REPORT

of the

NSS SECRETARY/TREASURER

March 27, 1999

 

OVERVIEW

Since the last Board of Governors meeting we’ve:

Developed an analysis of FY92/93 – 97/98 NSS Membership & Dues.

Developed an analysis of FY92/93 – 97/98 NSS Bookstore Sales & Cost of Goods Sold.

Developed FY99/00 NSS Operating & Capital Budgets.

Published an analysis of the 1997 NSS convention Executive Planning Committee travel expenses.

Continued to gain EC consensus to implement aspects of our strategy to mitigate the risk of fraud, waste or abuse of NSS resources.

 

Before the March 1999 Board meeting we expect to:

Complete the transfer of our accounting system from DacEasy to LedgerMaster.

Complete a Balance Sheet and Statement of Financial Activity for the first nine months of FY98/99.

 

ENCLOSURES

E-1) FY99/00 NSS Operating Budget Operating Fund Revenue

E-2) FY99/00 NSS Operating Budget Operating Fund Expenses – Department of the President

E-3) FY99/00 NSS Operating Budget Operating Fund Expenses – Department of the Administrative Vice President

E-4) FY99/00 NSS Operating Budget Operating Fund Expenses – Department of the Executive Vice President

E-5) FY99/00 NSS Operating Budget Operating Fund Expenses – Department of the Operations Vice President

E-6) FY99/00 NSS Operating Budget Operating Fund Expenses – Department of the Secretary - Treasurer

E-7) FY99/00 – 01/02 NSS Capital Budget

E-8) FY99/00 NSS Conventions, National Cave Rescue Commission, and Mammoth Cave Restoration Project Cash Flow

E-9) FY99/00 NSS Operating Budget Summary

E-10) FY99 NSS Convention Budget

E-11) FY00 NSS Convention Budget

E-12) FY92/93 – 97/98 NSS Membership & Dues

E-13) NSS Dues Over Time in Constant 1940 Dollars

E-14) FY92/93 – 97/98 NSS Bookstore Sales & Cost of Goods Sold

E-15) Breakdown of Projected FY99/00 Bookstore Sales

E-16) Statement of FY98/99 NSS Financial Activity – January 31, 1999

E-17) NSS Balance Sheet – January 31, 1999

E-18) National Speleological Foundation December 31,1998 Financial Statement for NSS Trust Funds

E-19) 1998 NSS Convention Financial Report – January 31, 1999

DETAILS

FY99/00 Budget

Attached is the FY99/00 NSS Operating (#E-1 through #E-6) and Capital Budget (#E-7) recommended by the Executive Committee for Board of Governor s’ approval. The budget process was lead by Cheryl Jones with Dave Irving providing historical data and review. The budget values are based upon NSS officer and committee cost estimates and the proposed program represents the priority of the NSS officers. Note the FY99/0 deficit projected by the Executive Committee. The Society has sufficient reserves to absorb a short term deficit budget, but cannot do so for long. The Executive Committee considered options to increase revenue or decrease costs associated with the NSS administrative infrastructure and benefits provided to the members. The Executive Committee does not believe that current membership benefits can be maintained over the long term unless the membership dues are increased.

Also attached is the anticipated cash flow for NSS conventions, NSS NCRC National Rescue Seminar, and the NSS Mammoth Cave Restoration Project during FY99/00 (#E-8) and a summary of the aggregate FY99/00 NSS cash flow (#E-9).

Since the cash flow for each NSS Convention actually occurs over a three-year period, the full budget for the 1999 (#E-10) and 2000 (#E-11) conventions are also attached.

Membership and Dues Revenue Trend

Attached is a set of graphs (#E-12) depicting 1992-98 NSS membership and dues revenue, developed from DacEasy financial data supplied by Dave Irving. The graphs were used to help develop and support the FY99/00 dues revenue estimate in the budget. You'll see that they fall into two categories:

• Monthly membership totals: Points on the graph are the actual total number of NSS members for that month.
  
• Moving 12-Month-Total Dues: Points represent the total dues revenue for the previous 12 months. Thus, the figure for October 1997 is the total from November 1996 - October 1997, the figure for November 1997 is the total from December 1996 - November 1997.

Note that our membership totals have been decreasing since September 1998, but it is too early to tell if this is part of a long term trend.

The moving 12-month-total for dues from members that renew has been stable for some time compared with the volatility in the moving 12-month-total for dues from new members. Note the sharp increase in the moving 12-month-total for dues from new members in mid 1996 apparently a result of raising annual NSS dues from $25 to the current $30 rate. This mid-1996 increase can also be seen in the moving 12-month-total for the total dues we receive.

Given that there are no plans afoot to develop a program to increase membership, with the attached charts and the above comments in mind, Cheryl, Dave and I estimate FY99/00 dues revenue will be $291,675.

Membership Dues Over Time

Attached is a graph developed by Dave Irving that shows the annual dues for a regular NSS member over time expressed in constant 1940 dollars. Dave used the latest Consumer’s Price Index data from the Bureau of Labor Statistics. For the 1999 and 2000 values he assumed a continuation of the current rate of inflation (1.7%/year).

Note that our 1999 dues are $2.57 in constant 1940 dollars, compared to historical values that have normally been in the $3 to $4 dollar range. If we were to increase the dues to $33 starting in 2000, the dues will be equivalent to $2.78 in constant 1940 dollars.

The Society dues have been as follows:

Bookstore Sales and Cost of Goods Sold (COGS)

Attached is a set of graphs (#E-13) depicting 1992-98 NSS Bookstore sales and COGS, developed from DacEasy financial data supplied by Dave Irving. The graphs were used to help develop and support the FY99/00 bookstore projections in the budget. You'll see that they fall into two categories:

• Monthly Sales: Points on the graph are the actual sales or COGS for that month.
  
• Moving 12-Month-Total Sales: Points represent the total sales or COGS for the previous 12 months. Thus, the figure for October 1997 is the total from November 1996 - October 1997, the figure for November 1997 is the total from December 1996 - November 1997.

The sales and COGS data for the main bookstore divisions (NSS Publications, Non-NSS Publications, and Symbolic Items) have been plotted, as well as that for our main drivers (On Rope, Cave Minerals, and Speleo Digest). The solid unbroken line running through the monthly sales graphs is the trend line.

Note that On Rope sales have been fairly consistent over the years, and over two editions, while CMWII sales have decreased significantly since publication.

Monthly sales of NSS Pubs have been increasing over the long term, but there are signs of a recent significant downward trend. Our NSS Pubs sales are dominated by On Rope II whose sales have been down 5-10% the past 5 months and we are out of the Cave Rescue Manual. When we print a popular new book, sales go up. But we do not plan to print a popular NSS book early in FY99/00.

Monthly sales of Non-NSS Pubs has a significant downward trend. Speleo Digest sales are increasing, and did very well this year. This graph illustrates the importance to bookstore sales of keeping SD issues up to date, and the effects of Scott Fee's excellent marketing. But many of the Speleo Digests now in the pipeline to be published will cover articles that are several years out of date, so future SD sales are not likely to maintain this trend.

The overall trend for the moving-12-month bookstore sales is up slightly, but it is significantly below what we budgeted in the past two FY budgets, while the monthly sales trend is about level. The total COGS reflects not only total bookstore sales, but the mix that is being purchased. Speleo Digest, for example, has a much higher COGS than On Rope II.

With the attached charts and the above comments in mind, Cheryl, Dave and I estimate FY99/00 bookstore sales will be $150.8K with COGS $84K. Attached (#E-14) is a detailed breakdown of projected FY99/00 bookstore sales While this is much lower than we budgeted last year, we believe it to be an aggressive estimate. There are definite signs that sales will be lower unless we take actions to reverse the recent trends.

FY98/99 Third Quarter Fiscal Report

Dave Irving plans to provide a FY98/99 third quarter statement of income and expenses (#E-15) and balance sheet (#E-16) by the March Board meeting. However, our priority is to finish the transition to LedgerMaster so this may slip. I expect the report will show our dues income and rate of expenditure will be near budget, and bookstore sales to be lower than we budgeted. We have sufficient cash on hand to meet expenses.

Financial Statement for NSS Trust Funds

Attached (#E-17) is the National Speleological Foundation’s January 1999 report on the NSS Trust Funds as of the end of December 1999. In summary:

The balance in each fund is adequate to meet the purpose for which they have been established.

At our November 1998 meeting the NSS Board asked the NSF to:

1) Transfer to the NSS Endowment Fund $25,000 of the amount in the NSS Life Membership Trust Fund above that needed for payment of life membership dues.

The NSF will transfer the $25K to the NSS Endowment Fund in March when their Investment Committee meets to decide how to raise the funds and how to invest them.

2) Establish the NSS Library/Museum Building Trust Fund

The NSF board meeting on Oct. 31, 1998 approved a motion to accept in principle management of the NSS Library/Museum Fund. The NSF Board will meet on March 20th to formally approve the contract change as proposed by the NSS.

Accounting Operations at the NSS Office & Improving Our Process

Camille spent most of her time for the last several weeks involved in NSS accounting. Dave Irving will join her at the NSS office the week of March 1stto resolve the remaining differences between the duplicate LedgerMaster and Dac Easy books we maintained for the office’s May - October 1998 transactions. Most of these relate to account receivables and bookstore sales and to matching bookstore inventory results. All of the FY98/99 NSS office deposits and payments are now in LedgerMaster. Dave will enter the few checks he has issued for large bills the first week of March. That leaves only those checks and deposits by the Mammoth Cave Restoration Project, NSS Convention and NCRC treasurers outside of our central LedgerMaster-based accounting system.

We now use LedgerMaster for all NSS office purchases. We use it to pay invoices. We use it to pay bills. by first producing a voucher, then an invoice, then a check. Camille has begun to use it to print all NSS checks (except those related to the Mammoth Cave Restoration Project, NSS conventions & NCRC) which then automatically logs the payment into our accounting system against accounts payable. We log purchase orders into LedgerMaster accounts receivable when companies buy books from us on credit. We match bills with purchase orders and log the match in LedgerMaster before payment. We maintain a file of all bills, vouchers and NSS committee requests for reimbursement by the month to back up the payment record in LedgerMaster We send invoices for accounts receivable with the transaction logged automatically into our LedgerMaster accounting records and use it to provide monthly statements. This process significantly reduces our risk of double or missed payments and fraudulent checks, increases the overall accuracy of our accounting and our ability to manage our cash flow, bookstore inventory, and publication expenditure for transactions processed through the NSS office. It does not cover our Mammoth Cave Restoration Project, NSS Convention and NCRC transactions except in aggregate since they are currently conducted outside of our central LedgerMaster-based accounting system.

Looking into the future it looks like LedgerMaster will deliver the efficient accounting system we sought, one that fully integrates our office operations. I’ve used it on my home computer and I am impressed by its capability. Camille has used LedgerMaster since January to prepare her transaction reports to the Executive Committee. Dave plans to complete a 9-month financial report from LedgerMaster before he leaves Huntsville.

We’ve used a purchase order system for NSS office purchases for some time and are now extending it to our publications. We are now working with the NSS publication editors to order goods and services using a uniquely-identified purchase order for each transaction that includes the following information:

The services (layout, printing, shipping, etc) that were ordered for which issue of which NSS publication.

We are asking the editors to tell their vendors that each invoice sent to the NSS Office should include the PO number, and have a copy of the relevant PO attached.

We do not plan to pay any publication bills in the future without there being a matching unique purchase order signed by our publication editors. Such a system will make it much easier for Camille to attribute our publication expenses to the proper budget line and provide you accurate reports. Until now, all requests for NSS payment (except those related to the Mammoth Cave Restoration Project, NSS conventions & NCRC) were sent to the NSS office, except the printing expense. These had been sent to Dave Irving so Dave could properly allocate expenses the appropriate issue of each publication.

We plan to update the signature requirement for the specific NSS office bank account to require two signatures for checks in excess of $3K. This is the account we use for all NSS payments (except those related to the Mammoth Cave Restoration Project, NSS conventions & NCRC). Camille is the only person at the NSS office with signature authority, so she will have to send these checks to an officer to obtain a second signature. I plan to make this change when updating the signature card for this account, to reflect other changes in our process that have been delayed until our complete conversion to LedgerMaster. The Executive Committee selected the $3K threshold in early February after reviewing recent NSS office transactions. These indicate we can expect to routinely issue each month about 7 checks in excess of $1K and about 3 checks in excess of $2K. Checks above $3K are not routine. We agreed to use email and purchase orders to assure officer and committee chairman oversight and verify services are delivered in response to appropriate orders by authorized individuals. These processes continue to be defined in consultation with those affected. I also plan to update the signature requirement on other NSS bank accounts to require two signatures for checks in excess of lesser thresholds after further consultation. I expect these changes to be in place later this year in association with other changes.

Starting in FY99/00 we plan to use a professional firm to do an annual independent NSS Bookstore inventory and compare it to what our accounting software indicates should be the inventory based upon recorded sales. This is a common process used in most organizations to mitigate the risk of unrecorded sales or loss of stock. In the past the bookstore staff has performed an inventory several times each year.

During Kevin Smith’s term as Treasurer the Society used a professional payroll service, but since then Dave Irving has:

• calculated NSS employee salaries for each pay period and provided NSS funds to each employee by NSS check or electronic transfer
  
• calculated NSS employee FICA, Medicare, medical benefits, pensions, workman's compensation, federal & state taxes deductions for each pay period
  
• periodically forwarded NSS funds for employee FICA, Medicare, medical benefits, pensions, workman's compensation, federal and state taxes deductions to the proper accounts in external organizations (mostly government)
  
• periodically filed the proper reports to federal & state governments.

We plan to transfer this function to a professional payroll service starting in FY99/00 and Dave will manage their activity to make sure everything is being done properly.

Dave Irving, Cheryl Jones, and I have spent significant time planning how to evolve our financial processes after LedgerMaster is in place to mitigate the risk of fraud, waste and abuse in a cost effective way, recognizing the structure and volunteer nature of our organization. In aggregate, the changes we are considering will dramatically affect the way each of the Society’s officers, staff and volunteers conduct their efforts. However such changes are best defined in consultation with those affected and then subjected to peer review. We have been pursuing this strategy for some time and will continue to do so. We also recognize that we must codify our business and financial processes and policies in the Board of Governors Manual if they are to survive.

Reconciling Accounts

As we fully implement the LedgerMaster accounting software at the NSS office, I expect to change signature authority on several of our bank accounts and perhaps open new ones. In anticipation I used the NSS News to solicit volunteers to reconcile these accounts. Several members have responded. Marilyn Walker of Dogwood City Grotto has assumed responsibility for reconciling the Mammoth Cave Restoration Project bank statements with the fiscal reports.

Reconciling 1997 NSS Convention Fiscal Report

I reviewed documentation related to the reimbursement of 1997 NSS Convention Executive Planning Committee (EPC) travel expenses and reported my finding to the Board in January 1999. In my opinion the documentation I reviewed provided a reasonable level of detail and adequately characterized the nature of the travel expenses that were reimbursed. Whether a few specific expenses should have been reimbursed can be debated. Inconsistencies were minor in comparison to the total reimbursed.

1998 NSS Convention Fiscal Report

The most recent report from Bill Stingfellow is provided as Enclosure E-19 and covers activity through January 1999. The only thing holding up closing the bank account is one (possible) delinquent payment. Bill plans on doing a cost comparison against the last two Conventions (Colorado & Missouri) to better explain where money was spent. Wm Shrewsbury plans to present the report at the March Board meeting.

NSS Convention Accounting

Last spring we adopted an updated version of Bill Stringfellow’s 1998 Convention Chart of Accounts (COA) for the 1999 and 2000 convention treasurers to adopt as part of the NSS COA. Since then we continue to make minor changes in response to Peggy’s Kesner request for changes to reflect 1999 convention experiences.

Scott Fee continues to reconcile the bank statements for all NSS Conventions.

National Cave Rescue Financial Office

Bob Lewis resigned as the National Cave Rescue Commission (NCRC) Financial Officer effective 2/13/99 citing work concerns as his primary reason. Butch Feldhaus reported that Bob, like his predecessors, indicated that the job was overwhelming. Butch and I are working to define a role that can be reasonably expected to be performed by volunteers before we solicit other candidates. We also continue to evolve an NCRC Chart of Accounts to be embedded within the NSS COA, and discuss how to improve our fiscal processes.

NSS Mammoth Cave Restoration Project (MCRP)

In December, the NSS office received the first payment ($25K) under our recent contract with Mammoth Cave National Park for managing the restoration camp and programs . We expect a total of $80K by the end of 1999. Program expenses to date have been:

One field camp is held each quarter. The next camp is scheduled in April.

Insurance

Nearly all of the Society’s insurance is incorporated into a single, commercial liability policy. It provides property, Convention, NCRC Seminar, general liability, trailer and umbrella coverage. After Ted Kayes and Camille Mueller reviewed our properties in Huntsville, we increased our coverage for the Office -Library building from $280K to $300K and maintained our coverage for its contents at $225K. We maintained our coverage for the "white house" building at $84,000 but increased our coverage for its contents to $100,000. These changes will be effective with the new policy, April 1, 1999.

Ted reviewed the cost of insuring our NSS Conventions as part of our commercial liability policy. He estimates that normally it will cost $1,500, but there are a few states where the costs will be much higher. Virginia was one of those because of the insurance rules of the state. Neither Idaho, Kentucky or Maine are states with high cost insurance and $1,500 should be sufficient.

NSS EC Administrative Policies

At the February Executive Committee meeting we decided to change our administrative policy (BOG Manual Section 9) for reimbursing NSS News Editor travel expenses. After reviewing our arrangement (see Section 9) with the current NSS News editor we found travel expenses are now reimbursed separately from the honorarium under the budget line "NSS News miscellaneous". We have included a note to this effect in the FY99/00 budget.

Collection of Outstanding Debt

At the 1995 NSS Convention, an NSS life member wrote a $376 check to the NSS that was not paid by his bank due to insufficient funds in his account. During the remainder of 1995, the member made several commitments to pay his debt but did not honor them. At the 1996 NSS convention the member paid $50 of the debt and said he would pay the rest when he got a job, but failed to do so. In late 1998 the member commited to pay his debt by January 1999 but failed to do so. Each failure to meet his commitments to pay occurred without notice or explanation. His behavior leads the Executive Committee to the conclude that he does not intend to pay his dept to the Society.

Safety Deposit Box

Camille inventoried the safety deposit box in January. We’re now looking for several original documents that should be stored in the NSS safe deposit box, including several active contracts.

Current S/T Department Members and Agents of the Treasurer

Dave Irving’s and Cheryl Jones’ roles continue to evolve. Dave is concentrating on working with the NSS office staff to implement LedgerMaster and on providing historical data from his DacEasy files. Cheryl continues to work on the NSS Budget, and works directly with EC members on most NSS business and finance issues.

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)

1997 NSS Convention Treasurer - Debra Quamen

1998 NSS Convention Treasurer - Bill Stringfellow

1999 NSS Convention Treasurer - Peggy Kesner

2000 NSS Convention Treasurer - Nick Schaer

NSS Convention Bank Account Reconciler - Scott Fee

MCNP Cooperative Agreement Treasurer - Karen Dennis

MCNP Cooperative Agreement Bank Account Reconciler - Marilyn Walker

NCRC Financial Officer – Vacant

NCRC Northeast Region – John Evans

NCRC Eastern Region – Barbara Ritts

NCRC Central Region – Michael Summers

NCRC Pacific Northwest Region – John W. Punches

NCRC California Region– Peri Frantz

NCRC 1999 Seminar – Peri Frantz

NSS News Ad Accounting - Bert Ashbrook

FUTURE ACTIVITIES

Our priority between now and the Summer 1999 Board meeting will be to continue to process our financial transactions in a timely manner and to provide timely reports to the EC. Other tasks include:

• Make substantial progress on integrating NCRC into the Society’s financial system.
  
• Negotiate, define, and codify our business and financial processes and policies in the Board of Governors Manual so they can be visible, maintained, and updated over time.

Paul Stevens
NSS Secretary/Treasurer