Is US Fencing going bankrupt?

[Mr Epee]

This seems to be popping up in the election threads, but it seems that it important enough to have its own discussion.

I think it's a monumental mistake not to make the USFA budget a public document. Fortunately, the US Govt agrees with me regarding the importance of transparency in non-profit organizations, and the tax filings of non-profit organizations are a matter of public record.

I just took a look at the USFA's tax returns from 2006.

They did show a loss of approximately 150k.
Revenue was approximately 3.8 M.
Expenditures were closer to 4M.

It's not a particularly simple document to understand, but if you are interested, I encourage you to take a look and learn what you like. The expenditures are broken into fairly broad categories, but with a little imagination you can fill in the blanks.
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Edit: Also if you're really interested, you can also take a look at the US Fencing Foundation, which is a separate non-profit with a stated purpose of making donations to the USFA. That ought to have between 1-2 Million, from what I remember a few years back. Generally, the investment earnings are skimmed off and donated to the USFA. I think.

[jjefferies]

Originally Posted by Mr Epee

I think it's a monumental mistake not to make the USFA budget a public document. Fortunately, the US Govt agrees with me regarding the importance of transparency in non-profit organizations, and the tax filings of non-profit organizations are a matter of public record.
.

Care to share the URL or how you located it? Most of what I got on a google was the US Fire Association.

[Mr Epee]

I have a free account with guidestar.org


Their mission:
GuideStar's mission is to revolutionize philanthropy and nonprofit practice by providing information that advances transparency, enables users to make better decisions, and encourages charitable giving.

Cool, huh?

The return itself is called a 990.

Once you sign in you just throw the organization's name, or a keyword, in their search engine... next stop... information overload.

The PDF is a full mb, so unless Craig is feeling particularly generous with his bandwidth, it's probably best to create a guidestar account and look it up there.

[Philistine]

Here is an interesting thread from October 2005 talking about the USFA budget in general (and 990's in particular).

I'm still at something of a loss to understand how, exactly, there can be the degree of uncertainty in amount between $250,000 and $1,000,000.

Also, is this amount a projected, year-end for 2008 shortfall or is it an existing one?

--Philistine

[Allen Evans]

Originally Posted by Philistine

Here is an interesting thread from October 2005 talking about the USFA budget in general (and 990's in particular).

I'm still at something of a loss to understand how, exactly, there can be the degree of uncertainty in amount between $250,000 and $1,000,000.

Also, is this amount a projected, year-end for 2008 shortfall or is it an existing one?

--Philistine

I would guess, since the number being quoted has been very nebulous, that it is a projected shortfall from costs that are expected to be over budget, or revenues that are under target, or both.

Allen Evans

[Greg_D]

Since I was one of the most vocal board members about our latest financial report and since I asked a number of questions I guess I should respond...

First, as a headline, the USFA has some significant issues, but it's not so dire that we're going to be unable to continue with operations or send teams to the Jr. World Championships or Olympics. The financial reports that currently come from the National Office present only a piece of the entire picture. That picture is pretty dire, showing a bottom line loss of more than $1 Million in 2006/2007. However, this is still a preliminary report and may get somewhat better after the auditors finish their work. More of the picture emerged during the board meetings for those who were able to attend both sessions.

Those of us on the Board of Directors only get what is, essentially, an income statement. As useful as an income statement is in a company reporting net profits and losses to shareholders who expect a return on their financial assets, it's not as useful for us in a not-for-profit. Rather, we need to know about cash flow. In other words, do we, as an organization, have cash on hand to cover our bills? What debts do we have outstanding?

The news here is better. We have sufficient cash on hand to cover most of our bills were we to shut down operations today. Since we’re not shutting down today, it’s more similar to the situation that The Momster described in a post in a different thread. The USFA is not unlike a family living paycheck to paycheck. We have debts outstanding. We’re waiting on certain revenues to arrive to pay the bills. We have some cash in case there are emergencies that arise in between those paychecks. It’s just on a much larger scale.

It’s also not acceptable and needs to be fixed. If everything comes in as projected for the rest of the year (which is a bad assumption to start) we’ll have a cash deficit at the end of the fiscal year to go along with a planned income statement deficit of around 100K. How did we get into this situation? Quite simply, there are not sufficient process controls over all of the spending of the USFA. There are a number of different groups outside the control of the national office that are able to spend money and then submit expenses. These expenses got out of control and the mechanisms and reporting were not in place to stop it. We spent the majority of the second half of the board meeting (the one that started at 5PM) going through the budget report line item by line item to understand what happened.

So, what do we do about it? In the short term, in my opinion, this is NOT the year to be cutting significantly. The Olympics only come around every four years and we need to spend prudently but as necessary to assist our athletes with training and competing so that we have the best chance to succeed. Rather, we need to make sure that we gain control of those out of control processes that led us to overspend various pieces of the budget by an aggregate 700K in fiscal 2006/2007. We also need to prepare a budget for 2008/2009 that shows significant surplus and will allow us to begin digging out from the hole.

My goal with the motions passed by the board was to provide a structure for giving more information to the board so that it could make better decisions (Motion 1), add people and oversight to the budget creation and variance processes (Motion 2), and add people and oversight to our actual spending and to reporting out to the BOD on what is actually happening (Motion 3).

I would like to point out that these motions were sent to the current USFA Secretary in time to be included in the October board agenda (i.e. in late September). This was significantly before I was nominated to be Treasurer. That occurred in December. Regardless of whether or not I actually become Treasurer I was then and am now concerned about our financial health and am doing what I can as a member of this organization to help. It had nothing to do with writing into the agenda a job description and job security for my next (uncontested elected) position.

[ViewtifulMisho]

Thanks, Greg. That's pretty helpful.

Originally Posted by Greg_D

We also need to prepare a budget for 2008/2009 that shows significant surplus and will allow us to begin digging out from the hole.

Can you give a little insight into what this will involve? Will it be just tightening up of sloppy spending, or will there be actual changes in operations? If the latter, will they be of the practical variety, e.g. making what must be a highly expensive print magazine into an online newsletter, or will it be painful stuff, like less reimbursement/pay for refs?

Those are just arbitrary examples to (I hope) just describe the types of scenario.

[Greg_D]

Originally Posted by ViewtifulMisho

Thanks, Greg. That's pretty helpful.Can you give a little insight into what this will involve? Will it be just tightening up of sloppy spending, or will there be actual changes in operations? If the latter, will they be of the practical variety, e.g. making what must be a highly expensive print magazine into an online newsletter, or will it be painful stuff, like less reimbursement/pay for refs?

Those are just arbitrary examples to (I hope) just describe the types of scenario.

Amazingly, the new magazine is actually a break-even or slightly positive revenue item all told (with the new format and more advertising and such) and so shouldn't need to undergo significant changes.

As to what we will need to do, it's my belief that there is a non-trivial amount of sloppy spending that can be corrected and should help a lot. Beyond that, I believe that there will be quite a bit less expense simply because we'll be in the first year post-Olympics. My understanding is that there is less travel and team expense in the first year. We'll need to speak to the Nat'l coaches and get their detailed plans for what they need in 2008/2009 and will need to then speak with the HPC and Nat'l training director to make sure these requests are reasonable, setting us up for long term success while being financially responsible. I would hope that we can simply be frugal and prudent rather than having to be drastic and painful.

That said, these are guesses. I have been involved with helping a smaller non profit dig out from a similar financial situation while on the finance committee of that organization (a small Boston Theatre company), but have not yet been involved with the production of the USFA budget.

Greg

[whtouche]

Thanks for the insigh, Greg. It's good to know the sky isn't (completely) falling and that there are people out there who know what's going on and have an idea of how to go about fixing it. I was wondering if you could shed some more light on what some of these out of control expenditures and sloppy spending are?

[DJ Apostrophe]

I'm guessing forgetting to ship the crate with all the bout committee stuff in it (laptops, printers, etc... basically everything that goes on the stage) is one of those 'sloppy expenditures' you were referring to? (Richmond NAC - 2006). As we had to run out and buy all new stuff to run the tournament...

-w

[HDG]

Originally Posted by DJ Apostrophe

I'm guessing forgetting to ship the crate with all the bout committee stuff in it (laptops, printers, etc... basically everything that goes on the stage) is one of those 'sloppy expenditures' you were referring to? (Richmond NAC - 2006). As we had to run out and buy all new stuff to run the tournament...

-w

Ouch.

[Greg_D]

Originally Posted by whtouche

Thanks for the insigh, Greg. It's good to know the sky isn't (completely) falling and that there are people out there who know what's going on and have an idea of how to go about fixing it. I was wondering if you could shed some more light on what some of these out of control expenditures and sloppy spending are?

DJ gives a good example of sloppy spending. Others generally relate to last minute travel being arranged as a result of poor planning. We need extra volunteers or staff to make a trip because we didn't plan far enough ahead or because situations change (e.g. registration for a tournament goes up) and, as a result, we end up spending a lot of extra money.

In a lot of cases the out of control expenditures are about one piece of the organization not communicating well enough with another part. Decisions are made without considering the financial impact. Those decisions turn out to cost a lot more than would reasonably be anticipated. We need to have better procedures for this sort of thing.

I am being somewhat deliberately non-specific here. I would rather not spread anecdotal information that I haven't thoroughly researched on a forum that can be reached by anyone in the world. If you're interested in a more full report on the budget discussions from JO's please talk to your section rep (who was hopefully there) or catch one of the other members of the Board. Those folks could give you a run-down without potentially causing extra trouble.

Greg

[teacup]

What seems a little disconcerting is that the USFA has spent all this money but this year Women's Epee doesn't have a coach or a budget.

[oiuyt]

Originally Posted by teacup

What seems a little disconcerting is that the USFA has spent all this money but this year Women's Epee doesn't have a coach or a budget.

What makes you think they don't have a budget?

-B

[Greg_D]

Originally Posted by teacup

What seems a little disconcerting is that the USFA has spent all this money but this year Women's Epee doesn't have a coach or a budget.

I can't disagree with you on the coach front, but I can assure you that they have a budget...

[fluidfencer]

*** I wrote the following email before reading the recent comments and notes by Brad regarding the recent Executive Committee meeting. There was apparently discussion similar to what I proposed below, but it raised three concerns. 1. The most critical issue is defining what is to be accomplished and that has to come FIRST; 2. related problem of approval given to hire a USFA staff person with first addressing needs; 3. people on a committee must be chosen after defining it's purpose, and including the people best suited to the task ***

I am director of development (fundraising) for the southeast region of the American Red Cross. They are currently in a restructuring that will result in one-third of the staff being dismissed and essentially all technical/operational support for the 750 chapters around the country being eliminated (regional service areas employed about 300 providing that support). The Red Cross suddenly realized the fact that they could not continue to spend without proper planning, which is hard to ignore with a net deficit (similar to a net loss in the business world) of over $200 million. My point is that great organizations can get in serious trouble when they take their focus off critical issues like finance, while trying to do the good work of their organization. The USFA is in a similar situation, but clearly not to the same degree.

I'm not sure why I decided to post this. I don't know if the USFA has the ability to do what is necessary. Greg is an exceptionally bright guy and I agree with everything he has already said. He is also someone who can help find good solutions. What is necessary for that to happen, however, is that Michael and the USFA Board solicit the help of volunteers to craft a plan. They can't afford that kind of help, but the membership includes some incredibly bright people with the right skills. I am an MBA/CPA with five years of professional fundraising, and I wouldn't even put that in the class of the best that we have to offer.

OK, here's what I recommend. The USFA creates an Advisory Committee with no decision making authority at all. The scope of what the committee would do will be determined by the USFA Executive Committee. Members of that AC (12 to 18 in number would be appropriate) would be based on the scope of the work. I suggest Greg and one other person (of comparable skills and experience - and not me because that would sound self-serving and not send the right message I am trying to make) to identify and solicit people who are best qualified to solve the issue at hand. This would need to be a TRANSPARENT process with meeting notes and decisions posted along the way, and a feedback mechanism for USFA members (maybe something similar to Facebook or blog messages).

Now, you can take this idea and make it a big complicated theological mess, but that is exactly what drives away those most capable to help. If he agrees and would be willing to do so, I ask that Greg make this recommendation to the USFA.

I have this vague memory that something like this was discussed or considered or done in the past. To be honest, one of our biggest problems is dwelling on the past. Let's start by not saddling something potentially important with emotional baggage.