Incredibly Stupid Game

Yes, this game is incredibly stupid! So, can you beat it?

The Stupid Test

This is an online game with really dumb questions. So, you can get them all correct, right?

USCF Officials Respond to My Accounting Statements

Veteran users of this forum will remember the lengthy discussions in the spring of last year about the profitability of the USCF for FY 2007. We will remember the assertions of Sloan, Donna and others that the projected loss for the year would be $300,000 and the assertions by Bill G, Joel, Nolan, Grant P, and others that it would be somewhat less. What everyone agreed on was that the current amounts were unknowable until the auditors made the year-end adjustment for accrued membership revenues. This adjustment would be made well after the year ended. The consensus of all was that the margin of error in their estimates ran from $300,000 to zero. Donna and Sloan claimed a much higher margin but that was what Bill G, Nolan, and their crowd admitted to. In fact, the auditors reported out a small net profit for the year.

A lot of us outside observers thought that this was a very large margin of error. More significant, was the inability of the USCF to track profitability on an interim basis. (The issue of public reporting and transparency was a side issue to many of us.) What was important was management’s claim that not even they knew the true situation of the USCF’s profitability during the course of the year.

Management responded to concerns by saying that (a) the business was seasonal in nature and (b) membership accounting was too hard and costly. They also said that they were working on improvements. This was difficult for me to swallow whole because (a) the USCF is hardly the only business in the world that is seasonal in nature and (b) the USCF is hardly the only membership organization in the world, either. We wonder how come other organizations can keep track of their finances but the USCF can’t. 10% of a $3 million business is a pretty large margin of unknowability.

I gather from the statements made by Grant and Nolan in this thread that a custom routine is being written for their stand-alone membership DB that will generate a summary journal entry that can then be entered into the General Ledger Peachtree program by hand. This entire approach seems strange to me.

Let’s say I want to buy a car. Now I am sure that if Mike Nolan were to contract with me to build me a car, I am sure he would provide (after some time to be sure) a very nice custom built car that would exactly fit me and my needs. He would design it; he would clear out space in his garage to build it; and then it would be great. Heck, he would even drive it from Nebraska to Atlanta to deliver it to me. Or, I could just go down the street and buy a car off the dealer’s lot. I wonder what Nolan would charge me for his car?

What’s more expensive: buying specially designed stuff or store-bought stuff?

Grant Perks, chair of the Audit Committee responded to my questions yesterday on the USCF Forum. Thank you, Grant! He said, “Based on my previous discussions with Mike Nolan, he was writing a script that will generate a report of the deferred balance at the end of a period. From this report the journal entry can be calculated and booked to Peachtree. This method might lead to additional cost at year end since in addition to auditing the general ledger the auditors will likely have to audit the membership database.”

I responded with these points:

(a) Mike Nolan is doing all of this work for free?
(b) How can auditing the numbers possibly be more expensive than the auditors developing them and then auditing them?
(c) Are you saying that the numbers from previous years do not come from actual DB’s of actual members paying actual money in actual transactions?
(d) If reported membership accruals in the past have not been coming from the above, then where have they been coming from?
(e) Assuming that the auditors calculated the year-end accrual from some schedule, they would audit that schedule, right? To avoid garbage in, garbage out. That schedule would be based upon something else, right? As the auditors drill down through the paperwork, they would eventually reach an actual DB representing actual members with actual transactions, right? Are you saying that they don’t – that the examination of the membership DB or some equivalent would be new?

Grant is supporting an accounting change. I don’t understand why the delegates have to be involved in such a technical issue. We’re talking about simply conforming to generally accepted accounting principles here.

Mike Nolan also came on and said that Peachtree “CAN DO THE JOB” but conceded that the USCF still needs automation of revenue posting.

I asked:

What does “CAN DO THE JOB” mean? If it can do the job (I presume you capitalized the letters in order to emphasize this point), then why write script for a separate DB? Why even have a separate DB at all? Why did Grant make a point about the 5,000 entries per month? Do you mean by “CAN DO THE JOB” that it does great jobs other than accruing revenues?

This kind of reminds me of a car that is a great car to drive. It CAN DO THE JOB, by golly! Just don’t drive it at night as it has no headlights. But so long as you will drive it only in daylight, it is a great car.

Forget what the members want. Why doesn’t management want to know how the USCF is doing? How do other organizations tackle this problem? Paying accountants tons of money to calculate this stuff, instead of investing in software that can “tack on the new membership to the remaining portion of the existing membership”?

I note that this is not just a personal concern. Here’s what our current VP-Finance said last year before the election:

As with many organizations, the USCF uses a variety of “shadow systems” (such as Excel spreadsheets) for accounting and reporting purposes. While functional, they do not integrate data; as we build new systems and integrate processes, we need to ensure that we can do our routine financial reporting and queries within our actual financial systems, such as our Peachtree accounting system. Only by getting these systems integrated and functional for reporting purposes will we be able to ensure the accuracy of the data.

Source of quote

Membership Accounting

Mike Nolan of the USCF commented on Wednesday's post in the USCF Forum. He said that this would be a radical departure from current USCF practices.

What people may not understand is that each year, ongoing discussion about USCF finances are mooted by the large uncertainty of what the revenues are going to be reported. Last year, management continually stated that revenues would not be known until the auditors made the annual year-end adjustment.

But what is this adjustment and how do the auditors figure the amount?

What they have to do is to arrive at year end figure I did in the below post for all the members. They have to perform elaborate calculations in order to do this.

There are two problems with this approach: (1) More work has to be done at the back end by high priced labor (auditors) because the USCF does not do the necessary work at the front end by lower proced labor (bookkeepers using software) and (2) the USCF does not know it's true financial picture until after the year is over.

In short, the USCF has to play the game without knowing whether it is a pawn ahead or a pawn (or 2 pawns or more!) behind. Even after the game is over, it cannot look back at the score sheet and see how it was doing in the earlier phases of the game.

My New Website

Me in my office.

I've branched out my business into the area of financial services. I like the Primerica's philosophy on the different aspects of finances.

First, people should only put their money where it is needed. For example, don't buy life insurance unless you need it. Many people don't. If you do, buy term. Forget all that extra "investment" stuff about insurance. Invest in investments. Investments that give a decent rate of return.

Second, people's finances ought to be based on a budget. This budget ought to be customized for each individual. It needs to be based on each individual's own goals.

I like this philosophy a lot.

Here's my new website.

How Does USCF Membership Accounting Work?

Here's my quickie version of how this would be done.

Assumptions: Donna pays $80 in May, 2008 for a 2 year membership. To simplify accounting, USCF policy is to count partial month as full month.

Entry in May, 2008.
Debit: Cash $80.00
Credit: Deferred Revenue $80.00
To record receipt of money from Donna A. for 2 years membership dues.

Then each succeeding month for the next 24 months 1/24 of the Donna's money is reclassified from deferred to actual revenue by the following entry.

Debit: Deferred Revenue $3.33
Credit: Membership Revenues $3.33
To recognize revenues earned from Donna A's 2 years membership payment.

So at December 31, 2008 Donna's account will look like this:

Deferred Revenue: $53.36 (80.00 - 26.64)
Membership Rev: 26.64 (8 months x 3.33 per month)
Donna's Total: $80.00 (53.36 + 26.64)

At the end of May, 2009 the USCF closes it's books for the fiscal year end. That means that all the Revenue and Expense accounts are reset back to zero. But the monthly entry stays the same.

Debit: Deferred Revenue $3.33
Credit: Membership Revenues $3.33
To recognize revenues earned from Donna A's 2 years membership payment.

So, for June, 2009, here's what Donna's account will look like:

Deferred Revenue: $36.67 (subtract 13 months x 3.33 per month = 43.33 from 80.00)
Actual Revenue: 3.33
Fund Balance: 40.00 (12 months x 3.33 per month)

Fund Balance is an equity account where the total of the previous years' revenues and expenses are closed to at the end of each year. And yes, since 40 does not divide by 12 evenly, there's going to be some rounding.

In April 2010 all of Donna's membership months will have been used up and her deferred revenue will be all gone. Then she will have to renew her membership.

Note, that for sustaining and life members, the same accounting technique applies. Only changes are the different payments and the different timeframes.

My point here, is that the 3.33 entry does not have to be done by hand each month. Conceptually, this is not that difficult. Mastering any chess opening is way harder than this. This could all be done automatically. We just need the right software.

Don’t Overlook This! 7/8/08

These are stories in the news that have much more significance than they’ve received. These stories should have been the leading news items of their day. Their significance extends beyond just a particular area and beyond just a particular news cycle.

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Ireland Rejects Treaty but European Union Will Grows in Power Anyway

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The European Union has already assumed many of the functions of a nation state. It has a capital, Brussels, it has a President, and it has a Parliament. It has a currency, the Euro. Like the Euro, its laws are supplanting the laws of most of the nations of Europe.

It still lacks a Constitution. The Original Constitution was turned down by voters in France, Holland and other countries. The statesmen of Europe decided to get around the voters by getting the same thing done by Treaty instead of a formal Constitution.

The trouble this scenario is that Ireland has a requirement it it's own Constitution that any treaty that would change it's government would require a vote by the people. So the Treaty was put to a vote and then defeated.

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Here is the story in The American Spectator.

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Why this is significant:

First, Europe is rapidly coalescing into one big super-state to rival the United States.

Second, it is based upon elitism and bureaucracy and not democracy. This is a milestone in the path.

Polgar to Resign If . . .

In a dramatic challenge to President Goichberg and the rest of her opponents, Susan Polgar offered to resign from the USCF Executive Board Monday provided they (1) "give me the FULL CONSENT to release all information to ALL USCF members" and (2) " If I cannot prove what I said is true then I will resign immediately."The other half of the challenge: "However, if I can prove that what I said is true then President Goichberg would resign from the board immediately."

Read the thread for the "what I said" part. These statements contain significant revelations.

Polgar has been complaining for months that she possesses major information that she is unable to disclose to the public only because of Board confidentiality requirements. On the other hand, she has also stated in the past that she has had to withhold information on the advice of her lawyer, so the stonewalling cannot be laid entirely at Bill Goichberg's door.

The gist of Polgar's point is that if the information were revealed, then people could see that it was her side that was trying to get the truth out about the scandal and the other side that was not. If this point were to be proved, this would still not prove Truong's innocence as the fake Sam Sloan. However, it would definetely target the finger of suspicion to other directions.

These statements also affects the recall effort on Paul Truong. It is based on "breach of fiduciary duty" - he allegedly failed to disclose information to the USCF attorney defending the organization against Sloan's lawsuit. If, in fact, other Board Members and staff were leaking information to Sloan, then this disclosure would certainly trump the Truong issue. Failure to disclose needed information versus providing confidential information to legal adversaries.

The most significant part of these developments is that far from relying on "reasonable doubt" and such-like escapes, Polgar has boldly assumed the burden of proof on several key aspects of the simmering scandal.