REPORT
of the
NSS SECRETARY/TREASURER
- Attachment E -
Since the October 99 Board of Governors meeting we’ve:
ENCLOSURES (separately provided)
E-1: NSS FY00/01 Budget
Part Title
1) Budget Summary
2) Operating Fund Revenue
3) Operating Fund Expenses – Department of the President
4) Operating Fund Expenses – Department of the Administrative Vice President
5) Operating Fund Expenses – Department of the Executive Vice President
6) Operating Fund Expenses – Department of the Operations Vice President
7) Operating Fund Expenses – Department of the Secretary - Treasurer
8) Capital Investments and Special Non-Annual Activity
E-2: Projected NSS FY00/01 Cash Flow
E-3: 1999 Travel Costs
E-4: May – December 1999 Statement of FY99/00 Revenue and Expenses.
E-5: NSS Balance Sheet as of December 31, 1999.
E-6: NSF’s December 31,1999 Financial Statement for NSS Trust Funds - NSF Did Not Provide
E-7: New NSS Fiscal Policies to be recorded in Section 9 of BOG Manual
DETAILS
FY00/01 Budget
Cheryl Jones forwarded the FY00/01 NSS annual operating and capital budget (#E-1) recommended by the Executive Committee for Board of Governors’ approval. Cheryl led the budget process and developed the spreadsheets. Dave Irving provided historical data, revenue projections and spreadsheet review. The budget values were provided by the NSS officers based upon committee cost estimates and the proposed program represents the priority of the NSS officers. The historical financial data used to project revenue is posted on http://www.caves.org/nss-business/fiscal-information/default.htm.
The Finance Committee will distribute an executive summary of the proposed budget before the March Board meeting which describes it by department and also by various functional viewpoints that cross department boundaries.
The recommended budget does not include funds to provide cave rescue insurance as a benefit for all members. If the Board were to decide to offer cave rescue insurance as a membership benefit approximately $18,000 would be required through a combination of additional revenue and program expenditures reductions. The Executive Committee recommends we use the pending directors election ballot to solicit membership feedback on the desirability of this benefit and their willingness to pay for it through a dues increase.
The budgets for NSS conventions, SpeleoArt Salon, internal NCRC operations and the Mammoth Cave Restoration Project continue to be addressed outside of the normal NSS operating budget and are managed by the Administrative Vice President. The current version of these budgets is posted on http://www.caves.org/nss-business/fiscal-information/default.htm.
Cash Flow Analysis
Embedded as the last sheet in the FY00/01 budget spreadsheet Cheryl forwarded to the Board was Dave Irving's Cash Flow Analysis (#E-2), the projected NSS cash flow through our working capital, NSS restricted & NSF Trust Funds with significant expenses projected in FY0/01. The analysis indicates we should have an adequate balance in each of these funds at the end of FY00/01 to meet future needs.
Report of 1999 NSS Travel Expenses
Last summer the Board asked (ACT 16-635) for an annual report showing the amounts, source, and general purpose of funds spent for NSS travel expenses. The report for 1999 (#E-3) was distributed to the Board in February. This report includes all "travel-related" expenses reimbursed by the NSS including costs associated with air fare, car rental, mileage reimbursement for those using their personal car, food, lodging, office employee per diem, and NSS convention registration fees. "Office staff & NSS Bookstore at Convention" includes the cost to ship bookstore items ($742.78) and the repair of the office staff rental car window broken by thieves.
FY99/00 Fiscal Report
The six-month (through October) report of Revenue and Expenses as of October 31, 1999 is posted on http://www.caves.org/nss-business/fiscal-information/default.htm. It includes the $7,000 payment from ACPI for the Kartchner Journal color/overprint, even though that money technically didn't come in until early November. Halfway through the year income was running nearly $12,000 over expenses mostly due to the OVP/Office running $15,000 under its budget for the first six months. A large part of that was the result of not hiring the Bookstore Manager whose salary had been budgeted for the entire year. General Office expenses were also below budget, even after the budget was adjusted last October. Dave Irving will provide a eight-month report of Revenue and Expenses (#E-4) and a Balance Sheet (#E-5) as of December 31,1999 by the March Board meeting.
Financial Statement for NSS Trust Funds
Attached (#E-6) was not provided by the National Speleological Foundation. The following summary describes past NSF reports:
NSS Trust Fund Balance (12/31/98) Balance (4/30/99) Balance (8/31/99) Balance (12/31/999)
Life Membership $1,000,647 $1,019,572 $980,516
Stone Research $120,649 $126,678 $126,372
Awards $7,410 $ 7,234 $7,453
NSS Headquarters $123,818 $122,276 $120,640
NSS Library/Museum $0 $0 $0
Cave Preserve $50,030 $50,591 $50,719
Vandalism Deterrence $10,791 $9,906 $9,651
International Support $46,817 $46,767 $47,052
NSS News Photo $39,118 $37,761 $37,971
Stephenson $11,201 $11,770 $11,540
Sara Corrie $38,159 $38,781 $37,937
NSS Holding $77,296 $76,620 $87,565
Endowment $22,526 $48,439 $49,487
Publications $104,742 $108,166 $105,459
TOTAL: $1,653,204 $1,740,865 $1,672,362
The balance in each fund is expected to be adequate to meet the purpose for which each fund was established.
Sale of Securities Donated to NSS
I'm working with the NSF to sell the securities donated to the Society using a program of "trailing stop orders." These are orders to sell if a stock declines beyond a chosen price. Assuming the individual stock is trending upward, the stop price will be set below the rising trend, or usually just below the low of the last price pullback. The stop price will be reviewed periodically (generally weekly) and raised as the price zig zags higher. Our goal is to capture further appreciation, without risk of major decline.
At their October 24, 1999meeting the NSF Trustees considered amending the NSS NEWS Photographic Endowment Trust Fund as we requested at our July Board meeting
"Each fiscal year an amount equal to 5.5% of the total fund value shall
be available for payment to the Society. The Foundation Annual Report, as
described in paragraph 9 of the contract, shall specify the funds available.
The Foundation shall transfer available funds to the Society upon request for
reimbursement from the Secretary-Treasurer. Any funds not requested by the
close of the second fiscal year following notification shall be retained in
the fund."
Roger McClure signed the revised contract and sent it to Hazel Medville for signature.
National Cave Rescue Commission Finances
The NSS NCRC Eastern Region has said they have sent a bank card granting the NSS president and treasurer signature authority over their bank account and have directed their bank to send account statements to the NSS office, but as yet nothing has been received. Otherwise, the NCRC is now conducting their financial activity as if they are part of the Society. The NSS president and treasurer has signature authority over their bank accounts. All bank statements are sent directly to the NSS office who then distributes a copy to the NCRC regional treasurer and NCRC Financial Officer (Kathy Welling) who serves as the independent reconciler of the accounts. The NCRC regions have been sending fiscal reports to Kathy and forwarding funds to the NSS office to cover the costs associated with providing liability insurance, certificates and training material for regional training courses. Camille Mueller has been writing checks for national NCRC expenses and maintaining accounting records. Kathy and John Punches provided a FY00/01 budget for internal NCRC operations (http://www.caves.org/nss-business/fiscal-information/default.htm).
Kathy continues to seek the transaction records for the NCRC national bank account prior to its transfer to Huntsville. Without these records we have no way of knowing the extent to which the NCRC regions have been reimbursing the national NCRC account for the FY99/00 costs associated with providing liability insurance, certificates and training material for regional training courses.
Accounting Operations at the NSS Office
Since October Camille has worked almost full time performing NSS accounting and fiscal functions. She has:
2) Maintained an audit trail for all revenue received and expenses paid.
3) Entered all fiscal transactions in the NSS accounting system.
4) Reconciled our accounting & bank records once each month.
5) Provided a variety of fiscal reports to the NSS officers and Finance Committee
6) Distributed IRS form 1099 to individuals to whom we pay royalties or more than $600 in 1999 for services.
8) Developed a description of NSS office financial policies and processes.
It's unfortunate that Camille has decided to resign in the near future. During the past three years she established our accounting processes at the NSS office and got our LedgerMaster accounting software up and running. She has done a fantastic job keeping up with the NSS fiscal workload during a period in which we moved many of our accounting functions to the NSS office.
We may see some disruption in our fiscal operations after Camille departs and as we transition to Camille's replacement. Clearly we will be able to do less during any period of time in which Camille's position remains vacant. In October I worked with Camille to document our office fiscal processes and that documentation appears to be reasonably complete and up-to-date. Dave Irving has continued to be involved in office fiscal operations and Cheryl has been involved in specific issues. Fortunately Camille plans to help Dave Irving with the end-of-year fiscal closeout and the independent professional audit, something that would be difficult to do without her. She also plans to help us select and train someone to continue the accounting she has done These facts should helped to mitigate any fiscal disruption and make the transition easier for her successor.
It may be necessary to retain Camille as a consultant for some period of time after we hire her replacement. If so the expense of doing so is not covered in the proposed FY00/01 budget. It may also be necessary for the new OVP and members of the Finance Committee to spend more time at the office than now covered in the proposed FY00/01 travel budget. At this time not enough is known to budget to cover these contingencies, but it would be a wise investment if we discover our office operations would otherwise be seriously distrupted. I propose the President be allowed to authorize such expenditures if the OVP/S-T decide they are necessary. We can update our FY00/01 budget at the subsequent Board meeting.
Independent Audits
RGIS Inventory Specialists conducted an independent audit of our NSS bookstore inventory on November 5th which we compared with our LedgerMaster accounting records. The RGIS inventory indicated we were missing a book called The Hidden Sea, a few Caves of Tennessee and Natural Bridges of Tennessee. RGIS also reported we had 2,256 copies of On Rope while LedgerMaster carried only 1,778. Subsequently Jim Hall and Camille Mueller independently counted On Rope copies again and found 1,778. Other than these items, the audit revealed we had more books in inventory than we carried in LedgerMaster. We will update our accounting records to reflect the audit results.
For the past several months Dave Irving and Camille Mueller have been looking for a Huntsville accounting firm to audit our accounting procedures. We seek an independent review our NSS accounting records and process that will advise of us changes we should make to bring them into compliance with generally accepted accounting practices. Kevin Smith (former NSS treasurer & candidate to be NSS treasurer again) works for a Huntsville accounting firm that audits non-profit organizations but we seek an outsider who will give us a truly independent viewpoint. Dave is currently working with Noel Tallon (a Huntsville CPA) to arrange an audit our records in May. This is our first audit so we expect to have to make changes so in the future we can obtain an unqualified opinion from an independent auditor that our books accurately reflect our fiscal condition.
I see two potential problems. It appears we do not have the documents we will need to prove ownership of the Barton Hill Karst Preserve. Nor can we demonstrate a paper trail behind the value attributed to some of the cave properties on our Balance Sheet. These values were set in 1996 based upon an estimate from the Preserve
Managers for each Cave property.
Distributing Federal Tax 1099 Forms
Camille has mailed IRS form 1099 to those we paid royalties or more than $600 in calendar year 1999 for their services. We do not report reimbursement of expenses incurred on behalf of the Society.
NSS EC Administrative Policies
SFAS 117 (Financial Statements of Not-for-Profit Organizations) indicates we must segregate our NSS restricted funds and NSF Trust funds into those which are "temporary" (funded by the Board, e.g. Office Equipment Fund) and those that are "permanent" (funded with donor restricted contributions, e.g. Stephenson Fund). Attachment #E-7 describes the list Dave Irving and I developed characterizing our funds. The business and financial policies to be used by future NSS convention treasurers is also described in Attachment #E-7. I plan to post these policies in Section 9 of the Board Manual unless a Board member moves to amend.
Pittsburg Grotto Grant
I've agreed that the NSS will accept an annual grant from the Mary Alice Taylor Memorial Fund for "the purpose of producing a periodical newsletter such as the "Netherworld News" with an expected frequency of at least six issues per year. Available funds in excess of those needed to produce this periodical newsletter may be used to produce other publications in furtherance of the sport of caving or the science of speleology as pertaining to Western Pennsylvania or all of West Virginia." The term "publication" includes dissemination of information by any of various media such as, but not limited to, print, electronic reproduction and transmission, video, cinema, and oral communication such as lectures and training courses. Upon receipt the NSS office will forward the grant to the Pittsburgh Grotto for the purposes stated. We will continue this arrangement as long as Pittsburgh Grotto provides the Mary Alice Taylor Memorial Fund administrator and the NSS office an annual report of how the funds were spent.
1999 Convention
Peggy Kesner closed the 1999 convention bank account and is working on her final report. The final surplus for Idaho was $20,840.52. This includes a credit from the NSS Operating Fund account for $454.40 to cover the coupons they collected from new NSS members that entitled them to 30 percent off their registration fee for their first NSS convention.
2000 Convention
The EC approved the 2000 NSS convention budget. The current version is posted on http://www.caves.org/nss-business/fiscal-information/default.htm.
Convention Surplus
Reporting one year's convention surplus should be done in the fiscal year the convention occurred. That's consistent with Generally Accepted Accounting Practices and is what we tell the IRS in our Form 990 tax return. If we want to carry excess convention surplus over as income for the following fiscal year (BOG ACT 16-620) we should create a restricted fund to transfer it into in the current fiscal year and then transfer it out of the next fiscal year.
That's the accounting side of the problem, now for the budgeting side. Convention surpluses are highly variable. They vary randomly from year to year, going from small losses to excesses in the $20,000-30,000 range. If we balance one year's NSS operating budget with a large surplus and then find the next convention had only a small surplus we may have to cut a significant amount from the next fiscal year's budget. Rather than using a particular year's convention surplus in the budget, we'd be better off using the average surplus over a period of years.
How can we accomplish this? Dave Irving suggests the following with which I agree:
Expand the role of the existing Convention Surplus restricted fund. Transfer the full convention surplus for each year into the NSS Convention Surplus Fund. At the start of each new fiscal year, transfer one-fifth of the Convention Surplus Fund into the NSS operating budget as income as long as we maintain a minimum balance of $15K in the NSS Convention Surplus in accordance with BOG ACT 18-598. Why "one-fifth"? To give us five-year averaging of surpluses. Each year we would be withdrawing the average surplus for the past five years.
Currently we have about $33K in the Convention Surplus Fund. We've adopted the above strategy in our proposed FY00/01 budget have included $6,500 of convention surplus as revenue. The average surplus for the last 8 years has been about $12,000 but if you go back a lot more than 8 years the average surplus was about $6,000/year. So Dave's method is in line with the long-term average. If the long-term average has really gone up to $12K then the Convention Surplus Fund will slowly grow in size over 5 years to where the fund transfer into the NSS operating budget would be $12k a year. But the average surplus could easily go done since the Board has been encouraging convention staffs to budget more aggressively and avoid surpluses.
Mammoth Cave Restoration Project
Karen Dennis mailed the reimbursement checks for the October 99 week-long restoration camp and our annual report to the National Park Service. The current MCRP fiscal report and budget is posted at http://www.caves.org/nss-business/fiscal-information/default.htm. Nothing significant will change until after the accounting is completed for the January field camp.
SpeleoArts
The formerly independent SpeleoArts organization closed their bank account and transferred $1,293.76 to the NSS SpeleoArt restricted fund. This fund will be used to receive future NSS SpeleoArt Salon revenue and reimburse expenses.
Credit Card Donations
Phil Winkler updated our NSS office software to automate periodic charges against a donor's credit card, recognize each donor's contributions at the end of the year, and record the transactions in our accounting records. Cheryl Jones defined the process to be used.
Current S/T Department Members and Agents of the Treasurer
Camille has been working almost full time performing NSS accounting and fiscal functions. Dave works halftime on NSS fiscal efforts. He helps Camille reconcile NSS office bank account statements with LedgerMaster, develops fiscal reports, handles the NSS office payroll, works with our CPA to submit our tax return, and is now preparing for an independent audit. Cheryl works halftime on NSS budgets and most NSS business issues. Recently she’s concentrated on the FY00/01 budget and the credit card donation program. I work almost full time on NSS finances and participate in all of the above activities and more.
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)
1999 NSS Convention Treasurer - Peggy Kesner
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 Western Region Financial Officer – Peri Frantz
NCRC 2000 Seminar – John Appleby
NSS News Ad Accounting - Bert Ashbrook
FUTURE ACTIVITIES
Our priority between now and the July 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:
Paul Stevens
NSS Secretary/Treasurer