June 2000

REPORT
of the
NSS SECRETARY/TREASURER

- Attachment E -

OVERVIEW

Since the March 2000 Board of Governors meeting we've:

• Published the final FY 00/01 NSS Operating Budget.
• Published the final statements of FY99/00 NSS financial activity.
• Published the Balance Sheet for the NSS Operating Fund and NSS restricted funds as of April 30, 2000.
• Hosted an independent professional audit of our accounting records and processes.
• Worked with the OVP to hire a new NSS Office Operation Manager capable of performing the Operation Manager's accounting functions.
• Obtained signature authority over NSS funds in the NCRC Eastern Region bank account and direct access to its bank statements.

ENCLOSURES (separately provided)

E-1: FY99/00 NSS Operating Fund Revenues and Expenses

E-2: FY99/00 Operating Fund Cash Flow Statement

E-3: FY99/00 NSS Restricted Fund Activity

E-4 Balance Sheet for the NSS Operating Fund and NSS restricted funds as of April 30, 2000.

DETAILS

FY00/01 Budget

Cheryl Jones updated the FY00/01 NSS annual operating and capital budget to reflect changes by Board of Governors and distributed it in late March to the Board. It will be posted on http://www.caves.org/nss-business/fiscal-information/

FY99/00 Fiscal Report

Dave Irving developed the final statements of FY99/00 NSS financial activity (enclosures E-1, E-2, E-3) and Balance Sheet as of April 30, 2000 (enclosure E-4). In summary, these reports indicate:

• During FY99/00 NSS Operating Fund revenue exceeded expenses by $12,669. We had budgeted a $12K deficit.
• The Society has adequate working cash to meet anticipated cash flow needs.
• The Society has adequate restricted fund balances to meet the intended purpose of these funds.
• Our management and fund raising costs were 12 % of our total income, within the range expected for nonprofit organizations.

Note the "Functional Expenses" section of the "FY99/00 NSS Operating Fund Revenues and Expenses" report. This is the first time such information has been reported to the Board but similar information has been reported to the IRS for years. It allocates our Operating Fund expenses between Program Services, Management and General, and Fundraising, as prescribed by FASB 117 and IRS Form 990. The Program Services portion is further broken down into several distinct categories. Dave will update the "Functional Expenses" later to a full corporate statement including our restricted funds expenses.

Also note the "FY99/00 Operating Fund Cash Flow Statement". This is the first time the Board has been provided such information.

The final statement of FY99/00 NSS financial activity will be posted on http://www.caves.org/nss-business/fiscal-information/

Financial Statement for NSS Trust Funds

Enclosure # E-3 describes changes during FY 99/00 in the NSS Trust Funds managed by The National Speleological Foundation. In summary we saw very little growth ($4K on assets of $1,620K). However, I expect the balance in each fund to be adequate to meet the purpose for which each fund was established. We did not receive a report from the NSF between August 1999 and May 2000. We have not received a detailed report from the NSF on how our funds are invested since August 1999. Upon receipt I will provide it to the CPA who is auditing the Society and to those Board members who indicate interest. I've discussed this situation with the NSF and hope they will provide more timely information the future.

Accounting Operations at the NSS Office

Since the March BOG meeting Camille’s financial efforts have concentrated on paying the surge of bills that normally come in at the end of the fiscal year. Dave Irving and Karen Dennis arrived at the office on Thursday, May 4th to work with Camille on closing the accounting for FY 99/00. Camille reports there were "No big problems, but it is funny how much time it can take to find a $6.00 error." They finished Friday the 12th at 6pm.

We may see some disruption in our fiscal operations after Camille departs and as we transition to Camille's replacement. We plan to retain Camille as a consultant for some period of time after we hire her replacement. If so the expense of doing so may not covered in the approved FY00/01 budget. We can update our FY00/01 budget at the subsequent Board meeting.

Independent Audit of NSS Inc.

In May we hired Noel Tallon, a professional Huntsville CPA, to perform the first independent review our NSS accounting records and process and advise of us changes we should make to bring them into compliance with generally accepted accounting practices. His estimate to perform the service was $4900, $500 over budget. The audit started May 15th. Dave Irving and Camille spent the next 3 days answering questions, explaining procedures, and pulling supporting documentation. They were able to quickly provide everything the auditors requested with a few exceptions such as a copy of the NSS property insurance policy, one of the bills from publishing Cave Minerals, and a deed to Warren Cave, all of which were provided later. They suggested we made a few adjustments (not required) on how we accrue payroll, annual leave and how we depreciate the office equipment. Also, they suggested a few potential changes (again not required) on how we list the value of our caves and office equipment plus the removal of the words "fully deductible" on our donation letter (already changed). As soon as they receive the letters from the NSF and our banks verifying our balances and a letter from Joel Stevenson saying we were no major lawsuits against the Society, they will write their final report. Upon receipt we will provide a copy to the Board.

Insurance

Ted participated in the recent discussion of whether our 1999 NSS convention liability insurance policy would cover the cost associated with defending the Society and its agents against a threatened lawsuit for copyright infringement. He indicated if the Society was a party to the suit then we can likely call upon the insurance carrier.

Ted also determined it would cost $1200/year to provide liability insurance for members of the NSS Board of Governors and NSS committee chairmen with a coverage of $l million for the aggregate of incidents during the one year term. He estimated it would cost $1700/year for an aggregate annual coverage of $2 million.

National Cave Rescue Commission Finances

The NSS president, NSS treasurer and NCRC Eastern Region treasurer now have signature authority over the NSS NCRC Eastern Region bank account and bank account statements are now being sent direct to the NSS office.

The NCRC Financial Officer (Kathy Welling) has prepared a draft report of FY 99/00 NCRC finances including internal NCRC operations not previously visible to the Board. We will post her final report on http://www.caves.org/nss-business/fiscal-information/

Starting in FY 00/01 we will reflect all NCRC financial transactions in our NSS fiscal reports regardless of whether the source of funds was the AVP NCRC budget line or funds obtained from NCRC sponsored courses. The money budgeted and reported for NCRC in the past was based on the perception that the AVP NCRC budget line was the only money spent by the Society for NCRC activities. In reality all of what NCRC spends is NSS money.

2000 Convention

Nick Schaer provided an up-to-date report of NSS 2000 convention income and expenses. At this point we seem on track to obtain the income associated with the budget for 1000 attendees, but few expenses have actually been paid.

Mammoth Cave Restoration Project

Karen Dennis provided an up-to-date report of NSS Mammoth Cave Restoration Project income and expenses which includes the financial activity associated with the last field camp in January 2000.

Current S/T Department Members and Agents of the Treasurer

Secretary-Treasurer - Paul Stevens

Chief Accounting Officer - David Irving (Finance Committee)

NSS Budget & Business/Finance Issues - Cheryl Jones (Finance Committee)

NSS Operations Manger - Camille Mueller

Insurance Committee - Ted Kayes (Chairman)

Personal Property Committee - Mike Gunderloy (Chairman)

2000 NSS Convention Treasurer - Nick Schaer

2001 NSS Convention Treasurer - Werner Jud

2002 NSS Convention Treasurer - Joe Levinson

2003 NSS Convention Treasurer - Michele Richardson

NSS Convention Bank Account Reconciler - Scott Fee

MCNP Cooperative Agreement Treasurer - Karen Dennis

MCNP Cooperative Agreement Bank Account Reconciler - Marilyn Walker

NCRC Financial Officer – Kathy Welling

NCRC Northeast Region Financial Officer – John Evans

NCRC Eastern Region Financial Officer – John Appleby

NCRC Central Region Financial Officer – Anmar Mirza

NCRC Pacific Northwest Region Financial Officer – John W. Punches

NCRC 2000 Seminar – John Appleby

NSS News Ad Accounting - Bert Ashbrook

FUTURE ACTIVITIES

Our priority between now and the Fall 2000 Board meeting will be to continue to process our financial transactions in a timely manner and provide timely reports. This may be a challenge with Camille's departure. Other tasks include:

• Work with the OVP to transition Camille's accounting responsibilities to her replacement.
• File our FY99/00 federal income tax report.
• Implement the independent auditor's advice on what we must do to have a professional audit firm certify our accounting records conform to generally accepted accounting practices and properly state our finances.
• Continue to update our NSS bank accounts to provide signature authority for the new president and NSS Operations Manager.
• Record NSS convention and NCRC income and expense summary information in LedgerMaster on a monthly basis.
• Continue to codify our business and financial policies and procedures.

Paul Stevens
NSS Secretary/Treasurer