LNC Meeting Report - Budget and Finances
The rumors of dire financial straits at national were pretty much confirmed at this meeting, although staff and the newly created LNC Finance Committee have offered some hopeful signs for the future. On top of this, the LNC Executive Committee completely ignored its responsibility to have a 2006 budget prepared in advance of this meeting.
Treasurer Mark Nelson reported that he has not even seen September financial statements, and distributed what he had just received for October. That report shows we had about $14,000 in the bank available to pay bills as of 10/31/05, with over $90,000 in bills due. Chair Michael Dixon said that the stoppage of reports was due to staff turnover, and it took a great deal of effort to get the reporting system restarted.
Nelson ascribed some of the shortfall to our struggle to change operations in response to staff turnover and the LNC’s decision to set dues at zero. For example, there was some significant cost to replacing materials that bore the name of our recently departed Executive Director Joe Seehusen. One change Nelson is pushing for is to institute a purchase order system, which is still in negotiation with staff. Purchase orders would allow us to better know about obligations for which we have not yet been invoiced. Nelson reported that debts that have not shown up yet in the reports currently total at least another $10,000.
Another large potential cost on the horizon is potential fines by the Federal Election Commission (FEC) stemming from our many problems with filing accurate campaign finance reports over the last two years. We are currently engaged in the Alternative Dispute Resolution program of the FEC, which allows for negotiation and working out problems in a more informal setting instead of simply facing a quasi-judicial hearing resulting in penalties. Nelson estimated this may result in fines between $20,000-50,000, and that long term compliance issues are still ongoing. In his report, LNC Counsel Bill Hall suggested the likely amount could be as much as $28,000 yet held out some small hope that fines might be avoided.
Nelson renewed several concerns of his which have been constant throughout his tenure. For example, he cited how some revenue lines have always been improperly posted. Dixon explained that contributions which combined a membership with an extra donation are still not split properly to account for the cost of servicing the membership. Nelson cited further examples where both staff and the LNC have failed to follow our own policies and standards. The most famous of this is our historic inability to maintain reserves as demanded by our policy manual.
Region 2 Representative Aaron Starr (California) moved that no Unified Membership payments (UMP) be made while there exist undisputed accounts payable over 30 days past due. For example, apparently our printer has still not been paid for the annual report which went out at the beginning of the year. While little was said about it, I can tell you that the UMP check we were expecting in mid-October in North Carolina has yet to arrive and nothing has been said about when we should expect it.
Vice Chair Lee Wrights spoke against the motion, saying that our UMP obligations are equal to those made to our vendors. At Large Representative Bill Redpath offered that such a firm rule may not fit a fluid situation, although Starr countered that the effect of his motion would cease as soon as we had the money to get caught up on our current obligations. Region 2 Representative M Carling (California) said it may be illegal for us to pay the states before our vendors, but did not elaborate.
At Large Representative Michael Colley noted that one payday he was in the office two employees did not receive their paychecks, choosing to defer them until money was available. This he said was an untenable situation, adding that some states are moving on in the wake of zero dues and the abolition of UMP, and all states should do so. Region 6 Representative George Squyres (Arizona) added that our first financial obligation must be to our staff. Nelson reported that he instructed staff to hold vendor payments until we can cover UMP and payroll.
By a show of hands, Starr’s motion failed 7-7-2.
Acting LP Chief of Staff Shane Cory reported that we brought in over $124,000 in October, a sharp increase due to a number of factors. One major change is the segmenting of our fundraising letters. Instead of our former practice of sending all our fundraising letters to everybody on our list, we are finally taking advantage of our new database software to identify more likely donors to each appeal and send it only to them. This has greatly reduced the cost of each letter, allowing to send more frequent mailings which have a much lower threshold to reach profitability. He said the focus has shifted from chasing former donors to generating new ones, which yields superior results. We have also hired a new direct mail consultant, who has more experience and offers us a lower rate.
The Advertising and Publications Review Committee (APRC) has been involved in review of fundraising letters although that technically falls outside their purview. Nelson, a member of the APRC, had raised concerns about what he termed several misstatements of fact in the zero dues letter, which he ascribed to a lack of institutional knowledge resulting from staff turnover. Nelson and Cory attempted to hold that letter after Nelson expressed his concerns, but it had already gone out. Wrights, Chair of the APRC, stressed that the only role of that committee is to ensure that our materials conform with our platform, and it is not to be seen as an editorial board. Region 5E Representative Jim Lark (Virginia), the third member of the APRC, drew out Cory’s response so the LNC would be fully informed of these issues.
Starr asked about the how the chain of command is currently maintained. Cory replied that he speaks to Nelson daily to clear expenses and keep him informed, while Dixon noted elsewhere that he speaks to staff at least once a week. Cory spoke of the need for the LNC to resolve remaining communication issues with the Treasurer, and said he was quite open to greater communication from individual LNC members.
Cory also spoke of discovering and correcting a new level of errors in the pledge program which has cut the credit card failure rate in half. Personally I am disturbed by the constant pattern of always uncovering major flaws in our operations whenever a director-level employee leaves, most recently our development coordinator Jessica Wilson. The fact that Wilson remains very highly regarded, and rightly so considering how she instituted many corrections and improvements to our procedures after previous employees departed, lends credence to the view that this pattern is due to far more to flaws in our systems more than in our personnel. One obvious factor is our habit of promoting or shifting employees into responsibilities for which they were not originally hired and have no prior experience. These folks may well be resourceful and eager to help, yet this practice forces them to develop solutions on the fly with limited or no training, as well as ensuring a loss of institutional knowledge when we experience staff turnover.
Dixon cited At Large Representative Mark Rutherford’s work with major donor development in his role as Chair of the new Finance Committee. Nelson cautioned not to get too excited about the increase in major donor revenue in October as it is not necessarily repeatable, citing that one of these donations (for $8,000) resulted from a check written a year ago that was found while cleaning out a desk drawer in the office. While major donor income, at least at our current level, will yield disparate results from month to month, I still find it a very hopeful sign that Rutherford, his committee and staff are laying the groundwork for soliciting large donations on an ongoing basis.
Nelson distributed a rough draft budget, which was based on adjustments he made to an initial document developed by staff. Our policies state that the Executive Committee (EC), composed of the four officers of the party and four other LNC members, is to develop and distribute the proposed budget well in advance of the November meeting so it may be amended and approved by the LNC. No reason was given for the EC’s failure to do this work.
The budget is still about $96,000 short of balancing, with projected revenues of $1,090,760 and expenses of $1,187,377 for the next calendar year. This is significantly below the expectations of running a $1.7 million enterprise as reflected in the two most recent budgets. Nelson said there was no consideration yet in the draft budget for the project line items such as the convention, ballot access, branding or training. (The budget separates activities between program items, which are paid from the general fund, and project items which are supposed to be segregated and self-funding.) He renewed his concerns over the difficulty of the convention breaking even, and how we are unprepared if it results in a serious shortfall. He also pointed out that outsourcing LP News would add more significant costs for which there is no room in the budget.
The discussion of the budget was reserved for the last major agenda item on Sunday. Some adjustments were suggested or approved at the table. Nelson said training was being moved from program to project status, since in theory it is supposed to be self-funding. Squyres asked for a separate program line item for affiliate support and development. This was agreed to, but no information was offered to determine how much to fund it. Starr suggested separating outreach between those activities designed to generate donors and those meant purely for marketing.
The budget now goes to EC to do the work they were supposed to complete before the end of October. Once they have refined the draft budget, it will be submitted to the LNC for a week of email debate and amendment and returned to the EC for approval, all to conclude before 12/31/05.
Wrights closed the meeting by saying how ridiculous it is to be voting to do what we should have already done. He noted that he has been sitting on the board for four years now and is still waiting for us to get the budget process done right.
Treasurer Mark Nelson reported that he has not even seen September financial statements, and distributed what he had just received for October. That report shows we had about $14,000 in the bank available to pay bills as of 10/31/05, with over $90,000 in bills due. Chair Michael Dixon said that the stoppage of reports was due to staff turnover, and it took a great deal of effort to get the reporting system restarted.
Nelson ascribed some of the shortfall to our struggle to change operations in response to staff turnover and the LNC’s decision to set dues at zero. For example, there was some significant cost to replacing materials that bore the name of our recently departed Executive Director Joe Seehusen. One change Nelson is pushing for is to institute a purchase order system, which is still in negotiation with staff. Purchase orders would allow us to better know about obligations for which we have not yet been invoiced. Nelson reported that debts that have not shown up yet in the reports currently total at least another $10,000.
Another large potential cost on the horizon is potential fines by the Federal Election Commission (FEC) stemming from our many problems with filing accurate campaign finance reports over the last two years. We are currently engaged in the Alternative Dispute Resolution program of the FEC, which allows for negotiation and working out problems in a more informal setting instead of simply facing a quasi-judicial hearing resulting in penalties. Nelson estimated this may result in fines between $20,000-50,000, and that long term compliance issues are still ongoing. In his report, LNC Counsel Bill Hall suggested the likely amount could be as much as $28,000 yet held out some small hope that fines might be avoided.
Nelson renewed several concerns of his which have been constant throughout his tenure. For example, he cited how some revenue lines have always been improperly posted. Dixon explained that contributions which combined a membership with an extra donation are still not split properly to account for the cost of servicing the membership. Nelson cited further examples where both staff and the LNC have failed to follow our own policies and standards. The most famous of this is our historic inability to maintain reserves as demanded by our policy manual.
Region 2 Representative Aaron Starr (California) moved that no Unified Membership payments (UMP) be made while there exist undisputed accounts payable over 30 days past due. For example, apparently our printer has still not been paid for the annual report which went out at the beginning of the year. While little was said about it, I can tell you that the UMP check we were expecting in mid-October in North Carolina has yet to arrive and nothing has been said about when we should expect it.
Vice Chair Lee Wrights spoke against the motion, saying that our UMP obligations are equal to those made to our vendors. At Large Representative Bill Redpath offered that such a firm rule may not fit a fluid situation, although Starr countered that the effect of his motion would cease as soon as we had the money to get caught up on our current obligations. Region 2 Representative M Carling (California) said it may be illegal for us to pay the states before our vendors, but did not elaborate.
At Large Representative Michael Colley noted that one payday he was in the office two employees did not receive their paychecks, choosing to defer them until money was available. This he said was an untenable situation, adding that some states are moving on in the wake of zero dues and the abolition of UMP, and all states should do so. Region 6 Representative George Squyres (Arizona) added that our first financial obligation must be to our staff. Nelson reported that he instructed staff to hold vendor payments until we can cover UMP and payroll.
By a show of hands, Starr’s motion failed 7-7-2.
Acting LP Chief of Staff Shane Cory reported that we brought in over $124,000 in October, a sharp increase due to a number of factors. One major change is the segmenting of our fundraising letters. Instead of our former practice of sending all our fundraising letters to everybody on our list, we are finally taking advantage of our new database software to identify more likely donors to each appeal and send it only to them. This has greatly reduced the cost of each letter, allowing to send more frequent mailings which have a much lower threshold to reach profitability. He said the focus has shifted from chasing former donors to generating new ones, which yields superior results. We have also hired a new direct mail consultant, who has more experience and offers us a lower rate.
The Advertising and Publications Review Committee (APRC) has been involved in review of fundraising letters although that technically falls outside their purview. Nelson, a member of the APRC, had raised concerns about what he termed several misstatements of fact in the zero dues letter, which he ascribed to a lack of institutional knowledge resulting from staff turnover. Nelson and Cory attempted to hold that letter after Nelson expressed his concerns, but it had already gone out. Wrights, Chair of the APRC, stressed that the only role of that committee is to ensure that our materials conform with our platform, and it is not to be seen as an editorial board. Region 5E Representative Jim Lark (Virginia), the third member of the APRC, drew out Cory’s response so the LNC would be fully informed of these issues.
Starr asked about the how the chain of command is currently maintained. Cory replied that he speaks to Nelson daily to clear expenses and keep him informed, while Dixon noted elsewhere that he speaks to staff at least once a week. Cory spoke of the need for the LNC to resolve remaining communication issues with the Treasurer, and said he was quite open to greater communication from individual LNC members.
Cory also spoke of discovering and correcting a new level of errors in the pledge program which has cut the credit card failure rate in half. Personally I am disturbed by the constant pattern of always uncovering major flaws in our operations whenever a director-level employee leaves, most recently our development coordinator Jessica Wilson. The fact that Wilson remains very highly regarded, and rightly so considering how she instituted many corrections and improvements to our procedures after previous employees departed, lends credence to the view that this pattern is due to far more to flaws in our systems more than in our personnel. One obvious factor is our habit of promoting or shifting employees into responsibilities for which they were not originally hired and have no prior experience. These folks may well be resourceful and eager to help, yet this practice forces them to develop solutions on the fly with limited or no training, as well as ensuring a loss of institutional knowledge when we experience staff turnover.
Dixon cited At Large Representative Mark Rutherford’s work with major donor development in his role as Chair of the new Finance Committee. Nelson cautioned not to get too excited about the increase in major donor revenue in October as it is not necessarily repeatable, citing that one of these donations (for $8,000) resulted from a check written a year ago that was found while cleaning out a desk drawer in the office. While major donor income, at least at our current level, will yield disparate results from month to month, I still find it a very hopeful sign that Rutherford, his committee and staff are laying the groundwork for soliciting large donations on an ongoing basis.
Nelson distributed a rough draft budget, which was based on adjustments he made to an initial document developed by staff. Our policies state that the Executive Committee (EC), composed of the four officers of the party and four other LNC members, is to develop and distribute the proposed budget well in advance of the November meeting so it may be amended and approved by the LNC. No reason was given for the EC’s failure to do this work.
The budget is still about $96,000 short of balancing, with projected revenues of $1,090,760 and expenses of $1,187,377 for the next calendar year. This is significantly below the expectations of running a $1.7 million enterprise as reflected in the two most recent budgets. Nelson said there was no consideration yet in the draft budget for the project line items such as the convention, ballot access, branding or training. (The budget separates activities between program items, which are paid from the general fund, and project items which are supposed to be segregated and self-funding.) He renewed his concerns over the difficulty of the convention breaking even, and how we are unprepared if it results in a serious shortfall. He also pointed out that outsourcing LP News would add more significant costs for which there is no room in the budget.
The discussion of the budget was reserved for the last major agenda item on Sunday. Some adjustments were suggested or approved at the table. Nelson said training was being moved from program to project status, since in theory it is supposed to be self-funding. Squyres asked for a separate program line item for affiliate support and development. This was agreed to, but no information was offered to determine how much to fund it. Starr suggested separating outreach between those activities designed to generate donors and those meant purely for marketing.
The budget now goes to EC to do the work they were supposed to complete before the end of October. Once they have refined the draft budget, it will be submitted to the LNC for a week of email debate and amendment and returned to the EC for approval, all to conclude before 12/31/05.
Wrights closed the meeting by saying how ridiculous it is to be voting to do what we should have already done. He noted that he has been sitting on the board for four years now and is still waiting for us to get the budget process done right.
posted by genushaha at 11:31 PM
3 Comments:
The income number here disagrees with the number in the FEC report by almost $30,000. The FEC reports claim that UMP payments were made on time for October.
The same way you can misplace cash contributions, lap tops and other equipment. It is very easy if you have:
No internal controls
No purchase order system
No effective audits
No management expertise on the staff or the LNC
George, I found out the difference between our financials and the FEC report is that major donor activity wasn't included in the former. I think including the not quite $8,000 check.
By the way, turns out it was a cashier's check from a bequest, so there was no problem cashing it nor would the donor have been offended. Please remember the LP in your will. ;-)
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