Sunday, February 15, 2009

USCF Finances - A Summary

Yesterday I vetted my summary of the financial issues facing the USCF. The below is based upon what that, modified by pertinent critiques.

Appreciate the kind thoughts expressed in another thread about my summarizing the accounting issues facing the USCF.

I like the legal summary that Wick Deer put on his blog:
It would be nice if someone (like Jack LeMoine, for example) with an accounting background would post a summary of the financial issues facing the USCF.


Just off the top of my head are:

1) The accounting reports have improved since I saw them a couple of years ago.

2) The main problem accountingwise that the USCF faces is the inability to know how ahead or behind we are during the course of the year. However far behind we are mid-year, management always responds with first, "The second half of the year is always better" and "The auditors always make year-end accruals that could vary the bottom lines by many thousands of dollars".

3) The members badly need to know how much the average rate of increase the second half revenues are over the first half. This gives you an historical, verifiable, and measurable benchmark to project the annual result.

4) I wouldn't depend too much on comparing first half results with prior years. It is like comparing middle-game positions in a game of chess. You may have fewer pieces but still be ahead. There are other factors than just how many and what pieces you have. The same is true for comparing dollars to dollars mid-year. It is the end of the year that counts. Management is correct to point to annual results instead of interim results.

5) The problem of membership accruals at year-end needs to be addressed. I note that Mike Nolan has come out in favor of a database for this.

6) Various audit issues have been discussed at very great length on this forum. Amid all the drek, there's been some legitimate points raised. I have pointed out (see some of my earliest posts) that we have independent auditors and these issues ought to be taken up with them. I favor the Executive Board meeting with the auditors on an annual basis to discuss matters that have come up and to ask questions. Such questions could relate to findings that did not rise to the level of financial statement disclosure but that people would still be interested in knowing. (e.g. the infamous Susan Polgar laptop computer incident. Did the auditors look into this or did they not? If they did, what did they find? Another audit mystery is the documentation of the Crossville land and building valuation. Did the auditors examine them or did they not? How did they verify the valuations used?) Bill Goichberg opposed this; Randy Bauer hasn't taken a position.

7) Sevan Murdian brought up the subject of operational/internal audits about a year and a half ago. He offered his services for free and I had said I would help. Mike Nolan was right to say that these would only work if people did the work in Crossville. At this point, I'm unclear how this would help but perhaps it is worth looking into.

8) The unpaid post-employment money owed remains a critical issue. I am unsure why the USCF hasn't been sued over this. The money owed ought to be paid ASAP.

9) The invite to me to summarize the accounting issues was kindly appreciated and this was a quick and dirty response. The proper person who ought to summarize these issues is Randy Bauer, the USCF's Vice-President of Finance. Recently, we exchanged views on this forum on the matter. RB was quite adament that he no longer feels responsibility for discussing USCF Finances because of the lawsuits and because he is just a volunteer. (From his statements, I infer that he won't address USCF finances in any other manner, either, but I could be mistaken. He could still be functioning in some way. - Or not.) I believe he ought to reverse his position on this issue.

Note: After publication of the above on the USCF’s Forums, the VP-Finance broke his silence on USCF finances. His major points were:
USCF finances, through the first 8 months of the fiscal year, are remarkably on track with the budgeted amounts on the revenue side. In fact, the differences are so not material in almost every major category to be, well, remarkable.

That said, one expenditure area has a large variance from budget: professional services - i.e., legal fees. This is about $129,000 over budget.

The overall picture through 8 months has us about $246,000 ahead of budget, of which almost $400,000 is bequests. The difference between the two numbers is almost entirely additional legal fees.

Wow, that sounds like some serious mis-management. Got a blog post ready to go on that, Jack?
- Post 127870

And this:
I don't see any "accounting issues" to "clean up" - I think our current accounting processes are just fine and are now a lot more straightforward with reports developed straight out of the Peachtree accounting system.
- Post 127927

Management’s annual demurs about unknown year-end membership accruals usually comes around April and May. These accruals throw the final bottom line off by many thousands of dollars. The USCF looks to the auditors to calculate. This means that the USCF doesn’t know how it is doing until after the year is over.

Until then, the accounting is just fine. This has been management’s story for several years now.