Treasurer’s Report
Fiscal Year 2007:
July 1, 2006 - June 30, 2007

This is my fifth and final report as treasurer, as my term ends this year. As usual, my report is drawn from the annual accountants’ report and audit and from summaries prepared by the OAH business manager. The accountants’ report was prepared by the CPA firm of Crowe Chizek and Company, LLC, of Indianapolis. This report is also my longest in five years, as I’ve taken this opportunity to reflect on some of the experience of the past five years as well as to report on the 2006-2007 fiscal year.

Last year, I began by reviewing OAH’s budget process, and that may be useful again. The first draft of the annual budget is prepared by the executive office. That draft then goes to the OAH Finance Committee, which includes the president, past president, president-elect, and treasurer as voting members, and the executive director, JAH editor, and chair of the OAH Leadership Advisory Council as nonvoting members. This usually takes place in late February. The draft approved by the finance committee then goes to the board for action during the annual meeting. The budget is for a fiscal year that begins July 1. After the beginning of each new fiscal year, an accounting firm reviews our books and procedures and prepares an audit and financial summary report on the previous fiscal year. During its fall meeting in October, the board reviews this report, reviews a financial report from the executive director and treasurer, and approves any necessary revisions in the budget.

During this past year, we have had several important changes in personnel and procedures. This summer, the finance committee conducted a careful search for a new accounting firm, eventually choosing Crowe Chizek as most closely meeting our needs. Crowe Chizek is well experienced both with nonprofit organizations and with educational associations. At about the same time, we lost the services of our long-time business manager, Sheri Sherrill, and hired a new business manager, Scott Dobereiner. In the interim between the departure of Sheri and the hiring of Scott, we contracted with R. Timothy Murphy, a CPA who specializes in nonprofit organizations, to assist us with the transition. At Tim Murphy’s recommendation and with his advice, we invested in new bookkeeping software that has resulted in a new chart of accounts and also are making more effective use of our membership database software. The board has contracted with Tim to serve as a part-time CFO, providing occasional assistance and quarterly oversight of financial operations. He provided the board with an extended report at our October meeting, and we also had a telephone discussion of the audit report with a representative of Crowe Chizek.

▪ Total Assets. OAH had total assets at the end of the 2006-2007 fiscal year of $2,583,982, as compared to $2,390,198 the year before. Of the current assets, the largest single category consists of investments, worth $2,002,776. The next largest categories are operating cash, $197,543; contributions receivable, $174,119; other receivables, $167,521; and property and equipment, $23,230, net of depreciation. Before we congratulate ourselves on increasing our assets by some $190,000, however, it is important to realize our investments produced more than that amount of unrealized gains, mostly from the rising stock market.

▪ Revenue. Total revenue was up slightly, from $3,415,488 in 2005-2006 to $3,574,165 in 2006-2007. Figure 1 indicates revenue by type. In-kind revenue represents the cash equivalent of the space and other support made available to us by Indiana University (IU). Due to changes in accounting procedures, these categories and figures are not directly comparable to those presented in last year’s report.

▪ Expenditures. Total expenditures are down slightly, from $3,210,178 in 2005-2006 to $3,158,295 for 2006-2007. The major categories of expenditures are shown in Figure 2. Again, due to changes in accounting procedures, these categories and figures are not directly comparable to those presented in last year’s report.

Table 1.

▪ The Bottom Line: Fiscal Year 2006-2007.  The accountants’ reports (table 1) show revenue and expenses for the past five fiscal years. This year has been significantly more successful financially than any of the past four, although some of the positive balance is due to the success of our investments and some is due to success in fundraising for restricted purposes.

▪ Investments. OAH’s assets consist primarily of investments. In general, our investments have done quite well this past year, partly due to the skill of the IU foundation managers and partly because of a favorable stock market. Table 2 presents the end-of-fiscal-year balance for the reserve fund, the Fund for American History, the Prize Fund, and the Second Century Initiative.

Table 2.

Revenue from the Fund for American History is earmarked for particular projects within the overall OAH budget, while revenue from the Prize Fund is used solely for prizes and awards. The Second Century Initiative—Community College Project contains those funds from the Second Century Initiative that are restricted for the community college workshop project. The reserve fund (formerly called the endowment) is not restricted, and the decline in the value of that fund in 2006-2007 came primarily from using it to pay off the $179,000 debt to Indiana University that was carried over from 2005-2006 and described in my report last year.

During 2006-2007, OAH realized an overall increase of $383,344 on its investments, consisting of $112,226 from interest and dividends and $271,118 from unrealized gains, i.e., largely gains from a rising stock market.

▪ Audit Recommendations. Our accounting firm prepares an annual report that summarizes our finances, based on data provided by the executive office, and makes recommendations regarding our internal procedures. With our previous accounting firm, we implemented a series of changes in procedures over several reports, and our last report with that firm included no recommendations for additional changes. With the transition to a new accounting firm, we have received a list of recommended changes in our policies and procedures. Most of these have already been implemented, including some policy changes approved by the board at its October meeting.

▪ Looking Back and Looking Ahead. The past few years have seen the OAH face serious financial strains. In 2004-2005, we had the unusual expense of moving the annual meeting on short notice. However, in both the 2005-2006 and 2006-2007 fiscal years, our actual revenues fell well short of projected revenues due largely to a failure to realize projected membership growth. This produced deficits that were unrelated to moving the annual meeting. In response, the finance committee and the board adopted a reduced budget for 2006-2007, then cut the 2006-2007 budget in mid-year, and adopted an even leaner budget for 2007-2008. Reductions, some of which are likely to prove to be permanent, include eliminating funding for the Talking History radio program, reducing the number of annual issues of the OAH Magazine of History to the previous level and reducing the editor’s position to part-time, reducing the full-time deputy director position to a half-time assistant director, eliminating the position of development director, and moving online the Recent Scholarship section of the Journal of American History. The board also approved increases in the cost of institutional subscriptions and membership dues—the first dues increase in some ten years.

Whether all these will be sufficient to put us on a sound financial footing is not yet clear, but there are some positive signs at the halfway mark (end of December) in the current fiscal year. Revenue has matched expenses for the first six months of the fiscal year, and we have a slightly positive balance of $10,269. This is a significant improvement over last year. You’ll recall that, last year, we started the fiscal year with a debt of $179,000 to IU (who handles many of our expenses, and whom we periodically reimburse). Halfway through the last fiscal year, our debt to IU had actually increased. This year we have a significant positive balance with IU rather than a debt. (And IU has made clear that our accounts must be cleared every six months, so they are no longer willing to carry us for longer than six months at a time.)  Another positive sign at the halfway mark of this fiscal year is that our accounts receivable and pledges receivable have improved markedly, most likely due to the new software and new procedures. The annual meeting is an important source of revenue. Because the 2008 annual meeting will be in New York City, we anticipate a very healthy attendance, perhaps even a record-breaking attendance.

However, amid these positive signs at midyear, two areas for concern stand out—investments and membership. As I noted above, we did very well last year with our investments—indeed, the unrealized gain on our investments meant that we ended the last fiscal year with increased assets over the previous year. In the past six months, however, we have lost some of those unrealized gains as the falling stock market has affected our investments. Membership is also down by 300 as compared with a year ago. Despite the increase in dues (or perhaps related to the increase in dues), our revenue from membership dues and institutional subscriptions stood at only 44 percent of the projected annual total. Unless this is reversed during the next six months, we could fall as much as $142,000 short of projected revenues. The executive office has recognized this potential problem, and is developing plans to increase membership.

The rocky financial experiences of the past few years have given the finance committee and the board a much better understanding of the organization’s financial situation. That experience, along with the changes in the accounting firm, executive office personnel, and software, promise better forecasts for future budget-making. The finance committee—and Tim Murphy—are firmly committed to a conservative approach to revenue projections, and to developing annual budgets based on those estimates rather than hoping to raise sufficient funds to cover projected expenses. These experiences and commitments will help to guide OAH as it will likely continue to face difficult financial decisions in the near future, notably: What are the core activities of the organization that should have first call on revenues, and what activities are less central? Should future budgets give priority to restoring funds that have been taken from the reserve fund to cover deficits or to restoring the programmatic reductions of the past few years?

When I agreed to serve as treasurer some five years ago, I could not have anticipated the financial troubles that we have faced, but the experience has demonstrated to me the responsibility and dedication of OAH’s elected officers, especially the 2006-2007 OAH Finance Committee of Vicki Ruiz, Richard White, and Nell Painter. We owe them our thanks for the way that they have given of themselves above and beyond what is usually expected of our presidents. I hope that future presidents and treasurers will not have to go through what we have experienced. Over the four years that I worked with Sheri Sherrill, I came to appreciate her strong sense of responsibility and commitment to OAH, and I wish her well in her new position at IU. Lee Formwalt, our executive director, has faced difficult decisions about cutting programs that he had nurtured but has nonetheless remained optimistic about the future, and I wish him well, too. Jay Goodgold and Bill Chafe, the current cochairs of the OAH Leadership Advisory Council, and Ira Berlin, a previous cochair, have given generously of their time and advice, and deserve the gratitude of all OAH members.