Transcript Financial Report Options - American Philatelic Society

APS Treasurer’s Report
Board Meeting Presentation
August 15, 2012
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Operational Spending Overview
• Operating Expense $4 million/year
• Breakout: $3.6 Million APS & $375k APRL
• Operating Within a Balanced Budget
– We Provide Services Our Dues & Income Allow
• Funding Depreciation
– Allowing for Future Repairs on Capital Plan
• Donor Dollars Pay For Capital Projects and
Reducing Mortgage Debt
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Audit Results
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Clean audit record
Improved asset position
No needed changes
All tax filings are in order
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Investment Results
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Successfully changed investment advisors
New advisor has rebalanced our portfolio
Solid performance in tricky market
Loss in prior year – tracking market conditions
Plan to retain funds in account, no changes
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Where Operational Expenses Go
APS APRL Total
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$4.0 Million
Staffing /Benefits APS
Printing/Postage/Credit Card/ COGS
Mortgage (to principal)
Shows/Meetings/Travel/Seminars
Office/Committees/Dues Collection/Other
Recruiting/Promotion
Audit/Legal
Library (Library Expense $200k, Staff $175k)
$1.7 million
$750k
$120k
$550k
$150k
$145k
$ 90k
$375k
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Our Investments
APS Investments Total: $2.0 Million
Restricted Funds Comprised of:
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Insurance Fund
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Circuit Sales, Internet Sales and Expertizing
Tiffany Endowment Fund
Life Membership Fund
General Fund
Publications Fund
APRL Investments Total: $1.3 Million
Restricted Funds Comprised of:
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Endowment Funds
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Includes Endowment, Founder/Patron and Vooys Harrison Funds
Building Fund
Life Membership Fund
Operating Fund– includes construction in progress
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Business Risks & Financial Impact
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Mortgage Interest Rate Adjustment Up
• It is about as low as it can go, until it goes lower
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Significant Loss of Donations
Membership Decline
• Constant job to keep our 34,000+ members
• Working number of $60,000 gross dues loss/year
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Unexpected Litigation & Other Similar Risks
Insurance Rate Increases – Market Driven
Asset Related Risk
Tenant Loss, Building Capital Needs, Flood
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Business Risk Quick Facts
• Membership Loss
– $60,000 gross income loss , at 1,300 members per year
– $26,000 net income loss, after costs of members services
• Legal Costs
– Typical Year $15,000 for base legal services
– Highest Year $65,000 for base services and litigation expense
• Insurance Cost Structure Change
– Medical Increase $20,000 or more , Property Insurance Increase – Low Cost
– Flood cost $6,000 Insurance Deductible, Building & Contents
• Mortgage Reset Interest Rate – a 2% bump would cost:
– $120,000/yr operating expense additional estimated
– Resets happen only once every five years
• Tenant Move or Non Payment
– Larger tenants have longer term leases and high credit rating and good payment
history
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Solutions Focused: Business Risk
Remedies to Cost Increases or Member Loss
• Dues Increase
• Service Cost Increase
– Advertising, Circuit Sales, ISU, Expertizing
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Service Level Decrease – Technology Options
Shrink Our Space
Further Leasing of Unoccupied Space
Staffing and Operating Expense Reductions
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Philatelic Assets & Values
• APC Property $9.755m book value
– Value of asset improved with our construction
– Mortgage Liability $6.1m
• Philatelic Reference Collection $1.5 million
• APRL Assets – Our Unique Holdings $1 million
• All assets except the Reference Collection are
collateral for loans
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Match Factory Asset & Expenditure
• Construction For New Tenants
– Spending with Signed New Lease
• Building 5, 2nd and 3rd floors for UCBH lease $1.2 million
– 7 year lease at $180k/year rent - Positive Cash Flow
• Spending for Asset Preservation
• Roof & Windows 2011, 2012 Bathrooms, Floors & Halls
• Pay off the Mortgage - $6.1 Million Needed
– Four separate bank loans at 3.3 to 5.2%
– One internal loan at 3.8%
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Major Capital Projects
APRL
• New Library
– $1.8 million Estimate to Completion, $300k in hand
– $400k – Spent to Date on Library Shell & Assets
• Digitize Philatelic Materials
– $150k - AP & APRL all issues
– $10k Digitize Books in Library
• limited by copyright issues for material after 1923
– Other Library Materials (Belmont Faries) $10k
• Other Technology Investments
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Rental Income and Mortgage
• Tenants Paid $388k in Rental Payments in 2011
– Covering our Mortgage Expense
• APS Pays $10k/month rent (goes to principal)
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APC Tenants Allow Us to Live Rent Free
Our Rent Income is Growing
• Current tenants have low risk of moving out
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Rental Prospects and Return
• Space We Can Market for $75k/year+
– Building 5-1 – 4,000 sf for Office Use
– Building 10 – 5,300 sf Flexible Space, Easy to Fit
• Maximum Rental of Unoccupied $250k/year+
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16,500 sf in total at rental rate of $16/sf market rate
Includes Existing Library – 7,500 sf
Capital Expenditure Required to Finish Space
Rental of Unoccupied Space Provides double digit returns
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Role of Treasurer
Bylaws Present:
6.5 The Treasurer.
• (a) The Treasurer shall oversee the investments
of the Society subject to the supervision of the
Board of Directors.
• (b) The Treasurer shall advise the Executive
Director in all matters concerning the financial
duties discharged at the National Headquarters.
• (c) The Treasurer shall in collaboration with the
Executive Director present an annual financial
report and a report of budgetary requirements.
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Treasurer Responsibilities
• Review Processes & Activities w Controller
• Heads Up Committees:
– Finance, Audit and Investments
• Signs Off on Spending Vouchers
• Reviews Reporting Tools:
– Audit Recommendations, Monthly Spending,
Budget Package, Investment Reports
• Advises on Capital Spending & Real Estate
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Schedule of Financial Activities
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Calendar Year – January – December Tracking
Finance Committee Reviews - Quarterly
Budget Development – August & September
Budget to Treasurer & Finance Comm. – October
Budget Approved by Board – October End
Audit Preparation – January -March
Audit – April
Audit Results to Finance Committee - July
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Financial Management Thoughts
• Ended - Era of Crisis Financial Management
• Continued Impact of Membership Loss
• Maintained an Era of Responsible Financial
Management
• Board Members Need Financial Understanding
• We Need to Remain Future Focused & Careful
• Avoid Complacency
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Looking Back: Financial Comments
from April 2010 Board Presentation
• Leaving - Era of Crisis Financial Management
– Managing Cash Flow
– Month to Month, Year to Prior Year Focus
• Entered – Era of Responsible Financial
Management
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Financial Prudence Tone
Long Range Planning Tools
Focused & Involved Boards
Unity of Purpose
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What Changed to Stabilize Finances
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Phase I Savings 2008 – Staff & Board Cost Cuts
Phase II Savings 2009 – Operational Changes
Bauer Estate Funds
Rent Income – Graymont Lease Turned Corner
Stable Mortgage Cost – Low Interest Rates
Cleared Litigation Expense Volatility
Prudence - Discipline in Spending
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Financial Turn Around Summary
• Phase I Savings
$1,080k
2009 $300k , 2010 $390k, 2011 $390k
• Phase IA & II Savings
$490k
2009 $0k , 2010 $220k, 2011 $270k
• Bauer Estate Donation
• Graymont Rent for 2011
• Mortgage Interest Rate Drop
$815k to date
$85k
$100k
four years at $25k/year
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What Financial Stability Means
• Not Borrowing from Investments for Cash Flow
– Investments or held Sales Division funds $1.3 million
• Putting Donor Dollars to Work
– Long Term Projects vs. Operating Expense Use
• Responsibly Maintaining Our Assets
– Backlog of Roof Replacement and Capital Projects
• Regaining a Future Focus instead of Cash Crisis
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