NOTES TO FINANCIAL STATEMENTS.

1. Organization and Significant Accounting Policies

The California Society of Certified Public Accountants (CalCPA) is a nonprofit incorporated membership organization whose purpose is to advance the profession of accountancy in the State of California CalCPA provides its members with general and technical resources through its chapters and committees. California Certified Public Accountants Education Foundation (Foundation) is a nonprofit public benefit corporation organized to provide continuing professional education to Certified Public Accountants (CPAs) and other interested parties. Revenues for both CalCPA and the Foundation are derived primarily from CPAs in California. CalCPA and the Foundation share some administrative functions. Such costs are incurred by CalCPA, who charges the Foundation for its estimated share.

PRINCIPLES OF CONSOLIDATION

The Board of Trustees of the Foundation consists of members of CalCPA who are elected by the governing Board of Directors of CalCPA. Because of common control, the accompanying financial statements reflect the consolidation of CalCPA and the Foundation. Material transactions between the entities have been eliminated in consolidation.

BASIS OF PRESENTATION

The financial statements are presented in conformity with Statement of Financial Accounting Standards (SFAS) No. 117, Financial Statements of Not-For-Profit Organizations.

REVENUE RECOGNITION

Membership dues are recognized as revenue in the membership period. Dues collected in advance of the membership period are recorded as deferred revenue until earned. Peer review registration fees are recognized over the calendar year. Peer review processing and review fees are recognized as review engagements are completed. Revenue from professional education programs is recognized in the periods the programs are held.

CASH AND EQUIVALENTS

For financial statement purposes, CalCPA and the Foundation consider all investments with a maturity at purchase of three months or less to be cash equivalents.

ADVERTISING COSTS

Direct response advertising consists primarily of catalogs and brochures for educational seminars and other events. Direct response advertising costs are capitalized as other current assets and charged to expense in the period the events occur. Other advertising costs are expensed as incurred.

INVESTMENTS

Investments are stated at market value.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and depreciated using the straight-line method over estimated useful lives of 3 to 10 years.

DEFERRED LEASE COSTS

Rent expense is recognized on a straight-line basis over the life of the lease. Deferred lease costs represent rent expense recognized in excess of rental payments made.

DONATED SERVICES

Members of CalCPA donate their time to various activities of CalCPA and the Foundation, including the leadership of the organizations, committees, chapters, and member events. The value of this donated time is not reflected in the accompanying financial statements since it does not meet the criteria for recognition.

INCOME TAXES

CalCPA and the Foundation are exempt from income taxes under Internal Revenue Code (IRC) Sections 501(c)(6) and 501(c)(3), respectively, and related California code sections. However, the organizations are subject to income taxes from activities unrelated to their tax-exempt purposes. The Foundation is considered a publicly supported organization.

FUNCTIONAL EXPENSES

The costs of providing the program services and supporting services have been summarized on a functional basis in the statements of activities and of functional expenses. Accordingly, certain costs have been allocated among the program services and supporting services based on estimates of employees' time incurred and on usage of resources.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

2. Related Parties

CalCPA shares certain administrative functions with CAMICO Mutual Insurance Company (CAMICO) and Group Insurance Trust (GIT). CalCPA charges CAMICO and GIT for their estimated shares of related expenses. In addition, CAMICO and GIT purchase services from CalCPA

CAMICO provides professional liability insurance for CalCPA members and is endorsed by CalCPA. Since CAMICO is not under common control with CalCPA and the Foundation, the financial statements do not reflect consolidation of CAMICO. Balances of $73,000 and $126,000 due from CAMICO as of April 30, 2001 and 2000, respectively, are included in CalCPAs other accounts receivable. Services purchased and expenses allocated for CAMICO totaled $191,000 for 2001 and $353,000 for 2000.

GIT is a multiple employer welfare arrangement formed to provide health and welfare insurance plans to CalCPA members at favorable group rates. The CalCPA Board of Directors exerts control over the nomination process for the Board of Trustees of GIT. However, since regulatory agencies limit CalCPAs control of GIT's activities, the financial statements do not reflect consolidation of GIT. A balance of $105,000 due from GIT as of April 30,2001, is included in CalCPA's other accounts receivable. A balance of $136,000 due to GIT as of April 30,2000, is included in CalCPAs accrued expenses. Services purchased and expenses allocated for GIT totaled $233,000 for 2001 and $256,000 for 2000.

3. Peer Review Program

The financial statements of CalCPA include the operations of the Peer Review Program, which administers the American Institute of Certified Public Accountants peer review program in California, Arizona, and Alaska. Peer review expenses are included in "Other Activities" in the statements of activities and of functional expenses. Revenues, expenses, and net assets for the division are summarized as follows:

                        2001       2000
Revenues:
Registration fees  $ 760,000  $ 771,000
                                               2001       2000
   Processing and review fees               202,000    216,000
Total peer review fees                      962,000    987,000
   Interest income                           63,000     28,000
   Other income                              21,000     42,000
     Total revenue                        1,046,000  1,057,000
Expenses:
   Reviewer costs and operating expenses    929,000    836,000
Increase in net assets                      117,000    221,000
Net assets, beginning of year               345,000    124,000
Net assets, end of year                   $ 462,000  $ 345,000

4. Advertising Costs

The Foundation's direct response advertising consists primarily of catalogs and brochures for events. Other current assets include capitalized advertising costs of $196,000 and $177,000 as of April 30, 2001 and 2000, respectively. Advertising costs charged to expense are as follows:

                   2001       2000
CalCPA        $  72,000  $  67,000
Foundation      627,000    630,000
Consolidated  $ 699,000  $ 697,000
5. Investments
                                               CalCPA    Foundation
Investments consist of the following:
2001
U.S. government obligations               $   695,000   $ 1,361,000
GNMA mortgage pool                             97,000       187,000
Other debt securities                         281,000       455,000
Equity securities                           1,797,000     2,820,000
Total                                     $ 2,870,000   $ 4,823,000
2000
U.S. government obligations               $   715,000   $ 1,510,000
GNMA mortgage pool                            125,000       242,000
Other debt securities                         191,000       265,000
Equity securities                           1,972,000     3,205,000
Total                                     $ 3,003,000   $ 5,222,000
Investment income (loss) consists of the
following:
2001
Interest and dividends                    $   395,000   $   338,000
Net realized and unrealized losses           (229,000)     (280,000)
  Investment income                           166,000        58,000
Less investment expenses                      (45,000)      (74,000)
Investment income (loss), net             $   121,000   $   (16,000)
2000
Interest and dividends                    $   263,000   $   262,000
Net realized and unrealized gains              28,000       125,000
  Investment income                           291,000       387,000
Less investment expenses                      (41,000)      (71,000)
Investment income, net                    $   250,000   $   316,000
                                          Consolidated
Investments consist of the following:
2001
U.S. government obligations               $  2,056,000
GNMA mortgage pool                             284,000
Other debt securities                          736,000
Equity securities                            4,617,000
Total                                     $  7,693,000
2000
U.S. government obligations               $  2,225,000
GNMA mortgage pool                             367,000
Other debt securities                          456,000
Equity securities                            5,177,000
Total                                     $  8,225,000
Investment income (loss) consists of the
following:
2001
Interest and dividends                    $    733,000
Net realized and unrealized losses            (509,000)
  Investment income                            224,000
Less investment expenses                      (119,000)
Investment income (loss), net             $    105,000
2000
Interest and dividends                    $    525,000
Net realized and unrealized gains              153,000
  Investment income                            678,000
Less investment expenses                      (112,000)
Investment income, net                    $    566,000
6. Property and Equipment
Property and equipment consist of the following:
                                        Ca1CPA    Foundation
2001
Equipment                              938,000   $ 1,079,000
Software                               937,000       783,000
Furniture                              290,000       189,000
Leasehold improvements                 626,000        94,000
  Total                              2,791,000     2,145,000
Less accumulated depreciation and   (1,711,000)   (1,312,000)
 amortization
Property and equipment, net        $ 1,080,000   $   833,000
2000
Equipment                          $   867,000   $   886,000
Software                               950,000       448,000
Furniture                              185,000        90,000
Leasehold improvements                  57,000
  Total                              2,059,000     1,424,000
Less accumulated depreciation and   (1,283,000)   (1,151,000)
 amortization
Property and equipment, net          $ 776,000   $   273,000
                                   Consolidated
2001
Equipment                          $  2,017,000
Software                              1,720,000
Furniture                               479,000
Leasehold improvements                  720,000
  Total                               4,936,000
Less accumulated depreciation and    (3,023,000)
 amortization
Property and equipment, net        $  1,913,000
2000
Equipment                          $  1,753,000
Software                              1,398,000
Furniture                               275,000
Leasehold improvements                   57,000
  Total                               3,483,000
Less accumulated depreciation and    (2,434,000)
 amortization
Property and equipment, net        $  1,049,000
7. Deferred Revenue
Deferred revenue consists of the following:
CalCPA:                                       2001         2000
   Dues                                $ 3,098,000  $ 2,942,000
   Peer review registration fees           597,000      604,000
   Annual meeting fees                      29,000       29,000
   Web site advertising                                   9,000
    CalCPA total                         3,724,000    3,584,000
Foundafion:
   Registration fees, including Value    1,451,000    1,420,000
    Pricing (VP) program
Consolidated                           $ 5,175,000  $ 5,004,000

8. Operating Lease Obligations

CalCPA and CAMICO lease office space for their corporate headquarters under non-cancelable operating leases expiring in July 2010. GIT and the Foundation sublease a portion of the office space for their corporate headquarters under non-cancelable sublease agreements with CalCPA and CAMICO, respectively, also expiring in July 2010. Sublease payments are based on square footage occupied.

CalCPA also leases office space in several major California cities, mostly under year-to-year operating leases. The Glendale office lease is a non-cancelable operating lease expiring in November 2003.

Future minimum lease payments under these agreements, net of minimum sublease receipts from GIT, are as follows:

Year ending April 30:      CalCPA   Foundation  Consolidated
2002                   $  596,000  $   297,000   $   893,000
2003                      611,000      309,000       920,000
2004                      590,000      321,000       911,000
2005                      556,000      334,000       890,000
2006                      572,000      348,000       920,000
Thereafter              2,228,000    1,604,000     3,832,000
Total                  $5,153,000  $ 3,213,000   $ 8,366,000

Under the former operating lease for the corporate headquarters, CalCPA and the Foundation earned income, included in other income on the statements of activities, on space subleased to unrelated tenants. CalCPA has not subleased any of its space under the new lease to unrelated tenants, but has the option to do so. Rent expense under the lease was recorded net of the portion of the lease paid by CAMICO. Rent expense and sublease income under the leases are as follows:

Rent expense:          2001         2000
  CalCPA          $ 600,000  $   857,000
  Foundation        348,000      347,000
Consolidated      $ 948,000  $ 1,204,000
Sublease income:
  CalCPA          $  49,000  $   184,000
  Foundation         27,000      102,000
Consolidated      $  76,000      286,000

9. Retirement Plans

CalCPA sponsors a defined benefit pension plan for substantially all full-time employees of CalCPA and the Foundation. Each employee's benefits are based on years of service and the employee's compensation during the last five years of employment. CalCPA's funding policy is to contribute annually an amount not less than the ERISA minimum funding requirement and not more than the amount that would be deductible for federal income taxes. Due to investment performance, no employer contributions were required for 2001 or 2000. Contributions are intended to provide not only for benefits earned to date but also for benefits expected to be earned in the future. The following information is based on computations by the plan actuary:

                                                  2001          2000
Net periodic pension expense:
    CalCPA                                $    220,000   $   207,000
    Foundation                                 103,000       108,000
    Total                                 $    323,000   $   315,000
Employer contributions                    $          -   $         -
Benefits paid                             $     85,000   $   110,000
The following weighted average
assumptions were used in the actuarial
computations:
Discount rate                                    7.09%         7.00%
Expected long-term rate of return on             9.00%        10.00%
 plan assets
Rate of compenstation increase                   6.00%         6.00%
The plan's funded status is as follows:
Fair value of plan assets as of April 30  $  3,032,000   $ 3,523,000
Projected benefit obligation as of April    (5,442,000)   (4,929,000)
 30
Funded status                             $ (2,410,000)  $(1,406,000)
Accrued pension liability included in     $ (2,184,000)  $(1,855,000)
 the statements of financial position

CalCPA and the Foundation each sponsor defined contribution plans under IRC Section 401(k). All employees at least 21 years of age who have completed one year of service are eligible to participate. Participants may contribute up to 15 percent of eligible gross compensation. Employer contributions are at the discretion of the organizations' respective governing boards. There were no employer contributions in 2001 or 2000.

CalCPA maintains a deferred compensation plan under IRC Section 457. The plan is closed to further contributions or new participants, and only a few participants remain. Deferred compensation assets consist of investments reserved for future payment of deferred compensation liabilities.

10. Net assets

As of April 30, 2001 and 2000, the net assets of the Foundation include approximately $300,000 that is temporarily restricted for scholarships by CalCPA chapters. Except for this balance, the net assets of CalCPA and the Foundation are unrestricted. The changes in temporarily restricted net assets for 2001 and 2000 are not significant.

11. Contingency

CalCPA is involved in a potential legal action for which a determination of either the likelihood or the amount of potential losses, if any, cannot yet be made.

12. Subsequent Event

The Foundation entered into an agreement as of May 8, 2001, to purchase certain assets of SC Publishing, Inc., which provided a home-study continuing education program for certified public accountants under the "Western Schools" registered trade name. The purchase price was $150,000.

13. Concentration of Credit Risk

CalCPA and the Foundation maintain a majority of their cash in money market accounts that are not federally insured and in bank deposit accounts which, at times, may exceed federally insured limits. The organizations have not experienced any losses in such accounts. Management believes the organizations are not exposed to any significant credit risk related to cash.