Board Reports

Secretary-Treasurer's Report

John Rogers, MD, MPH

The secretary-treasurer of STFM is responsible for presenting fiscal issues to the Board of Directors, but the real work is done by Roger Sherwood, CAE, executive director; Stacy Brungardt, CAE, deputy executive director; and Dana Greco, controller. Roger and Dana provide the Finance Committee and Board with a monthly report that includes a balance sheet of assets and liabilities/equity, a statement of income and expenses, and an analysis comparing the current and prior fiscal years. Roger and Dana also develop an annual budget for the next fiscal year, which the secretary-treasurer presents to the Board at its November meeting. Roger and Stacy manage the day-to-day activities of the organization that affect whether the budget approved by the Board becomes reality. These three talented and dedicated professionals are continuously seeking and developing ways to enhance the financial health of our organization. Their efforts, and those of the rest of the STFM staff, have significantly improved our bottom line from deficits in excess of $200,000 in 2002 and 2003, to a deficit just over $100,000 in 2004, to a deficit of less than $44,000 in 2005.

The budget for 2005 had projected income of $2,363,000 and expenses of $2,477,950, with a deficit of $114,950 due to $115,000 support for the Annals of Family Medicine. However, when the Annals of Family Medicine was started, the Board decided to fund the first 5 years of our commitment out of contract surpluses or our long-term reserves, so this projected deficit is not a real cash flow deficit. The budget projections were very accurate, with actual 2005 income of $2,413,384 and expenses of $2,470,926, for a deficit of $57,542, which when adjusted for contract net income, change in investment market value, and expenses charged to long-term reserves, resulted in a net deficit of $44,048.

The Board adopted financial performance measures for the Society proposed by the Finance Committee, which included five goals. The status of those goals for 2005:
(1) Maintain balanced budget—not achieved with deficit of $44,048
(2) Maintain balanced budget within sectors—achieved in each sector (publications, merchandise, grants, service contracts, and meetings)
(3) Cost of business operations not exceed regular business income—not achieved with shortfall of $134,836.
(4) Review fees and explore other income streams—achieved.
(5) Maintain strategic reserve for emergency and opportunity funds—achieved with $2,539,408 in long-term reserves, which is equal to 102.5% of 2005 budget or 12.3 months of expenses, when goal is to have 6 months of expenses in reserve.

The Board of Directors has also become more active in the financial aspects of the organization. This included consideration of our business model and core services, which would inform Board decisions about proposed Society initiatives with fiscal implications. We reiterated that faculty development is the Society’s core mission. We also had frank discussions of STFM’s future financial commitment and funding for the Annals of Family Medicine. As noted above, when the Annals of Family Medicine was started, the Board at that time decided to fund the first 5 years of commitment out of contract surpluses or our reserves.

In deliberating about the 2006 proposed budget, the Board renewed STFM’s commitment to supporting the Annals of Family Medicine but at a reduced level. The Board also anticipated the 2007 budget when we must fund Annals out of our regular operating budget. Given our recent budget deficits, adding support for Annals to the operating budget would lead to significant deficits unless there were substantial reductions in expenses or increases in revenues. For this discussion, the Finance Committee outlined a number of potential cost-cutting measures and new sources of revenue. The Board preferred to work to increase revenues to avoid significant budget cuts, so at its next meeting, the Board developed an extensive list of additional fund-raising strategies. The Board and staff are prioritizing these potential methods to identify those most likely to increase our income.

While the Society has had budget challenges like many organizations, we are sound fiscally with a substantial reserve, excellent budgeting projections, sound financial management, and a highly effective management team that has an actively engaged Board of Directors. STFM has an important mission, and with careful planning and implementation, we will have the financial resources to continue momentum toward our goals.