As a 501c3 nonprofit organization, APA focuses on activities that support and advance psychology. Our collective goal is to enable the discipline to continue to apply its science in ways that advance human welfare. We know that supporting APA's mission to apply psychology for the public good is, in part, why you belong to the association. Don't assume, however, that our charitable and educational mission means that APA's financial strength is a secondary concern. Simply put, because financial strength leads to mission strength, we take very seriously our responsibility to spend wisely, balance our budget and protect APA's overall financial health.
APA's financial management team — the Finance Committee, the APA treasurer, the Board of Directors and our Finance Office staff — oversees the association's $126 million annual budget. The income side of the budget consists of operating revenue, grants and contracts revenue and income from the two office buildings owned by the association. The sale and licensing of APA publications and databases is by far the largest source of revenue, generating nearly $86 million annually. Your dues payments are the second largest source of revenue, about $10 million annually. Part of the association's financial strength is that we are not largely dependent on dues income. During the last five years, APA has decreased member dues and continues to offer students and early career psychologists special rates to make membership more affordable.
As for expenses, staff salaries and benefits are APA's largest expense. We employ over 600 people in functions ranging from editing APA journals, to supporting psychology's interests in Washington, to staffing governance groups. A second major expense is producing APA's print and electronic publications. These expenses pay for themselves in returned revenue and in the many ways they allow APA to meet member needs, disseminate psychological scholarship and affect public policy.
APA's annual operating budget is managed to ensure that, on a three-year rolling average basis, revenue exceeds spending — in other words, we must have a positive operating margin across any three-year period.
To ensure APA has money for unplanned but critical projects, APA uses "designations." For example, in 2012, the Council of Representatives established a special $3 million, three-year designation to help create more APA-accredited internship positions. Special designations totaling $6.2 million were created in 2012 to support projects aligned with APA's Strategic Plan, including the new Psychology: Science in Action public education campaign, the Good Governance Project and a process by which APA will create clinical practice guidelines.
The final components of the association's overall financial picture are its real estate and investment portfolio. As mentioned earlier, APA owns two office buildings in Washington, D.C. One serves as APA headquarters, with about 40 percent of the overall space leased to tenants. Our second building, one block away, is entirely leased to tenants. We also use the headquarters buildings to host many APA governance meetings to save the expense of holding them elsewhere. In addition, APA just completed a state-of-the-art conference center on the roof of the headquarters building. The conference center, with an outstanding view of the U.S. Capitol, is a new source of income when rented out for events and conferences.
APA's investments are a well-diversified mix of large-, mid- and small-cap equity funds that include domestic and international companies. APA also invests in bond funds. Like that of all investors, APA's portfolio is subject to the market's ups and downs but is structured to preserve capital and enjoy long-term growth. Last year's strong stock market helped increase the association's net assets to $67 million. In addition to the investment portfolio, APA has considerable equity in its two office buildings that is not included in the $67 million of net assets.
Viewed together, the solid budget and investment strategy will ensure APA's long-term stability and help us continue our mission to advance the creation, communication and application of psychological knowledge to benefit society and improve people's lives.