by Mark E. Hernick
ALTA® had a very successful year in 2005. The association accomplished many goals in the areas of Government Affairs, Education, Membership, and Public Relations. Despite the slowdown in the overall real estate market, ALTA®’s revenues remained strong and expenses were controlled within budgeted limits.
Here is a brief synopsis of ALTA®’s financial picture for 2005, and a look at the approved 2006 budget.
YEAR IN REVIEW
In anticipation of even greater slowing of the real estate market, ALTA®’s 2005 operating budget was developed with a conservative outlook on revenue and tight controls on expenses. However, the market downturn was not as severe as predicted, and our estimate of significantly lower revenues in 2005 was never realized. In fact, most of the association’s income-generating programs were more successful than the previous year, and overall expenses were less than budgeted. Unaudited year-end financials indicate that the association has Assets and Liabilities in balance at $9,275,000 with an Operating Income of $1,225,000. It should be noted, however, that $694,000 of the 2005 income is restricted for use in the Public Awareness Campaign and will be carried forward into 2006.
As noted above, 2005 Dues revenue did not decline as previously anticipated. In fact, dues revenue increased by one percent over 2004 collections. Also experiencing positive financial results in 2005 were the association’s three conventions, and advertising in Title News, ALTA® e-News and on ALTA®’s Web site. We also experienced an increase in the Products and Services category that reflects direct sales to the membership. ALTA® staff was encouraged by these increases because they directly reflect greater participation in the association by you, the members. Expenses of the association ended the year within budgeted limits (actually $34,500 below budget) due to the tenacious efforts of the ALTA® staff to control costs and to develop new and better operating procedures.
With the implementation of a new portfolio structure in the last quarter of 2004, the association’s Reserve Asset Fund faired much better in 2005. The fund posted a net return of more than 9.5 percent and assets at the end of the year were approximately $5,900,000. ALTA® strives to maintain reserve funds at the non-profit sector standard of “one year’s annual budget” in order to compensate for fluctuations in dues revenue, and, ultimately, to be prepared for unforeseen financial demands.
The final financial hurdle for 2005 will actually take place in March 2006, when the accounting firm of Johnson Lambert & Company will audit the association. Johnson Lambert, which has audited ALTA® for the past three years, brings special expertise in the area of nonprofit auditing to the engagement, and the ALTA® Audit Committee is confident in their abilities.
A LOOK AHEAD
As ALTA® begins a new year, I believe it is well positioned for what could be a very challenging twelve-month period. The real estate market continued to slow in 2005, and the effects of the decline are expected to impact ALTA® in 2006. The approved 2006 budget anticipates a decline in revenue and, accordingly, a decline in ALTA® spending. The budgeted operating income for the year is $5,457,000 with expenses budgeted at $5,400,000. This very conservative budget results in an estimated operating gain of $57,000 for the year.
Exhibit 1(on the previous page) represents the approved 2006 Income and Expense Budget. Exhibit 2 represents the percentage of revenue and expense categories as they relate to the overall 2006 budget.
In addition to our normal operations in government affairs, education, product services and meetings for 2006, ALTA® will continue its efforts to promote the title industry through the ongoing Public Awareness Campaign. Efforts will continue to educate real estate agents, lenders and consumers about the value of title insurance. In addition, we will focus more on legislators and regulators who need to understand the value we bring to the homebuying process, especially as they look more closely into our industry this year.
Members can rest assured that their commitment to ALTA® will continue to provide the funding necessary to conduct outstanding educational programing, provide quality products and services and retain the leadership necessary to promote the industry and its interests in 2006 and beyond.
If you have any questions or would like additional information about ALTA®'s financial operations, please feel free to contact me.
|Mark E. Hernick is ALTA®’s director of finance and administration. He can be reached at 800-787-2582 ext. 222 or email@example.com.|