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, 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 Council 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.
Membership dues are recognized as revenue in the membership period. Peer review registration fees are recognized over the calendar year. Peer review processing and review fees are recognized as review engagements are completed. Revenues from professional education programs are recognized in the periods the programs are held. Revenues collected in advance are deferred until earned.
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.
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 represent the cost of trademarks and goodwill associated with the Foundation's acquisition of the Western Schools professional education materials. The Foundation is phasing out the Western Schools trade name over a three-year period ending April 30, 2005; accordingly, the Foundation is charging the intangible assets to expense over that period.
DEFERRED LEASE COSTS
Rent expense is recognized on a straight-line basis over the lives of the leases. Deferred lease costs represent rent expense recognized in excess of rental payments made.
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.
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.
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.
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 GIT and is charged by CAMICO for 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 $16 and $7 due from CAMICO as of April 30, 2004 and 2003, respectively, are included in CalCPA's other accounts receivable. Services purchased by CAMICO, net of expenses allocated from CAMICO, totaled $178 for 2004 and $156 for 2003.
GIT is a multiple-employer welfare arrangement formed to provide health and welfare insurance plans to CalCPA members at favorable group rates. CalCPA's Council 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. A balance of $64 due from GIT is included in CalCPA's other accounts receivable as of April 30, 2004. A balance of $13 due to GIT is included in CalCPA's accounts payable as of April 30, 2003. Services purchased and expenses allocated for GIT totaled $277 for 2004 and $255 for 2003.
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:
2004 2003 Revenues: Registration fees $ 725 $ 738 Processing and review fees 202 175 Total peer review fees 927 913 Interest income 6 10 Other income 13 13 Total revenue 946 936 Expenses: Reviewer costs and operating expenses 916 904 Increase in net assets 30 32 Net assets, beginning of year 492 460 Net assets, end of year $ 522 $ 492
Investments consist of the following:
CalCPA Foundation Consolidated 2004 Debt securities $ 3,160 $ 2,155 $ 5,315 Equity securities 4,909 3,392 8,301 Total $ 8,069 $ 5,547 $ 13,616 2003 U.S. government obligations $ 911 $ 911 GNMA mortgage pool 194 194 Other debt securities $ 2,080 925 3,005 Equity securities 4,091 3,031 7,122 Total $ 6,171 $ 5,061 $ 11,232
Investment income (loss) consists of the following:
CalCPA Foundation Consolidated 2004 Interest and dividends $ 247 $ 187 $ 434 Net realized and unrealized gains 1,158 236 1,394 Investment income 1,405 423 1,828 Less investment expenses (22) (55) (77) Investment income, net $1,383 $ 368 $ 1,751 2003 Interest and dividends $ 209 $ 198 $ 407 Net realized and unrealized losses (158) (330) (488) Investment income (loss) 51 (132) (81) Less investment expenses (35) (71) (106) Investment income (loss), net $ 16 $ (203) $ (187)
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
CalCPA Foundation Consolidated 2004 Equipment $ 1,147 $ 549 $ 1,696 Software 645 497 1,142 Furniture 265 56 321 Leasehold improvements 673 673 Total 2,730 1,102 3,832 Less accumulated depreciation and amortization (1,961) (761) (2,722) Property and equipment, net 769 341 $ 1,110 2003 Equipment $ 982 $ 609 $ 1,591 Software 665 661 1,326 Furniture 263 131 394 Leasehold improvements 656 94 750 Total 2,566 1,495 4,061 Less accumulated depreciation and amortization (1,884) (913) (2,797) Property and equipment, net $ 682 $ 582 $ 1,264
6. DEFERRED REVENUES
Deferred revenues consist of the following:
CalCPA: 2004 2003 Dues $ 4,450 $3,396 Peer review registration fees 539 593 Advertising 224 143 Annual meeting fees 17 11 CalCPA total 5,230 4,143 Foundation: Registration fees, including Value Pricing (VP) program 1,671 1,793 Consolidated $ 6,901 $ 5,936
7. 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 Sacramento and Glendale under non-cancelable operating leases expiring in February and November of 2008, respectively.
Future minimum lease payments under these agreements, net of minimum sublease receipts from GIT, are as follows:
Year ending April 30: CalCPA Foundation Consolidated 2005 649 359 1,008 2006 673 374 1,047 2007 692 389 1,081 2008 678 404 1,082 2009 536 420 956 Thereafter 626 547 1,173 Total $ 3,854 $ 2,493 $ 6,347
Rent expense, recorded net of the portion of CalCPA's lease paid by GIT, is as follows:
2004 2003 CalCPA $ 671 $ 682 Foundation 366 365 Consolidated $ 1,037 $ 1,047
8. DEFINED BENEFIT PENSION PLAN
CalCPA sponsors a funded defined benefit pension plan for substantially all full-time employees of CalCPA and the Foundation hired on or before June 1, 2002. Effective May 31, 2003, the plan has been frozen, and is therefore closed to further benefit accrual or new participants. The plan provides defined benefits based on years of service and final average salary accrued through the effective date of plan freeze. The following information is based on computations by the plan actuary:
2004 2003 Net periodic pension expense: CalCPA $ 35 $ 435 Foundation 11 148 Total $ 46 $ 583 Employer contributions $ 927 $ 626 Benefits paid $ 87 $ 82
The plan's funded status and balance recognized are as follows:
2004 2003 Fair value of plan assets as of April 30 $ 5,187 $ 3,737 Projected and accumulated benefit obligation as of April 30 (5,829) (5,616) Funded status $ (642) $ (1,879) Accrued pension liability included in the statements of financial position $ (749) $ (1,630)
The following weighted average assumptions were used in the actuarial computations:
2004 2003 Benefit obligation at April 30: Discount rate 6.25% 6.00% Rate of compensation increase N/A N/A Net periodic pension expense for years ended April 30: Discount rate 6.00% 7.00% Expected long-term return on plan assets 8.00% 9.00% Rate of compensation increase N/A 6.00%
The expected long-term rate of return on plan assets was developed by adding the weighted average historical risk premiums on the asset classes held in the plan to the long-term expectation of inflation.
The plan's primary investment objective is a balance among capital appreciation, preservation of capital, and current income, with a goal of attaining a 9% annual rate of return net of fees. To meet this objective, the plan is expected to maintain between 50% and 70% of its assets in marketable equity securities and the remainder mostly in marketable debt securities. The current investment policy was implemented during 2004. The actual and projected asset allocations for the plan are as follows:
Target Actual Actual Asset Category 2005 2004 2003 Marketable equity securities 60% 59% 71% Marketable debt securities 38% 39% 26% Cash equivalents 2% 2% 3% Total 100% 100% 100%
Expected employer contributions are $340 for 2005. Expected benefit payments for the next ten years are as follows:
2005 $ 108 2008 $ 286 2006 157 2009 329 2007 222 2010-2014 1,931
9. OTHER EMPLOYEE BENEFIT PLANS
CalCPA and the Foundation sponsor a defined contribution plan under IRC Section 401(k). All employees at least 21 years of age who have completed one year of service are eligible to participate. Effective May 1, 2003, CalCPA and the Foundation enhanced the plan and began making matching contributions up to 4% of salary. In addition, all employees, regardless of participation, earn an employer contribution equal to 3% of salary. Employer contributions for 2004 totaled $237 for CalCPA and $125 for the Foundation; there were no employer contributions for 2003. All employer contributions vest at a rate of 20% per year.
CalCPA maintains a deferred compensation plan under IRC Section 457. Deferred compensation assets consist of investments reserved for future payment of deferred compensation liabilities.
10. ADVERTISING COSTS
The Foundation's direct response advertising consists primarily of catalogs and brochures for events. Other current assets include capitalized advertising costs of $161 and $135 as of April 30, 2004 and 2003, respectively. Advertising costs charged to expense are as follows:
2004 2003 CalCPA $ 208 $ 190 Foundation 565 541 Consolidated $ 773 $ 731
11. NET ASSETS
As of April 30, 2004 and 2003, the net assets of the Foundation include approximately $621 and $481, respectively, that is temporarily restricted for scholarships by CalCPA chapters. Temporarily restricted net assets increased $140 for 2004 and $70 for 2003. Except for this balance, the net assets of CalCPA and the Foundation are unrestricted.
CalCPA has designated $2,000 of its net assets to a building fund as of April 30, 2004.
12. 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.
|Printer friendly Cite/link Email Feedback|
|Date:||Sep 1, 2004|
|Previous Article:||Consolidating statements of cash flows.|
|Next Article:||No more dumping: State Unemployment Tax Avoidance needs to stop.|