A CPA who examined the 2013 audit of PR Society of America, focusing on the $304,305 in "deferred dues" when dues income is $5,180,386, says dues should not be booked until earned.

"The not for profit, [PR Society] in my opinion, is not reflecting the transaction properly," said the CPA in an e-mail to this website. "They should be setting up a deferred revenue liability until the income is earned," he said.

The CPA is someone who has been contacting us in recent weeks seeking to write about accounting subjects. We gave him the PRSA audit and sought his opinion. He had no previous knowledge of the Society nor any previous contact with us. We are not using his name. What he says tracks with what we have been writing for many years.

Lewis, McClennan
Lewis, McClennan

Section 958-605-25-1 of the Financial Accounting Standards Board says the same thing. PRSA has replied in the past that it is "acceptable" accounting to book dues as cash if there is no obligation to refund dues. The Society also champions "best practices" in PR (not "acceptable practices").

PRSA's financial reporting is on the griddle now because the current treasurer of the Society, Mark McClennan, and the 2013 treasurer, Blake Lewis, both running for chair-elect of PRSA, have gone along with the false picture of the Society's finances as provided by CFO Phil Bonaventura and outside CPA PKF O'Connor Davies. Society members are paying a lot for this misleading information. Bonaventura's package in 2012 (latest available year) was $243,765 and PKF was paid $49,230.

Here are further remarks of the CPA:

"Deferred revenues reflect situations in which money has been received, but goods and services haven't been provided. These revenues are also known as deposits, and they are not recognized as revenues in the income statement. (as the assets will not be overstated because there is a balancing liability to offset set it until the revenue is recognized.)

"Deferred revenues are not "real revenues" -- they don't affect net income or loss at all. Rather, they report on the balance sheet as liabilities. The journal entry to recognize a deferred revenue is to debit (increase) cash and credit (increase) a deposit or another liability account.

"When services or goods are provided, the entry is to debit (decrease) the deposit account and credit (increase) the revenue account -- the "real" one, which reports in the income statement and impacts net income or loss.

"To conclude, board members for the NFP [PR Society] should have a thorough review of their financial statements by an independent CPA who can better advise on how to treat these transactions in a fairly presented way to the actual financial position of the entity."

McClennan, Lewis Duck Press

McClennan released the audit in May which showed “unrestricted net assets” grew to $4.9 million from $4.1 million. However, if about half of dues were subtracted from that total, as required by accounting conventions, net assets would only be about $2.5 million.

The 2013 IABC audit bites the bullet by acknowledging $1,499,364 in deferred dues (about half of dues of $3.1M) which plunges its net assets to $680,013 (declining from $1,209,086 in 2012). IABC has about 14,000 members.

Society practice is not to take any questions on its audits.

Non-members including reporters are not even supposed to see the audit. A request to McClennan by this website to see the audit was turned down. Sources who provided the audit to this website were said by VP-PR Stephanie Cegielski to be breaking their “contract” with the Society although we are doing nothing wrong by reporting the audit.

Cegielski has refused to provide the audit to a PR news medium other than us on the ground that the audit is “for members only” and that reporters are not allowed to join.

Contradicting that statement is the fact that PR executive/journalist Gil Schwartz of CBS who also is a journalist using the pen name of “Stanley Bing,” confirmed to us he has been a Society member for many years.

Brief Period to Question Candidates

There is only a brief period when letters and e-mails can be sent to the nominating committee. That extends from June 24 when the nominations were announced to July 8, a period that includes the Fourth of July holiday.

Under no circumstances do any of the candidates answer questions of members or the press on where they stand on such topics as booking dues when earned; removing the APR rule for national offices and the Ethics Board; providing a PDF of the membership list that would match the previous printed directory; moving most of h.q. from New York; having a PR careerist as staff head rather than an association careerist; allowing reporters to join, and posting the Society’s 990 IRS tax return on the website early in the year.