In his first treasurer's report at an official session of the AVMA House of Delegates, Dr. Bret D. Marsh indicated that membership dues will not increase during the 2007 fiscal year.
Membership dues represent 60 percent of the AVMA's income. Dues revenue is projected in the fiscal year 2007 budget at $16.3 million. AVMA dues have not increased since 2004, though dues in many national organizations for human health-care professionals are much higher.
In addition to dues revenue, the AVMA derives substantial income from the sale of classified and display advertising in the JAVMA; registrations, sponsorships, and exhibit sales at the Annual Convention; and the Association's investment portfolio.
Dr. Marsh said that FY 2005 was a good year for the AVMA and FY 2006 is projected to be another good year. The Association's current financial position lists cash and government funds at $1.6 million, receivables at $334,000, prepaid expenses of $236,500, and investments of $26 million.
According to the treasurer, the long-term investment strategy adopted by the Executive Board in November 2004 resulted in an initial investment of $8 million in managed funds beginning in January 2005 that posted a gain of 9.42 percent for FY 2005. Using this careful investment strategy has permitted the reserves to grow more rapidly while preserving the original investment.
The FY 2006 budget is projected to have a net income of $682,060, and the FY 2007 budget a net income of $61,550. The average net income over the past 10 years has been $1.3 million.
Another message from the treasurer is that measures were taken so that the AVMA can continue to recruit and retain talented, dedicated staff members. To ensure the AVMA's competitiveness in the marketplace, the Executive Board established a salary compensation review subcommittee this past November and hired a consultant to assist the subcommittee. The subcommittee's recommendations led the board to adjust the budget to more appropriately compensate staff. Salaries and benefits represent 42 percent of the AVMA's annual expenses.
During FY 2005 and into the first months of FY 2006, Dr. Marsh said the AVMA's investment income continued to grow as projected, and sponsorships continued to be a valuable source of income. On the other hand, revenue from the sale of classified and display advertising has stabilized.
Travel expenses have continued to climb, and new protocols have been implemented to monitor this expense. Dr. Marsh noted that the AVMA will experience an increase in salary and benefits expense over the next year as the new Animal Welfare Division is staffed and as vacant positions in other divisions are filled.
Because of the need for more office space for new staff members and the growing demand for meeting space at AVMA headquarters, the Executive Board approved a plan for remodeling, which is now under way. The remodeling, furniture, and equipment are projected to cost $1.96 million, Dr. Marsh said.
AVMA finances were the subject of three resolutions this year (all disapproved; see page 648), and Dr. Marsh told the HOD, "AVMA fiscal policies are in place and are being observed."
The management of AVMA reserve funds was the focus of Resolution 2:
Resolved, that the American Veterinary Medical Association (AVMA) establish a reserve policy with regard to liquid assets, with a goal of maintaining 20 percent of the organization's annual budget in cash reserves.
The treasurer explained that current AVMA fiscal policy specifies that a level of reserves must be maintained equal to an amount between 50 percent and 150 percent of the annual operating expenses. The upper limit ensures that AVMA income is used to support member services rather than simply growing a large reserve. The lower limit ensures an adequate reserve in the event of a catastrophic event.
The AVMA fund balance—assets minus liabilities—is considered to be the reserves of the Association. The reserve percentage is calculated by dividing the fund balance by total operating expenses at the end of the year. Using this formula, the reserve percentage at the end of FY2005 was 101 percent.
Resolution 3 concerned the management of unbudgeted expenditures:
Resolved, that the American Veterinary Medical Association (AVMA) is encouraged to develop a policy that places a limit on non-budgeted spending for the annual budget. A five percent limit would be considered prudent if preservation of cash reserves is deemed important.
Dr. Marsh noted that current policy requires a three-fourths vote of the Executive Board for new, unbudgeted expenditures from the reserves when such expenditures would deplete or exceed the contingency fund. In addition, a three-fourths affirmative vote is required for approval of recommendations costing $25,000 or more.
The treasurer said, "These safeguards require careful deliberation by the Executive Board before funding any new initiatives during the fiscal year."