From the CEO
At a time when many of us feel bogged down by the continuing bad economic news, I’m pleased to give you a good report. After a tough year of decreased revenues and other financial challenges, APA is back on track. In fact, APA ended 2009 significantly better than we had forecast. It wasn’t easy, but it was made possible thanks to the guidance of the APA Board of Directors and Council of Representatives, as well as the significant sacrifices of APA staff.
To put this information in context, we finished 2008 with a $4.97 million operating deficit. Early in 2009, due to the precipitous drop in the stock market, APA’s net assets were down by almost $40 million. We also faced shortfalls in 2009 dues and advertising revenue. As I reported last year, to balance the budget for 2009 and 2010, staff and governance worked together to make deep spending cuts, including reductions in operations, governance activities, staff pay and benefits, and, for the first time ever, laying off APA staff. In August, we estimated these adjustments would give us an end-of-year operating safety margin of $922,200.
The final outcome was even better: We ended 2009 with a safety margin of $3,860,300, or nearly 4 percent of the total budget. Much of that increase was due to the July release of the sixth edition of the APA Publication Manual, which generated $2.5 million more in revenue than we budgeted. In addition, APA staff found further savings and efficiencies that enabled us to save another $360,000. The 4 percent safety margin is well in line with the Council of Representatives’ “aspirational guideline” that calls for an operating safety margin of 1 percent to 2 percent of the annual budget.
In December, APA’s Board discussed how to handle our larger-than-expected 2009 year-end margin. Given the large budget deficit from 2008, the instability of the stock market and the potential for unforeseen budget shortfalls (such as less advertising revenue or fewer membership renewals), the board decided to add $2.8 million to the APA’s net assets. It devoted the rest of the overage to three priorities: funding the 2010 fall consolidated meetings in recognition of the critical work APA members do through the board and committee structure; giving each APA staff member an $850 bonus (minus appropriate taxes) due to the dramatic cuts made in their compensation and benefits in 2009; and funding staff longevity awards and promotions, which had been put on hold last year. The Executive Management Group volunteered to exempt itself from these payments.
Of course, the economy’s unpredictability will continue to challenge us in 2010. This year, we are forecasting an operating margin of $1 million, slightly below a 1 percent safety margin. And we won’t have a magic bullet like the Publication Manual, which is published only once a decade. However, we are well-positioned to succeed. APA President Carol D. Goodheart is working with the APA Board, Finance Committee and staff to develop guidelines for future budgets that exceed the safety margin. They will look be closely examining how our budgets should align with the new strategic plan.
In the meantime, I want to thank APA’s governance and staff for their tremendous role in steering APA away from a financial crisis. Their creative thinking and hard work made all the difference in our ability to end 2009 in the black. I couldn’t be prouder of the accomplishments we’ve made, nor could I be more excited about the association’s future.