FY 2004 was another very good year financially
From the Treasurer
Finally, industry grants and contributions increased from $2.8 million in 2003 to $4.9 million in 2004. Taken together, the total increase in our reserves in 2004 was more than $7.1 million, which compares favorably with the total increase of $7.9 million in 2003.
Combined Balance Sheet
Total assets of $74.4 million at year-end 2004 represented an increase of approximately $8.4 million from the 2003 year-end balances. The increase is due to both operational revenues and investment gains. Operationally, the gain is due to Annual Meeting revenue (mainly from exhibitors), publications (due to the release of Orthopaedic Knowledge Update 8), CME courses (due in great part to course sponsorship grants) and the Political Action Committee (PAC).
Our liabilities at year-end increased by $1.3 million over 2003, wholly attributable to the increase in deferred 2005 Annual Meeting revenue because the 2005 meeting was held one month earlier than the 2004 meeting.
For the second consecutive year, there were gains in long-term investments. More than $1 million in dividends and interest income, net of fees, was generated. In addition, the increase in market value at Dec. 31, 2004 resulted in $2.7 million of unrealized gains. Combined, the Academy experienced an 11.1 percent return on the portfolio compared to our benchmark of 10.6 percent.
Combined Statement of Activities
Combined revenues of the Academy and Association were $44.4 million, an increase of $3.5 million over 2003. The increase resulted from the Annual Meeting, publications, CME courses, and the PAC. Combined expenses of $43.1 million were $3.4 million more than in 2003. The increase in expenses is directly tied to the increase in revenue noted above.
I would like to comment briefly on two programmatic activities: 1) the AAOS PAC and 2) medical liability reform. The PAC had a tremendous year in 2004, with member contributions of more than $1.1 million spent on political activity, and another $333,000 from Association reserves.
Medical liability reform was also a key initiative with more than $500,000 from member contributions and $860,000 from Association reserves spent on this activity. Taken together, we spent almost $2.8 million dollars on public and political education on the medical liability crisis and got involved in the political process to an extent we never did before.
While we saw success in 2004, particularly in the November elections, there is more we need to accomplish not only on medical liability reform but on Medicare payment and pay-for-performance issues. Thus, it will be critical to continue our efforts, through member donations to both the PAC and medical liability reform in 2005 and 2006, and through the continuing use of Association reserves.
As you know, your Board has already voted to spend $717,000 in 2005 and up to $2 million in 2006 from Association reserves on medical liability reform. We need to continue this fight.
Recent forecasts have projected another strong year financially from operations with investments see-sawing back and forth but expected to be slightly positive by the end of 2005.
Education continues to be the AAOS’s predominant activity under our Strategic Plan priorities. New products and programs are continually being developed, in both traditional and new, innovative formats. The Academy will be increasingly active in Washington, D.C., particularly with medical liability reform, the Medicare physician payment schedule, and the development and implementation of pay for performance initiatives.
As always, your involvement through participation in AAOS activities, programs and committees, along with your continuing donations to the PAC and medical liability reform will ensure a robust Academy for years to come.
In summary, the total financial picture for the Academy/Association continues to be strong. An emphasis on controlling expenses and developing new sources of revenues continues. In 2003, I began to track the financial performance of various activities to identify trends and we are using this information to identify areas that need our attention as we move forward. We continued these efforts through 2004 and have already begun to expand them slightly in 2005.
Also, the Leadership Review Group continues to critically look at each key program, committee and activity annually to ensure that each is within budget and that the program accomplishes what it is designed to do: create value for the fellowship.
Please contact Stuart L. Weinstein, MD, AAOS president, or me with any comments or concerns.
Edward A. Toriello, MD
CONSOLIDATED STATEMENTS OF ACTIVITIES
For the years ended December 31, 2004 and 2003