Budget FY 2011 DuWayne W. Jones, CPCM, Fellow San Diego, California March 27, 2010

2 2 Consolidated Budget Summary FY11 BudgetEAC FY10- FEBFY10 Budget Variance FY11 BUD/FY10 EAC FEB Revenues$6,578,114$5,082,261$4,803,324$1,495,853 Expenses$6,232,150$4,864,352$4,810,104($1,367,798) Net Operating $345,964$217,909($6,780)$128,055 Net %5.3%4.3%-0.1%

3 General Assumptions Moderate risk Continued economic uncertainty. Income from all advertisement accounts are at risk. –Association advertising and exhibiting is down. –Print ads down across all industries. –CMjobs.com is subject to employment trends beyond our control. No new income streams although World Congress is back in the budget after one fiscal year hiatus. Budgeted surplus from operations is 5.3% (FY 10 EAC 4.3%, FY 09 0%).

4 General Assumptions Restricted Investments. In light of the current economic situation, and continued uncertainty in the stock market, and discussions with NCMA’s investment advisors net investment income has been included at zero (Investment Revenue of $10,000 offset by investment fees of $10,000) Unrestricted investments – Assumed 0.2% on $208,000 = $416 Information Technology Investments: After the significant investment in information technology both in hardware and software in the past three years the FY 11 Budget includes no significant information technology investment.

5 Revenue Growth Assumptions Revenue increase over FY 10 EAC: 29.4%. –Isolating out World Congress and one ADC effect: 6.2% Membership13.1% –Dues increase Education4.3% –Webinars Advertising 2.6% –Corporate sponsors/education partners Certification7.2% –Exam fees, recertification fees Meetings130.5% - Isolating out World Congress and one ADC effect (-0.1%)

6 Changes from FY2010 Meeting schedule changed: –World Congress is Back; schedule shift from April to July. –One ADC in FY2011. –No Academic conference. Re-formed Marketing and Communications department. –Dedicated expense accounts. –Moved two employees from Creative Services to Marketing. Increased staff: –Director of Marketing (two months in FY 10 EAC) –Educational Technologist –Chapter Relations Specialist - P/T

7 Changes from FY2010 (con’t) Not forecasting revenues from investments. CoPs Symposia now Virtual Conferences. No merger implementation costs included (small expense planned for exploratory alliance discussions). Planned contributions to restricted reserves and new building reserves fund.

8 Total Revenues Budget FY 11 EAC FY 10Variance Membership2,104,9791,861,325243, % Component Relations9,25010,445(1,195)-11.4% Education823, ,7894.3% Advertising1,444,9001,407,97536,9252.6% Certification120,600112,4958,1057.2% Meetings2,074,625900,0491,174, % Total Revenue6,578,1145,082,2601,495, %

9 No World Congress this FY! BudgetEstimate Recession of EAC

10 Total Expenses Budget FY 11 EAC FY 10Variance Governance112,593117,8795,2864.5% Component Relations192,147100,396(91,751)-91.4% Administration1,880,1611,672,506(207,655)-12.4% Marketing and Communications601,784191,534(410,250)-214.2% Customer Service312,735270,111(42,624)-15.8% Education463,443485,11621,6734.5% Creative Services1,177,0031,281,524104,5218.2% Certification135,527127,036(8,491)-6.7% Meetings1,356,758618,250(738,508)-119.5% Total Expenses6,232,1514,864,352(1,367,799)-28.1%

11

12 Expense Summary Aggregate Salaries and Benefits – Addition of Director of Marketing, Educational Technologist, Chapter Relations Specialist (P/T), annual raises and higher health insurance costs. Component Relations – Increase in Chapter Grant program, Awards – timing (WC Schedule) Administration – Staff training, tuition reimbursement, depreciation. Comparable to FY 09 expense - $627,629. Marketing – Inclusion of WC, comp CM Magazine program.

13 Expense Summary (con’t) Customer Service – Additional mailings, higher printing costs. Education – Lower Webinar, Book costs, Higher LDP – timing. Creative Services – Variable commission costs, lower CM Magazine printing costs –new contract. Meetings – No WC in FY 10, Two ADC’s in FY 10.

14 Reserve Management Nonprofit Operating Reserve Policy Group currently drafting white paper on Operating Reserve Policy for Non-Profits. Group comprises ED’s, CFO’s, Audit Partners, Consultants and Tax Professionals. Chaired by one of the leading experts on Not-for-Profit accounting in the US. Greater Washington Society of CPA’s endorses initiative, mission. Recommendations will carry weight with AICPA and FASB.

15 Reserve Management – cont. Preliminary conclusions by Group on level of Reserves –No right answer. –The balance in reserves should not be less than three months of the annual expense operating budget. –To determine appropriate level each organizations should determine risk associated with each revenue stream and the organization’s ability to adjust spending levels as the need arises. –In most cases level will fall between three and six months. –Only in cases where high percentage of revenue is high risk and the majority of costs are fixed would a level of reserves in excess of six months be appropriate.

16 Reserve Management – cont. NCMA’s Risk level for Revenue Streams –Membership Low –EducationLow to Moderate –Advertising Moderate to High –CertificationLow –MeetingsModerate NCMA’s Ability to Adjust Spending Levels –NCMA has flexibility to adjust costs –Low fixed costs (Mortgage, Leases, Hotel contracts) –Labor is largest cost but can be adjusted if the need arises

17 Reserve Management – cont. In summary NCMA operates in relatively low risk environment. However because of risk associated with Advertising (22% of revenue) and to lesser extent Meetings level of reserves should be above three months. 4 months is probably adequate but set at mid-point – 4.5 months 4.5 months equates to $2.3 million under FY 11 Budget Total investments as of 3/27/10 - $1.8 million Current shortfall $500,000 – but subject to material fluctuation depending on the market FY 11 Budget incorporates $100,000 transfer to reserve

18 Building Fund No Building Fund currently established. Prudent to establish fund. FY 11 Budget establishes fund with initial transfer of $25,000. Intention is to make annual transfers. Fund to be used for building upkeep/significant repairs.

19 Cash Flow – Summarized The purpose of the Cash Flow slide is to adjust the FY 11 Budgeted net income in the income statement onto a cash basis and in so doing demonstrate that the Budget provides for a transfer to reserves and still leaves NCMA with a positive cash flow for the year It is a broad brush version of the statement that is included in the monthly financial package. As both June 30, 2010 and June 30, 2011 are at the same period in the business cycle (one month before World Congress) it assumes working capital is at a similar level at both dates. It assumes the Line of credit is fully paid down both at 6/30/10 and 6/30/11 which is reasonable given the World Congress positive effect on cash flow.

20 Cash Flow – Summarized FY11 Operating Profit345,963 Income Tax Expense (assumes equals amount paid)(90,000) _______ Net Income from Operating Activities after Tax255,963 Add back non cash items: Depreciation 267,771 Deduct non Income Statement Cash outflows: Purchase of Fixed Assets(46,248) Mortgage and Leases (Principal) (160,849) Other Cash Outflows Transfer to Reserves (100,000) Transfer to Building Fund (25,000) _______ Increase in Cash under FY 11 Budget 191,637

21 Board Motion Motion: “Be it resolved that the NCMA Board of Directors approve the Fiscal Year financial budget.”