Planning a Strong, Sustainable Future

I would like to offer a perspective on ACS finances, including some recent history, current financial status and near-term outlook, and long-range financial goals. As part of the long-range goals, I want to share the results of our recent 2005 Financial Planning Conference (FPC).

ACS is financially sound. The financial markets have largely rebounded from the 2000–02 lows, providing investment gains that have strengthened our reserves. However, investment income remains low. We recovered from the operating deficits of 2001–03, and in 2004 we achieved a net contribution of $4.3 million dollars, mainly through strong earnings from information services (Chemical Abstracts Service and ACS publications), careful control of discretionary spending and staff head count, and administrative cost savings. However, we are increasingly dependent on information services and investment income to finance mission-related activities. Currently, net dues revenue covers less than 15% of member program costs. The remainder is funded by net contributions from CAS and ACS publications, investment income, and donations.

For 2005, we forecast a net contribution of $2.6 million, relying primarily on strong performance from information services and investments. As we look to the future, 2006 and beyond, we want to ensure that ACS remains a vibrant and financially stable society. Since current times remain challenging, with market uncertainties and competitive threats to our core revenue-generating businesses, we must maintain financial restraint and plan carefully for the future.

Members of the board of directors, representatives of the Budget & Finance (B&F) Committee, and key senior staff met in January for the 2005 FPC. The purpose of the conference was threefold: to provide a comprehensive assessment of the society's financial position, to review the appropriateness and adequacy of the society's current financial guidelines, and to assess the society's changing risk profile and the potential implications on major ACS funding sources over the next three years.

The conference began with presentations on issues impacting the society's financial position. To assess financial performance, we reviewed board-established financial guidelines and performance against benchmarks as well as a comparison of ACS's financial position with other not-for-profit organizations. We also received in-depth reports on 2005–07 strategic outlooks for CAS, publications, and membership, as well as the society's financial trends and outlook.

Participants broke into small groups for discussions on four topics: membership, contingency planning, financial guidelines and policies, and revenue-generating initiatives (non-CAS and publications). The result was eight recommendations for changes aimed toward improving the society's future financial performance:

Membership (to strengthen our membership and services while ensuring effective operations):

◾ Review ACS membership requirements, including dues categories, with an aim toward identifying those areas in need of revision to improve the society's position as a welcoming home for all those who have an interest in chemistry or the sciences related to chemistry in their life's work.

◾ Review Bylaw XII, Sec. 3a, regarding member dues.

◾ Increase the society's membership numbers, endorsing the philosophy of membership growth.

◾ Define a process for the periodic and regular review of society programs. This review should be multidimensional, including analysis of costs, efficiency, and value. The process should be determined by a small group composed of representatives from the board of directors, B&F, cognizant committees, and ACS management.

Contingency Planning (to ensure responsiveness to changing conditions):

◾ Develop a robust contingency plan for society operations. The plan should address the major risks facing the society and include provisions for periodic review and revision as needed.

Financial Guidelines and Policies (to strengthen our reserves for protection against potential adverse circumstances and to enhance the society):

◾ Adjust the fund balance ratio (reserves divided by annual operating expenses): Increase the target to 55% from the current 50% and expand the range to 40–70% from the current 40–60%.

◾ Adopt a net contribution guideline as follows: 2006, 1.0%; 2007, 1.5%; 2008, 2.0%.

Revenue-Generating Opportunities (to ensure adequate funding for our member programs):

◾ Vigorously pursue new revenue-generating activities that are mission related, diverse with respect to the society's current activities, and sustainable over the long-term and supported by the ACS Governing Board for Venture Enterprise to provide guidance and expertise during both the identification and incubation periods.

The 2005 FPC was very successful, with recommendations that will strengthen our position as the world's leading scientific society. The recommendations were approved by the ACS Board of Directors at the San Diego national meeting in March, and now will be pursued by staff with assistance from appropriate governance groups.

For additional information on the society's financial performance and policies, please see B&F's website, chemistry.org/committees/budget. We welcome your comments and questions. Please send them to b_ffeedback@acs.org. Someone from B&F or the Office of the Treasurer will respond. The future depends on all of us, working together to ensure a strong, sustainable future for ACS.