2021/22 Audit Report

By Gordon Smith, CPA, NJCPA Chief Financial Officer – November 1, 2021
2021/22 Audit Report

The combined financial statements for the NJCPA and Affiliates (NJCPA Education Foundation and NJCPA Scholarship Fund) for the year ended May 31, 2021, have been published. 

The effects of the COVID-19 pandemic that began in the latter part of the fiscal year ended May 31, 2020, persisted through the fiscal year ended May 31, 2021. Social distancing requirements continued to prevent members from attending education events in person, and all Society interest groups, committees and the Board of Trustees continued to meet remotely. While this has not been ideal, members, volunteers and staff have persevered. Summer brought renewed hope for the return to in-person events, but the rise of the Delta and other COVID variant strains slowed the progress. As of this writing, in-person events will not resume until after the new year. 

Unrestricted consolidated revenues for fiscal 2021 increased 3.3 percent from the prior year. Investment income gained the most as the investment portfolios returned between 26 and 28 percent for the year, the result of strong financial markets. Improvements were also seen in advertising revenue, royalties and commissions, and peer review fees. 

New Jersey Society of CPAs 

Under the Society, membership dues were $3.56 million, a decrease of less than 1 percent from the prior year; a slight decrease in dues-paying members offset the implemented small dues increase. Overall membership decreased from 14,725 members at May 31, 2020, to 14,301 members at May 31, 2021, with 70 percent of the decrease attributable to non-dues-paying Student members. The Fellow member retention rate remained strong at 94.6 percent in fiscal 2021, the same as the prior year, while the overall member retention for 2021 was 90.5 percent versus 90.1 percent for 2020. 

Peer review fees for fiscal 2021 from administration of that program rose slightly to $353,000, the result of a small price adjustment, though there remains pressure on the program as firms continue to evaluate whether they will continue to perform certain attest services and remain part of the program. 

As previously noted, the investment portfolios had strong returns for the fiscal year as financial markets performed well. Unrealized gains drove the results while decreases in interest and dividends, the result of companies managing cash and operations during a pandemic, pared down those returns. 

Expense savings versus budget were realized in several areas, the largest being in the Travel and Meetings line as costs for attending in-person meetings were essentially non-existent due to the lack of such meetings. Costs relating to staff education were significantly below budget as any learning was done virtually as opposed to attending in-person. Employee-related costs were below budget as staff compensation was limited due to the pandemic, and certain information technology costs were delayed or canceled, also due to the pandemic. 

With a modest increase in revenues and a decrease in total expenses, the Society experienced an increase in net assets of $819,000. Separately, the Society applied for and received funds under the federal government’s Paycheck Protection Program, with such proceeds shown in the Statement of Financial Position under liabilities; the Society expects forgiveness of such loan once its application is filed and reviewed. 

NJCPA Education Foundation

Throughout fiscal 2021, the NJCPA Education Foundation continued to provide educational programming on a fully virtual basis, as was done in the latter part of fiscal 2020. Fiscal 2021 included a portion of calendar year 2020, the last year of New Jersey’s CPE reporting cycle. While the last year of a triennial normally brings increased revenues due to higher attendance, and though attendance was very strong, fiscal 2021 programming revenues were lower than the prior year due to the fact that online programming carries lower per-unit revenues. However, the direct costs to produce programs decreased more than revenue decreased, resulting in better gross margins for fiscal 2021. 

As in the Society, investment income was strong on portfolio performance and, from an expense perspective, employee-related costs came in below budget as less staff time than expected was allocated to educational activities. Reduced expenses versus budget were also seen in, among other categories, printing and distribution, as printed catalogs were not produced as information was disseminated digitally, and contributions to the Scholarship Fund were held as the Education Foundation Board analyzes investment needs moving forward. 

Although the Foundation saw revenues decline in fiscal 2021, expenses declined even more, and the fiscal year brought a positive change in net assets of approximately $752,000 versus a flat budget. For 2021, all-virtual educational programming served more than 27,000 registrants and delivered just under 60,000 credit hours of CPE. 

NJCPA Scholarship Fund

Revenues in the NJCPA Scholarship Fund for fiscal 2021 were approximately $443,000 over budget. Investment income came in $504,000 over budget on large, unrealized gains as financial markets performed very well but were partially offset by lower contributions from the Education Foundation, as that entity’s Board analyzes funds needed for future investment. Total expenses for fiscal 2021 were roughly $30,000 below budget as the awards ceremony was cancelled for a second year due to COVID along with reduced employee-related costs. 

The Fund restructured its award given to high school seniors beginning their college careers from a four-year, scaled award to a one-time award. A total of $250,500 was awarded in state and local scholarships to 52 applicants, while making payments on prior-year awards for another 53 students; overall award expense was $4,200 below budget. 

The higher-than-budgeted revenues and reduced expenses resulted in a positive change in net assets of $308,000 for fiscal 2021 versus a budgeted negative change of $164,000 and compared to a negative change in net assets for fiscal 2020 of $103,000.