|
|
2002 Finance Committee Report
During the Spring meeting of Council, the Finance Committee Chair
reported that the Society continues to be financially strong through sound
management and investment practices. As directed by Council, the Society
uses up to four percent of the value of its investments annually as
operating income. Only that amount required to offset the cost of Society
programs, other than the Journals Program, is withdrawn, and the remainder
continues in actively managed investment accounts. The Journals Program, by
a 1995 Council mandate, is expected to generate a return of 10% annually.
These funds are also available to support the general operations of the
Society.
Society Budget
The chair reviewed the 2001 budget versus actual income and expenses and
presented the modified 2002 budget based on the 2001 results, as reviewed
and approved by the Finance Committee at its Spring meeting. The Society
employs a consolidated operating budget to manage overall operations. The
consolidated budget is comprised of the individual budgets for the various
cost centers; these include Publications, Membership and Meetings,
Education, Public Affairs, Marketing, and the Executive, Information
Technology, and Business Offices. For 2001, the year ended with income of
$16,153,866 (including $1,279,672 allocated from the Society’s investment
income to supplement operations in accordance with Society policy) and
direct expenses of $13,886,110, plus general and administrative (G&A) costs
of $1,573,291, for total expenses of $15,459,401. G&A costs (the sum of
Executive, Information Technology, and Business Office expenses) are
allocated to other Society offices based on each office’s share of total
salary expenses. Including the $1,279,672 investment income allocation,
total operating revenue exceeded total operating expenses, resulting in an
increase in net assets from operations of $694,465.
The Council approved a 2002 budget of $16,280,746. To achieve a balanced
budget, it is expected that the entire investment allocation of $1,327,285
from the managed accounts will be needed, plus an additional $743,688 from
Publications net revenue of $1,222,779. Including the investment allocation,
total APS operating revenue ($16,759,837) is expected to exceed total
operating expenses resulting in a $479,091 increase in net assets from
operations.
Journal Subscription Pricing
Council reviewed the Publications and Finance
Committees’ recommendations for 2003 journal subscription prices. It should
be pointed out that journal publication is the major source of revenue for
the Society and is key to our financial well being. In 1995, the Council
recommended that the journals’ prices be set at a point that generates a
margin of approximately 10% to help defray the costs of the various Society
programs. The Finance Committee recommended that 2003 subscription prices be
raised by an overall rate of 7.3%.
Nonmember individual subscription prices will continue
to be 2/3 of the domestic institutional price. Beginning in 2002, APS
members were provided online access to all journals at no cost.
Society Reserves
The Finance Committee reviewed the performance of the Society’s
investment managers. The investments are administered by four managers under
the direction of our investment consultant, Salomon Smith Barney. As of
December 31, 2001, the accounts had the following market values: Operating
Reserve I $11,806,044, Operating Reserve II $9,791,849 Publication Reserve
$10,012,190, Second Century Program Fund $2,774,504, Giles F. Filley
Memorial Fund $855,028, Caroline tum Suden Fund $584,950, IUPS Fund
$352,082, Perkins Memorial Fund $320,429, Shih-Chun Wang Fund $157,440,
Rife/Guyton Fund $452,436, and the Lazaro Mandel Fund $153,964. The return
on the managed accounts was -4.34% for the year ended December 31, 2001. The
return on equities for 2001 was -11.82%, and the return on fixed income
investments was 7.91%. The market value of the managed accounts at December
31, 2001 was $37,260,916.
Due to variable performance in the four managed accounts, each manager
held between 23% and 29% of all invested assets. Based on a recommendation
from the Finance Committee that was approved by Council, the accounts were
rebalanced so that each of the four fund managers will be allocated
approximately 25% of all assets as of April 30th in accordance with the
Society’s investment strategy.
Financial Forecast
The Finance Committee presented a three-year financial forecast to
Council. The forecast was developed using historical revenue and expense
information and also considered known future events. The three-year forecast
will be prepared annually for the Spring Finance Committee and Council
meetings.
2001 Audit
The Finance Committee received the annual audit performed by Grant
Thornton, LLP. In the opinion of the auditors, based on generally accepted
accounting principles, the financial statements shown below present fairly
the financial position of the Society as of December 31, 2001.
Mordecai Blaustein, Chair
For a Statement of Financial Position as of December 31, 2001 and a
Statement of Activities for the year ended December 31, 2001 please see the
October issue of The Physiologist.
Council Actions
|
|
