ABA Treasurer's Report

• Pages: 35-37

Year-end Audit and Financi al Results

Grant Thornton issued an unqualifi ed

audit opinion for the fiscal yea r ended August

31, 2017. The audit includes an audit of our

government grants. The aud it committee

reviewed the audit a nd recommended accep-

tance by the Board of G overnors and the Board

did in fact acc ept and approve the audit at its

meeting on February 2 , 2018.

As you can see fr om the chart below, on a

consolidated basis , operating revenue was

$207.5 million and operating expen ses were

$215.2 million, producing an operating defic it

of $7.7 million.

Final audited re sults are posted on the ABA web page at

the ABA Groups tab, A BA Leadership and then the Office of

Treasurer tab.

A review of the operating defic it shows that the revenue

shortfall in G eneral Operations is attributa ble to a short-

fall in Dues ($2.9 million), Advertising ($0.9 million) and

Royalties ($0.8 million). The shortfall for Sec tions of $0.4

million came in the a reas of Meeting Fees, Publications,

Investment Income for Operations and Due s. There was a

shortfall in Gr ants ($0.5 million) attributa ble to a slowdown

in international g rants. On an operating basis, ex penses

were managed such that oper ating expenses were below

budget and below last year.

The Association ha s historically manage d expenses

within or below budget, but the r evenue component of the

budget has been the weak p oint. In FY17, expenses on a

consolidated basis wer e $5.1 million favorable to budget.

The General Operations e xpense line was unfavorable to

budget for the first time in a few yea rs ($2.9 mil-

lion), but the Section expense line wa s favorable to

budget ($4.0 million), Grants ($2.4 million) and

Gifts ($1.5 million). Also wort h noting: General

Operations included a number of unbudgeted

expenditures, l ike web development expenses, sev-

erance expense s, and recognition of a new Illinois

state law requir ing payment of accrued adminis -

trative leave when an employee leaves employment

which, if excluded, would have resu lted in a posi-

tive General Operat ions variance to the expense

budget.

FY17 Statement of Financia l Position (Balance Sheet)

The Association bal ance sheet is strong,

but it is important to rev iew the components

and the changes in the components . A few

years ago, it was com monplace to refer to the

entire investment port folio as “our reserves.”

However, such a statement ignores our liabili-

ties (such as the pension obligation) and gives

a false sense of the as sets available to support

operations or implement other opportunities .

Looking at the graph on pag e 36, you will see

that total as sets as of August 31, 2017 were

$344.8 million and t otal liabilities were $172.7

million, leaving t otal net assets of $172.1 mil-

lion. As compared w ith 2016, our total assets

increased by $2.6 mil lion and our liabilities

decreased by $14.6 million.

Long term investments g rew by $4.8 million year over

year. The interest rate by which ou r pension liability is cal-

culated increa sed so that our pension liability decrea sed

by $12.2 million. Despite t he operating deficit, net assets

increased by $17.1 million. This is a signi ficant swing from

the FY16 decreas e in net assets of $19.6 million. The driver s

of this positive cha nge in net assets were (1) strong invest-

ment returns and (2) increase in the inter est rate that is

used to determi ne our pension liability. This increase in net

assets is cer tainly good news, but in late Januar y and early

February we saw market volat ility and the verdict is stil l

out on whether this is the market c orrection that advisors

have been anticipating and the b eginning of an inflation-

ary period or just a r eaction to economic events. Of the tot al

unrestric ted net assets of $159.6 million, $53.6 million is

attributable to G eneral Operations/FJE and $106.0 million

is attributable to t he Sections and the balance are tempor ar-

ily or permanently res tricted funds.

MAY 2018 ABA JOURNAL || 35

CHARTS BY SARA WADFORD

ABA Treasurer’s Report

At the ABA Midyear Meeting in Vancouver, BC, I presented my first official Treasurer’s Report

to the House of Delegates. This report covers the FY17 year-end results as audited by Grant

Thornton, including a review of our Statement of Financial Position (balance sheet). I will also

provide results through January for fiscal year 2018, touch on the status of the ABA Pension,

and preview the fiscal 2019 budget challenge.

Consolidated ABA Results for FYE2017

Amounts in millions

Variance to:

Actual Budget LY Budget LY

Operating Revenues $ 207.5 $ 211.4 $ 207.7 $ (3.9) $ (0.2)

Operating Expens es 215.2 220.3 216.4 5.1 1.2

Operating Deficit (7. 7 ) (8.9 ) (8 .7) 1.2 1.0

Investment Income

not in Operations 12.2 0.5 3.3 11.7 9.0

Other Non-Op erating Items 0.4 (0. 3) (0.9) 0. 6 1.2

Results before Pension Adjustment 4.9 (8 .6) (6. 3) 13.5 11.2

Year-end Pension Adjustment 12.2

–

(13. 3) 12.2 25.6

Change in Net Assets $ 17.1 $ (8.6) $ (19.6) $ 13.5 $ 11.2