Combined financial statements & independent auditor's report 2004 to 2005.

• Position: 2005 annual report

CalCPA TREASURER'S REPORT

CalCPA experienced another excellent year. Revenues exceeded budget by $871,000 due to a number of factors: The great success of several chapter events; an increased demand for CPAs, which boosted print and online advertising revenues; and CalCPA Institute scholarship donations, which is a new line item on the statement of activities.

Naturally, an increase in revenues is followed by an increase in expenses. However, continued cost-saving methods kept the expenses low. Additionally, higher than estimated attendance contributed to a 58 percent increase in corresponding revenues. This was accomplished without increasing directly related costs other than facilities.

Investment income and gains, together with the above-mentioned success with chapter events and the increase in advertising revenues, increased net assets by $915,000. The transfer of scholarship funds to CalCPA Institute from the Education Foundation further enhanced this amount. This transfer, which totaled $768,457, is reflected in the statement of activities under other income. The funds were transferred directly into scholarship investment accounts held by Charles Schwab increasing overall investments.

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In addition to the investment activities, early renewals contributed to an increase in net assets, which positively affected deferred revenue on the statement of financial position. CalCPA had posted 15,654 early member renewals as of April 30, 2005, an increase of 1,433 members from prior year.

CalCPA is committed to maintaining the current level of member service and financial performance. With a break-even budget and practical financial oversight by all staff members, CalCPA is well-positioned for another successful year.

FOUNDATION TREASURER'S REPORT

I am pleased to report the 2004-05 financial report for the California CPA Education Foundation. The Foundation continues to provide outstanding continuing education at a reasonable cost to California CPAs and other professionals.

The Foundation ended another year with more than $10 million in revenue. The revenue exceeded budget by $203,020. The original forecast was based on 704 events and 47,792 attendees. The final numbers were 696 events and 48,780 attendees. The average attendance per class increased 3 percent.

VP attendance dropped by 2 percent from last year, while coupon usage and full-pay attendance increased 1 percent each. Sponsorship income came in lower than expected due to sponsors paying directly for lunches, speakers and materials, offsetting conference expenses. The total value for this bartering amounted to approximately $26,000. CPE Products' sales are up 21 percent from budget as interactive study materials are replacing the former self-study materials at a faster pace than estimated. Our in-house training (formerly Site Licenses) pricing structure has changed to include fees collected for materials and instructors. This change also has affected the expenses.

Direct expenses exceeded budget by only $79,097. The main reasons for the increase are the new in-house training pricing structure and the increased CPE Products' activities.

The Foundation transitioned custody of scholarship funds this year to CalCPA Institute. As of October 2004, when the transition took place, the scholarship funds totaled $768,457. Of that amount, $115,082 was transferred directly from Salomon Smith Barney, where the Orange County Chapter had its own investment account. Net assets decreased mainly due to this scholarship transfer

The Foundation continues to be a strong organization providing quality service and value and continually succeeds as one of the leading CPE providers in the country.

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INDEPENDENT AUDITOR'S REPORT

Board of Directors

The California Society of Certified Public Accountants

Board of Trustees

California Certified Public Accountants Education Foundation

Redwood City, California

We have audited the accompanying combining statements of financial position of the California Society of Certified Public Accountants (Society) and California Certified Public Accountants Education Foundation (Foundation) as of April 30, 2005, and the related statements of activities, functional expenses and cash flows for the year then ended. These financial statements are the responsibility of the management of the Society and the Foundation. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the Society and the Foundation as of April 30, 2004, were audited by other auditors whose report dated June 11, 2004, expressed an unqualified opinion on those statements.

We conducted our audit 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 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 also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 2005 financial statements referred to above present fairly, in all material respects, the combining financial position of the California Society of Certified Public Accountants and California Certified Public Accountants Education Foundation as of April 30, 2005, and the changes in their net assets and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Macias Gini & Company LLP

Certified Public Accountants

Sacramento, CA

June 24, 2005

notes to the COMBINING FINANCIAL STATEMENTS (dollars in thousands)

1. ORGANIZATION & SIGNIFICANT ACCOUNTING POLICIES

   The California Society of Certified Public Accountants (Society) is a nonprofit incorporated membership organization whose purpose is to advance the profession of accountancy in the State of California. The Society provides its members with general and technical resources through its chapters and committees. California Certified Public Accountants Education Foundation (Foundation) is a nonprofit public benefit corporation organized to provide continuing professional education to Certified Public Accountants (CPAs) and other interested parties. Revenues for the both the Society and the Foundation are derived primarily from CPAs in California. The Society and the Foundation share some administrative functions. Such costs are allocated between the entities based...