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TREASURER'S REPORT TO THE MEMBERSHIP

The Society for Conservation Biology has not been immune from the effects of the economic downturn, but thus far is weathering it. The Board of Governors and staff have been managing SCB's finances conservatively, expecting that the downturn will continue into 2010 and that a recovery could be slow. Our main sources of income include earned income (journals, meetings), contract income, and donor income from foundations and others. All of these sources of revenue have been affected. Nevertheless, SCB's financial position remains sound and programs continue to operate effectively. This report examines our financial position for 2008 and then for 2009.

2008 Position

Audit. SCB has completed its 2008 audit and again received a "clean" audit opinion. The audit report from Rubino & McGeehin provided suggestions for improvement, and we will continue to enhance our financial management in partnership with our accounting services firm, Burk & Associates, Inc. The clean opinion means that our books fairly represent our financial position. In other words, SCB management has accurate financial information. The regulatory environment for non-profit organizations continues to grow more complex, and the audit reflects that we are keeping up with new requirements.

Balance Sheet. Because a balance sheet is a snapshot of our finances that can change substantially from day to day, it is most useful when compared with balance sheets (snapshots) taken at another time. The follow highlights differences between 2008 year end and 2007 year end.

-- The Board Designated Reserve (line 1100) decreased in value during 2008 by about $400,000. This decline in value reflects the lost value of stocks and bonds held by SCB and a one-time withdrawal of $100,000 to cover an operating shortfall in 2008. One purpose of the reserve is to see us through difficult times. Our losses ultimately should be paper loses as investments recover. We already have seen some recovery in 2009.

-- The major portion of the decline in cash (lines 1000 et seq, checking account and CDs) reflects our investment in and expenditures on the new building, which totaled $554,000.

-- The decline in cash is parallel with a major increase in fixed assets (lines 1500 et seq, $1.376 million), which is the new building, land, capital improvements, and furniture. The amount still owed on the building appears below, under liabilities (line 2700, our mortgage). Although not liquid, we have significant equity in the new building, and real estate is mostly maintaining its value in Washington, D.C.

-- The increase in receivables includes grants awarded in 2008 but not due for receipt until 2009.

Income & Expenses (see Tables 2008-1, 2008-2)

-- 2008 expenses were 115% of income, resulting in a deficit for the year of $404,000. This is not a desirable way to end the year, but it is not quite as bad as it might appear. First, more than $150,000 spent in 2008 was covered by funds received in another year. Second, about $50,000 was paid in property taxes; the property tax bill was erroneous but needed to be paid; most of this amount should be refunded. The real deficit was about $200,000, and reflects our inability to meet income goals from foundations and donors.

-- SCB always has supported many programs with income earned from other programs. Most notably, Conservation Biology income has supported SCB "overhead" functions such as governance or important internal communications functions such as the website and newsletter.
Other programs, like Conservation magazine and the Policy Office, have relied in part or totally on raising funds from donors. SCB globalization and creation of and basic support of the Sections also have historically been funded with grants and general earned income. In 2008 we had the following shortfalls:

-- Conservation magazine did not receive $117,000 in revenue from sponsors and other sources.

-- The Policy Office fell $7,000 short of its fundraising goal, although the amount looks higher because $75,000 of income for 2008 had to be booked in another year.

-- Sections income was $44,000 less than expenses although this was masked by income from the International Marine Conservation Congress (IMCC).

-- There were some unbudgeted expenses authorized during the year, including refining costs for the building and a business plan for Conservation magazine.

-- The deficit was minimized by rigorous efforts to reduce expenses, but could not be erased without cutting into basic programs, so the $100,000 from the Reserve and $100,000 from a line of credit (since repaid) were used.

-- Certain building costs, which are capital and not part of operating budget, are tracked separately (see the balance sheet).

Because we ran surpluses from 2004 to 2007 inclusive, the 2008 deficit is somewhat less of a concern. However, 2009 and 2010 will be difficult years for fundraising and earned income likely will show a slight decline. SCB has responded in several ways:

-- Costs have being reduced below 2009 budget while trying to maintain basic program elements.

-- Diversified fundraising efforts are underway generally and a new business plan aimed to make Conservation magazine self-sustaining is being implemented.

-- Senior staff and the Board's Executive Committee are meeting at frequent intervals to monitor income and expenses and take action as needed.

-- The financial planning horizon has been extended out to 18-24 months on a rolling basis.

2009 to 31 May (42% of the year)

Balance Sheet. The significant increase in assets ($850,000) is due to receipt of the Cedar Tree (Smith Fellows) grant, the 2008 profit share, and other grants. Liabilities decreased overall as early year bills were paid and the principal on the building mortgage is reduced. The value of assets is measured only at year end.

Income & Expenses (see Tables 2009-1, 2009-2)

-- Income is 50% of expenses, largely due to receipt of the entire Cedar Tree grant, Conservation Biology income, and income from the annual meeting for which expenses are minimal at this point. Section/group income is largely the result of the IMCC, as are the expenses amounting to $201,275. The $99,000 deficit for the year does not include funds received in 2008 to cover part of the IMCC (nearly all IMCC money will be included in 2009 after audit adjustments are complete).

-- Administrative expenses appear high in part because we have not yet allocated Executive Office costs to programs.

-- Expenses are 38% of planned with 42% of the year gone, but many expenses, such as the annual meeting, will not be booked until they occur.

-- Expenses for Groups are much higher than planned because we did not budget for the IMCC. The meeting, however, will likely turn a substantial profit for the Marine Section. SCB overhead costs are built into expenses.

-- We have raised $150,000 of the $170,000 needed for the Policy Office. 85% of projected Conservation Biology income has been received as has 56% of planned Membership Services income.

-- Fundraising goals for the Policy Office can likely be met (most has been raised) and a campaign is planned to raise the remainder for 2009 and for 2010. Conservation magazine is pursuing several potential partners and sponsors and is also implementing a plan to increase subscription revenue substantially by 2010. A major challenge continues be support for the Sections' general operations.

-- We do not anticipate cash flow problems -- should we have any -- until the last quarter. Because we will be monitoring income closely throughout the year we will know if anticipated income is falling short and can take additional action to reduce expenses. The ability to act quickly on shortfalls -- and better, to anticipate them -- is critical to keeping solvent. Funders are looking to organizations that are taking the downturn seriously, have planned for it, and thus continue to be strong even if operating at some reduced capacity.

The success of SCB ultimately depends on you, its members, and your personal support for programs and your willingness to tell others about our publications, meetings, and other important work.

David Johns

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