30 years. Most mortgage loans in the United States have a fixed interest rate and fixed installment amount over the course of the loan, affected by the consumer’s credit score and market conditions.48 Households buying a new home and taking out a mortgage loan to purchase it generally cannot borrow for the full cost of the house’s value. To limit the risk to the lender, borrowers are typically required to make a down payment, the difference between the house’s value and the mortgage loan. If the down payment is less than 20% of the home’s value, the borrower is often required to pay for additional insurance. In addition to first-lien purchase mortgages, a consumer may choose to take out a home equity line of credit (often referred to as HELOC) or a smaller installment mortgage loan, which often is a second lien. A second lien means that the lender is second in line, after the first lien holder, to be compensated if the consumer defaults and the home is foreclosed upon. These loans are underwritten using the value of the home, but can be used for a variety of different purposes either related to the home or not. For example, second mortgages can be used to renovate the home, pay for college, or consolidate credit card debts. Mortgage loans are by far the largest consumer credit market in the United States, and homes are a large part of most households’ wealth. According to the Fed, more than $9 trillion of mortgage debt is currently outstanding,49 and more than $20 trillion in real estate equity is owned by households.50 As of the third quarter of 2020, 67.4% of U.S. households owned their home. 51 Many people view homeownership as an important way to build wealth over time, both through price appreciation and home equity by paying down their mortgage. Nevertheless, because home prices can fluctuate over time, this investment can be risky, especially if the home owner only stays in the home for a short time. Although homeownership has certain benefits, such as tax benefits like the mortgage interest tax deduction,52 it also imposes costs on the household, such as mortgage loan closing costs and home maintenance. As noted above, most experts believe that a housing price bubble was a central cause of the 2008 financial crisis. In response, Dodd-Frank reformed the mortgage market by attempting to strengthen mortgage underwriting standards, to reduce the risk that consumers’ default on their mortgages, even if house prices fluctuated in the future. Dodd-Frank also directed the CFPB to update federal mortgage disclosure forms (called the combined TILA/RESPA form) 53 and improve standards for mortgage servicing (a company who manages mortgage loans after the loan is originated).54 During and after the financial crisis, mortgage lenders tightened underwriting standards, making it harder for consumers to qualify for a loan.55 Although most borrowers with good credit scores continued to qualify for mortgage credit, other borrowers in weaker financial positions found it more difficult to obtain a mortgage.56 As the economy has recovered from the Great Recession, concerns exist about whether new consumer compliance regulation in the mortgage market has struck the right balance between prudent mortgage underwriting and access to credit for potential borrowers to build wealth.57 Certain features of mortgages during the mortgage boom that were considered to be particularly risky, such as teaser interest rates and loans with little or no income verification, are now uncommon in the mortgage market.58 However, research suggests that the regulation of underwriting standards may have caused lenders to prefer certain borrowers, such as those with lower debt-to-income ratios.59 Mortgage shopping is another policy issue in this market. Consumers do not tend to shop among lenders for more advantageous mortgage interest rates, even though large price differences exist in the market. According to the CFPB, nearly half of all borrowers only seriously consider one lender or broker before taking out a mortgage.60 Given the range of interest rates available to a consumer at any given time, the CFPB estimates that a consumer could save thousands of dollars on a mortgage by shopping for the best interest rates.61 More recently, the COVID-19 pandemic has impacted the mortgage market. Many consumers who would likely have experienced difficulty repaying their mortgage loans received loan forbearance. 62 Loan forbearance plans can prevent a consumer from becoming delinquent, giving the consumer time to repay the debts owed rather than potentially experiencing adverse consequences, such as credit score declines or foreclosure.63 As previously mentioned, the CARES Act established consumer rights to be granted forbearance for federally backed mortgages for up to a year. The CARES Act’s consumer protections and financial institutions’ loan forbearance programs arguably helped avoid sharp increases in loan delinquencies by making it possible for many loans to receive forbearance during the spring and summer of 2020.64 However, when these programs expire, some consumers may fall delinquent on their loans, impacting the mortgage market. In addition, during the second and third quarters of 2020, mortgage debt balances increased as interest rates reached historic lows, causing more mortgage refinances and other mortgage finance activity. 65
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Use only the provided text to formulate your response. Do not rely on any outside knowledge. Provide me a three-paragraph response. How does the second lien differ from the first lien? Overview of Major Consumer Finance Markets The following sections examine specific issues within major consumer debt markets: mortgage lending, student loans, automobile loans, credit cards and payments, payday loans and other credit alternative financial products, and checking accounts and substitutes. The markets discussed are under the jurisdiction of the CFPB, and sometimes other regulators as well. Each section briefly describes the financial product, recent market developments, and selected policy issues that may lead each market away from its efficient price or outcomes. These sections focus on the consumer and household perspective as well as consumer protection policy issues in each market. Mortgage Lending Market A mortgage loan is a loan collateralized by a house and its land.47 Generally, consumers use these loans to purchase a new home or refinance an existing one. These types of mortgages are often called first liens, because if a consumer defaults on the loan, the lender is typically the first in line to be compensated through the proceeds of a home foreclosure. First-lien mortgage loans are usually installment loans, in which the consumer pays off the loan in monthly installments over 15 years or 30 years. Most mortgage loans in the United States have a fixed interest rate and fixed installment amount over the course of the loan, affected by the consumer’s credit score and market conditions.48 Households buying a new home and taking out a mortgage loan to purchase it generally cannot borrow for the full cost of the house’s value. To limit the risk to the lender, borrowers are typically required to make a down payment, the difference between the house’s value and the mortgage loan. If the down payment is less than 20% of the home’s value, the borrower is often required to pay for additional insurance. In addition to first-lien purchase mortgages, a consumer may choose to take out a home equity line of credit (often referred to as HELOC) or a smaller installment mortgage loan, which often is a second lien. A second lien means that the lender is second in line, after the first lien holder, to be compensated if the consumer defaults and the home is foreclosed upon. These loans are underwritten using the value of the home, but can be used for a variety of different purposes either related to the home or not. For example, second mortgages can be used to renovate the home, pay for college, or consolidate credit card debts. Mortgage loans are by far the largest consumer credit market in the United States, and homes are a large part of most households’ wealth. According to the Fed, more than $9 trillion of mortgage debt is currently outstanding,49 and more than $20 trillion in real estate equity is owned by households.50 As of the third quarter of 2020, 67.4% of U.S. households owned their home. 51 Many people view homeownership as an important way to build wealth over time, both through price appreciation and home equity by paying down their mortgage. Nevertheless, because home prices can fluctuate over time, this investment can be risky, especially if the home owner only stays in the home for a short time. Although homeownership has certain benefits, such as tax benefits like the mortgage interest tax deduction,52 it also imposes costs on the household, such as mortgage loan closing costs and home maintenance. As noted above, most experts believe that a housing price bubble was a central cause of the 2008 financial crisis. In response, Dodd-Frank reformed the mortgage market by attempting to strengthen mortgage underwriting standards, to reduce the risk that consumers’ default on their mortgages, even if house prices fluctuated in the future. Dodd-Frank also directed the CFPB to update federal mortgage disclosure forms (called the combined TILA/RESPA form) 53 and improve standards for mortgage servicing (a company who manages mortgage loans after the loan is originated).54 During and after the financial crisis, mortgage lenders tightened underwriting standards, making it harder for consumers to qualify for a loan.55 Although most borrowers with good credit scores continued to qualify for mortgage credit, other borrowers in weaker financial positions found it more difficult to obtain a mortgage.56 As the economy has recovered from the Great Recession, concerns exist about whether new consumer compliance regulation in the mortgage market has struck the right balance between prudent mortgage underwriting and access to credit for potential borrowers to build wealth.57 Certain features of mortgages during the mortgage boom that were considered to be particularly risky, such as teaser interest rates and loans with little or no income verification, are now uncommon in the mortgage market.58 However, research suggests that the regulation of underwriting standards may have caused lenders to prefer certain borrowers, such as those with lower debt-to-income ratios.59 Mortgage shopping is another policy issue in this market. Consumers do not tend to shop among lenders for more advantageous mortgage interest rates, even though large price differences exist in the market. According to the CFPB, nearly half of all borrowers only seriously consider one lender or broker before taking out a mortgage.60 Given the range of interest rates available to a consumer at any given time, the CFPB estimates that a consumer could save thousands of dollars on a mortgage by shopping for the best interest rates.61 More recently, the COVID-19 pandemic has impacted the mortgage market. Many consumers who would likely have experienced difficulty repaying their mortgage loans received loan forbearance. 62 Loan forbearance plans can prevent a consumer from becoming delinquent, giving the consumer time to repay the debts owed rather than potentially experiencing adverse consequences, such as credit score declines or foreclosure.63 As previously mentioned, the CARES Act established consumer rights to be granted forbearance for federally backed mortgages for up to a year. The CARES Act’s consumer protections and financial institutions’ loan forbearance programs arguably helped avoid sharp increases in loan delinquencies by making it possible for many loans to receive forbearance during the spring and summer of 2020.64 However, when these programs expire, some consumers may fall delinquent on their loans, impacting the mortgage market. In addition, during the second and third quarters of 2020, mortgage debt balances increased as interest rates reached historic lows, causing more mortgage refinances and other mortgage finance activity. 65
|
Use only the provided text to formulate your response. Do not rely on any outside knowledge. Provide me a three-paragraph response.
EVIDENCE:
Overview of Major Consumer Finance Markets The following sections examine specific issues within major consumer debt markets: mortgage lending, student loans, automobile loans, credit cards and payments, payday loans and other credit alternative financial products, and checking accounts and substitutes. The markets discussed are under the jurisdiction of the CFPB, and sometimes other regulators as well. Each section briefly describes the financial product, recent market developments, and selected policy issues that may lead each market away from its efficient price or outcomes. These sections focus on the consumer and household perspective as well as consumer protection policy issues in each market. Mortgage Lending Market A mortgage loan is a loan collateralized by a house and its land.47 Generally, consumers use these loans to purchase a new home or refinance an existing one. These types of mortgages are often called first liens, because if a consumer defaults on the loan, the lender is typically the first in line to be compensated through the proceeds of a home foreclosure. First-lien mortgage loans are usually installment loans, in which the consumer pays off the loan in monthly installments over 15 years or 30 years. Most mortgage loans in the United States have a fixed interest rate and fixed installment amount over the course of the loan, affected by the consumer’s credit score and market conditions.48 Households buying a new home and taking out a mortgage loan to purchase it generally cannot borrow for the full cost of the house’s value. To limit the risk to the lender, borrowers are typically required to make a down payment, the difference between the house’s value and the mortgage loan. If the down payment is less than 20% of the home’s value, the borrower is often required to pay for additional insurance. In addition to first-lien purchase mortgages, a consumer may choose to take out a home equity line of credit (often referred to as HELOC) or a smaller installment mortgage loan, which often is a second lien. A second lien means that the lender is second in line, after the first lien holder, to be compensated if the consumer defaults and the home is foreclosed upon. These loans are underwritten using the value of the home, but can be used for a variety of different purposes either related to the home or not. For example, second mortgages can be used to renovate the home, pay for college, or consolidate credit card debts. Mortgage loans are by far the largest consumer credit market in the United States, and homes are a large part of most households’ wealth. According to the Fed, more than $9 trillion of mortgage debt is currently outstanding,49 and more than $20 trillion in real estate equity is owned by households.50 As of the third quarter of 2020, 67.4% of U.S. households owned their home. 51 Many people view homeownership as an important way to build wealth over time, both through price appreciation and home equity by paying down their mortgage. Nevertheless, because home prices can fluctuate over time, this investment can be risky, especially if the home owner only stays in the home for a short time. Although homeownership has certain benefits, such as tax benefits like the mortgage interest tax deduction,52 it also imposes costs on the household, such as mortgage loan closing costs and home maintenance. As noted above, most experts believe that a housing price bubble was a central cause of the 2008 financial crisis. In response, Dodd-Frank reformed the mortgage market by attempting to strengthen mortgage underwriting standards, to reduce the risk that consumers’ default on their mortgages, even if house prices fluctuated in the future. Dodd-Frank also directed the CFPB to update federal mortgage disclosure forms (called the combined TILA/RESPA form) 53 and improve standards for mortgage servicing (a company who manages mortgage loans after the loan is originated).54 During and after the financial crisis, mortgage lenders tightened underwriting standards, making it harder for consumers to qualify for a loan.55 Although most borrowers with good credit scores continued to qualify for mortgage credit, other borrowers in weaker financial positions found it more difficult to obtain a mortgage.56 As the economy has recovered from the Great Recession, concerns exist about whether new consumer compliance regulation in the mortgage market has struck the right balance between prudent mortgage underwriting and access to credit for potential borrowers to build wealth.57 Certain features of mortgages during the mortgage boom that were considered to be particularly risky, such as teaser interest rates and loans with little or no income verification, are now uncommon in the mortgage market.58 However, research suggests that the regulation of underwriting standards may have caused lenders to prefer certain borrowers, such as those with lower debt-to-income ratios.59 Mortgage shopping is another policy issue in this market. Consumers do not tend to shop among lenders for more advantageous mortgage interest rates, even though large price differences exist in the market. According to the CFPB, nearly half of all borrowers only seriously consider one lender or broker before taking out a mortgage.60 Given the range of interest rates available to a consumer at any given time, the CFPB estimates that a consumer could save thousands of dollars on a mortgage by shopping for the best interest rates.61 More recently, the COVID-19 pandemic has impacted the mortgage market. Many consumers who would likely have experienced difficulty repaying their mortgage loans received loan forbearance. 62 Loan forbearance plans can prevent a consumer from becoming delinquent, giving the consumer time to repay the debts owed rather than potentially experiencing adverse consequences, such as credit score declines or foreclosure.63 As previously mentioned, the CARES Act established consumer rights to be granted forbearance for federally backed mortgages for up to a year. The CARES Act’s consumer protections and financial institutions’ loan forbearance programs arguably helped avoid sharp increases in loan delinquencies by making it possible for many loans to receive forbearance during the spring and summer of 2020.64 However, when these programs expire, some consumers may fall delinquent on their loans, impacting the mortgage market. In addition, during the second and third quarters of 2020, mortgage debt balances increased as interest rates reached historic lows, causing more mortgage refinances and other mortgage finance activity. 65
USER:
How does the second lien differ from the first lien?
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 21
| 10
| 1,039
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[question] [user request] ===================== [text] [context document] ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
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How do I go about choosing the right benchmark to calculate alpha given a particular basket of stocks? Explain in 250 words like I'm a portfolio manager.
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Evaluating the return of an investment without regard to the risk taken offers very little insight as to how a security or portfolio has really performed. Every security has a required rate of return, as specified by the capital asset pricing model (CAPM). The Jensen index, or alpha, is what helps investors determine how much a portfolio's realized return differs from the return it should have achieved. This article will provide a deeper understanding of alpha and its practical application. Key Takeaways Alpha refers to excess returns earned on an investment above the benchmark return. Active portfolio managers seek to generate alpha in diversified portfolios, with diversification intended to eliminate unsystematic risk. Because alpha represents the performance of a portfolio relative to a benchmark, it is often considered to represent the value that a portfolio manager adds to or subtracts from a fund's return. Jensen’s alpha takes into consideration the capital asset pricing model (CAPM) and includes a risk-adjusted component in its calculation. Alpha Defined Alpha is computed in relation to the capital asset pricing model. The CAPM equation is used to identify the required return of an investment; it is often used to evaluate realized performance for a diversified portfolio. Because it's assumed that the portfolio being evaluated is a diversified portfolio (meaning that the unsystematic risk has been eliminated), and because a diversified portfolio's main source of risk is the market risk (or systematic risk), beta is an appropriate measure of that risk. Alpha is used to determine by how much the realized return of the portfolio varies from the required return, as determined by CAPM. The formula for alpha is expressed as follows: 1 α = Rp – [Rf + (Rm – Rf) β] Where: Rp = Realized return of portfolio Rm = Market return Rf = the risk-free rate β = the asset's beta What Does Alpha Measure? Alpha measures risk premiums in terms of beta (β); therefore, it is assumed that the portfolio being evaluated is well diversified. The Jensen index requires using a different risk-free rate for each time interval measured during the specified period. For instance, if you are measuring the fund managers over a five-year period using annual intervals, you must examine the fund's annual returns minus the risk-free assets' returns (i.e., U.S. Treasury bill or one-year risk-free asset) for each year, and relate this to the annual return of the market portfolio minus the same risk-free rate. This calculation method contrasts with both the Treynor and Sharpe measures in that both examine the average returns for the total period for all variables, which include the portfolio, market, and risk-free assets. Alpha is a good measure of performance that compares the realized return with the return that should have been earned for the amount of risk borne by the investor. Technically speaking, it is a factor that represents the performance that diverges from a portfolio's beta, representing a measure of the manager's performance. For example, it's insufficient for an investor to consider the success or failure of a mutual fund merely by looking at its returns. The more relevant question is this: was the manager's performance sufficient to justify the risk taken to get said return? Applying the Results A positive alpha indicates the portfolio manager performed better than was expected based on the risk the manager took with the fund as measured by the fund's beta. A negative alpha means that the manager actually did worse than they should have given the required return of the portfolio. 1 The regression results usually cover a period between 36 and 60 months. The Jensen index permits the comparison of portfolio managers' performance relative to one another, or relative to the market itself. When applying alpha, it's important to compare funds within the same asset class. Comparing funds from one asset class (i.e., large-cap growth) against a fund from another asset class (i.e., emerging markets) is meaningless because you are essentially comparing apples and oranges. The chart below provides a good comparative example of alpha, or "excess returns." Investors can use both alpha and beta to judge a manager's performance. Table 1 Fund Name Asset Class Ticker Alpha 3 Yr Beta 3 Yr Trailing Return 3 Yr Trailing Return 5 Yr American Funds Growth Fund A Large Growth AGTHX 4.29 1.01 16.61 20.46 Fidelity Large Cap Growth Large Growth FSLGX 7.19 1.04 22.91 -- T. Rowe Price Growth Stock Large Growth PRGFX 5.14 1.03 17.67 21.54 Vanguard Growth Index Fund Admiral Shares Large Growth VIGAX 6.78 1.04 19.76 21.43 Table 1 The figures included in Table 1 indicate that on a risk-adjusted basis, the Fidelity Large Cap Growth yielded the best results of the funds listed. The three-year alpha of four exceeded those of its peers in the small sample provided above. It's important to note that not only are comparisons among the same asset class appropriate but the right benchmark should also be considered. The benchmark most frequently used to measure the market is the S&P 500 stock index, which serves as a proxy for "the market." However, some portfolios and mutual funds include asset classes with characteristics that do not accurately compare against the S&P 500, such as bond funds, sector funds, real estate, etc. Therefore, the S&P 500 may not be the appropriate benchmark to use in that case. So the alpha calculation would have to incorporate the relative benchmark for that asset class. The Bottom Line Portfolio performance encompasses both return and risk. The Jensen index, or alpha, provides us with a fair standard of manager performance. The results can help us determine whether the manager added value or even extra value on a risk-adjusted basis. If so, it also helps us determine whether the manager's fees were justified when reviewing the results. Buying (or even keeping) investment funds without this consideration is like buying a car to get you from Point A to Point B without evaluating its fuel efficiency.
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[question] How do I go about choosing the right benchmark to calculate alpha given a particular basket of stocks? Explain in 250 words like I'm a portfolio manager. ===================== [text] Evaluating the return of an investment without regard to the risk taken offers very little insight as to how a security or portfolio has really performed. Every security has a required rate of return, as specified by the capital asset pricing model (CAPM). The Jensen index, or alpha, is what helps investors determine how much a portfolio's realized return differs from the return it should have achieved. This article will provide a deeper understanding of alpha and its practical application. Key Takeaways Alpha refers to excess returns earned on an investment above the benchmark return. Active portfolio managers seek to generate alpha in diversified portfolios, with diversification intended to eliminate unsystematic risk. Because alpha represents the performance of a portfolio relative to a benchmark, it is often considered to represent the value that a portfolio manager adds to or subtracts from a fund's return. Jensen’s alpha takes into consideration the capital asset pricing model (CAPM) and includes a risk-adjusted component in its calculation. Alpha Defined Alpha is computed in relation to the capital asset pricing model. The CAPM equation is used to identify the required return of an investment; it is often used to evaluate realized performance for a diversified portfolio. Because it's assumed that the portfolio being evaluated is a diversified portfolio (meaning that the unsystematic risk has been eliminated), and because a diversified portfolio's main source of risk is the market risk (or systematic risk), beta is an appropriate measure of that risk. Alpha is used to determine by how much the realized return of the portfolio varies from the required return, as determined by CAPM. The formula for alpha is expressed as follows: 1 α = Rp – [Rf + (Rm – Rf) β] Where: Rp = Realized return of portfolio Rm = Market return Rf = the risk-free rate β = the asset's beta What Does Alpha Measure? Alpha measures risk premiums in terms of beta (β); therefore, it is assumed that the portfolio being evaluated is well diversified. The Jensen index requires using a different risk-free rate for each time interval measured during the specified period. For instance, if you are measuring the fund managers over a five-year period using annual intervals, you must examine the fund's annual returns minus the risk-free assets' returns (i.e., U.S. Treasury bill or one-year risk-free asset) for each year, and relate this to the annual return of the market portfolio minus the same risk-free rate. This calculation method contrasts with both the Treynor and Sharpe measures in that both examine the average returns for the total period for all variables, which include the portfolio, market, and risk-free assets. Alpha is a good measure of performance that compares the realized return with the return that should have been earned for the amount of risk borne by the investor. Technically speaking, it is a factor that represents the performance that diverges from a portfolio's beta, representing a measure of the manager's performance. For example, it's insufficient for an investor to consider the success or failure of a mutual fund merely by looking at its returns. The more relevant question is this: was the manager's performance sufficient to justify the risk taken to get said return? Applying the Results A positive alpha indicates the portfolio manager performed better than was expected based on the risk the manager took with the fund as measured by the fund's beta. A negative alpha means that the manager actually did worse than they should have given the required return of the portfolio. 1 The regression results usually cover a period between 36 and 60 months. The Jensen index permits the comparison of portfolio managers' performance relative to one another, or relative to the market itself. When applying alpha, it's important to compare funds within the same asset class. Comparing funds from one asset class (i.e., large-cap growth) against a fund from another asset class (i.e., emerging markets) is meaningless because you are essentially comparing apples and oranges. The chart below provides a good comparative example of alpha, or "excess returns." Investors can use both alpha and beta to judge a manager's performance. Table 1 Fund Name Asset Class Ticker Alpha 3 Yr Beta 3 Yr Trailing Return 3 Yr Trailing Return 5 Yr American Funds Growth Fund A Large Growth AGTHX 4.29 1.01 16.61 20.46 Fidelity Large Cap Growth Large Growth FSLGX 7.19 1.04 22.91 -- T. Rowe Price Growth Stock Large Growth PRGFX 5.14 1.03 17.67 21.54 Vanguard Growth Index Fund Admiral Shares Large Growth VIGAX 6.78 1.04 19.76 21.43 Table 1 The figures included in Table 1 indicate that on a risk-adjusted basis, the Fidelity Large Cap Growth yielded the best results of the funds listed. The three-year alpha of four exceeded those of its peers in the small sample provided above. It's important to note that not only are comparisons among the same asset class appropriate but the right benchmark should also be considered. The benchmark most frequently used to measure the market is the S&P 500 stock index, which serves as a proxy for "the market." However, some portfolios and mutual funds include asset classes with characteristics that do not accurately compare against the S&P 500, such as bond funds, sector funds, real estate, etc. Therefore, the S&P 500 may not be the appropriate benchmark to use in that case. So the alpha calculation would have to incorporate the relative benchmark for that asset class. The Bottom Line Portfolio performance encompasses both return and risk. The Jensen index, or alpha, provides us with a fair standard of manager performance. The results can help us determine whether the manager added value or even extra value on a risk-adjusted basis. If so, it also helps us determine whether the manager's fees were justified when reviewing the results. Buying (or even keeping) investment funds without this consideration is like buying a car to get you from Point A to Point B without evaluating its fuel efficiency. https://www.investopedia.com/articles/financial-theory/08/deeper-look-at-alpha.asp ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
|
[question] [user request] ===================== [text] [context document] ===================== [instruction] Answer the question using only the information provided in the context. Do not rely on external knowledge or sources.
EVIDENCE:
Evaluating the return of an investment without regard to the risk taken offers very little insight as to how a security or portfolio has really performed. Every security has a required rate of return, as specified by the capital asset pricing model (CAPM). The Jensen index, or alpha, is what helps investors determine how much a portfolio's realized return differs from the return it should have achieved. This article will provide a deeper understanding of alpha and its practical application. Key Takeaways Alpha refers to excess returns earned on an investment above the benchmark return. Active portfolio managers seek to generate alpha in diversified portfolios, with diversification intended to eliminate unsystematic risk. Because alpha represents the performance of a portfolio relative to a benchmark, it is often considered to represent the value that a portfolio manager adds to or subtracts from a fund's return. Jensen’s alpha takes into consideration the capital asset pricing model (CAPM) and includes a risk-adjusted component in its calculation. Alpha Defined Alpha is computed in relation to the capital asset pricing model. The CAPM equation is used to identify the required return of an investment; it is often used to evaluate realized performance for a diversified portfolio. Because it's assumed that the portfolio being evaluated is a diversified portfolio (meaning that the unsystematic risk has been eliminated), and because a diversified portfolio's main source of risk is the market risk (or systematic risk), beta is an appropriate measure of that risk. Alpha is used to determine by how much the realized return of the portfolio varies from the required return, as determined by CAPM. The formula for alpha is expressed as follows: 1 α = Rp – [Rf + (Rm – Rf) β] Where: Rp = Realized return of portfolio Rm = Market return Rf = the risk-free rate β = the asset's beta What Does Alpha Measure? Alpha measures risk premiums in terms of beta (β); therefore, it is assumed that the portfolio being evaluated is well diversified. The Jensen index requires using a different risk-free rate for each time interval measured during the specified period. For instance, if you are measuring the fund managers over a five-year period using annual intervals, you must examine the fund's annual returns minus the risk-free assets' returns (i.e., U.S. Treasury bill or one-year risk-free asset) for each year, and relate this to the annual return of the market portfolio minus the same risk-free rate. This calculation method contrasts with both the Treynor and Sharpe measures in that both examine the average returns for the total period for all variables, which include the portfolio, market, and risk-free assets. Alpha is a good measure of performance that compares the realized return with the return that should have been earned for the amount of risk borne by the investor. Technically speaking, it is a factor that represents the performance that diverges from a portfolio's beta, representing a measure of the manager's performance. For example, it's insufficient for an investor to consider the success or failure of a mutual fund merely by looking at its returns. The more relevant question is this: was the manager's performance sufficient to justify the risk taken to get said return? Applying the Results A positive alpha indicates the portfolio manager performed better than was expected based on the risk the manager took with the fund as measured by the fund's beta. A negative alpha means that the manager actually did worse than they should have given the required return of the portfolio. 1 The regression results usually cover a period between 36 and 60 months. The Jensen index permits the comparison of portfolio managers' performance relative to one another, or relative to the market itself. When applying alpha, it's important to compare funds within the same asset class. Comparing funds from one asset class (i.e., large-cap growth) against a fund from another asset class (i.e., emerging markets) is meaningless because you are essentially comparing apples and oranges. The chart below provides a good comparative example of alpha, or "excess returns." Investors can use both alpha and beta to judge a manager's performance. Table 1 Fund Name Asset Class Ticker Alpha 3 Yr Beta 3 Yr Trailing Return 3 Yr Trailing Return 5 Yr American Funds Growth Fund A Large Growth AGTHX 4.29 1.01 16.61 20.46 Fidelity Large Cap Growth Large Growth FSLGX 7.19 1.04 22.91 -- T. Rowe Price Growth Stock Large Growth PRGFX 5.14 1.03 17.67 21.54 Vanguard Growth Index Fund Admiral Shares Large Growth VIGAX 6.78 1.04 19.76 21.43 Table 1 The figures included in Table 1 indicate that on a risk-adjusted basis, the Fidelity Large Cap Growth yielded the best results of the funds listed. The three-year alpha of four exceeded those of its peers in the small sample provided above. It's important to note that not only are comparisons among the same asset class appropriate but the right benchmark should also be considered. The benchmark most frequently used to measure the market is the S&P 500 stock index, which serves as a proxy for "the market." However, some portfolios and mutual funds include asset classes with characteristics that do not accurately compare against the S&P 500, such as bond funds, sector funds, real estate, etc. Therefore, the S&P 500 may not be the appropriate benchmark to use in that case. So the alpha calculation would have to incorporate the relative benchmark for that asset class. The Bottom Line Portfolio performance encompasses both return and risk. The Jensen index, or alpha, provides us with a fair standard of manager performance. The results can help us determine whether the manager added value or even extra value on a risk-adjusted basis. If so, it also helps us determine whether the manager's fees were justified when reviewing the results. Buying (or even keeping) investment funds without this consideration is like buying a car to get you from Point A to Point B without evaluating its fuel efficiency.
USER:
How do I go about choosing the right benchmark to calculate alpha given a particular basket of stocks? Explain in 250 words like I'm a portfolio manager.
Assistant: Answer *only* using the evidence. If unknown, say you cannot answer. Cite sources.
| false
| 28
| 27
| 991
| null | 249
|
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