2003 annual report.

• Position: California Society of Certified Public Accountants

CALCPA TREASURER'S REPORT

I am delighted to present you with CalCPA's financial operating results for the year ended April 30, 2003. We are continuing a four-year trend of improving operating results. Membership is increasing and we continue to support and improve programs at the chapter and committee levels.

During this year of tremendous change for the profession, CalCPA's major achievements have included instituting a revised investment policy; revamping our employee retirement benefits; finalizing our strategic plan document; beginning implementation of the strategic plan; continuing to advocate on behalf of our members and the profession in Sacramento; and stepping up our image campaign to promote our profession--all of this and more has been accomplished well within budget.

We increased net assets by $713,000, an increase of nearly 44 percent over 2002, primarily through fiscal prudence on the part of the CalCPA management team and strategic realignment of staff in response to the current economic environment.

Our net assets of more than $4.9 million represent approximately 83 percent of our net assets goal, giving us sufficient reserves to be prepared for the unexpected in coming years and to begin planning for the future purchase of our own building.

In the words of CalCPA CEO Susan Waters, "Our team is at fighting weight," and I would say that we are poised and ready for another financially successful and productive year!

Jessie Powell, CPA

FOUNDATION TREASURER'S REPORT

I am pleased to present the FY 2002-03 financial report for the California CPA Education Foundation. The Foundation continues to be a highly effective continuing professional education resource for California CPAs and other professionals provided at a reasonable cost.

The Foundation exceeded last year's gross margin by almost 5 percent, which was remarkable because last year was a record for revenue--exceeding $10 million. It experienced almost a 5 percent decline in VP revenue, which was partially offset by an increase in coupon book sales. Last year it received $130,000 in royalty revenue from its PETH product from the AICPA. The AICPA launched its own product this year, however, which reduced the Foundation's royalty income by 50 percent. The Foundation is making efforts to remedy that situation. On the other hand, the Foundation's new source of revenue for sponsorship resulted in fees in the sum of $60,000.

Spending was significantly reduced due to a number of factors. Specifically, last year, the Foundation incurred substantial costs associated with modifications and customizations of the new database system, AM4, which were dramatically reduced this year. Moreover, the Foundation was able to negotiate better rates with hotels regarding facility and audio/visual costs due to the sluggish economy.

Another factor affecting expenses last fiscal year was the purchase of Western Schools, for which the Foundation incurred one-time costs for legal fees and promotional expenses, whereas this year its only expenses were for new materials. The Foundation introduced new self-study materials created by its instructors, which has offset a loss in Western Schools sales. The next step will be to make the same material available on the Foundation website.

Although the Foundation's operations were successful, unfortunately the stock market decline resulted in a realized loss suffered in the amount of $280,000, compared with a realized gain of $162,000 last year. The trend for the future is demonstrated by the Foundation suffering an unrealized loss this year in the stun of $50,000 compared with the unrealized loss last year of $412,000.

In summary, the Foundation continues to be a viably strong organization providing quality service, which it contemplates will continue to qualify it as the foremost CPE accounting provider in the country.

Elliott H. Kajan, CPA

Gilbert Associates, Inc. CPAs and Advisors

Council The California Society of Certified Public Accountants Board of Trustees California Certified Public Accountants Education Foundation Redwood City, California

We have audited the accompanying consolidating statements of financial position of The California Society of Certified Public Accountants (Society) and California Certified Public Accountants Educati Foundation (Foundation) as of April 30, 2003 and 2002, and the related statements of activities, functional expenses, and cash flows for the years then ended. These financial statements are the responsibility of the management of the Society and the Foundation. Our responsibility is to express a opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit a includes assessing the accounting principles used and significant estimates made by management, as w as evaluating the overall financial statement presentation. We believe that our audits provide a reasona basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the individual and consolidated financial positions of The California Society of Certified Public Accountant and California Certified Public Accountants Education Foundation as of April 30, 2003 and 2002, and changes in their net assets and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

GILBERT ASSOCIATES, INC. June 6, 2003

NOTES TO FINANCIAL STATEMENTS (dollars in thousands)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

   The...