|July 21, 2011|
|PRSA Financial Report Violates FASB Rules|
|By Jack O'Dwyer|
|Arthur Yann, VP-PR of PR Society of America, contends that Generally Accepted Accounting Principles allow the Society to book dues as cash (thereby inflating its “net assets” by about $2.2 million). |
There is no such thing as GAAP except as defined by the Financial Accounting Standards Board. Section 958-605-25-1 of FASB says that dues should be booked as earned over the period covered by the dues, which is one year in the Society’s case.
Legal, accounting, medical, association, and many other groups do this.
Yann says booking dues as cash is “acceptable” and that auditor PKF has given the Society an “unqualified” review of its 2010 financial report.
But that’s not what we find on the FASB website.
FASB is recognized by the Securities & Exchange Commission and the American Institute of CPA as the arbiter of what is or isn’t GAAP.
Here is FASB’s description of itself:
The Financial Accounting Standards Board (FASB) is the independent board of the Financial Accounting Foundation, a private sector, non-for-profit corporation (FAF), responsible for establishing standards of financial accounting and reporting for nongovernmental entities in the United States.
FASB’s standards are officially recognized as authoritative by the U.S. Securities and Exchange Commission (SEC) for publically traded companies and by the American Institute of Certified Public Accountants (AICPA).
Standards set by the FASB are commonly referred to as generally accepted accounting principles (U.S. GAAP) for the private sector.
FASB’s standards are important to the efficient functioning of the U.S. capital markets and the global economy because decisions by investors and other providers of capital about their allocation of resources rely heavily on credible, transparent, and understandable financial information.
Deferred Dues Go Up and Down Like Yo-Yo
The PR Society, which is seeking a $30 dues increase from members this year. is inconsistent in handling its deferred dues account. It raids the account when it needs to beautify the books for consumption by members.
DD were $904,767 in 1991, or about half of dues income.
Then came the 1990s when PRSA needed to boost its “net assets” figure artificially because of the costs of starting Tactics and Strategist.
It also cost itself a lot of money by cancelling the annual conference exhibit hall from 1995 to 1999. This was a move to destroy the PR Services Council, a group of nearly 50 exhibitors who had organized to obtain better treatment from the Society.
The exhibitors wanted a hall near the general sessions, space for classrooms for the new technology, and more annual conferences in New York where the audience was by far the biggest.
Many of the exhibitors were based in New York and could save lots of money by not having to ship their exhibits all over the country.
The non-New York ARPs who run the Society felt threatened by the Council and closed the exhibit hall.
A colossal waste of money was the APR program. It lost $2.9 million from 1986-2002. Accrediting one member cost $1,794 in 2000 (over an above APR income). APRs control PRS and make all the decisions. The Assembly is currently about 75% APRs.
The DD went as low as $169,530 in 1995 and was $350,309 in 1998—far below where it should have been.
Pisinski Started Restoring DD
Steven Pisinski, 2000 president, announced that the Society would again properly defer dues, following the example of the American Society of Assn. Executives.
The DD was boosted to $813,116 for the 2000 audit.
But with new boards headed by Kathy Lewton in 2001 and Joann Killeen in 2002, helped by a new CPA firm, Sobel & Co. of Livingston, N.J., PRS went back to its old accounting tricks.
DD fell to $566K in 2001 and $389K in 2002 and by 2101 was down to $290K on dues of $4,479,744.
PKF principals have been contacted on this issue and we’re awaiting a reply.
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