Minutes
Conference Call of the Board of Directors of the
Society for Classical Studies
February 4, 2015
The Board of Directors of the Society for Classical Studies met via conference call on February 4, 2015. Those present were Dr. Adam D. Blistein, Profs. Mary C. English, Bruce W. Frier, Mary-Kay Gamel, Ralph J. Hexter, Stephen Hinds, Laura McClure, Ellen Oliensis, David H. Porter, Ralph M. Rosen, and Michele Renee Salzman. Profs. Roger S. Bagnall, Joy Connolly, Michael Gagarin, Kathryn J. Gutzwiller, Sarah Iles Johnston, John Marincola, and John F. Miller were absent. Also present by invitation was the Society’s auditor, Mr. Ronald Scaramuzza of BBD, LLP.
The conference call began at 3:00 p.m. In Prof. Marincola’s absence, Dr. Blistein asked Mr. Scaramuzza to begin the presentation of the single agenda item for the call: a review of his firm's most recent report on the Society's financial condition with the Board. The Directors had received copies of the Society’s audited financial statements for the fiscal year that had ended on June 30, 2014, as well as an accompanying professional standards letter from BBD, LLP. At 3:00 p.m. Dr. Blistein asked Mr. Scaramuzza to begin his report. He directed the Board’s attention first to the independent auditor’s report at the beginning of the statements. That report gave the firm’s opinion that the statements contained no significant misstatements.
Turning to page 2 of the statements, Mr. Scaramuzza noted that the Society’s net assets had increased by more than $900,000 during the fiscal year. He described the three types of assets included in this total and pointed out that of the three, unrestricted assets represented ones that the Society could use to support any Board-approved project. Those assets had increased by about $350,000 during the year, and the new total at the end of the year, just over $2 million, was equal to 21 months of operating expenses at the Society’s current spending rate. The corresponding figure at the end of the 2013 fiscal year had been 16 months.
Mr. Scaramuzza noted that almost all of the Society’s assets consisted of investments in mutual funds, and he directed the Board’s attention to a schedule showing that at the end of the fiscal year 67% of these holdings were in equities. That schedule also showed that investment income had increased by more than $500,000 in 2014 over 2013, mainly because of unusually large capital gain distributions from the mutual funds.
The Society’s liabilities consisted of the TLL and Pearson Fellowships which were typically awarded in one fiscal year but paid in the subsequent one and deferred membership revenue. Because the Society’s membership year ended in December while the fiscal year ended in June, half of the dues collected during a calendar year had to be applied to the subsequent fiscal year.
Mr. Scaramuzza discussed the schedules that showed the composition of the Society’s temporarily and permanently restricted assets. The Board had recently voted to broaden the range of projects that could be funded by assets temporarily restricted for publications, and this decision was beginning to have an impact on this figure.
The statement of activities provided details of the large increase in net assets from the 2013 to 2014 fiscal years. The unrestricted column of this statement provided the best measure of the Society’s financial performance because it showed where SCS had derived revenue and then spent those funds. Unrestricted revenue included temporarily restricted assets released from their restrictions because they were being used for the purposes for which they had been donated. This figure had increased by $366,000 during the fiscal year as compared to an increase of only $69,000 the previous year.
On the other hand, Mr. Scaramuzza noted that the statement showed the large extent to which investment income and appreciation were responsible for this growth. The statement provided figures for changes in assets both before and after the impact of investments was taken into consideration. The Board could thus see both the results of activities they could control (the day-to-day operations of the Society) and that they could not control (financial markets). While assets had increased overall between 2013 and 2014, once the impact of investments was eliminated, total assets had decreased in 2014 because the Society was no longer receiving substantial amounts of Gateway Campaign gifts. In addition, when investment income was excluded, both revenue and expenses had decreased in 2014 versus 2013, while unrestricted assets had increased.
The statement of functional expenses showed the types of expenses that the Society incurred. Mr. Scaramuzza noted that salaries were by far the largest expense category, but this figure had declined in 2014 versus 2013 because the SCS had transferred responsibility for the Digital Latin Library project to the University of Oklahoma. Travel, meal, and lodging expenses had declined for the same reason and because the 2013 annual meeting had included a special celebration of the successful conclusion of the Gateway Campaign. “Cosponsor share of joint revenue” represented AIA’s share of annual meeting registration and exhibit revenue and so fluctuated annually with the amount of revenue received. Equipment rental expenses had been higher in 2013 than in 2014 because the societies had incurred fees for using a convention center in the former year. On the other hand, printing and postage expenses had increased in 2014 because of the production of the Gateway Campaign acknowledgment book.
The auditors’ professional standards required them to include a statement of cash flows in their report, but Mr. Scaramuzza felt that this statement did not provide much useful information to the SCS. The statement was designed to show the extent to which an organization depended on financing activities (in addition to operations and investments), and only permanently restricted gifts to the Society fell into this category.
Mr. Scaramuzza then reviewed several notes to the statements that described the adoption of the Society’s new name and the fact that the Society had not changed any accounting policies during the year. Other notes explained what discounts the auditors applied to multi-year grants, the terms of the Society’s lease at the University of Pennsylvania, its contributions to pension plans for its employees, commitments to hotels for future annual meetings, and descriptions of methods used to assign values to Society assets. In addition, a final note stated that while the auditors were presenting statements as of June 30, 2014, they believed that as of December 15, 2014, the date on which they had issued their report, nothing had occurred subsequently that required any reconsideration of the statements.
Turning to his firm’s professional standards letter, Mr. Scaramuzza reminded the Directors that the statements belonged to the SCS itself; the auditors were merely expressing an opinion on their validity. The auditors believed the statements were accurate, but that belief was one their profession defined as reasonable but not absolute. The letter reminded the Board that the statements rested in part on estimates, particularly with regard to the allocation of staff effort and certain other expenses among the Society’s various activities. The auditors had not needed to make any adjustments to information provided by staff and had enjoyed good cooperation from staff.
Mr. Scaramuzza then described for the Board various kinds of deficiencies in internal financial controls that the firm sought to identify in any audit. While professional standards prohibited the firm from issuing a letter stating that it had found no such deficiencies, he reminded the Board that, if they had found a deficiency, the firm would have written another letter to the Directors describing that finding.
Control deficiencies in small organizations typically arose when one person handled all or almost all of the financial activity. In the case of SCS, Dr. Blistein had taken on this level of responsibility, but for many years the Society had offset this concentration of responsibility by asking Financial Trustees to receive monthly bank and investment statements directly from the financial institutions issuing them and to review the statements carefully. Mr. Scaramuzza stressed the importance of this review by the Trustees and reminded the Board that the search for the new executive director was both an opportunity to reduce the concentration of financial responsibility and a challenge in that the SCS would need to find new ways of generating ongoing financial reports.
Directors had no questions for Mr. Scaramuzza, and the call was concluded at 3:50 p.m.