Against Challenging Backdrop, PRSA Achieves Solid 2008 Financial Results

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PRSA’s Bylaws specify that our financial statements must be audited at least once a year  by certified public accountants. The results of our recently concluded 2008 audit show a reasonably gainful year for PRSA amid a very challenging economic environment.

Among the many highlights from a financial perspective is the fact that PRSA was able to keep the cost of its member dues level in 2008. In fact, the cost of PRSA dues has not changed since 2002, despite the Consumer Price Index (CPI) having risen nearly 20 percent over the same time period.  Much of our success in this regard comes from exercising tight cost controls and reducing administrative expenses to generate the maximum return on every member dollar, and from diversifying PRSA’s income sources.

At the same time, 2008 was a year of looking at new opportunities to increase member value and improve member benefits. PRSA offered free professional development opportunities for the first time, and put resources against a redesign of the PRSA Web site (concepts were presented to the National Assembly in October); a rewrite of PRSA’s bylaws; Member research; ongoing publication of the Public Relations Journal; and the introduction of a new insurance program for Members. We also succeeded in returning 1 percent of our operational expenses to PRSA’s cash reserves; this is part of an ongoing effort to grow our financial reserves — essentially PRSA’s “rainy day” fund — based on guidelines published by the American Society of Association Executives (ASAE).

For the year, despite the challenging economic conditions, PRSA posted an operating surplus of $233,000. This exceeded our surplus goal by more than 104 percent.

Like other organizations and individuals who are invested in stocks and other marketable securities, however, PRSA did suffer losses attributable to last year’s stock market decline. To mitigate PRSA’s exposure, we made the decision last summer to safeguard a significant portion of our investments in certificates of deposit (CDs).  This strategy not only reduced PRSA’s investment losses, it provided interest income that helped to defray operating expenses.

As a result, our investment portfolio suffered a loss of 23.5 percent, or $383,000 — as compared with typical losses of 33.8 percent for companies in the Dow Jones Industrial Average (DJIA).  Under normal accounting practices, these investment losses were offset against net earnings; the result shows PRSA as having a net deficit of $150,000 for the year.

PKF, PRSA’s independent auditor, issued an “unqualified opinion” as a result of the audit work it performed on our behalf.  An unqualified opinion—the most favorable report that can be issued by an external auditor — is received when the financial statements are “free of material misstatements” and presented in accordance with Generally Accepted Accounting Principles (GAAP); in other words, PRSA’s financial condition, position, and operations were presented fairly within our financial statements.

Notes to our 2008 financial statements explain that PRSA allocates its Membership dues between its Member print publications, The Public Relations Strategist and Public Relations Tactics, and the various services that PRSA delivers throughout the membership year.  This method of dues recognition follows GAAP and the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Not-For-Profit Organizations. PFK, as well as previous PRSA independent auditors, have all agreed that this accounting treatment of Membership dues is appropriate for PRSA.

The notes also make clear that PRSA records its investments at fair market values, with related gains and losses reflected as increases or decreases in unrestricted net assets in the statements of activities. This accounting treatment follows the guidelines set forth in the Financial Accounting Standards Board (FASB) Statement No. 124.

I encourage all PRSA members to review our full audited 2008 financial statements and report, which are available in the Membernet section of  the PRSA website, and to contact me with any questions or concerns that they may have.

Tom Eppes, APR, Fellow PRSA, is the 2009 Treasurer of PRSA and a Senior Partner at Eric Mower and Associates in Charlotte, N.C.

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Tom Eppes

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