Annual Report 2016-17: Independent Auditors' Report, Combined Financial Statements and Supplementary Information.

• Author: Sharpstone, Lewis E.

CalCPA TREASURER'S REPORT

CalCPA finished another fiscal year in strong financial condition. Net assets finished the year at $24.6 million, higher than prior year by $0.7 million due primarily to favorable investment returns. The retrofit and renovation of our new headquarters building added $7.2 million to fixed assets during the year. Total assets decreased by $2.0 million this year to a total of $35.8 million as we liquidated investments to pay off our construction loan prior to our year end. We moved into our new building in May 2017.

The year ended with membership at an all-time high of just under 44,000 members. Dues revenues, however, declined by nearly 2 percent compared to the prior year, reflecting the ongoing trend in recent years of the number of baby boomers reaching lifetime (free) membership status exceeding the number of new licensee members. Offsetting this, we ended the year with over 450 members in our newly created financial professional membership category. Also, our student and candidate membership categories grew this year. These members represent the future of CalCPA, so one of our priorities continues to be to engage these young individuals. Several other revenue items also declined compared to the prior year, but this did not significantly affect the bottom line since expenses were also reduced and managed accordingly.

As we look ahead, the future continues to hold exciting challenges and opportunities. Please stay involved. CalCPA will continue to fulfill its mission of protecting and promoting the integrity of the CPA profession for many years to come. Thank you!

Lewis E. Sharpstone, CPA

CalCPA EDUCATION FOUNDATION TREASURER'S REPORT

The CalCPA Education Foundation had a good year, yet a very challenging year. Fiscal 2017 showed a decrease in net assets for the second year in a row. Investment gains of $0.8 million offset operating losses of $1.5 million attributed to declining revenues from conferences and a shift away from the traditional eight-hour courses to shorter, one- to four-hour learning sessions. The Education Foundation is experiencing unprecedented competitive pressure, with many CPE providers offering low-cost or free content. I know I receive multiple emails daily for sometimes free or low cost CPE.

We continue to control expenses as much as possible to the level of budgeted revenue in order to maintain a strong net asset position. We consolidated several conferences this year which contributed to a reduction in direct expenses which correlate with the drop in revenue.

The Education Foundation finished the year with total assets of $13.1 million, including an investment portfolio of $11.1 million. With net assets of $8.7 million at year end, the Education Foundation has adequate resources to invest in its future.

Looking ahead, we are making investments in innovation and technology and continue to focus on partnerships with other state societies and CPE partners to expand our reach and remain relevant in the CPE marketplace. We remain steadfast in our commitment to provide high-quality continuing professional education and to differentiate the CalCPA Education Foundation as a trusted resource for CPAs and our profession.

ANNUAL REPORT TABLE OF CONTENTS Independent Auditors' Report 13 Combined Financial Statements: Combined Statements of Financial Position 15 Combined Statements of Activities 16 Combined Statements of Functional Expenses 17 Combined Statements of Cash Flows 18 Notes to the Combined Financial Statements 19 Supplementary Information: Combining Statements of Financial Position 26 Combining Statements of Activities 28 Independent Auditors' Report

COUNCIL CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS and BOARD OF TRUSTEES CALIFORNIA CERTIFIED PUBLIC ACCOUNTANTS EDUCATION FOUNDATION Burlingame, California

Report on the Combined Financial Statements

We have audited the accompanying combined financial statements of California Society of Certified Public Accountants (the Society) and California Certified Public Accountants Education Foundation (the Foundation), which comprise the combined statements of financial position as of April 30, 2017 and 2016, and the related combined statements of activities, functional expenses, and cash flows for the years then ended, and the related notes to the combined financial statements.

Management's Responsibility for the Combined Financial Statements

Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the combined financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of California Society of Certified Public Accountants and California Certified Public Accountants Education Foundation as of April 30, 2017 and 2016, and the changes in their combined net assets and their combined cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Report on Supplementary Information--Combining Statements

Our audits were conducted for the purpose of forming an opinion on the combined financial statements as of and for the years ended April 30, 2017 and 2016 as a whole. The accompanying supplementary information is presented for purposes of additional analysis and is not a required part of the combined financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the combined financial statements. The information as of and for the years ended April 30, 2017 and 2016, has been subjected to the auditing procedures applied in the audit of the combined financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the combined financial statements or to the combined financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information as of and for the years ended April 30, 2017 and 2016 is fairly stated in all material respects in relation to the combined financial statements as a whole.

San Francisco, California June 27, 2017

COMBINED STATEMENTS OF FINANCIAL POSITION California Society of Certified Public Accountants | California Certified Public Accountants Education Foundation April 30, (In Thousands) 2017 2016 Assets Current Assets: Cash and equivalents $ 5,646 $ 7,354 Accounts receivable, net 327 287 Other receivables 170 225 Receivable - affiliates 47 34 Prepaid expenses and other 709 671 Total current assets 6,899 8,571 Investments 18,708 26,954 Fixed Assets, net 20,727 13,235 Trust Assets - Deferred Compensation 1,148 1,144 Other Assets 147 162 Total assets $ 47,629 $ 50,066 Liabilities and Net Assets Current Liabilities: Accounts payable $ 390 $ 334 Accrued expenses 2,488 2,119 Deferred revenues 8,768 9,265 Deferred lease costs, current portion 406 319 Total current liabilities 12,052 12,037 Deferred Lease Costs, less current portion 1,098 1,554 Long-term Debt - 2,000 Deferred Compensation 1,148 1,144 Total liabilities 14,298 16,735 Net Assets: Unrestricted 31,492 31,563 Temporarily restricted 1,789 1,718 Permanently restricted 50 50 Total net assets 33,331 33,331 Total liabilities and net assets $ 47,629 $ 50,066 COMBINED STATEMENTS OF ACTIVITIES California Society of Certified Public Accountants | California Certified Public Accountants Education Foundation Years Ended April 30, (In Thousands) 2017 2016 Unrestricted Net Assets: Unrestricted revenues: Dues $ 8,979 $ 9,140 Professional education programs 9,512 11,042 Peer review fees 1,364 1,402 Member meetings and events 706 808 Advertising 613 742 Affiliation fees 513 518 Royalties and affinity programs 213 177 Interest and dividends, net 614 741 Rental income 237 304 Other income 331 151 Total unrestricted revenues 23,082 25,025 Net assets released from restrictions 418 553 Total revenues 23,500 25,578 Expenses...