2018/19 Audit Report
By Gordon Smith, CPA, NJCPA Chief Financial Officer –
October 1, 2019
![2018/19 Audit Report]( "2018/19 Audit Report")
The combined financial statements for the NJCPA and affiliates (NJCPA Education Foundation and NJCPA Scholarship Fund) for the year ended May 31, 2019, have been published.
Fiscal 2019 brought new non-profit reporting requirements for the NJCPA and affiliates, including enhanced disclosures on liquidity and availability of financial assets, and the presentation of functional and natural expense details in one place. Additionally, net assets are no longer reflected as unrestricted and/or temporarily restricted; they are now referred to as net assets without donor restrictions and net assets with donor restrictions.
Unrestricted consolidated revenues decreased when compared to the previous fiscal year with roughly two-thirds of the change coming in educational program fees. This decrease is typical as we move from the last year of a triennial reporting cycle, when many CPAs are catching up on credits, into the first year of the next cycle, when attendance drops at programs until we get further into the cycle. The remainder of the change stems mainly from losses in our investment portfolios, as equity markets experienced significant drops in the latter part of May 2019 as trade wars between the U.S. and China continued, resulting in a negative return of roughly 2.5 percent for fiscal 2019 as compared to a positive 7.5 percent return in the prior fiscal year.
New Jersey Society of CPAs
Membership dues were $3.59 million, a reduction of approximately 2 percent versus the $3.69 million in the prior year, as there was a slight shortfall in the generation of new Fellow members and an increase in the number of Fellows removed from our rolls for non-payment of dues. Overall membership was relatively stable, ending May 2019 at 14,900 members versus 15,000 total members at May 31, 2018. The rate of retention of Fellow members was relatively flat at 93.2 percent for fiscal 2019 versus 93.8 percent for fiscal 2018, while overall member retention dropped from 90.6 percent to 88.9 percent, the result of removing a number of non-paying student members after their graduation, where, in prior years, they were automatically moved into a different membership category.
Peer review fees from administration of that program were lower than the prior year as more firms removed themselves from the program as they no longer perform certain services. As previously noted, the investment portfolios decreased as a result of market activity, and the Society recorded an unrealized loss of $168,000 for the year. This result, when combined with a flat expense level and the noted changes in revenue, resulted in a decrease to NJCPA net assts for fiscal 2019 of $168,000, compared to a budgeted decrease of $200,000 and an increase in net assets for the prior year of approximately $248,000 (including unrealized gains of $137,000).
NJCPA Education Foundation
The NJCPA Education Foundation completed fiscal 2019 with a negative change in net assets of approximately $457,000 versus a positive change in net assets for fiscal 2018 of $319,000. As previously noted, fiscal 2019 contains the first year of a reporting triennial cycle, which customarily brings lower attendance, and therefore revenues, at our educational programs. Attendance trends typically increase as we move through a cycle, and operating results are analyzed, in total, over the three years of each cycle. Total costs decreased for the year, though employee-related costs increased as more staff time was dedicated to the analysis, refinement and execution of program marketing campaigns. Educational programming served almost 19,500 registrants and delivered over 90,000 credit hours of CPE. Investments, as with the Society, decreased and resulted in an unrealized loss of approximately $63,000.
NJCPA Scholarship Fund
Chapter contributions to the NJCPA Scholarship Fund for the fiscal year ended May 31, 2019 were approximately 20 percent above budget due to better-than-expected financial results in those programs. While the Fund saw a small decrease in general and dues renewal fundraising, it did receive a special contribution of approximately $30,000 from the NJSCPA Insurance Trust dissolution. The Fund awarded approximately $399,500 in state and local scholarships to 75 applicants and made payments on prior-year awards for another 55 students; overall award expense was $14,500 below budget. As with the other entities, the Fund’s investment portfolio had negative performance, which included an unrealized loss for the year of $135,000, driving the overall decrease in net assets for the year of $209,000 versus a budgeted decrease of $166,000.