A meeting of the Executive Committee of the United States Sailing Association was held by telephone conference at 8:00 p.m. (Eastern Time) on Tuesday, February 15, 2000. President Muldoon presided, and Secretary Everingham recorded the minutes.
ROLL CALL AND INTRODUCTION OF GUESTS.
All members of the Executive Committee were present except Mr.
Director Terry Harper also was present.
APPROVAL OF MINUTES. The
minutes of the January 18, 2000 meeting of the Executive Committee
were approved as distributed before the meeting.
PRESIDENT’S REMARKS. Mr.
Muldoon hopes to meet with the Offshore Racing Council representatives
in Europe in March to discuss the IMS issues.
discussed the financial statements for the three-month period ended
January 31, 2000 and the report dated February 9, 2000 from the
working party appointed at the January Executive Committee meeting (Attachment
1), both of which were distributed to the Executive Committee
before the meeting. The
Executive Committee members also discussed a related memorandum dated
February 15, 2000 from President Muldoon to the Executive Committee (Attachment
Executive Committee recognized the problems cited in the February 9th
report although there were differences of opinion as to its magnitude.
Muldoon will appoint a working party, which will include the chairs of
General Services, Training and Offshore and one or more
representatives from the Budget Committee, to work with the staff to
review the conclusions in the February 9th report and to
make a report and propose recommendations to the Executive Committee
before the Spring Meeting. Mr.
Muldoon will send the Executive Committee a copy of his instructions
to the working party.
The Executive Director’s report was distributed before the
Membership Report -
Mr. Harper reviewed the statistical information distributed to the
Executive Committee before the meeting and discussed in his report.
He reported that, as of the end of the preceding week,
individual memberships year to date were about 600 below last year.
This is about even with mid-January but worse than the end of
January when we were about 200 behind last year.
Mr. Harper does not see any trend to indicate that anything is
wrong with renewals. Acquisitions
are higher than budget in all individual categories, and keelboat
renewals are ahead of target. Thus,
the deficit appears to be in non-keelboat adult renewals and
corrections are being undertaken in that area.
Organizational memberships are behind 1999 year to date, except
in the corporate membership area.
However, renewal solicitations went out a month later this
– There was no unfinished business.
Executive Committee Review of RRS Submissions to ISAF – Mr. Cook described the process used the last two years for reviewing
RRS submissions to ISAF and suggestions from the Racing Rules
Committee’s (RRC) for modifying the process.
The Executive Committee approved an arrangement under which (a)
three people from the Executive Committee and three from the RRC will
hold conference calls to discuss proposed submissions and (b) as the
RRC develops submissions, it periodically will send drafts to the
three Executive Committee representatives, probably immediately after
each RRC meeting. The
Executive Committee representatives will be the same as last year:
Messrs. Cook (chair), Lane and Everingham.
Site for March 23 Executive Committee Meeting (Chicago) –
The Executive Committee will hold its Thursday evening (March 23)
meeting at the Palmer House.
Proposal for US SAILING Internet Domain Name Program – The Executive Committee approved the Proposal for Affinity Domain
Name Program (Attachment 3).
Proposal from The Warren Company –
The Executive Committee authorized US SAILING to enter into a proposed
90-day agreement with The Warren Company, subject to approval by Mr.
Everingham, but without any confidentiality covenants.
ISAF Advertising Code –
Mr. Cook reported on developments related to the ISAF advertising
code. He will prepare a draft submission for review at a future
Executive Committee meeting.
Gorge Games – Ms.
Baxter reported on her discussions with the organizers of the Gorge
Games. Mr. Durant will talk with the organizers and report to the
Executive Committee at the Spring Meeting in Chicago.
ARTICLE 14 AND RRS 69 MATTERS
– The Executive Committee and the Executive Director continued in
executive session respecting Article 14 and RRS 69 matters.
meeting adjourned at 10:13 p.m. (Eastern Time). The next meeting will be a dinner meeting beginning at 7:00
p.m. (Central Time) on Thursday, March 23, 2000, at the Palmer House
Hilton Hotel in Chicago.
J. Theodore Everingham, Secretary
M E M O R A N D
TO: Executive Committee
FROM: Bob Lane
DATE: February 9, 2000
Subject: Review of Financial Performance FY 2000
As requested by the Executive Committee, we have reviewed U S Sailing’s performance in FY 2000 through January 31, 2000 and make the following report.
On January 28, 2000, we met with Terry Harper and as many of the staff directors as were available. We have also reviewed financial and cash flow reports through January 31, 2000. We have also met twice by conference call to review the results of our analysis. We have made the following findings:
A. The staff continues to do an excellent job operating within the amounts budgeted for expenses.
B. Financial performance since the beginning of the fiscal year, November 1, 1999, indicates that revenues in the FY 2000 budget will not be achieved.
C. We anticipate that at the end of FY 2000 results will be $150,000 to $225,000 worse than budgeted. That means the budgeted increase in operating assets (i.e., cash) of $72,000 at the end of the fiscal year will actually be a decrease in operating assets of between $78,000 and $123,000. All but approximately $30,000 of this projected variance is due to lower than anticipated revenues.
D. The projected variance is largely attributable to three factors:
1) Membership renewals and acquisitions at below budgeted figures
2) Budgeted sponsorship revenues which have not been contracted for (and for which, at this time, we cannot anticipate executed contracts)
3) Net losses in merchandising (clothing, not publications)
Additionally, there are anticipated variances in Offshore and Training, and there have been unbudgeted expenses for printing, rent and staff. The details for these anticipated variances are shown on the attached as “Anticipated Variances”.
E. Our credit line is fully withdrawn ($250,000) and we have used approximately 66% of our operating reserves ($400,000 out of $600,000). As shown on the attached, it is unusual to withdraw funds from operating reserves. In a typical year, the line of credit is withdrawn in the first few months of the year to cover expenses during the Fall and Winter and is repaid in full in the Spring.
F. We need a portion of our operating reserves to repay the line of credit in order to assure its continued availability. This means that operating reserves will be reduced to approximately $91,000 at the end of FY 2000 (compared to approximately $600,000 at the beginning of the fiscal year). However, the line of credit will be available during the slow months at the beginning of FY 2001.
This situation is untenable. Although the problem is primarily related to a projected shortfall in revenues, we believe that the short-term solution must be to explore expense reductions. We urge the Executive Committee to take the following actions:
A. Achieve reductions in expenses for FY 2000 of a least $125,000.
B. Start immediately on the FY 2001 budget.
C. Adopt a policy that the FY 2001 budget will include the repayment of $100,000 to operating reserves, with a plan for repaying the balance over the ensuing 3 years.
D. Adopt a policy that the FY 2001 budget will include a zero outstanding balance in our line of credit at the end of FY 2001 (October 31, 2001).
E. Ask staff to prepare and distribute to the Executive Committee no later than February 29, 2000 the following:
· A detailed analysis of the costs and benefits of sponsorship, and a proposal exit strategy with anticipated costs and savings.
· A detailed analysis of the costs and benefits of merchandising (clothing, not publications), and a proposed exit strategy with anticipated costs and savings.
· A detailed analysis of staff travel, and a plan for reducing same.
· A detailed plan for eliminating $125,000 in expenses during FY 2000.
We then recommend that the Executive Committee meet by special conference call no later than
March 8, 2000 to consider the plans and analyses prepared by the staff.
We enclose the following exhibits:
1. A copy of the memo submitted to the Executive Committee for the January conference call.
2. A summary of operations for the years 1997 - 1999, including the 2000 budget and the detail of anticipated variances.
3. A summary cash flow analysis for this fiscal year.
4. An analysis of operating results since 1990.
5. A summary of operating reserves since 1990.
February 15, 2000
I would like to address the report that was sent on February 9, 2000 by Bob Lane, Janet Baxter, Charley Cook and Ted Everingham. I appreciate the concern this group has exhibited and even more the trouble and work that they have gone through to make a recommendation(s).
Although I share some of the concerns outlined in the report, I must respectfully disagree with some of the conclusions drawn and would make the following observations:
1. The report that you received does not include the January financial results, which I believe alter the picture.
2. For the Executive Committee (EXCOM) to request that the measures suggested in the report be taken such a short time into the year and one-month before the Board meets during the US SAILING Spring Meeting, would be an abuse of the role of the EXCOM.
3. None of the three chairman of the departments highlighted in the report, General Services, Training, or Offshore, were asked whether or not they agreed with the conclusions drawn in this report. Since these people are primarily responsible for these departments, their input should be considered.
4. This is a “worse case” scenario.
Speaking specifically to the shortfall being forecast in this report, we should take into consideration:
1. Since 1990, revenue has increased on an average of 6.79% per year. This year, we are budgeting a 1.17% increase in revenue but YTD are running 6% ahead of 1999 and 7.84% of the YTD budgeted revenue.
2. Expenses are approximately 4% lower YTD than budgeted.
3. This puts us $110K ahead of budget YTD.
Based on the newest financial information as well as, my personal observations I would also like to address specifically some of the areas the report cites particular concern.
The report forecasts a short fall from the budget of $10K in training. I would point out that this concern was brought about be the fact that prices were recently raised for instructor courses and it was projected that this would hurt course revenue. To date, although it is very early to tell, course revenue is running 87% above this time last year and approximately that percentage higher than in years 1996 through 1999.
It is difficult for me to understand why a $40K shortfall is being predicted in the report. Our sponsorship revenue goal this year is only $10K higher than last year. Sponsorship expenses are budgeted at $2,000 less than last year.
· YTD sponsorship has brought in $72,320 in revenue.
· Last year at this time sponsorship had $0 in revenue.
· 53% of the sponsorship budget ($123,000) is under contract.
The fact that we have not yet contracted for the rest of the sponsorship money projected in this year’s budget is not unusual. Our sponsorship people are certainly working as diligently as ever and in a much more professional way than in the past to ensure that they will meet their 2000 budget.
Sponsorship revenue has always been a risk, but we cannot ignore the fact that the revenue went from $81K to $220K in three years. They are no variables that would indicate that our current budget for 2000 will not be met.
The projected additional deficit in Offshore is a more difficult issue to deal with. The shortfall in revenue impact stems from the Year 2000 IMS rule, which we are not in a position to control the time line on and the rule is not finished. Therefore, we will experience a delay in the Offshore revenue, however, if the rule is done soon most of this revenue will be received later in this fiscal year.
There is also one other thing to consider. Historically, the Offshore department has been run to provide the same level of services to fewer and fewer handicapped sailors. Although the situation was not corrected earlier, we now have a new director in Offshore who is committed to expanding the services to a broader base of US handicapped sailors. Without exception, the people I have talked to have faith that Offshore Director Dan Nowlan will be able to do so.
We have subsidized Offshore for 15 years and the department has only made a profit one time in 15 years, in 1998. We are trying to reverse a base of 14 years of revenue losses, but it might take some time to turn this ship around. Bruce Eissner is making a full assessment of the Offshore Department and will advise us at the Spring Meeting.
We have had two changes in membership directors in four months and these are the most crucial months of our membership year. Several things have fallen through the cracks and the result is that we are behind in several membership categories.
Unfortunately, part of this is because in several categories renewal notices were not sent or sent late. In non-individual members alone, we are $48K behind budget, which works out to a 19% shortfall on that group between this year and last. There is no reason to believe that clubs, classes, RSAs and the President’s Club members will not renew or that the categories will not grow at the same rates that they have in the past.
For individual memberships, both from the acquisitions and renewal standpoint, the numbers are closer and tend to vary from report to report, but still lagging 7% behind last year. This is certainly cause for concern and needs to be watched, but the $80K shortfall cited in the report seems overly pessimistic this early in the year.
5. General Merchandise
The merchandize issue is one that has certainly dragged on too long. Does our merchandizing department lose money? From the way we do accounting and revenue transfers, it is difficult to say. If merchandising is carried on as a convenience to our members, it needs to be dealt with in a way that even with revenue transfers, the charge that the merchandizing department would levy on the other department for services would make them break even.
If we are to stay in the merchandising business and cannot recover all of our costs, this function needs to be contracted out where there is no risk to the organization and provides a potential for some financial benefit.
I would make a few additional observations:
· We have increased the operating reserves between 1997 to 1999 by $316K so that at the end of the year it was the highest that it has ever been except for 1995 ($601K.)
· Our responsibility is to take the money we receive and serve and better the sport.
· Our operating reserves have been consistent with the operating reserves of most NGBs.
At the request of our financial people, we have spent a great deal of money among other things on how to budget better. Why are we challenging so hard the numbers that the budget forecast has yielded when we are meeting or exceeding them?
Proposal for Affinity
Domain Name Program
The Program: US SAILING members will have the opportunity to obtain an Internet mailbox with an address ending with @ussailing.net. This would cost $20 per year.
US SAILING will receive $10 of the $20 at the time the person signs up.
Administration: Power Shift, the Internet service provider for US SAILING’s web site will administer this service and bear all costs for managing it. US SAILING will have no financial exposure.
Member Benefits:This mailbox will provide a convenient mechanism for members to manage their sailing related e-mail correspondence. They will be able to access their messages from a remote location, such as the office or some other Internet access point without putting messages on that computer or server. In effect this will give them a personal space on the Internet separate from others they might have.
As US SAILING strengthens its sense of community with its members, this domain address will give members who feel positively towards US SAILING an easy and visible way to associate with US SAILING. It might even become a “cool” address.
Benefits to US SAILING:
(1) Income that could reach $10,000 (1000 members
participating) or more. Note that the affinity credit card program,
which has a lot of parallels to this program, has 1000 members actively participating.
(2) Increased visibility as members with the @ussailing.net address send and receive messages on the Internet.
(3) Increased loyalty from members who would be somewhat more committed having proclaimed their identification with US SAILING on the Internet.
Risks to US SAILING:
(1) Less that 100 people participated and this
became generally known, then some people might conclude that US SAILING
did not have much of a following with its members. US SAILING still
gets some revenues, though not very much.)
(2) Power Shift fails to deliver the service or to
support it properly. This could embarrass US SAILING. Power Shift has
served US SAILING well so far, and we have no reason to believe that
they will not continue to in the future.
Secondly, if they do fail, we should be able to transfer the
service to another Internet service provider along with our web site.
(1) Pre-launch the program immediately getting interested members of the Executive Committee and some other leaders of US SAILING to participate.
(2) Announce and promote the service at the Spring Meeting.
(3) Place an ad on the web site promoting this new member service.
(4) Promote this program in American Sailor.