The October 21, weekly LNC Update provides a good opportunity for a preliminary Treasurer’s report. Corrections are being made to the September financials. I will forward them to the LNC, with comment if necessary. Preliminary financials for October may be available at the meeting.
Despite the “incredible” response to the recent letter, the big picture is that the LNC isn’t generating enough revenue to cover expenses. The September Balance Sheet reported Accounts Payable over $95,000 in excess of cash available. This is an increase from August.
The “facts” presented in the Weekly Update are technically accurate; however, they are not measures the LNC has traditionally reviewed. This is a long term pattern in staff/board relations — only the most optimal “facts” are reported. I am insisting that the same data points be consistently reported.
The increase in the new pledges is a positive sign, but this also isn’t a typical metric. The typical reporting metric is the gross Pledge dollars collected. Pledge Revenue did increased in September ($4,000), but is still well below pre Raiser’s Edge installation and Budgeted levels. Because of the continued problems with the Pledge, I took an active role in monitoring the Pledge in October.
Rather than report a narrow data point within the Pledge, the LNC would be better served by a complete recap of the internal problems that created the sustained drop in Pledge Revenue. The Pledge deterioration clearly illustrates several shortcomings in our current operations.
The LNC needs to establish metrics to be tracked/ reported, and direct staff to report those metrics. My opinion is that budgetary lines - Revenue and associate Expenses, and the relationship between those lines and the budget, are the primary metrics. If lower level data points are reported, a complete report/analysis, rather than selected data points, should be available to the committee.
Whatever the LNC commits to, they must aggressively adher to. Our current reporting and financial requirements provide a good policy system, but we are ineffective, if not incompetent, in enforcement.
In addition to fund raising metrics, there are several reporting issues that need the LNC’s attention. Outreach Revenue is not being posted as budgeted, so individual revenue lines are misrepresented. The total revenue should be accurate. I have begun reviewing the daily revenue log for accuracy.
There are continued problems with the expense coding associated with revenue streams. In the 3rd quarter expense journals, roughly 10% of the Outreach, Contributions and Membership transactions were questionable. Again, the total expense lines should be accurate.
There are continued questions on the Accounts Payable. All outstanding invoices are being copied for my review. Additionally, there is no method to gauge how much has been purchased but not invoiced.
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Budget:
Roughly the 2nd week of September, staff was directed to prepare a draft budget. This was to help with ongoing coding problems. The draft was to be available for review/refine on September 25, 2005. An EC meeting was to be scheduled shortly after this review. As of this report, a draft budget has not be completed. The unintended consequences of this delay may be good.
Michael Colley is investigating lower cost office options. This is a minor (<5%), but highly predictable portion of our expenses.
The initial bid(s) indicate that outsourcing LP News may be substantially more expensive than our current arrangement. This could be a significant budget line that needs to be accurately budgeted.
The pledge revenue, as sizable portion (10%+) of our revenue stream should become more stabilize, allowing for a better projection of revenue.
It is my hope that staff will provide a draft budget well before the LNC meeting. At the meeting, the LNC can provided direction to the EC. The EC can finalize a budget, and present it to the LNC for approval via a mail ballot in early December.
Other issues:
In September, staff reported UMP funds were used to offset a full page LP News Ad. This is a violation of the FEC regs. (Staff has been instructed that UMP funds can not be use to offset state generated memberships. Bill Hall has informed, and reinforced, these discussions, as have the FEC consultants.) I directed staff to not deduct the UMP funds for the LP News ad. Staff questioned this direction. Bill Hall and FEC consultants supported me. The LNC may have to absorb this ad’s cost.
In September, the LP News distribution was delayed waiting for the CA newsletter. In early summer, Daniel Cloud asked about the co-bundling of LP News with CA newsletter and CA’s inclusion of a fund raising piece. I told him that co bundling the two newsletters was contrary to FEC regs, which was confirmed by Bill Hall. Daniel was specifically directed to discontinue the co bundling arrangement immediately. September was the first I was informed that this did not occur. I have not received confirmation that the practice has been discontinued.
Several 2004-04 UMP checks outstanding (a total of $5,455.00) were written off without board or officer approval. After two asks, I was given a list of the checks. Many may be duplicate checks, but staff has not indicated which checks are duplicates, and what is owed to the states. Staff stated
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they were directed to do this by the past ED. I believe that the board’s approval to write off checks is required, and that even with the ED’s direction, staff should come to the Chair, Treasurer, or the LNC for approval. Staff was especially critical of suggestions to contact states about the uncashed checks that were written off. They have also been slow to research and address an April, 2005 uncashed UMP to TXLP.
The preliminary September membership report indicated a negative number of new subscribers. This is impossible, but staff defended the report. I have not seen a correction. Coupled with prior reports indicating a prospecting letter had a below $25/donor average response, but the number of donors equaled the number of new subscribers/members, this suggests the membership numbers are not accurate. The variances may not be significant, and may be costly to track.
The staff received an invoice for the Convention Planner. Without funds budgeted, they do not have authority to pay the invoice. They also expressed concern about the convention planner’s pricing (this was a no-bid contract), and the need for reporting from the planner.
The staff expressed concerns about Ballot Access expenditures. There is no spending authority for Ballot Access, other than fund raising expenses, without LNC approval of a Ballot Access plan.
The staff reported plans for a fund raising for the proposed educational program. I have serious concerns about doing this without explicit LNC approval of the program, the establishment of policy and the creation of budgetary guidelines. I also have concerns about the educational program’s content, focus and implementation. Finally, the LNC should establish clear, concise metrics to measure the program’s effectiveness prior to implementation.
I have several ethical concerns about our fund raising practices and vendor payments.
My questions about the accuracy of fund raising statements have been answered with a “we are trying to raise money,” or a “we need to do what is necessary to keep the donors checks flowing” attitude.
My questions about measures for the effectiveness of activities have been answered by statements about the need to do something to keep donors involved.
There is an adamancy about sending monthly fund raising letters, not to address the topic of the letters, but to pay ongoing and prior bills. Notably, we are now having discussions about sending out the 2006 annual report, and have not yet paid the printing bill for the 2005 annual report.
Staff indicated they wanted to approach our long term past due vendors to discount the amount due for immediate payment. Bill Hall has advised that this could be an FEC violation. More importantly, I do not see this as a principled business practice.
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Action Items:
Unless prohibited from doing so by the chair, I intend to institute a purchase order system. This will allow us to gauge was has been purchased, but not invoiced, and provide a control on expenses.
I suggest the LNC discuss declaring a state of financial exigency. This is provided for in the Policy Manual. At this time, I do not have an opinion on this. The benefits of this action are debatable.
I suggest the LNC review the reporting and financial requirements in the Policy Manual. Few of these are adhered to. I suggest we limit those requirements to those we are willing to strictly enforce.
I suggest the LNC migrate from the current membership/ subscribers numbers report to a number of individual donors over time. Since, national political entities operate on four year cycles, I suggest this be divided into yearly segments back through two presidential election years, or a minimum of five years data.
I encourage the LNC to provide staff policy and budgetary direction on the convention, educational programs and ballot access.
With the gap between this LNC meeting and the next LNC meeting, the serious financial circumstances, and the events scheduled, I encourage the LNC to direct the chair to schedule monthly EC meetings to keep the LNC members apprised, and involved, in the decisions.
There have been comments that our financial reports are too complicated. I tend to agree. My efforts to work with staff to simplify and arrange our reports to more directly correlate with the budget lines have not been fruitful. I would like approval to go to an outside contractor for help.
I encourage the LNC to direct the chair and the employment committee to move forward with the hiring of an Executive Director as quickly as possible. Property hired, this position should more than pay for itself, and address several ongoing operational problems.