Notes to financial statements. (2002 Annual Report).

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, which 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.

INTANGIBLE ASSETS

Intangible assets, consisting primarily of trademarks, customer lists, and mailing lists, are initially stated at fair value and reviewed annually for impairment losses, in conformity with Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets.

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 accounting principles generally accepted in the United States of America 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. CalCPA also sells services to CAMICO and GIT.

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 $49,000 and $73,000 due from CAMICO as of April 30, 2002 and 2001, respectively, are included in CalCPA's other accounts receivable. Services purchased and expenses allocated for CAMICO totaled $177,000 for 2002 and $191,000 for 2001.

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 CalCPA's control of GIT's activities, the financial statements do not reflect consolidation of GIT. Balances of $41,000 and $105,000 due from GIT as of April 30, 2002 and 2001, respectively, are included in CalCPA's other accounts receivable. Services purchased and expenses allocated for GIT totaled $211,000 for 2002 and $233,000 for 2001.

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:

                                        2002        2001

Revenues:

  Registration fees                $ 746,000  $  760,000
  Processing and review fees         193,000     202,000

Total peer review fees               939,000     962,000
  Interest income                     23,000      63,000
  Other income                        13,000      21,000

    Total revenue                    975,000   1,046,000

Expenses:

  Reviewer costs and
    operating expenses               977,000     929,000

Increase (decrease) in net assets    (2,000)     117,000
Net assets, beginning of year        462,000     345,000

Net assets, end of year            $ 460,000  $  462,000
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 $159,000 and $196,000 as of April 30,
2002 and 2001, respectively. Advertising costs charged to expense are as
follows:

                   2002       2001

CalCPA        $ 114,000  $  72,000
Foundation      662,000    627,000

Consolidated  $ 776,000  $ 699,000
5. INVESTMENTS

Investments consist of the following:

                             CalCPA   Foundation  Consolidated

2002:

U.S. government
  obligations           $   555,000  $   950,000   $ 1,505,000
GNMA mortgage pool          124,000      314,000       438,000
Other debt securities       419,000      867,000     1,286,000
Equity securities         1,716,000    3,303,000     5,019,000

Total                   $ 2,814,000  $  5,434,00   $ 8,248,000

2001:

U.S. government
  obligations           $   695,000  $ 1,361,000   $ 2,056,000
GNMA mortgage pool           97,000      187,000       284,000
Other debt securities       281,000      455,000       736,000
Equity securities         1,797,000    2,820,000     4,617,000

Total                   $ 2,870,000  $ 4,823,000   $ 7,693,000

Investment income (loss) consists of the following:

2002:

Interest and dividends  $   270,000  $   239,000   $   509,000
Net realized and
  unrealized losses       (161,000)    (239,000)     (400,000)

Investment income           109,000                    109,000
Less investment
  expenses                 (50,000)    (107,000)     (157,000)

Investment
  income (loss), net    $    59,000  $ (107,000)   $  (48,000)

2001:

Interest and dividends  $   395,000  $   338,000   $   733,000
Net realized and
  unrealized losses       (229,000)    (280,000)     (509,000)

Investment income           166,000       58,000       224,000
Less investment
  expenses                 (45,000)     (74,000)     (119,000)

Investment
  income (loss), net    $   121,000  $  (16,000)   $   105,000
6. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

                               CalCPA     Foundation   Consolidated

2002:

Equipment               $     998,000  $     844,000  $   1,842,000
Software                      647,000        570,000      1,217,000
Furniture                     257,000        121,000        378,000
Leasehold improvements        656,000         94,000        750,000

Total                       2,558,000      1,629,000      4,187,000
Less accumulated
  depreciation and
  amortization            (1,633,000)      (900,000)    (2,533,000)

Property and
  equipment, net        $     925,000  $     729,000  $   1,654,000

2001:

Equipment               $     938,000  $   1,079,000  $   2,017,000
Software                      937,000        783,000      1,720,000
Furniture                     290,000        189,000        479,000
Leasehold improvements        626,000         94,000        720,000

Total                       2,791,000      2,145,000      4,936,000
Less accumulated
  depreciation and
  amortization            (1,711,000)    (1,312,000)    (3,023,000)

Property and
  equipment, net        $   1,080,000  $     833,000  $   1,913,000
7. DEFERRED REVENUE

Deferred revenue consists of the following:

CalCPA:                                 2002         2001

  Dues                           $ 3,676,000  $ 3,098,000
  Peer review registration fees      580,000      597,000
  Advertising                        174,000      101,000
  Annual meeting fees                 11,000       29,000

    CalCPA total                   4,441,000    3,825,000

Foundation:

  Registration fees, including
  Value Pricing (VP) program       1,455,000    1,451,000

Consolidated                     $ 5,896,000  $ 5,276,000
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

2003                   $   611,000  $   326,000   $   937,000
2004                       590,000      339,000       929,000
2005                       556,000      352,000       908,000
2006                       572,000      367,000       939,000
2007                       590,000      381,000       971,000
Thereafter               1,638,000    1,345,000     2,983,000

Total                  $ 4,557,000  $ 3,110,000   $ 7,667,000
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 GIT. Rent
expense and sublease income under the leases are as follows:

                         2002       2001

Rent expense:

  CalCPA          $   653,000  $ 600,000
  Foundation          361,000    348,000

Consolidated      $ 1,014,000  $ 948,000

Sublease income:

  CalCPA                       $  49,000
  Foundation                      27,000

Consolidated                   $  76,000
9. RETIREMENT PLANS

CalCPA sponsora a defined benefit pension plan for substantially all
full-time employees of CalCPA and the Foundation. Each employe's
benefits are based on years of service and the employee's compensation
during the last five years of service employment. CalCPA's funding
policy is to contributive annually an amouont 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 in
2001, no employer contributtions were required for that year.
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:

                                         2002           2001

Net periodic pension expense:

  CalCPA                        $     278,000  $     220,000
  Foundation                          109,000        103,000

    Total                       $     387,000  $     323,000

Employer contributions          $     896,000  $           -

Benefits paid                   $      85,000  $      85,000

The following weighted average
 assumptions were used in the
 actual computations:

                                         2002           2001

Discount rate                           7.00%          7.00%
Expected long-term rate
 of return on plan assets               9.00%          9.00%
Rate of compensation increase           6.00%          6.00%

The plan's funded status
 is as follows:

                                         2002           2001

Fair value of plan assets
 as of April 30                 $   3,738,000  $   3,032,000
Projected benefit obligation
 as of April 30                   (6,022,000)    (5,442,000)

Funded status                   $ (2,284,000)  $ (2,410,000)

Accrued pension liability
 included in the statements
 of financial position          $ (1,652,000)  $ (2,163,000)

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% of eligible gross compensation. Employer
contributions are at the discretion of the organizations' respective
governing boards. There were no employer contributions for 2002 or 2001.

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, 2002 and 2001, the net assets of the Foundation include approximately $411,000 and $300,000, respectively, that is temporarily restricted for scholarships by CalCPA chapters. Except for this balance, the net assets of CalCPA and the Foundation are unrestricted.

11. 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 that, 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.