The American Institute of CPAs presented its budget and finances at its Spring Meeting of Council in Washington, D.C., on Monday as the organization undergoes a transformation into an international association with the Chartered Institute of Management Accountants.

Eric Hansen, chair of the AICPA’s Audit Finance Committee, provided a summary of the financials for the last five months of the organization’s fiscal year, which will now have a calendar year-end in alignment with CIMA. For the five-month period ending Dec. 31, 2016, the AICPA had a net deficit of $2.6 million, which was $2.5 million unfavorable to budget. The variance related to several factors, Hansen noted. Net operating revenues were $1.3 million lower than budgeted, primarily related to timing assumptions for the five-month period budget, for which most amounts are expected to be realized in 2017. Total operating expenses were unfavorable to budget by $1.6 million. The major contributing factor was the cost invested in bringing together the new Association of International Certified Professional Accountants between the AICPA and CIMA.

There were two significant nonoperating items affecting the financial statements during the period. First was an impairment charge of $5 million recorded after AICPA management evaluated several of its old software projects and determined them to have been effectively replaced or rendered “noncurrent.” That impairment charge was offset by a $5.5 million pension gain driven by an increase in the plan’s discount rate due to current market conditions. On a combined basis, net assets decreased by $2.6 million, primarily a result of those variances. Last month, the AICPA board of directors unanimously approved the audited financial statements, which included an unmodified opinion.

AICPA vice president of finance Tim LaSpaluto said the performance of the AICPA’s investment portfolio has grown since 2012 and the Institute continues to monitor its portfolio mix. The pension plans of the AICPA and CIMA remain liabilities of each respective organization.

For calendar year 2017, the AICPA is budgeting for the new association as a whole. “Consistent with what was communicated in past council meetings, we budgeted a net deficit of $10 million due to the association’s investment in the strategic value drivers,” Hansen noted. “We anticipate continued growth in our revenue-producing activities and have budgeted growth of 5 percent over 2016.”

One of the highlights the AICPA expects in 2017 will be a new event in June called Engage, which will present the profession’s most notable innovators, influencers and thought leaders. Dues revenue is expected to increase 5 percent, mainly thanks to continued growth in membership in all areas and dues rate increases in line with prior years and inflation. The AICPA is expecting a decline in exam revenue of 10 percent following last month’s release of the next-generation CPA Exam. However, the AICPA saw an increase in the number of candidates taking the exam in the four quarters prior to that change. The new Uniform CPA Examination places greater emphasis on testing candidates’ higher-order cognitive skills, such as critical thinking and analytical ability.

From an expense perspective, the AICPA anticipates increases in its operational expenses due to annual salary increases, which are said to be in line with the market. The budget also contains a contingency of $1.75 million, consistent with prior years, to allow management and the board of directors to deploy unbudgeted resources if needed.

Membership continues to grow. “We expect to end 2017 with over 670,000 members and students, an increase of 10,000 over 2016,” said LaSpaluto. “Our section and credential membership grew by 10 percent to 76,000, which includes the newly launched Certified in Entity and Intangible Valuations credential. We continue to grow revenue in all areas, which enables us to invest in programs and initiatives that support our members all over the world.”

This year the AICPA launched the new CEIV credential, which should generate some extra revenue. The AICPA also launched a Tax Reform Resource Center to keep members informed of what has been proposed or passed in Congress and the Trump administration related to the anticipated tax overhaul.

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