OAH Treasurer's Report, Fiscal Year 2008

Robert Griffith

This is my first report as OAH treasurer. My term started in May 2008, although I began sitting in on finance committee meetings in February 2008. My report is based in turn on the reports of our auditors, our part-time chief financial officer, and the OAH staff. Please note that this report focuses on FY2008, which ended on June 30, 2008, before the worst of the current financial storm had occurred. I will address recent changes and related issues at the end of my report.

Let me begin by acknowledging a tremendous debt of gratitude to Lee Formwalt and the OAH staff, to former OAH Treasurer Bob Cherny and the other members of the OAH Finance Committee, and to OAH Presidents Vicki Ruiz, Richard White, and Nell Painter, who guided the organization through a very difficult period and who introduced a series of important changes in the organization’s financial management. These changes included the selection of a new accounting firm (Crowe Horwath, LLP), the appointment of a new business manager (Scott Dobereiner), and the appointment of a part-time CFO (Timothy Murphy). New accounting software was installed, which provided the organization with more effective financial management and reporting tools. The OAH’s relationship with Indiana University remains a good one and we are currently negotiating a renewal of our external agency agreement with the university. As a result of these changes, the OAH is much better prepared to face the challenges that lie ahead.

Auditor’s Report

In October 2008, the OAH received a positive report from its auditors, Crowe Horwath, LLP. This was an excellent indication of the changes in financial management introduced over the past several years. Auditors routinely identify problems in ascending order of seriousness, from “deficiency” to “significant deficiency” to “material weakness.” They also recommend “best practices.” At the end of fiscal 2007, the auditors identified two deficiencies, five significant deficiencies, and made recommendations on four best practices. At the end of fiscal 2008, by contrast, they called attention to only two deficiencies and only one significant deficiency, while offering recommendations regarding only two best practices. By the time the auditors’ report was issued, OAH staff were already addressing these issues.

OAH Budget Process

In his last several reports, Bob Cherny began by reviewing OAH’s budget process, a useful practice that I intend to continue. Here is the sequence: The first draft of the annual budget is prepared by the executive director, who submits it to the finance committee, usually in February. The finance committee is comprised of the president, past president, president-elect, and treasurer, as voting members, and the executive director, the JAH editor, and the cochair of the OAH Leadership Advisory Council as nonvoting members. Once approved by the finance committee, the budget then goes to the executive board for action when that group meets during the annual meeting. The OAH fiscal year ends on June 30, after which our accounting firm reviews our books and procedures and prepares an audit and summary report on the past fiscal year. The executive board reviews and discusses this report during its fall meeting in which our part-time CFO, Tim Murphy, also participates. The board also reviews the current budget and approves any necessary changes. The finance committee continues to monitor the organization’s finances throughout the fiscal year.

Revenue and Expenditures

In FY2008, OAH revenues were $3,300,534, down from $3,574,165 in FY2007. Total expenditures in FY2008 were $2,799,623, down from $3,158,295. Expenses for the annual meeting in New York exceeded what had been budgeted, while revenues from the meeting were lower than anticipated. Belt-tightening by the OAH staff in Bloomington reduced overall expenses, which produced a $99,443 surplus at year’s end. For a comparison with previous years, see Table 1 and Figure 1.

Total Assets

At the end of FY2008, the OAH had total assets of $2,677,957, up from $2,583,982 in FY2007. The majority of these assets ($1,914,908) are comprised of investments managed by the Indiana University Foundation (see Figure 2). However, three points are worth making: 1) To note the obvious, while the OAH, like other investors, fared relatively well during the first years of the new century, the same cannot be said of our current circumstances or the outlook for the near term. Since June 30, we have lost $553,824 or 29% of our endowment, which will result in reduced income in the years ahead. 2) The OAH has, in its unrestricted fund, a cumulative deficit of $562,000, in the form of services, mainly subscriptions, paid for but not yet delivered.

The decline of the Reserve Fund reflects several factors, including the moving of the 2005 annual meeting and the settlement of a cumulative debt to Indiana University. While the impact of this decline was offset by the overall growth of OAH investments (from June 2004 to June 2008, the Fund for American History rose 15% from $720,693 to $825,658 and the Prize Fund rose 31% from $354,736 to $466,052), that growth has now come to an abrupt halt with the recent sharp decline in our endowment (see above).

Looking ahead to FY2009 and beyond

Acting on the recommendation of the finance committee, the executive board adopted a downwardly revised budget for fiscal 2009 at its October 2008 meeting. We are continuing to closely monitor the budget as the current crisis unfolds. We are also working hard to budget closely for fiscal 2010, which begins on July 1, 2009. While the OAH is by no means in crisis, it is not on as strong of a footing as many of us would like. Moreover, membership numbers reveal some disturbing trends. Although overall membership is high (9,370 as of September 2008), this figure is misleading. It includes 1,000 high school history teachers whose membership is subsidized through Teaching American History grants and who tend to cycle off when the grants expire. Another 1,270 are student members, who pay a discounted price of $35.00 a year. The impact of membership on revenue is offset in the short run by the higher dues paid by growing numbers of older historians. But in the long run, this too is cause for concern, especially if our membership is not replenished by younger members.

All of this leads me to encourage the executive board, the strategic planning committee, and the membership at large to undertake the creative thinking and bold actions necessary to forge a strong, sustainable future for the OAH.

Robert Griffith is chair of the history department at American University.