Report to NSPE Board of Directors

By NSPE Treasurer, RussellC. Devick,P.E., FNSPE

September 29, 2007

This report presents another look at the Society’s operating results for fiscal year 2006/07, after all the year-end entries have been made and the books closed, together with a brief look at where we are in the current fiscal year 2007/08. It will also address the challenges we face in meeting our current year’s budgetary goals.

Fiscal 2006/07 Operations

The final year-end results were in line with the preliminary estimates that were presented to the Board in July. On a consolidated basis, we achieved a small operating surplus of $56,419, which was slightly less than the estimated surplus of $72,332 provided at the July meeting.

This surplus is entirely due to the very strong earnings of NICET, which achieved a surplus of $313,575 for the year. The NSPE General Fund incurred an operating deficit of $270,289. As the following table illustrates, the deficit is entirely due to shortfalls in revenue.

NSPE General Fund

FY 2006/07 Budgeted vs. Actual Operating Results

BudgetActualVariance

  • Revenue$7,179,330$6,906,394$ (272,936)
  • Expenses 7,235,833 7,176,683 59,150

Surplus (Deficit) $ (56,503)$ (270,289)$ (213,786)

The shortfall from membership dues amounted to $266,700, and this shortfall accounts for almost the entire $272,936 revenue shortfall incurred last year.

As always, these operating results are subject to the annual audit, which is scheduled to commence on October 1st.

Current Year Budget and Operations

It is still very early in our current fiscal year, and these interim operating results are not sufficient to identify any real trends. Nevertheless, a brief examination of results can perhaps identify areas of operations that bear watching. The following table provides an overview of results for the NSPE General Fund through the first two months of the fiscal year (16.7% completed).

Fiscal 2007/08 Budgeted vs. YTD Operating Results

Budget Actual Percent

  • Revenue$7,265,851$1,106,115 15.2%
  • Direct Expenses 3,214,807 452,383 14.1%
  • Staff Costs & Overhead 4,015,900 643,900 16.0%
  • Surplus (Deficit) $ 35,144$ 9,832

Overall, the table shows a very familiar story: we are behind pace in achieving our revenue objectives, but expense savings are mitigating the negative impact of the revenue shortfall.

Direct expenses are currently about 2.6% below budget pace. As long as we do not engage in spending initiatives that are unbudgeted, we should achieve modest savings in direct expenses, as we have in most of our previous years.

Staff costs and overhead are slightly below budget pace. We have experienced some staff turnover in recent months, and we are currently in the process of consolidating or eliminating some of those vacant positions. As a result, we anticipate additional savings in this area as the year progresses.

Revenue results can be further broken out, as follows:

Interim Revenue Results, Fiscal 2007/08

Budget Actual Percent

  • Member Dues$3,882,000$ 589,000 15.2%
  • Non-dues Revenue 3,383,851 517,115 15.2%
  • Total Revenue $7,265,851$1,106,115 15.2%

Both dues and non-dues revenue are at 15.2% of budget pace, which is 1.5% below plan.

That non-dues revenue is behind pace is not a cause for concern at this time. Many of our non-dues revenue producing programs have not really even begun at this early point in the year. Some of these programs that typically begin a bit later in the year include the following:

  • Life Member Solicitation
  • Interest Group Voluntary Contributions
  • Online seminars and educational programs
  • PEPP roundtables

If we take a look at some of the major non-dues revenue programs that run throughout the year, we see some positive trends:

Ongoing Non-Dues Revenue Programs

Budget Actual Percent

  • Affinity Card (21-10-002)$ 625,000$ 104,200 16.7%
  • Tenant Rentals (21-30-001) 592,100 88,600 15.0%
  • EJCDC Sales (32-01-082) 403,800 53,700 13.3%
  • Job Board (32-06-013) 175,000 48,500 27.7%
  • Investments (21-20-001) 130,000 30,000 23.1%

Royalties from the affinity card are, of course, fixed by contract and will always track the budget. Revenue from the Job Board and from investments continues to be stronger than anticipated. Tenant rentals are slightly behind budget pace due the vacancy of a small suite on the fifth floor. We anticipate leasing this suite in the near future. In addition, rents in other tenant suites will increase later in the year, due to escalation clauses written into the leases. We also anticipate that revenue from EJCDC sales will increase substantially as we introduce newly revised documents later in the year. In general, we are optimistic about making or exceeding our non-dues revenue budget in this fiscal year.

Member Dues Revenue

Dues revenue is also 1.5% behind budget pace. This is an area that we must watch very closely.

In the February / March time period of our last fiscal year, when we prepared the budget for the current year, we were pleased with the extent of the recovery of dues revenue that we had experienced up to that time. We were optimistic that we could meet the budgeted revenue goal of $3,882,000. We made what we thought was a conservative decision to budget for flat dues revenue in the new fiscal year.

Unfortunately, the pace of dues collections fell off dramatically in the last quarter of our fiscal year, and we ended the year with a shortfall in dues revenue of $266,700. We now find ourselves faced with a very challenging dues revenue budget. We must increase our membership by an amount sufficient to offset the normal annual attrition in members, and we must also recruit enough new members to make up for the loss of members that we experienced last year.

Our declining dues revenue over the last several years mirrors our declining membership. Following are the membership totals, excluding students, for fiscal years 2003 through 2007.

  • FY 200348,613
  • FY 200446,523-4.3%
  • FY 200545,106-3.0%
  • FY 200644,098-2.2%
  • FY 200742,322-4.0%

Clearly, we must focus our efforts on reversing the decline in our membership and the associated dues revenue. Toward this end, we are ramping up our efforts in recruiting Enterprise Member Firms and Corporate Memberships, and we hope to show some positive results from this effort. We must also expand our partnership with states and work closely together to bring new members into the NSPE family.

On a more positive note, the latest membership numbers are moving upwards. Following are the membership totals, excluding students, for the last four months.

  • May 200741,638
  • June 200742,322+1.6%
  • July 200742,666+0.8%
  • Aug 200743,011+0.8%

We have increased our membership by 1,373 (3.3%) over the past four months. This is heartening, especially since we are now performing drops of delinquent members on a monthly basis. The gain of the last four months, then, is a real gain in membership, since no delinquent members are included in the count.

In conclusion, it is very early in our fiscal year to identify trends or make any firm projections. We have reason to be cautiously optimistic that we may be reversing a long trend of membership decline. But we must be very careful to control expenditures this year until we get a better sense of the direction of membership.

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