- Email: [email protected]
1974–Another SolventYear
REPORT OF THE TREASURER
1974-Another SolventYear Grover C. Bowles nclosed with your material is the audit report for the year ended December 31 , 1974 as prepared by Oliver T. Grahn, Certified Public Accountant (CPA). As our Bylaws are specific in that all our accounts shall be audited each year, no value judgment is needed as to whether our accounts should be audited . However, I agree with this provision and advocate its continuance. The benefits derived of an independent audit can be segregated into four areas. They are : creditability of the financial statement; professional assistance in developing meaningful financial statements; professional advice in internal control; and assistance in tax reporting and compliance. Creditability is enhanced by the unqualified opinion expressed by the Certified Public Accountant on the financial statement which may be found on the first page of the audit report. The purpose of financial statements is to communicate in a straightforward manner what has happened . The presence of an auditor's opinion helps in this communication process because an independent expert, after the examination, tells the reader that the financial statement presents fairly what has happened . All organizations are competing for dues dollars and members are paying more attention to how their money is spent. We can tell our financial story accurately and completely. It can be accepted at face value by our members and they should be proud of what their support is accomplishing . Another benefit of having an outside professional review is that the auditor is an expert at preparing financial statements .in a format that will be most clear to the reader. All too often financial statements are poorly organized and hard to understand . The CPA has had years of experience in helping organizations prepare financial statements in a clear and understandable language. APhA staff constantly consults with our CPA and institutes recommended controls to strengthen internal proce-
E
dures. Also, Mr. Grahn periodically meets with the Executive Director and Controller to discuss financi al conditions and changes in accounting practices . An example of this is the furniture and fixtures and National Formulary assets. They are now capitalized in the amount of $35,279 and $750,000 respectively, when in the prior years purchases were expensed in the year of purchase. This method of reporting fixed assets was not widely used previously. However, with the issuance of the 1973 AICPA audit guide which states that non-profit organizations are required to capitalize fixed assets and follow depreciation accounting, this practice now becomes a generally accepted one to be used consistently. Also, our auditors would be required to qualify their opinion if we did not capitalize our fixed assets. Following the auditor's unqualified opinion is the Combined Statement of Assets, Liabilities and Fund Balances. This exhibit is ·descriptive of the fund accounting concepts used by most nonprofit organizations and at APhA. This method of accounting is widely used by non-profit organizations because it provides stewardship reporting . While this concept of separate funds in itself is not particularly difficult, it requires attention in presenting a financial statement that can be understood by most readers. By presenting all the funds side by side, in one statement, the exhibit is easier to read and review . The columnar headings of the funds should be self-explanatory. The various permanent funds and trust funds are detailed in Exhibit C. The special funds and grants include the Academy of Pharmaceutical Sciences, the Student APhA, The Pharmacists Insurance Trust and the OEO grant. Each of these various subdivisions receives an audit report as well. Other than for the capitalization of N .F. assets and furniture and fixtures explained previously, there appears to be only one other item that needs comment. That is the line item referred to as Prior Years Adjustment. This rep-
resents a return to the fund balance, funds that were originally segregated for accounts payable that no longer apply. I would like to point out once more that this statement is a perfect example of fund accounting. In this type of presentation the activity of each fund is shown in a separate column. In this manner it is possible to see all the funds at one time. Once oriented to this format, it is possible at a glance to see the total activity of the Association. The next statement, Exhibit B, is the General Fund Statement of income and expenses for the years ended December 31, 1974 and 1973. Although the format remains similar, we regrouped and combined income and expense items to present a more concise view of the year's activity. Rather than go into a lengthy discussion of any other items, charts similar to last year have been made part of this report to visually describe 1974 activity. If any of you have questions, I would appreciate having them submitted to me in writing and I will be glad to reply. Because the question arises annually, I do want to make one comment. The funds expended for the APhA subdivisions-which also includes SAPhAdo not include any of the indirect expenses absorbed by the Association in supporting its subdivisions. In some instances the indirect expense is much greater than the direct expense reflected in the charts. Although inflation continued to spiral during 1974, we were still able to finish the year with a respectable excess of income over expense. While these charts provide a visual picture of how the Association funded its activities during 1974, I would suggest that the membership read the Treasurer's Report in conjunction with the 1974 and 1975 Reports of the Chairman of the Board of Trustees. These comprehensive reports by Chairman William F. Appel will help you better understand the significant accomplishments of the APhA during fiscal calendar year of 1974. We all participated in (continued on page 336)
328
Journal of the AMERICAN PHARMACEUTICAL ASSOCIATION
Review process and the joining of pharmacy with other health care disciplines in assuring appropriateness and quality of health care.
B.
Continuing Competence
On recomlnendation of the Policy Committee on Professional Affairs the Association adopted the following policy at the April 24, 1975, meeting of the House of Delegates in San Francisco, California: 1. The Association advocates that pharmacists maintain their professional competence throughout their professional careers.
2. The Association supports a voluntary system to measure the competence of pharmacy practitioners on a continuing basis. 3. The Association supports programs designed to establish valid standards of competence for pharmacy practice and reliable means of measuring and evaluating such competence.
Background a. On September 10, 1974, the APhA/ AACP Task Force on Continuing Competence completed work on its final report and transmitted its recommendation to the respective sponsoring organizations. Among its recommendations the Task Force suggested the following"The American Association of Colleges of Pharmacy and the American Pharmaceutical Association ... should take appropriate steps that would ... encourage enactment of legislation and regulations that would require proof of continuing competence for relicensure of pharmacists, when standards of competence for pharmaceutical practice have been established, and when the means of measuring
Bowles (continued/rom page 329)
these accomplishments. Our Executive Director and his staff deserve to be congratulated for their management skill in making every dollar count. The last exhibit is that of our securities. Unfortunately, the value of our investments at year end had not recovered substantially from the lows of 1974 due to the discouraging economic news. The minor recoveries made have been interpreted by our investment counsellors to mean that our financial system will not collapse as some have predicted and that there are solutions to our economic problems even though
336
and evaluating such competence have been devised." b. In making its recommendation the Task Force said" ... members of the practicing profession, including specialists and representatives of colleges of pharmacy, with advice of related professions and the the general public, should have the responsibility for the development of standards for continuing competence which pharmacists will be required to meet to continue in practice. In the exercise of their authority to regulate requirements for practice, the states should establish and implement procedures for relicensure based on standards of competence developed by the profession." c. The Task Force also said"Furthermore, the public has relied on licensure granted by state boards to monitor minimum standards of admission to a profession and to provide reasonable protection from incompetent practitioners. It has also relied on nongovernment accreditation of educational programs for the health professions to identify those institutions that offer satisfactory preparation for practice. In addition to these groups that have long been concerned with competence of health professionals, third-party payersboth private insurance and public programs-have a substantial interest in the qualifications of those who provide the care." "The rationale for proposing shared responsibility is that each group has an important and significant contribution to make. The Task Force on Continuing Competence in Pharmacy proceeded on the principle that those who will be affected by the implementation of policies should be represented in the determination of such policies. This principle is consistent with the fact that the members of any profession will be motivated to more successfully implement policy on continuing competence when they, through their representatives, are directly involved in establishing the standards that they are expected to meet ." they are unclear at the present time. The difference between cost and market is a staggering $261,512.50 paper loss. However, the market is showing signs of some improvement. A comparison of cost against market at March 26, 1975 indicates costs are still substantially lower than market values, but the difference at that date was down to $136,126.00. Hopefully, congressional actions will stimulate the economy further to bring the market in balance with costs. This leads into another area of discussion held with our auditors in the area of new accounting trends. Carrying investments at market value is deemed acceptable pending further
Journal of the AMERICAN PHARMACEUTICAL ASSOCIATION
d. The Committee recognizes that the specific recommendation cited above involves a basic issue of professional practice; namely, should the state have the power to license practitioners periodically based on measures of competency? e. The Committee believes that a number of other professional issues must be thoroughly considered and settled before this fundamental question can be discussed. First, professionally determined standards of practice and performance are required before true and valid assessment o( professional competence can be achieved. Second, mechanisms of applying these standards to individual practice in order to arrive at measures of competence must be developed and tested for accuracy, accountability and efficiency. Third, the question of whether a voluntary system of continuing competence is feasible and effective must be investigated. f. The Committee believes that an orderly and stepwise procedure of (1) developing professional standards of practice and competence, (2) developing the mechanisms of applying these standards to practice and (3) testing these standards and mechanisms in a voluntary system will provide useful information to the profession and a firm basis on which to approach the eventual question of whether or not pharmacists should be mandated by law to demonstrate evidence of continuing competence. Arthur G. Jacob, chairperson Earl L. Giacolini, vice chairperson Lawrence A. Barr Maureen M. Fink Gill T. Hartliep Jordan D. Johnson Jr. August P. Lemberger Arthur G. Lipman Gary L. Manley W. Joe Shaw Stanley V. Susina study and the issuance of an authoritative pronouncement by the Financial Accounting Standards Board of the AICP A. If investments are carried at market, the unrealized appreciation or depreciation should be separately identified and included in revenue or other expenses of the appropriate fund in the statement of income and expense and of course the fund balance should also reflect the adjustment. This area will be watched and if the AICP A determines a procedure for the proper accounting of securities we will implement it. Once again I agree with our auditors that these statements fairly present the financial position of the Association.
1974-Another SolventYear Grover C. Bowles nclosed with your material is the audit report for the year ended December 31 , 1974 as prepared by Oliver T. Grahn, Certified Public Accountant (CPA). As our Bylaws are specific in that all our accounts shall be audited each year, no value judgment is needed as to whether our accounts should be audited . However, I agree with this provision and advocate its continuance. The benefits derived of an independent audit can be segregated into four areas. They are : creditability of the financial statement; professional assistance in developing meaningful financial statements; professional advice in internal control; and assistance in tax reporting and compliance. Creditability is enhanced by the unqualified opinion expressed by the Certified Public Accountant on the financial statement which may be found on the first page of the audit report. The purpose of financial statements is to communicate in a straightforward manner what has happened . The presence of an auditor's opinion helps in this communication process because an independent expert, after the examination, tells the reader that the financial statement presents fairly what has happened . All organizations are competing for dues dollars and members are paying more attention to how their money is spent. We can tell our financial story accurately and completely. It can be accepted at face value by our members and they should be proud of what their support is accomplishing . Another benefit of having an outside professional review is that the auditor is an expert at preparing financial statements .in a format that will be most clear to the reader. All too often financial statements are poorly organized and hard to understand . The CPA has had years of experience in helping organizations prepare financial statements in a clear and understandable language. APhA staff constantly consults with our CPA and institutes recommended controls to strengthen internal proce-
E
dures. Also, Mr. Grahn periodically meets with the Executive Director and Controller to discuss financi al conditions and changes in accounting practices . An example of this is the furniture and fixtures and National Formulary assets. They are now capitalized in the amount of $35,279 and $750,000 respectively, when in the prior years purchases were expensed in the year of purchase. This method of reporting fixed assets was not widely used previously. However, with the issuance of the 1973 AICPA audit guide which states that non-profit organizations are required to capitalize fixed assets and follow depreciation accounting, this practice now becomes a generally accepted one to be used consistently. Also, our auditors would be required to qualify their opinion if we did not capitalize our fixed assets. Following the auditor's unqualified opinion is the Combined Statement of Assets, Liabilities and Fund Balances. This exhibit is ·descriptive of the fund accounting concepts used by most nonprofit organizations and at APhA. This method of accounting is widely used by non-profit organizations because it provides stewardship reporting . While this concept of separate funds in itself is not particularly difficult, it requires attention in presenting a financial statement that can be understood by most readers. By presenting all the funds side by side, in one statement, the exhibit is easier to read and review . The columnar headings of the funds should be self-explanatory. The various permanent funds and trust funds are detailed in Exhibit C. The special funds and grants include the Academy of Pharmaceutical Sciences, the Student APhA, The Pharmacists Insurance Trust and the OEO grant. Each of these various subdivisions receives an audit report as well. Other than for the capitalization of N .F. assets and furniture and fixtures explained previously, there appears to be only one other item that needs comment. That is the line item referred to as Prior Years Adjustment. This rep-
resents a return to the fund balance, funds that were originally segregated for accounts payable that no longer apply. I would like to point out once more that this statement is a perfect example of fund accounting. In this type of presentation the activity of each fund is shown in a separate column. In this manner it is possible to see all the funds at one time. Once oriented to this format, it is possible at a glance to see the total activity of the Association. The next statement, Exhibit B, is the General Fund Statement of income and expenses for the years ended December 31, 1974 and 1973. Although the format remains similar, we regrouped and combined income and expense items to present a more concise view of the year's activity. Rather than go into a lengthy discussion of any other items, charts similar to last year have been made part of this report to visually describe 1974 activity. If any of you have questions, I would appreciate having them submitted to me in writing and I will be glad to reply. Because the question arises annually, I do want to make one comment. The funds expended for the APhA subdivisions-which also includes SAPhAdo not include any of the indirect expenses absorbed by the Association in supporting its subdivisions. In some instances the indirect expense is much greater than the direct expense reflected in the charts. Although inflation continued to spiral during 1974, we were still able to finish the year with a respectable excess of income over expense. While these charts provide a visual picture of how the Association funded its activities during 1974, I would suggest that the membership read the Treasurer's Report in conjunction with the 1974 and 1975 Reports of the Chairman of the Board of Trustees. These comprehensive reports by Chairman William F. Appel will help you better understand the significant accomplishments of the APhA during fiscal calendar year of 1974. We all participated in (continued on page 336)
328
Journal of the AMERICAN PHARMACEUTICAL ASSOCIATION
Review process and the joining of pharmacy with other health care disciplines in assuring appropriateness and quality of health care.
B.
Continuing Competence
On recomlnendation of the Policy Committee on Professional Affairs the Association adopted the following policy at the April 24, 1975, meeting of the House of Delegates in San Francisco, California: 1. The Association advocates that pharmacists maintain their professional competence throughout their professional careers.
2. The Association supports a voluntary system to measure the competence of pharmacy practitioners on a continuing basis. 3. The Association supports programs designed to establish valid standards of competence for pharmacy practice and reliable means of measuring and evaluating such competence.
Background a. On September 10, 1974, the APhA/ AACP Task Force on Continuing Competence completed work on its final report and transmitted its recommendation to the respective sponsoring organizations. Among its recommendations the Task Force suggested the following"The American Association of Colleges of Pharmacy and the American Pharmaceutical Association ... should take appropriate steps that would ... encourage enactment of legislation and regulations that would require proof of continuing competence for relicensure of pharmacists, when standards of competence for pharmaceutical practice have been established, and when the means of measuring
Bowles (continued/rom page 329)
these accomplishments. Our Executive Director and his staff deserve to be congratulated for their management skill in making every dollar count. The last exhibit is that of our securities. Unfortunately, the value of our investments at year end had not recovered substantially from the lows of 1974 due to the discouraging economic news. The minor recoveries made have been interpreted by our investment counsellors to mean that our financial system will not collapse as some have predicted and that there are solutions to our economic problems even though
336
and evaluating such competence have been devised." b. In making its recommendation the Task Force said" ... members of the practicing profession, including specialists and representatives of colleges of pharmacy, with advice of related professions and the the general public, should have the responsibility for the development of standards for continuing competence which pharmacists will be required to meet to continue in practice. In the exercise of their authority to regulate requirements for practice, the states should establish and implement procedures for relicensure based on standards of competence developed by the profession." c. The Task Force also said"Furthermore, the public has relied on licensure granted by state boards to monitor minimum standards of admission to a profession and to provide reasonable protection from incompetent practitioners. It has also relied on nongovernment accreditation of educational programs for the health professions to identify those institutions that offer satisfactory preparation for practice. In addition to these groups that have long been concerned with competence of health professionals, third-party payersboth private insurance and public programs-have a substantial interest in the qualifications of those who provide the care." "The rationale for proposing shared responsibility is that each group has an important and significant contribution to make. The Task Force on Continuing Competence in Pharmacy proceeded on the principle that those who will be affected by the implementation of policies should be represented in the determination of such policies. This principle is consistent with the fact that the members of any profession will be motivated to more successfully implement policy on continuing competence when they, through their representatives, are directly involved in establishing the standards that they are expected to meet ." they are unclear at the present time. The difference between cost and market is a staggering $261,512.50 paper loss. However, the market is showing signs of some improvement. A comparison of cost against market at March 26, 1975 indicates costs are still substantially lower than market values, but the difference at that date was down to $136,126.00. Hopefully, congressional actions will stimulate the economy further to bring the market in balance with costs. This leads into another area of discussion held with our auditors in the area of new accounting trends. Carrying investments at market value is deemed acceptable pending further
Journal of the AMERICAN PHARMACEUTICAL ASSOCIATION
d. The Committee recognizes that the specific recommendation cited above involves a basic issue of professional practice; namely, should the state have the power to license practitioners periodically based on measures of competency? e. The Committee believes that a number of other professional issues must be thoroughly considered and settled before this fundamental question can be discussed. First, professionally determined standards of practice and performance are required before true and valid assessment o( professional competence can be achieved. Second, mechanisms of applying these standards to individual practice in order to arrive at measures of competence must be developed and tested for accuracy, accountability and efficiency. Third, the question of whether a voluntary system of continuing competence is feasible and effective must be investigated. f. The Committee believes that an orderly and stepwise procedure of (1) developing professional standards of practice and competence, (2) developing the mechanisms of applying these standards to practice and (3) testing these standards and mechanisms in a voluntary system will provide useful information to the profession and a firm basis on which to approach the eventual question of whether or not pharmacists should be mandated by law to demonstrate evidence of continuing competence. Arthur G. Jacob, chairperson Earl L. Giacolini, vice chairperson Lawrence A. Barr Maureen M. Fink Gill T. Hartliep Jordan D. Johnson Jr. August P. Lemberger Arthur G. Lipman Gary L. Manley W. Joe Shaw Stanley V. Susina study and the issuance of an authoritative pronouncement by the Financial Accounting Standards Board of the AICP A. If investments are carried at market, the unrealized appreciation or depreciation should be separately identified and included in revenue or other expenses of the appropriate fund in the statement of income and expense and of course the fund balance should also reflect the adjustment. This area will be watched and if the AICP A determines a procedure for the proper accounting of securities we will implement it. Once again I agree with our auditors that these statements fairly present the financial position of the Association.