Combining financial statements & independent auditor's report 2005 to 2006.

• Position: Annual report

CalCPA TREASURER'S REPORT

CalCPA has experienced another excellent year of membership growth and financial success. Revenues exceeded budget primarily due to investment gains, strong chapter events and increased advertising revenue. The rising demand for CPAs in the marketplace has helped fuel increases in print and online advertising.

Furthermore, CalCPA's financial literacy initiative, including the very successful California Summit on Financial Literacy held in Sacramento in April, brought in $178,000 in sponsorships, and scholarship donations exceeded $409,000.

Naturally, an increase in revenues is followed by an increase in expenses. However, continued cost-saving methods kept the expenses in-line with the budget overall.

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For example, savings in personnel costs resulting from the decrease in the pension liability offset higher professional fees. The reduced liability was due to both market performance and an actuarial-recommended change in the discount rate from 5.50 percent to 6.25 percent. Professional expenses include the AM4 database conversion costs. Included in the expenses for professional education programs are scholarship distributions of $247,000.

Investment income and gains, together with the above-mentioned success with chapter events and scholarship activities contributed to an increase of net assets by $2.7 million, $1.5 million of which will be added to the board-designated building fund.

CalCPA is committed to continuing to deliver unparalleled member service and a strong financial performance. With a break-even, program-driven budget, CalCPA is well positioned for another successful year.

Teresa Mason, CPA

California Society

Certified Public Accountants

FOUNDATION TREASURER'S REPORT

It is my pleasure to report on the California CPA Education Foundation's financial results for FY 2005-06. The Foundation continues to provide outstanding continuing education at a reasonable cost to California CPAs and other professionals.

The Foundation ended another year in the more than $10 million range. Revenues, including investment gains, exceeded budget by $1.5 million. The original forecast was based on 761 events and 50,535 attendees, and actuals were 779 events and a record breaking 51,736 attendees--907 more attendees than the previous record set in FY 2000-01.

VP attendance increased by 3.6 percent over the previous fiscal year, and coupon use and full-pay attendance increased slightly more than 1 percent each. CPE Products' sales also have grown significantly, due primarily to online offerings.

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These changes have affected related expenses as well. Direct expenses exceeded the budget by almost 7 percent. Hotel-related costs, such as facilities and food, have exceeded estimations due to increased costs for space rentals and services.

On the other hand, indirect expenses came in well below budget as a direct result of the reduction in pension liability. The liability was reduced due to both market performance and an actuarial-recommended change in the discount rate from 5.50 percent to 6.25 percent. Additionally, Foundation personnel-related costs decreased due to an increase in shared services with CalCPA.

Investment income and gains of $1.3 million together with the above-mentioned revenue growth contributed to a net asset increase of $1.6 million.

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

Patricia Cochran, CPA

CALIFORNIA CPA

EDUCATION FOUNDATION

INDEPENDENT AUDITOR'S REPORT

To the Council of

The California Society of Certified Public Accountants

To the 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, 2006 and 2005, 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 an opinion on these 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 financial statements are free of material misstatement. An audit includes consideration of internal control over the financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Society's and Foundation's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the 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, 2006 and 2005, and the 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.

Macias Gini & Company LLP

Certified Public Accountants

Sacramento, California

June 1, 2006

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 on their estimated share. The California CPA Institute (the Institute), a nonprofit organization under Internal Revenue Code Section 501(c)(3), was formed in October 2004 to account for scholarship activities and financial literacy program. The activities of the Institute are included in the Society.

PRINCIPLES OF COMBINATION

The Board of Trustees of the Foundation consists of members of the Society who are elected by the governing Council of the Society. Because of common control, the accompanying financial statements reflect the combining of the Society and the Foundation.

BASIS OF...