1998 Delegates Meeting
Return to Governance Area | Return to US Chess Federation Homepage
Finance Committee Report
submitted by James F. Pechac, Chair
Financial Performance
First, I would like to commend Mike Cavallo and the Business Office on a profound performance in addressing the budget deficit. As of this writing, the USCF is well on the way in achieving its financial objectives, with a $230,000 profit compared to last year's 11-month loss in excess of $100,000. The turnaround was achieved not only by LMA gains in the favorable U.S. stock market, but also by Mike's willingness and ability to hold the line on spending relative to inelastic regular membership enrollments and flat merchandising revenues. Congratulations!
Committee Membership
For the second straight year the Finance Committee (FC) has lost a senior staff member in Norm Peacor, who elected earlier this year to step down from the committee, due primarily to health reasons. Norm's dedicated contribution to the finance function of USCF chess over all these years is notable, and the committee is challenged to guide the Federation without his assistance. Hopefully, Norm can provide assistance in an advisory capacity from time to time.
For 1998-99 there are positions on the committee which are available to competent individuals in the financial community. If you are a professional in auditing, accounting, information systems, or finance and would like to assist the USCF in an advisory or technical capacity, please send your background and qualifications to [email protected].
Review of K12 National Scholastic
The 1997 National Scholastic K-12 Grade Championships, hosted jointly by the USCF and the New Jersey State Chess Federation (NJSCF), was held in November 1997. This major scholastic event was unique in that, under agreement with USCF, the organizer directly managed the USCF Book & Equipment concession, a responsibility normally assigned to the USCF staff. At the conclusion of the event the concession revenues were summarized and mailed to USCF headquarters via an overnight air express package. One week later, the NJSCF representative advised the USCF that the express package was not logged in by the carrier and could not be located. In excess of $25 thousand in cash and cash items (including approximately 200 credit card charge slips totaling $17 thousand) were in the package.
Unfortunately, the organizer did not maintain backup records for the credit card transactions. As a result, the USCF and the organizer suffered a combined loss in excess of $15 thousand. The Policy Board subsequently requested that the Finance Committee document and investigate the loss and report on improvements to operating and accounting controls.
I performed this review along with the assistance of FC member Mike Carr, a long time chess organizer from California and a seasoned financial professional. Our report, presented to the Policy Board at the May meeting, concluded that the NJSCF representative should not be held personally liable for the loss, and that the USCF should establish formal policies and reporting procedures to control assets stored or collected at tournament sites. The report contains a series of recommended control improvements intended to address the inherent risks in this area of the business. The text of the full report may be obtained by accessing the FC report on the USCF Website. As several of the recommended control improvements relate to responsibilities of USCF affiliates, the FC has suggested that this subject be covered in a special workshop at the U.S. Open.
Systems Development
For the past year, representatives of the USCF Business Office (Mike Cavallo, Lillian Arnold, and Sonia Lynch) have conducted a software search to determine the package that is most suitable for USCF's financial and operating needs. FC member Pete Dyson, a systems professional residing in Florida, has contributed time to assist the Office in this area. Pete's primary contribution has been to provide consultation advice on various facets of the systems development project, including a technical evaluation of the primary software contenders and the preliminary proposal as to systems architecture. At the time of this writing the search is still ongoing. A copy of Lillian Arnold's progress report, along with Pete's technical memo, is included in the FC report on the Website. In summary, Pete's memo evaluated the USCF system's development approach as reasonable and contained three recommendations:
1) Now would be a reasonable time to invite vendors in for on-site demos, with the plan of following up with a formal RFP to the small set of best prospects.
2) The risks associated with the add-on functionality for "association management" are high, since the USCF's core business processes will be closely intertwined with this part of the software. The risks may be even higher if this drives the selection of the accounting software — the USCF should get input from their outside accountants as an unbiased source that should be familiar with the reputation of these packages from an accounting standpoint.
3) The USCF has not obtained enough pricing detail at this point to draw any conclusions. Lil's summary spreadsheet basically aggregated all the costs together. The USCF should break the cost figures down to get a better picture of initial investment and on-going support costs.
USCF management is pressing vigorously to resolve the vendor selection process and acquire and install the software. The FC will continue to monitor this activity, and will present a more comprehensive report at the annual meeting.
Budget and Finances
Each member of the FC receives financial data monthly from New Windsor. FC members Leroy Dubeck, Jim Pechac, and Myron Lieberman attended the May Policy Board meeting, which included Mike Cavallo’s detailed budget presentation. The FC has prepared trend analysis to monitor P&L and balance sheet reporting points, including comparative analysis of sales and margins, and has reported same to the Treasurer and the Executive Director. In addition, Leroy Dubeck prepared a key salary schedule and discussed the financial implications of it at the Budget Meeting.
Appraisal of USCF Land and Building
In previous years, the USCF valued the New Windsor land and building on its financial statements at market value based on formal appraisals, conducted every three years. This asset valuation policy was changed by the delegates in 1996, and all fixed assets are now valued at historical cost, net of depreciation. As real estate is a component of LMA investments, it will still be necessary to obtain a property appraisal, which was last done in 1995. Operations are currently pricing this service, which will be conducted over the summer. The FC will assist in review and assessment of the results prior to submission to the LMA Management Committee.
Policy Issues
An important decision concerning the cost/benefit of hiring a full-time professional to monitor Federation financial affairs will soon be decided by the delegates. Steve Doyle, former USCF President and long-time FC member, emphasized how important it was to have a full time Chief Financial Officer (CFO) in his January 1, 1997, memo to the Policy Board (Binfo 97-11). This emphasis was carried forward by Steve in the initial proposal by the Blue Ribbon Panel, which required that the Policy Board appoint a Chief Financial Officer. (1997 Annual Report, p.33 - BRC draft - Article VII, section 1). The delegate-amended BRC version (Article VIII, section 1) was revised to state that "the Policy Board shall (also) give approval to the hiring of a Chief Financial Officer by the Executive Director."
The result is that the decision whether or not to hire a full-time CFO is now judgmental. In this context it is important to note that the affairs of the Federation and the accompanying Chess Trust continue to become increasingly complex. The lack of a full-time CFO places responsibility for financial affairs on both the Executive Director and the Policy Board. Should the delegates collectively conclude to make this post discretionary, it is important that they understand this responsibility.
Selected Finance Committee reports will be included in the delegate handout packet. If you would like a more comprehensive abstract of Finance Committee correspondence, please send your request to [email protected] , or download the committee report file from the USCF Website. [zipped version of a Word 2.0 for Windows file, 39k]
Return to Governance Area | Return to US Chess Federation Homepage
