REPORT
of the
NSS SECRETARY/TREASURER

- Attachment E -

OVERVIEW

Since the July 1999 Board of Governors meeting we’ve:

• Analyzed 1999 Convention NSS Bookstore sales.
  
• Updated the FY99/00 Operating Budget to reflect the increase in dues and other changes.
  
• Integrated internal NCRC financial transactions conducted through NSS bank accounts into the Society’s accounting system.
  
• Extended our purchase order process to NSS publications and documented the process.
  
• Obtained a quote for a NSS cave rescue insurance program.
  
• Worked with the 2000 Convention staff to resolve JSS and other issues
  
• Provided our CPA the information necessary to file our FY98/99 tax return.
  
• Documented several fiscal policies and job descriptions.
  
• Developed a draft convention fiscal policy.
  
• Published the May – July 1999 Statement of FY99/00 Revenue and Expenses.
  
• Published the NSS Balance Sheet as of July 31, 1999.

ENCLOSURES (separately provided)

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 NSS Operating Budget Summary

E-8) Analysis of 1999 Convention Bookstore Sales

E-9) Statement of FY99/00 Revenue and Expenses, May - July 31, 1999

E-10) NSS Balance Sheet July 31, 1999

E-11) National Speleological Foundation’s August 31,1999 Financial Statement for NSS Trust Funds

E-12) New NSS Fiscal Policies to be recorded in Section 9 of BOG Manual

E-13) Insurance Feedback Report

DETAILS

FY99/00 Budget

Enclosures E-1 through E-7 provide an update to the approved FY99/00 NSS Operating budget prepared by Cheryl Jones. They incorporate all of the changes recommended by the Executive Committee. In summary the update:

Reflects the dues increase to $33 (effective 1/1/00) and increases the amount budgeted for dues/subscriptions by $11,650.

Decreases the amount budgeted for bookstore sales by $22,800 and makes it the same as the actual FY98/99 bookstore sales. Adjusts the Cost of Goods Sold to maintain it at 55% of sales.

Adjusted a variety of NSS OVP Department budget lines to reflect FY98/99 actuals and current plans. The most significant changes were a $2K decrease in the amount budgeted for Office Supplies, a $1K increase for Internet services, and a $1K increase to cover the actual cost of office staff travel to the 1999 convention. The net change is a $600 decrease in the OVP Department budget, and $568 decrease in the budget for NSS Office expenses.

Increased the President’s Department budget by $695 to reflect the actual expense to conduct the 1999 election and publish the NSS Boy Scout booklet.

Corrected minor math and spreadsheet errors in the approved budget spreadsheet.

Added the footnote "Includes reimbursement of travel expenses for trips approved by the AVP" to 03-72101-35, "Conservation Chairman Expenses".

After all of the above budget changes our FY99/00 deficit remains at $10K. The Society has sufficient reserves to absorb this deficit budget. In FY00/01, when we receive the $33 dues for the entire fiscal year, we should have no deficit.

1999 Convention Bookstore Sales

Enclosure E-8 provides an analysis of the 1999 Convention Bookstore sales prepared by Cheryl Jones. Last year we earned a $5K profit. This year we lost money. In summary:

If the current rate of sales continues, the overall bookstore profit will be below that for FY98/99.

FY98/99 Fiscal Report

The enclosures E-9 and E-10 provide a May – July 1999 Statement of FY99/00 Revenue and Expenses and a NSS Balance Sheet as of May 31, 1999. Both were prepared by Dave Irving.

Financial Statement for NSS Trust Funds

Attached (#E-11) was provided by the National Speleological Foundation. It reports on our NSS Trust Funds as of the end of August 1999. In summary:

The balance in each fund remains adequate to meet the purpose for which each fund was established.

The above report does not reflect the transfer of NSS funds made to the NSF in early September 1999.

Sale of Securities Donated to NSS

I intend to adopt a policy recommended by Larry Southam (NSF treasurer) under which we will direct the NSF to sell securities donated to the Society upon receipt 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.

Our donated securities as of early September, 1999, were:

I asked the NSF to amend the NSS NEWS Photographic Endowment Trust Fund as we decided at our July Board meeting.

National Cave Rescue Commission Finances

At convention Doug Medville and I asked the NCRC Board of Regional Coordinators to consider each of their NSS bank accounts and either:

1) Close the account and transfer the funds to the NSS office where we would manage them as separate restricted funds for each NCRC region and the National Coordinator. (Under this option NCRC checks would be written by the NSS office in response to NCRC requests just like we do for the Conservation Committee, etc. Every month the NSS office would send them a report of account activity.), or

2) Retain the bank account and provide budgets and regular monthly reports of program activity. (Under this option NCRC checks would be written by NCRC treasurers and they would provide budgets & fiscal reports based upon a NSS chart of accounts just as we do for NSS conventions. An independent person would reconcile their reports with bank statements as is done for all other NSS bank accounts)

In August 1999 the National Coordinator, "Butch" Feldhaus, closed the NCRC National Coordinator’s account and transferred $10K to a Huntsville bank account managed by the NSS office. The NCRC regions chose Option #2 and will maintain their regional NSS bank accounts. The NCRC Board elected Kathy Welling to serve as the NCRC Financial Officer. She expects to provide draft FY00/01 budgets and reports for all NCRC regional accounts to Doug and me by the fall 1999 Board meeting. She is also responsible for reconciling all NCRC account statements. She will not have signature authority on these accounts.

Accounting Operations at the NSS Office & Improvements in Our Process

Camille and I have derived the following list of financial activities now being performed by the NSS Office:

1) Receive NSS revenue, post it in the NSS accounting system and deposit it in the bank.

2) Pay NSS bills when authorized by S-T & responsible officer.

3) Maintain audit trail for all revenue received and expenses paid.

4) Enter all fiscal transactions in the NSS accounting system.

5) Reconcile accounting & bank records not less than once each month.

6) Prepare fiscal reports defined by S-T.

7) Solicit SSNs (IRS form W-9) from individuals to whom we pay royalties or more than $600 in a calendar year for services. Distribute IRS form 1099 to them each January.

8) Store business documents in the NSS bank safe deposit box and maintain a list of its contents.

9) Inventory NSS bookstore stock.

10) Maintain on-line access to NSS accounting records for S-T and designated agents.

11) Provide electronic copies of NSS accounting data to S-T and designated agents.

12) Train NSS office staff to perform financial tasks.

13) Supervise NSS office staff as they perform financial tasks.

14) Develop and maintain description of NSS office financial policies and processes.

15) Schedule work load so as to have time available during peak periods of financial activity.

With a two person staff, it is difficult to consistently require two people be involved in each fiscal transaction – a standard practice to mitigate the risk of fraud. However, in general we practice a two-person process. Avis handles most of the checks from membership dues and book orders. She also makes 99% of the deposits. Camille concentrates on making sure that everything is entered correctly into our LedgerMaster accounting system. The only deposits Camille usually handles from start to finish are miscellaneous checks such as NSF payments.

During the past three months Cheryl Jones and I have worked with NSS editors to extend our NSS office purchase order system to our NSS publications. In the future NSS publication editors will order goods and services using a uniquely identified purchase order for each transaction. The NSS office will track these as "accounts payable" and will not pay publication bills in the future without there being a matching purchase order from our editors. Such a system will allow the editors better control over their expenses and make it much easier for Camille to attribute each expense to the proper account.

The above job description and policy is codified in enclosure #E-12.

Independent Audits

Dave Irving will take the lead to hire an independent firm to audit our accounting records. I will take the lead to arrange for an independent inventory of our bookstore stock to support the audit. We plan to conduct the audits in early November 1999. This is our first audit. We expect the auditor to identify problems and provide advice on what we must do to have a professional audit firm certify that our accounting records conform to generally accepted accounting practices and properly state our finances.

At convention Kevin Smith (former NSS treasurer and professional auditor) suggested we gather the records an auditor would need to verify our assets. It appears we have all the documents we will need to prove ownership of all our assets except the Barton Hill Karst Preserve. Doug Medville will attempt to find the deed. However, we cannot prove the value attributed to each of these properties on our Balance Sheet. These values were set by a prior NSS treasurer apparently based upon their purchase price or someone’s estimate of their market value.

Kevin also advises that our accounting system is not in compliance with generally accepted accounting practices. He specifically cited SFAS 117, Financial Statements of Not-for-Profit Organizations and the recently released GASB 34 for fund accounting. Dave Irving has discussed the issue with our CPA. In our CPA’s opinion our current accounting system is adequate as long as it is intended only to support fiscal reports that remain within the Society. However, we must make changes if we seek to provide our reports to external organizations in order to obtain contracts, grants, loans, etc. We intend to make those changes. For example one change we must make is to segregate our NSS restricted 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).

We have motions on the agenda to clean up the Board Acts that define the purpose of our NSS restricted funds.

FY98/99 Federal Tax Return

I July we provided our CPA all the information he needed to file our FY98/99 federal tax return except the final 1998 NCRC National Cave Rescue Seminar fiscal report. We received the NCRC report in August, too late to submit our tax return on time, so we requested an extension of the due date. Our CPA now has everything and we expect to file our return in October.

NSS Cave Rescue Insurance

Based upon feedback from the 1999 Congress of Grottos Ted Kayes has found the following coverage based upon our paying an annual premium that covers all NSS members at a rate of $1.40 per member.

All NSS members are insured.

Insured persons are covered for losses up to $5K if they have an accident, on foot or on rope:

enroute to a cave.

searching for a cave.

entering or exiting a cave.

while in a cave.

leaving the cave area.

This coverage includes:

all medical expenses, whether at the accident site or at a medical facility near the accident site.

the cost of evacuation to a medical facility.

any expenses incident to the rescue billed to the insured person by governmental agencies for which the person is liable.

In a situation not requiring a rescue, emergency medical treatment at a nearby medical facility is covered up to $1K.

This coverage is not dependent on what other medical insurance an insured person may carry.

Specific exclusions:

injuries sustained during a vehicular accident.

coverage for insured persons intoxicated by alcohol or non-prescription drugs.

if a person travels to a medical facility in their home town, the presumption is that this is not emergency medical care and it will not be covered.

The total annual cost would be $16,800 based upon 12,000 members. It could be accommodated without impacting our current programs if we increased our regular dues to $35. The question for the Board to decide: "Do our members seek this membership benefit and are they willing to pay for it?"

NSS EC Administrative Policies

Since the summer Board meeting we’ve developed the policies in enclosure E-12:

a fiscal policy for EC travel (reviewed by the Board in August)

the NSS Office Manager’s financial responsibilities

the job description for NSS bank account reconcilers

a policy for sale of donated securities

a policy for NSS bank accounts

I plan to post these policies in Section 9 of the Board Manual.

I continue to work with Jim Wilson, the 1996 NSS Convention treasurer, to codify a set of business and financial policies to be used by future NSS convention treasurers.

Storing NSS Business Documents

Act 15-360 requires the original copies of all NSS contracts and deeds be stored in a NSS bank safety deposit box. Should we store the original copy of all copyright releases we obtain for NSS publications (Convention Guide Books, Speleo Digest, NSS News, JCKS, ACA, Members Manual, On Rope, Speleo Genesis, On Film, Cave Rescue Manual, etc) at the NSS office?

Junior Speleological Society

Doug Medville and I have derived a financial policy for JSS. JSS should be a permanent committee reporting directly to the AVP with income from optional fees collected from convention attendees (i.e. financed like field trips), with full S-T visibility of their internal financial transactions. We’ll implement this policy effective with the 2001 convention. The 2000 convention will finance JSS activities through their previously set registration fees.

1998 Convention

Bill Stringfellow expects to close out the 1998 convention and provide his final report shortly. As of now he expects to report $5,709.84 in excess income of which $3K has already been provided to the NSS Office.

1999 Convention

Peggy Kesner has yet to resolve all the finances for the 1999 NSS convention, but expects to do so shortly. Currently she projects over $20K of excess income.

2000 Convention

Cheryl Jones and I have been working with Nick Shear and Kelly Deem to derive a budget for AVP approval. Our role is not to tell the convention staff what to budget, but rather to advise whether the convention budget is consistent with past experience, complies with the NSS chart of accounts and is credible. In the process we’ve discovered unbudgeted items (e.g. JSS expenses) and spreadsheet errors. Such problems are not unusual in a draft budget and it’s always good to have an independent review. We expected to recommend AVP approval by the Board meeting

Mammoth Cave Restoration Project

Karen Dennis has mailed the reimbursement checks for the August week-long restoration camp and is now preparing our annual report to the National Park Service which is due this month.

FY00/01 Budget Process

The EC will use the following process to develop the FY00/01 NSS budget. One of the improvements we seek to accomplish this year is to improve the way we decide the scope of NSS books (On Rope, On Film, Cave Rescue Manual, Speleo Digest, etc), their print quantity, and sale price.

10/1/99 - EC circulates a list of potential publications (those that we anticipate contracting for or publishing during FY00/01).

11/15/99 - Cheryl Jones distributes FY00/01 budget templates to the EC with FY99/00 notes removed. Cheryl & Dave Irving will also provide any other fiscal information that may assist officers to prepare their budgets.

12/1/99 - Mike Hood (& Market Analysis Committee) provides a market analysis for each proposed NSS publication to the EC & Finance Committee.

12/1/99 - EC provides a first draft of their budgets, with side notes, to Cheryl. Dave provides his dues projections.

12/13/99 - Cheryl distributes the first draft of the consolidated budget spreadsheets to the EC and Finance Committee.

1/1/00 - Ray Keeler (& Special Publications Committee) provides analysis of publication costs (preparation, printing, shipping) for each proposed NSS publication to EC & Finance Committee.

1/1/00 - EC provides amendments and changes to the first draft to Cheryl with a copy to Paul.

1/10/00 - Cheryl distributes the second draft of the consolidated budget spreadsheets to the EC and Finance Committee.

1/24/00 - EC provides amendments and changes to the second draft of their budgets to Cheryl with a copy to Paul.

2/2/00 - Cheryl distributes the last draft of the consolidated budget spreadsheets to the EC and Finance Committee.

2/4-6/00 - EC meets at Ray Keeler’s house to consider the outstanding issues and complete the budget. In the past this effort has taken two to three eight-hour work days with the on-site support of the Finance Committee.

2/18/00 - Cheryl distributes the consolidated budget to the Board as part of the S-T report.

3/18/00 – The Board meets in Denver.

During the above process the Finance Committee will distribute fiscal background information, review draft budgets and provide constructive feedback in addition to projecting revenue and developing the budget spreadsheets.

Shadow NSS Treasurers

I wish to remain NSS Secretary-Treasurer for years to come. However, I am providing fiscal reports to Dave Luckins and Kevin Smith so they may be prepared to succeed me as NSS Secretary-Treasurer should the Board decide to elect them. They are the only candidates known to me. I hope to groom others so the Board has a pool of candidates from which to select.

Current S/T Department Members and Agents of the Treasurer

Camille Mueller’s, Dave Irving’s and Cheryl Jones’ roles continue to evolve. Camille works almost full time supervising the office staff, entering accounting data in LedgerMaster, and reconciling it. 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 on NSS budgets and most business issues. Recently she’s concentrated on the FY99/00 budget update, 1999 convention bookstore analysis, NSS publication purchase orders, NSS publication advertising, the 2000 convention budget and the credit card donation program. She works halftime and that will climb as she starts on the FY00/01 budget. I work halftime 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)

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

NSS Convention Business & Fiscal Policies - Jim Wilson

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 – Barbara Ritts

NCRC Central Region Financial Officer – Michael Summers

NCRC Pacific Northwest Region Financial Officer – John W. Punches

NCRC California Region Financial Officer – Peri Frantz

NCRC 1999 Seminar – Peri Frantz

NSS News Ad Accounting - Bert Ashbrook

FUTURE ACTIVITIES

Our priority between now and the March 2000 Board meeting will be to continue to process our financial transactions in a timely manner and provide timely reports. Other tasks include:

File our FY98/99 federal income tax report.

Work with the EC to prepare the FY00/01 operating and capital budgets for Board approval.

Continue to integrate NCRC into the Society’s financial system. Include NCRC internal budget in the NSS operating budget.

Contract for an independent audit of our inventory and accounting records. Implement the 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.

Direct the NSF to sell securities donated to the Society upon receipt using a program of "trailing stop orders."

Codify convention fiscal policies.

Develop additional LedgerMaster templates for our periodic financial reports.

Define an accounting process for the periodic credit card donation program.

Codify other business and financial policies and procedures.

 

Paul Stevens
NSS Secretary/Treasurer