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Doc. # 19
Report of the Administration and Finance Committee
The American Radio Relay League
2001 Second Meeting of the Board of Directors
Committee Members: Director Walt Stinson, W0CP, Chairman; Vice President Joel Harrison, W5ZN; Directors Coy Day, N5OK; Jay Bellows, K0QB; Bernie Fuller, N3EFN; and Dennis Bodson, W4PWF; Vice Director Jim Fenstermaker, K9JF (secretary); Executive Vice President Dave Sumner, K1ZZ; CFO Barry Shelley, N1VXY; Treasurer Jim McCobb, W1LLU; and President Jim Haynie, W5JBP (ex-officio).
Introduction
The committee has worked closely with management to ensure that the transition to the new management structure is successful. An example of the benefits of this structure came at the committee's May meeting where the management team presented recommendations for improving the effectiveness of member program spending. The committee was pleased with the proactive recommendations of the team. We are looking forward to the addition of the Chief Development Officer.
Computer System
The computer system upgrade is progressing satisfactorily. Management has kept this project under control and has not permitted it to grow much beyond its original scope. Though the system design is complete, suggestions and new ideas for modifications do occur. At the May meeting of the committee, Mr. Shelley and Mr. Sumner recommended, and the committee approved, the allocation of an additional $48,000 to the project. We do not consider this a "cost overrun". Instead, as the project has progressed, management has identified several opportunities worth capitalizing. In this particular instance, methods for user input will obviate the need for clerical staff data entry and the payback time is very fast. It is possible that further investments of this type will be considered when the economic advantage is clear.
Audit Report
The committee has received the audit report from Arthur Anderson. The purpose of the audit is to express an opinion to the board as to the accuracy and completeness of the financial statements provided by management and incorporated into the report. This was a "clean" (unqualified) opinion stating that the statements fairly present the League's financial position. When the auditor notes weaknesses in the financial reporting system or opportunities for strengthening internal controls, these are reported in a management letter. There was no management letter issued in conjunction with this audit.
Investment Portfolio
The market value of the investment portfolio at the end of 1999 was approximately $15,000,000. At the end of 2000, the market value had dropped to about $13,000,000, a decline of about 13%. In large part, this drop was due to a broad decline in the value of stocks. This was reflected in the League's net assets, which declined during this period from about $8.8 million to about $6.8 million. Since these are the reserves of the League, and well exceed what is necessary to fund operations, there will be no short-term effect on activities. We have identified growing net assets as a priority, as these reserves allow us to fund major capital outlays and provide the financial strength for new programs, such as advocacy.
Program Spending
A primary responsibility of the board of directors is to ensure that League resources are allocated appropriately. This is a daunting challenge because standard financial tools are inadequate when measuring non-profit member programs. The League supports a broad array of programs. Some of these programs provide direct member benefits, such as subsidies for the DXCC, QSL bureau and contest programs, while others are more indirect, such as our support of IARU and Advocacy. While these programs were all board approved at some point in the past, it falls to the A&F committee to periodically assess the cost benefit ratio and strategic importance of member programs and made recommendations accordingly. It has been quite a few years since the last such review and the committee believes an updated review is needed.
Management was asked to evaluate each program and provide preliminary recommendations. Their report was presented at the A&F meeting in May (see meeting minutes for more details). Various ideas for improving resource allocations were debated and several were adopted. The committee endorsed a more comprehensive review of Field Services activities. This review will be coordinated with the VRC.
In connection with the program spending review, the committee is also examining spending on staff and director travel to hamfests and conventions. The purpose is to ensure that the League gets a good "bang for the buck" from such travel. There is a concern that staff in particular may be traveling to events when attendance and other factors do not justify such travel at League. Under the present rules, most conventions feel entitled to have a staffer attend because of the way that the current guidelines are written. While director approval is required, no objective standards exist to assist in making a determination.
QST Page Count
In July, 2000, the board enacted a minimum page count standard for QST. In the year that followed, advertising in QST declined and AO-40 failed, cutting pages. Moreover, plans are being made to move low interest content out of QST and onto the web. Management has requested a lowering of the minimum page count so that, for example, lost advertising pages do not have to be replaced by editorial content. The committee concurs that more flexibility is needed, but also wants to maintain the higher standards that QST has achieved. The committee plans to formulate new guidelines to address this issue.
Executive Re-organization
The board has authorized a four person executive management team comprised of a CEO, CFO, COO, and CDO (chief development officer). Messrs. Sumner, Shelley, and Wilson now occupy the first three positions. Their first team effort was the production of the program spending report. The position of Chief Development Officer is open and recruiting efforts are ongoing. The transition to the new structure has been smooth. Some changes in office locations will be noted when touring HQ. Several key staff members have been promoted to help strengthen the structure.
Year to Date Results
The year to date financial results are running better than plan due to lower than expected program spending. One area of concern, however, is lower than expected advertising revenues, which reflect continuing weakness in the amateur radio marketplace.
Walton Stinson, W0CP
Chairman
25 June 2001
