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TREASURER'S REPORT TO THE SCB MEMBERSHIP, JUNE 2006

• 2005 BUDGET YEAR HIGHLIGHTS
• 2006 BUDGET YEAR TO DATE HIGHLIGHTS
• OVERALL ASSESSMENT

2005 BUDGET YEAR HIGHLIGHTS

Audit Findings. The 2005 audit was completed at the end of May. We are in compliance with accepted accounting standards and our financial statements have been found to reflect fairly SCB's financial situation. We expected no lesser result, but the rapid growth of SCB-greater revenue and expenses as well as new programs-is something of a challenge, and this indicates we are staying on top of things.

SCB income was 112% of planned, at $2,078,222, largely due to additional journal receipts and annual meeting receipts.

Conservation Biology constituted 47% of income, followed by Conservation In Practice (20%), annual meetings (11%), and Smith Fellows (8%). Together, publications and the annual meeting account for more than 75% of SCB income, with publications alone bringing in 66% of total income.

SCB expenses were 113% of planned, due to expert advice and assistance with publication contract negotiations, annual meeting costs, and membership services. In the case of annual meeting expenses, income also was proportionately higher. Membership services costs included conversion to a new fulfillment system.

Program related expenses (everything except administration and development) were just over 79% of total expenses-a very good ratio in both absolute and comparative terms.

The budget anticipated a net of ~$54,000; the actual net was ~$43,000.

The Board Designated Reserve gained 6.6% in earnings and another $23,300 in "regular" lifetime memberships; an additional $84,000 in lifetime membership income resulted from a one time purchase on behalf of the Smith Fellows. The total market value at year end was $1,053,508. This is very respectable growth, especially given market volatility. (Cost basis for the BDR is $577,340.) It is considered sound NGO financial management to have a reserve in excess of one year's core operating expenses. Although our reserve has grown, so has SCB, so we have still not reached the recommended reserve level.

2006 BUDGET YEAR TO DATE HIGHLIGHTS

The Board Designated Reserve reflects a slight increase (just over 2%) in net earnings so far this year, standing at $1.076 million as of mid-June. Steve Humphrey notes that the market has been volatile, costing us some earlier gains, but we have been outperforming the Standard & Poor's 500, which had only a 0.3% gain over the same period.

The Blackwell signing bonus of $500,000 will be received in January of 2007. The Board has directed staff to treat this as amortized income, spreading it over the eight years of the contract. The Board will implement this decision as part of its annual budget approval process.

New, unbudgeted income has been generated, primarily in support of the Europe Section meeting and the 2006 annual meeting. The Board will be notified formally of the exact amounts, the source, the purpose, and the staff's recommendation for budgeting expenses so they will have an opportunity to review the information and act as needed.

As of 31 May 2006, with 42% of the year gone, income is at 84% of budget or $2.058 million; expenses are at 45% of budget, or $1.106 million.

- Income is high due to profit sharing, annual meeting receipts, receipt of grants supporting the Smith Fellows, and other forms of support.

- Personnel expenses, which generally track evenly throughout the year, are at 39% of budget. There were some vacancies early in the year so it was expected we would be under budget at this time. We budgeted the development and policy positions at 75% of full cost with this in mind. Personnel costs make up about 40% of SCB expenses.

- Contracts are expensed when signed as are some other costs, which is partly why expenses exceed 42%. Timing of payments for publication of journals is not straight-line.

- Annual meeting income is somewhat higher than planned.

- Section income and administrative income also exceed budgeted income, due to unplanned grants from Blackwell and other sources.

- Fundraising continues for the policy position, which received seed support last year from the Marissa Foundation; these funds are being held and will be released when the position is filled.

- Administrative expenses appear to have exceeded the annual budgeted amount because administrative costs attributable to programs are not allocated until year-end.

Actual expenses are 54% of actual income overall. Not all programs have dedicated or designated income: the newsletter and Web site, for example, are perquisites of membership. They and the fulfillment system are funded by publications income. Marketing and governance periodically receive limited income but not enough to cover costs. Administration costs are built into some grants and other income streams.

To date, half of our income is from publications, against 62% planned. 75% of income thus far is from publications and the annual meeting, against 85% planned. We expect both to catch up.
By comparison, publications are planned to account for 48% of SCB expenses and are tracking at 49% of all expenses. Outreach actual expenses are at 16% of total, against ~29% of planned, largely because annual meeting expenses are yet to be paid.

OVERALL ASSESSMENT

- SCB is financially healthy.

- As we grow more complex and larger we need to watch expenses and income more carefully; small glitches defined by being a small percentage of our budget can be large in absolute dollar terms. In the case of some programs, no money in means no money out. But in the case of others we can quickly accrue costs, especially in the area of personnel.

- We continue to rely heavily on publications to carry other programs. Many of these programs are closely associated with services to members, or with managing SCB as a whole. Diversification of income remains a priority. We have just hired development staff-a role the Executive Director has been playing-increasing our capacity in this area.

- SCB's effort to bring the annual meeting in house - at least for North American meetings - is occurring. Nominally the meetings are showing a profit thus far, but "extra" revenue is mostly being used to support student and some international attendees.

- Costs of continuing to build and maintain a truly international society remain a big challenge.

- Because of the increasing complexity of our operations and the number of new programs or changes to programs, our fiscal management system is in need of a review. Among the items we need to review are (1) how we account for internal transfers, (2) how we minimize manual manipulation of system information in order to satisfy needs of the Board, staff, funders, auditors, and others, and (3) how our programs are delineated and costs allocated.

- In compliance with the California Non-Profit Integrity Act, the membership has amended the bylaws to create the required Audit Committee.

If you have any questions about this report or the financial status of SCB, please contact the Treasurer (djohns@viclink.com).

David Johns, Treasurer

NOTE: SCB's fiscal year is the calendar year.

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