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Old February 4th 07, 02:06 AM posted to rec.games.chess.politics,rec.games.chess.misc,rec.games.chess.computer,alt.chess
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First recorded activity by ChessBanter: Apr 2006
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Default The USCF lost $344,225 - Vote for Sloan, Schultz, Goodall and Lux

The USCF lost $344,225 in 2006. This is far less than the $2,000,000
other boards have lost. This is why you must re-elect Don Schultz and
me and elect Mike Goodall and Joe Lux. The USCF is better off in our
hands.

This is my response to the report on the web from the committee who
went to Crossville.

I've received reports from the meeting in CA and it seems that these
issues will be addressed "maybe in the next fiscal year". aka after
elections.

Mr. Channing seems to think that I should be communicating directly to
him and should have sent this report to both him and Bill Hall in
advance. They didn't request the report. Also, I was not included in
the committee going to Crossville nor to those Mr. Channing wanted to
keep "in the loop" upon their return.

Mr. Channing thinks that I have not communicated directly to him while
I have done so with others. That is correct. He sent an email
directing all communication to the Finance Chair. That is what I did.

This report did not go to Randy Bauer, Grant Perks, or Mike Nolan.
They did not request it.

It did go to Bill Goichberg, Beatriz Marinello, Steve Jones, and two
other non-EB members/non-candidates.

I did not do this report as a member of the Finance Committee. This
was a report that I did on my own as a concerned USCF member.
Therefore, it did not go to the Finance Committee members, the LMA, or
the Audit Committee.

This report took me 11 hours to analyze and then several hours of
discussions and emails took place afterwards. The response to many of
the details is that Bill Hall would call me to discuss it. Well, I
talked to Bill Hall on January 24 about many of these points and they
were not corrected in the financials. We have been waiting for better
financial records since November when Joe Nanna was hired. I do not
have high hopes of huge improvements in the near future.

My prediction is that we will end the year in the red as usual, there
will be a lot of finger pointing, Mr. Hall will be given a contract
extention now until after the elections are over, and at the delegates
meeting, the delegates will say how outraged they are that this has
happened again.

I've played by all the rules set up until now. This organization
belongs to the USCF members and we deserve better than the management
we are getting.

My report now follows as originally written and the references are to
the report that is on the web. The page numbers are referencing that
report:

Reply to the Phase I Financial Review:

1) Page 3 of 18 - Cash Flow Report by the tenth business day of the
month.

Are all the reports on the Appendices generated by Peachtree? Or are
these actually reports that are exported from Peachtree and then
manually edited in Excel? Would it be possible to see the reports that
Peachtree generates straight from Peachtree without modifications?

Email from Bill Hall after these reports were sent:
Appendix A contains an error in the revenue reporting. Please
disregard this
and we will distribute a corrected schedule early next week.

What is the nature of the error? Does it affect the total revenue
received?
And if Appendix A has an error in revenue reporting unless it is just
misposting to different line items, then won't that affect the bottom
line of profit or loss on the report and the balance sheet?

2) Page 3 of 18 - Quarterly basis - Balance Sheet and Profit and Loss
Statement. It is important for the general membership to see these
reports monthly. There are many delegates and USCF members who are
interested in these numbers and every USCF member has a right to know
what management is spending their dues dollars on.

It would not be prudent to post cash flow statements since that might
affect contract negotiations and also affect the willingness of
individuals to make commitments based on the cash flow at any
particular moment in time.

3) Page 3 of 18 - The correcting entries from the auditors were not
included until after the December financial statements were issued.
The correcting entries will be made on the January financial
statements.

Why were they not included here? The December report is an interim
report. Is it not possible to make adjusting entries should an error
be discovered in it in order to correct inaccuracies? Why is the
deferred revenue from prior years the same in each month on the P & L
summary? In other words, if a new member paid for a two year
membership in November 2006, wouldn't that mean that their second year
income would be recognized in November, 2007? If so, then wouldn't the
deferred revenue from prior years be recognized in a fluctuating
manner?

4) Page 4 of 18 - Cash Budget (See Appendix B)

Appendix B is flawed.

Tournament Revenue - 7 Month Budget is actually the figures for 6
months only.

Correspondence Chess is: 8271 not 7142
Reg. Tournaments is: 249667 not 239490
FIDE Registration Fees is: 1400 not 1200
Sponsorships is: 15700 not 14200

Total is: 275038 not 262032 - Difference of $13,006.

This means that the variances are all off on these line items as
well.

We were projected through December for a cash deficit of $193,871
through December not the $207,000 listed by Mr. Nanna.

In previous financial reports, there was $7,950 reported as income in
tournament concession on an actual basis from August, 2006. Appendix B
no longer shows that income. I believe that was the concession income
from the US Open this year. Where did it go?

In fact, there is no tournament concession income listed. Have we not
collected any income in this line item this year?

In revenues, Loan for Furniture is listed as other Revenue for
$24,334. At the very least, this is cash dr./loan cr. Listing it as
other revenue instead of listing it separately as other cash received
is misleading. This is offset by Office Equipment Expense in September
for $24,334. Where are the loan payments for this loan? Under expense,
it shows zero payments for Furniture from June through December. The
projections are showing $1,030 monthly payments from January through
May. Have we not made payments since September when we took the loan
out?

In fact, one of the reasons why a cash budget report is a problem is
that accounts payable would not be listed since items are only shown
when paid. Our accounts payable shows $58,983 at the end of December.
Does that include the above furniture payments?

In previous financial reports, there was interest on line of credit
expense: August through November total of $1,647. It doesn't appear to
be on Appendix B.

Revised statement from Joe Nanna would then be roughly $30,000 ahead
of budget thru December. Cash deficit projected $193,871. Actual:
$163,849.

5) Page 4 of 18 - "That's IF actual results parallel the budget that
was submitted."

First, let's review the last column in the actual vs. budget column of
Appendix B - the Variance. Management has not been anywhere near
projections for the first 7 months on virtually any line item.

Secondly, the future projections are in essence are a cut and paste of
the original budget for future months with the exception of
Professional Fees. So far this year, we have spent $131,858 in
Professional fees, yet starting in February; we will only spend $175
per month. This is the only line item that I see has been adjusted in
the budget going forward. What have we been paying Professional Fees
for all year and now why will we no longer need them? We were budgeted
for $200,000 for the year and are now projecting to save $46,000 on
this one line item. Is that truly realistic?

Third, Fringe Benefits for February is incorrect...typo which reflects
in the bottom line: Should be $11,708 making personnel total $71,927
not $60,219.

Fourth, a budget is intended to be a living document. If during the
course of the year, management realizes that they will be over budget
in one line item or under budget in another line item, it is hoped
that the future projections will reflect these changes and indicate
where cost savings will be anticipated or growth revenue will be
recognized. Instead the cash projections here cannot be expected to be
any more accurate than they have been for the first 7 months of this
fiscal year since they come from the same source.

My personal opinion is that the projections are seriously flawed and
need to be thoroughly re-evaluated especially in light of what has
occurred thus far this year.

6) Page 4 of 18 - Tournament Revenue and Expense - Tournament revenue
and expense as reported on the P & L statement appears to be somewhat
distorted.

I believe that this issue was first raised as a concern in December if
not sooner. On January 7, Joel Channing sent an email to the finance
committee members which stated referring to Mr. Nanna: "He believes
he'll finish analyzing the tournaments within a couple more weeks..." It
is now February 2.

Mr. Nanna states: "I am in the process of analyzing the accounts to
determine what, if any, adjustments have to be made to correct the
reporting." Surely by now, there is some indication as to whether the
tournaments are accurately reported or not.

I will agree with somewhat distorted:

Appendix B

Tournament Expense - Correspondence $20,860 listed on this report for
November. Why? The cash flow report sent to us for December showed
$730. In fact, the cash flow report shows the same total Tournament
Income and Expenses as what is listed here and this is what was
provided as a breakdown for income and expense. Perhaps the board can
help to analyze these numbers:

TOURNAMENT Income Expenses Profit or Loss

06 NATIONAL YOUTH ACTION 25,437 29854 (4,417)
06 K-12 103,058 44226 58,832
06 US AMATEUR TEAM 0 0
06 WORLD YOUTH 43,158 81464 (38,305)
06 US OPEN 76,474 53910 22,564
07 US OPEN 0 0
07 ELEMENTARY 11,968 7895 4,073
07 JUNIOR HIGH 183 7628 (7,445)
07 HIGH SCHOOL 4,124 2949 1,175
06 US CHAMPIONSHIP 0 0
06 NATIONAL OPEN 23,575 42808 (19,233)
06 SR OPEN 5,925 4736 1,189
06 COLLEGE FINAL 4 0 686 (686)
06 UMBC - PAN AM 400 400
06 OLYMPIAD 1,728 1,728
07 JR INVITATIONAL 7519 (7,519)
07 JR CADET 250 (250)
06 OLYMPIAD 19709 (19,709)
PAN AMERICAN YOUTH 18807 (18,807)
WORLD JUNIOR 3000 (3,000)

Correspondence Chess 10,892 730 10,162
FIDE Registration Fees 6,086 6,086
Sponsorships 17,338 17,338

Total 330,346 326,169 4,176

There was BINFO #200700375 and BINFO #200700376 discussing the World
Youth. So is it true that the USCF lost $38,000 on this item or is the
US Chess Trust reimbursing USCF for any of this item?

The Pan Am is showing a loss of $18,807 - again, is that a total loss
or will money be coming from the US Chess Trust and if so, how much?

Did we really make a profit $22,000 off the US Open? Also the
delegates meeting was $23,000 under expected expenses for this event?
(See Appendix B for Governance.) This must be a record for
profitability for the USCF on the US Open.

A loss of $20,000 for the National Open?

And then the Olympiad for a $20,000. loss?

If all of the above looks okay, then a $4,177 profit on tournaments is
great.


7) Page 4 of 18 - Chart of Accounts - Within the next several weeks, I
will design a new chart of accounts... Given the current state of our
financial records, it would seem that other items need priority.

Pages 5 through 15. Lots of interesting data. How exactly is the USCF
planning to calculate what our deferred memberships should be and what
the process will be for allocating them going forward?

Page 14 of 18 - "New memberships were down in all three time periods
for the current fiscal year compared to a year ago." That would be a
strong indicator to me that the dues sale did not inspire new
memberships.

"The large number of returning members in September 2006 is due to a
mailing to former members." How much did the mailing cost us to do in
comparison to how many former members sent in memberships?

"The biggest impact of the dues sale has been on memberships that were
renewed 2 or months in advance." This indicates that members took
advantage of a bargain when they saw one and I would expect this to be
the increase in multi-year memberships as well which would indicate
that next year we would not have those same people in the membership
pool to get renewals from. Following that thought would mean that
people who renewed multi-years in advance will not be paying $49
memberships next year so we can expect a decline in membership
renewals plus since our new memberships were down in all three time
periods, we can expect less revenue next year if the trend continues.

"...revenue has gone down nearly $10,000 during the due sale...revenue
which needs to be deferred to future years has increased by nearly
$27,000." We generated a net cash flow of $17,000 for this year,
earned $10k less this year and now have a $27k liability in the
future.

9) Page 16 of 18 - Budgeted Cash Profit for the Remaining 5 months of
FY 06-07 of $300k. That is one big IF.

10) Page 16 of 18 - "These are accounted for on an accrual basis and
each year an appropriate portion of the multiyear memberships are
deferred, i.e. they are saved for later on paper, but not actually
physically (or fiscally) saved for later."

This in essence is going to be what creates the downfall of the USCF.
This is the LMA fund revisited. We have taken the multi-year
membership income and borrowed from the future. To keep it simple: We
have $27,000 that should be deferred from the dues sale above (item .
Instead we save it "only on paper". So, next year, when we mail those
members their magazines, we will have to pay that expense out of
pocket because we already spent that money this year. And we've been
doing this for years. So in essence, we have to keep selling multi-
year memberships because the day we don't is the day that there is no
revenue stream to cover the money that was already spent. We are
taking future income and spending it now, but keeping a note to
ourselves on paper.

"Both cash and accrual tell part of the story and both are essential
for fully understanding the financial status of our organization."
Cash flow reports are just that...reports to determine if you have
enough cash coming in to pay the bills. Accrual reports let one know
if we are making a profit. We're not and sooner or later we will have
the bills and not have the cash to pay them.

11) Page 16 of 18 - Cash Reserves - "The potential impact of a future
cash crunch is serious because the Federation has insufficient cash
reserves." The questions regarding why we do not have cash reserves
and how we are managing our resources follow in items below.

12) Page 17 of 18 - Continuing the dues sale. All this will do is
decrease our current earning power, continue to provide a cash flow to
cover the money we spent this year instead of saving, and continue to
put money into future year deferrals which we will have "on paper".

13) Page 17 of 18 - This will be for vetting purposes..., etc. It
would seem to be reasonable to have a one week time frame for
committee members to review statements, decide if they appear to have
all the details and are accurate, and then there would be no rationale
not to provide reports to the general membership. There is no reason
for Finance Committee members to know more than the average USCF
member who has a desire to know where his/her membership money is
being spent.

14) Questions pertaining to the financials themselves:

a) Chess Life Tournament Ads - Under budget by $11,225. Will this
trend be likely to continue? In other words, we have only received
$12k for the first 7 months of the year, yet we are projecting $16k
for the last 5 months.

b) Chess Life Advertising under budget by $32,422. Have we made
entries for the ads provided to Ms. Polgar in exchange for services?
Advertising revenue for January is listed as double the following
months on the projections. Is this realistic?

c) Royalties - Under budget by $14k. We have only received $5k year to
date, yet anticipate another $14k by the end of the year. Is that
realistic?

d) Unreconciled Web Income. What is this exactly? My understanding is
that we cannot match our receipts to the items paid for by the web. Is
that an accurate explanation? How is that possible?

e) Catalog Mailing - It is my understanding that a catalog was mailed
in the summer and the fall. Why are there no entries for these items?
We had budgeted $10k for June and $20k for September. Are these
entries actually combined in the regular Chess Life mailing which
means that then our Chess Life mailing line item needs to be adjusted?
Or is this a bill that will show up at a later date?

f) Salaries over budget by $27k and Professional Fees over budget by
$10k. Will this trend continue for the rest of the year?

g) Building improvements $13k over budget on a new building? Or is the
$11,850 spent in July for something in New Windsor? What did we spend
$3,125 for in November?

h) Miscellaneous Expenses are $26k over budget. Exactly what are these
expenses?

15) Other questions from Balance Sheet for December, 2006

a) Accounts Receivable for December are $30,615 compared to almost
double that for each of the previous months. Was there something in
particular which created this sudden increase in cash receipts? Why
were we able to decrease our accounts receivable by $41k but our
accounts payable only decreased by $300?

b) Does the Chess Trust owe us money and if so, is that amount
included in the Accounts Receivable or is that income not booked
anywhere as of yet?


The above items are my questions and it took me 11 hours to compile
questions from various individuals, analyze the data here, and create
this response. I hope that it was worth my time and that these issues
will be seriously addressed.

Balance Sheet bottom line as of December 31, 2006

Net Loss: $344,225.

Total Capital: ($474,640)

Sending you the trial balance by email.

Maybe now we can talk about something that's a lot more important than
what Mr. Sloan has on his website.

And before anyone says I cannot do this, I trust that they handed out
the latest financials at the EB meeting. Besides which this
confidential stuff of ducking the inquiries from the membership has to
stop.


Donna Alarie
Massachusetts Delegate
_________________
Donna Alarie
Chesspals, Inc.

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