AAPG Treasurer's Report
For the past several years the annual operating budget of the Association has been in the $11-$12 million range with the FY 2005-06 budgetary expenditures approved last fall set at $12,422,262. At the close of the last fiscal year, June 30, 2005, we incurred a net operating gain of $ 203,658, before an additional corporate gain of $530,686 in the value of the $13+ MM investment portfolio. When considering the investment portfolio gain, as well as other non-operational gains and losses, AAPG's audited consolidated fund balance increased by $207,088 for FY 2004-05. The operating gain was primarily the result of two successful meetings in Cancun and Calgary, as well as successful cost containment on operating expenses, derived partly as a result of our first-ever Zero-base budgeting (ZBB) effort.
In the FY04-05 budget, every department was required to submit its own annotated budget projections, with ZBB justifications. Thus, ZBB was successfully applied for the first time, with its inherent cost vs. benefit analyses applied to every program, service, and committee. In addition, working closely with the auditors and legal counsel, I recommended a charter for the establishment of an AAPG Audit Committee, to perform the duties similar to a traditional for-profit corporate audit committee. With the future expectations of Sarbanes-Oxley styled laws and regulations being applied to the non-profit corporate world of AAPG, our committee has commissioned the outside auditors to begin reviewing our: 1) internal control system & processes, 2) the functionality of the accounting & financial systems, and 3) monitoring compliance with all legal and regulatory requirements. This committee is statutorily comprised of the Treasurer, Vice-President, and Presidentelect, and meets no less than twice per year with the outside auditors to commission and review their work. Lastly, in a separate operational review process, the new Tactical Operations Committee has completed performance audits of two (Global Development/Conventions and Education) of the 4 directorates, with the remaining two (Business Operations and Communications) scheduled for later this year and into next. .
At this time in March 2006, the fiscal year (2005-06) is expected to finish with another small surplus, having substantially reduced the impact of the annual pension expense, and with the expectation of financially successful FY conventions in Paris and Houston. Upon my recommendation, as a result of solid growth in the investment portfolio, the Executive Committee voted to reduce the balance of the $ 2MM UMB loan made last year to our pension fund, by $750,000. The loan is at a 3.87% fixed-rate loan for 3 years, and the original decision to borrow the funds, rather than withdraw the full amount from the portfolio, proved optimal, as the portfolio has grown at a rate of 8.2% over the past twelve months.We expect that this loan will likely be paid off from future growth in the investment portfolio during the next two years.
For budgetary purposes, activities in Headquarters are divided into two main groups. Essential Services includes Operations, Membership, Bulletin and Communications/Explorer -- all activities that are supported by dues. The second group is Self-Supporting Functions, which include Special Publications, Education and Convention departments. The "Self- Supporting" departments are supposed to be self-sustaining and even generate modest income for the Association, but Conventions is the only one to consistently do so. Thanks to the improved capabilities of the new IMIS/Great Plains Management Information/Financial Accounting system, we can now utilize a better overhead allocation methodology. This new methodology was developed by staff and our auditor, with Treasurer oversight and EC approval. It specifically assigns direct cost expenses to each department including such items as rent, utilities, insurance, depreciation, and professional and legal fees, which were built into the previous general overhead calculation. In addition, as a result of this new methodology, dues revenue budget allocations are now being made to the Explorer & Bulletin, since they are directly provided to every member for their dues.
Highlights of Revenue & Expenses:
Revenue last year was $1,757,836. In the current year's budget, dues revenue is projected to be $1,738,000. Our full-member fixed dues of $75 per year is an increasingly good value, when one considers the many activities, services, and programs that those dues support.
Last year's revenue was $4,793,524. After paying expenses associated with sponsoring these events, a net surplus of $883,840 from Cancun & Calgary was realized. Paris and Houston look positive for the current fiscal year, pending about $250,000+ in required deposit reimbursements from our Paris ground operator, that we have yet to receive.
Advertising in the Explorer generates most of this revenue. Last year all advertising generated $1,200,783 of revenue, and for the current budget, it's estimated at $1,267,862. However, we may improve upon the budget this year, due to the continuing increase in contractor companies' budgets for advertising and marketing expenses, as well as for firms advertising for experienced personnel.
Last fiscal year, sales were $817,918 up from the previous year's sales of $729,392. Despite the increase recognized last year, few professional organizations' books are selling as they once were. Last year the Special Publication's department posted a loss of ($152,722), but this year, with new publications being released, and an increase in the demand for oil and gas industry information, the department is expected to be close to break even for the year.
Although this department provides a valuable service for the membership, it has consistently produced a net loss for many years. Last year's amounted to ($219,000). Revenues from course/service fees, notes sales, and grants amounted to $1.339 million last year with offsetting expenses producing the loss. The FY 2005-2006 budget is for an improved financial performance with a modest loss projected at ($26,525). A reinvention of this functional area is under consideration, because very few members are utilizing this service area.
This is a very significant budget item. In FY 03-04 AAPG spent $624,122 for mailings and shipping, and $704,200 the year before. In FY04-05 we spent $639,138 and have budgeted $732, 917 for this year. We hope that as more members and most students choose the all-digital option, fewer Bulletins will be mailed.
In closing, I would encourage you to take the time to review the "Statement of Income and Expenses" published in the 2005 page 1684. This chart provides a comparison of fiscal years 2003-2004 with the completed 2004-2005 year figures, and is good way to review our financial performance statistically.
Most of all, I want to thank each of you, my dear fellow member, for the honor of serving as your Treasurer again this year. It has been a truly outstanding experience for me personally, and one that I will cherish for the remainder of my life. My special thanks also go to David Lange, Bryan Haws, Auditor Paul Hartog, and the entire financial team for their able assistance. I look forward to a successful FY 2005-2006, and hope that my two years as your Treasurer has succeeded in building a stronger foundation of financial stability for the many future years of AAPG. May God bless you all, and AAPG, as well.