Outcomes of the Finance Committee Meeting

The Finance Committee held its spring meeting at the Association headquarters on April 3, 2000. Already knowing the outcome of the 2000 officer elections, I was able to observe the spring meeting as treasurer-elect, which proved to be an invaluable experience. The agenda included topics related to the closing of fiscal year 1999, the review of FY 2000 finances, and fiscal planning for years 2001 and beyond.

The committee reviewed the 1999 audit report and management letter as prepared by the independent accounting firm of Langan Associates, P.C. The reports indicate that the association is conforming to generally accepted accounting principles and is operating under sound policies and practices. The 1999 General Fund reports an operating net income in the amount of $33,312, which will be distributed to the Information Technologies and Research Funds as approved by the Board of Directors.

The committee reviewed the financial statements and budget variance report for March 2000. While the financial performance is currently strong, there is concern regarding income in membership and the annual conference. A financial contingency plan has been enacted to offset the income variances. Staff will continue to monitor the fiscal progress in each of the program areas and report variances from budget to the Finance Committee on a monthly basis.

Representatives from Merrill Lynch Asset Management attended the meeting to present the detail regarding the association's investment accounts and to provide insight into the performance of the investment portfolio. The association's reserves and returns are expected to remain strong throughout 2000.

With regard to fiscal year 2001, the committee reviewed the financial assumptions approved by the Board of Directors at the Winter Meeting. The financial assumptions have been incorporated into the Association Program Plan and Budget documents developed by the staff. The assumptions include:

The Urban Consumer Price Index is projected to rise approximately 3%. The AIMS Association Financial Index is projected to increase near 4%. This will relate to an across-the-board increase in operational expenses.

The Internal Revenue Service and other regulatory bodies will begin their quest to tax Internet-based transactions. It is anticipated (or shall we say hoped) that non-profits will retain their e-tax exempt statuses.

Another U.S. postage increase is in the works ... probably one cent in 2001 for first class, 6% to 8% for direct mail, and more than 10% for non-profit publication rates. Further, the use of such for association programs and services will continue to be scrutinized and limited.

The demand for labor will continue to outpace the supply, nudging wages up. Changing demographics will pose major challenges for employers. Businesses will need to get ahead of the curve by taking action to ensure an adequate supply of good workers. Staffing costs will increase by 7% to 8% to fund the salary administration plan as approved by the Board of Directors, including the expansion of outsourcing, the upgrading of three to five administrative positions, and the addition of one administrative staff position. Benefits costs will increase by nearly 10% to accommodate the needs of the varied workforce. A growing number of women in the workplace will require benefits that support their roles are primary caregivers. The aging segment of the workforce will cause increases in health care and training. The younger workforce will find value in bonuses and technological upgrades.

Legal and other professional services will continue to rise at a rate of 5% to 6%.

Travel and lodging costs will continue to increase approximately 5%. The lodging industry will continue to reap the pricing benefits of an expanding market. The travel industry will compete for business not by lowering fares but rather by negotiating class upgrades, weekend-stay and advance-booking rules, and club memberships.

E-commerce will hurt some trade shows (those where floor sales are significant), but the overall trend in conferences is up—nearly 70% in the last four years. This trend is expected to continue as there is no substitute for face-to-face interaction and networking.

Interest rates will increase only slightly and will be dependent largely on the outcome of the U.S. Presidential elections. Stock dividends will continue to be low, while stock values will continue to show extreme fluctuations. The world economy is expected to strengthen in 2000 and continue into 2001 as countries shake off the global financial crisis.

Further technological advances and implementation of the virtual association will enable the association to provide more products and services in the digital format, offering potential sources of additional revenue. However, the initial period of changing any delivery method causes uncertainty. Staff will be faced with offering both digital and print formats in undetermined quantities as the initial demand may be somewhat vague.

The growth in the membership dues base is projected at 3%. The growth will be sustained by placing valuable member benefits and services behind "closed doors"—the members only site. Programmatic costs will increase to serve a growing membership base.

SLA's international interests and exposure will continue to increase. This will create greater demand for the development, implementation, and delivery of global products and services to a growing international membership.

Web-based firms will lift ad rates for conventional media as the means to attract new markets (especially the young professionals who are their key markets).

Staff will continue to monitor and revise these assumptions as necessary as the Association Program Plan and Budget for 2001 is implemented. Any revisions will be reported to the Finance Committee and Board of Directors.

With regard to the specific projections for membership counts, the following assumptions were made in projecting the 2001 figures:

The growth in regular and associate memberships will be 3%.

The percentage growth in student members will increase over the 1999 actual figures as the Student and Academic Relations Committee continues to actively pursue new student groups and promote membership in SLA. However, we do not project to realize the FY 2000 budget goal of 2,000 student members.

The decrease in the growth of retired members will continue to be evident. We have experienced an 11% to 18% decrease in the number of retired members over the past three years. However, the retired members caucus is promoting the retired membership quite heavily so we have proposed a modest increase over the 1999 actual figures.

The dues and fees income figures are based on the rate structure in place as of January 1, 1999. Although the full member growth is projected at 3%, the overall growth in dues income will be held at 2.5% due to the decline in student members.

An adjustment of $12,500.00 has been included for 200 unemployed members to pay the one-time 50% reduced regular member dues rate of $62.50.

The committee also spent considerable time reviewing the association's long-range financial plan, student registration fees, capital expenditures, and the association's travel policy. The Finance Committee recommended an increase in the Board's travel reimbursement from $1,000 to $1,500 and expanded the policy to cover expenses related to the Annual Conference Board meetings. The committee felt that the increases were sound and would help attract a greater pool of leadership candidates.

The Finance Committee will hold its next meeting on September 28 at the association headquarters. The agenda will be focused mainly on the review of the FY 2001 Budget.

Please feel free to contact me directly. For more information, contact Richard Geiger, SLA Treasurer (geigerr@sfgate.com).