NEC Finance Committee Report 29 APRIL 2011. I. FY 11 Budget Execution II. FY11 Restored Appropriated Budget Financial Plan/Impact of CRA III. FY12 Corporate.

NEC Finance Committee

Report

29 APRIL 2011

I. FY 11 Budget ExecutionII. FY11 Restored Appropriated Budget

Financial Plan/Impact of CRAIII. FY12 Corporate Financial PlanIV. Cadet UniformsV. Vanguard Training Center FundsVI. CD FundsVII. Investments UpdateVIII. ACMX Maintenance Fund BalancesIX. Wing Use of ACH/EFT Payment

XI. Partial Payment of Membership DuesXII. Overpayment of Membership DuesXIII. Unit Internet ReimbursementXIV. Document Scanning RequirementXV. Training/Orientation Flight BudgetsXVI. Travel Vouchers/Meals and

EntertainmentXVII. Unit Visits UpdateXVIII. Risk Matrix Update

FY11 APPROPRIATED BUDGET

Budget Expended %

O&M 27,048,000 12,052,157 45

DDR 425,000 122,532 29

Aircraft (3-yr funds) 2,424,000* 707,867 95Vehicle (3-yr funds) 902,000* -0- 0

*Full funding has not been received yet.

Program Income 1,344,087 697,104 53

FY11 CORPORATE BUDGET

FY10 FY11

Budget 2,510,333 2,438,755*

Income (YTD) 1,206,881 1,103,665

48% 46% Expenditures (YTD) 921,043 837,162 37% 35%

*While membership revenue has increased, the projected revenue for conferences & special events and ad sales was projected lower which explains the net decrease in overall revenue between the years.

Straight Line 50% Historical 49% Expenditures

Historical 40% Revenue

Diversity Committee (New Initiative) + 30,000

Cadet Med. Exp. Coverage(New Initiative) + 44,700

Total Unfunded Initiatives + 74,700

TOTAL CORPORATE UNFUNDED $128,522 (Corporate Unfunded List provided in Finance Cmte Folders)

FY12 CORPORATE

FINANCIAL PLAN

FY10 FY11 FY12

(Actual $$) (Projected $$) (Projected $$)

Income 2,431,950 2,421,755* 2,445,426 *While membership has increased, projected revenue for conferences & special events and CAP Magazine ad sales was lower which explains the net decrease from FY10 - FY11

Membership Income Projections (Figures are based on data available on 1 March of full paying

membership) Total membership is 61,119.

FY10 FY11 FY12Senior Mbrs 32,459 32,202 32,370Cadet Mbrs 22,891 25,160 24,450

55,350 57,362 56,820

FY12 – Expenses $2,445,426

Initial Projected Funding: 2,445,426

Initial Requests/Input: 2,689,217

Financial Plan Shortfall 243,791

REVENUE:Reduction of Picture ID Card - 8,500

EXPENSES:New Initiatives:

Diversity Committee Travel 30,000Safety Officer College 4,500Cadet Medical Expense Coverage 50,000

Total New Initiatives 84,500

EXPENSES:Significant Changes - INCREASES: (>4K from Pr Yr)

Allocation Salary & Benefits+35,000

Credit Card Expense +27,000Cash Reserves + 7,595Prof. Svcs – AMS System (25% of increase) + 7,250Electronic Media + 5,000Mbrshp Card Production + 20,000A.C.E. Pgrm Supplies + 14,500

EXPENSES:Significant Changes – DECREASES: (4K/40% or more from

Pr Yr)

Prof. Legal Services - 5,000Interest Expenses - 4,500

FY 12 FINANCIAL PLAN SHORTFALL $243,791

GENERAL ACROSS THE BOARD REDUCTIONS

NEC Travel funded at FY11 levels - 18,955

Region CC Tvl funded at FY11 levels -11,034

NCSA & Prof. Development -31,800funded at FY11 levels

New FY11 Unfunded Initiatives - 80,000remain as unfunded for FY12

Total Savings from Adjustments 141,789

ADDITIONAL REDUCTIONS

EX Dept (Leases & Telephone) - 3,302FM Dept (Travel & Cash Reserves) - 32,500PA Dept - 46,800 (AMS, Travel, Exhibits & Promo, Magazine & Mbrship cards)

AE Dept (Travel) - 10,000Ops Dept (NESA & CISM) - 6,400LG Dept (Oshkosh Tng Ctr) - 3,000

FINANCIAL PLAN BALANCED

The Finance Committee recommends the NEC endorse the FY12 Corporate Financial Plan as presented and forward to the Board of Governors for approval.

The Finance Committee recommends the NEC review in full session the possible modification to the Cadet Accident insurance program and the unfunded nature of that program and make a determination of how to move forward on this issue.

■ Costs allocated to the Cooperative Agreement must be reasonable, allowable, and allocable

■ Cadet uniforms are allowable per the Statement of Work and expenses may be allocated to appropriated funds

■ Analysis of cadet uniforms in relation to retention brings into question the reasonableness of the cost

■ CAP has expended in excess of $2M on cadet uniforms since 2006

Uniforms CostFY09 6,824 $409,723FY10 6,767 $449,291

■ Approximately 50% of cadets do not renew their membership after the first year

■ CAP should consider appointing a committee to review the cadet uniform policy

■ Further, CAP’s annual appropriation may be seriously reduced due to Congressional budget restraints

■ Potential savings would be used to maintain other program elements

The Finance Committee recommends to the NEC that a special uniform committee be appointed to review the cadet uniform policy.

■ Vanguard Funds balance is currently $101,914

■ FY11 Vanguard commissions are estimated to be approximately $130k

■ FY10 expenditures:NESA $67,642Hawk Mt $17,500Oshkosh $ 9,678Vehicle Wrap $ 2,666

■ Hawk Mountain has requested funds to remodel the kitchen at the facility

■ Kitchen is inadequate to support to support the activities

■ Hawk Mountain manages an ongoing fund raising campaign to enhance the facility

■ All buildings have volunteer “sweat equity” contributions to defer costs

■ HMRS requires an electrical service upgrade to complete the building project

■ CAP members can not perform electrical upgrade

■ Hawk Mountain has raised over $14,500 in funding and supplies for this project in the past year

■ Hawk Mountain is one of the only facilities owned by Civil Air Patrol

■ Vanguard Training Center funds would enhance the experience of cadets who attend Hawk Mountain

The Finance Committee recommends Hawk Mountain receive Vanguard Region Training Center funds in the amount of $75,000 for the purpose of kitchen and dining facilities upgrade.

■ Under the Counter Drug program prior to FY05 CAP Wings were paid 15% of the mission cost

■ Several Wings have remaining accumulated “CD Admin Fees”■ Funds are restricted to use within the CD program■Admin fee payments eliminated after FY04

NC $6,759KY $3,128WA $4,482

Finance Committee recommends to the NEC that the remaining CD balances, as reported, be drafted back by NHQ to be utilized as CD mission funding by those units who have accumulated the funds.

Wings bought into CMX program which currently have tail number balances remaining, but limited resources to remit reimbursement:

Arkansas $44,146

Hawaii $10,876Washington $11,211

Total $66,233

■ AR Wing will pay $100 monthly from dues rebates

■ Flying rate for corp missions will be increased by $5 per hour

■ AR Wing and NHQ will meet annually to review plan to determine if a modification to the plan is feasible

1. NCR will be refunded the amount paid for IA

2. Approve 50% write off of all amounts outstanding and/or currently being paid; all remaining balances would require a payment plan.

■ Member dues are frequently overpaid by small amounts

■ CAP has been refunding overpayments by issuing checks■ Overpayments are generally less than $15■ Many refund checks issued are not cashed

■ Most organizations noted at the Personify user conference that they record overpayments as contributions due to cost (time, postage) of refunding

The Finance Committee recommends to the NEC that dues payments that exceed the proper dues amount by less than $15 be recorded as contributions and that members be notified of the policy.

■ NHQ provides access to dialup internet service via EarthLink

■ Where EarthLink access is not available reimbursement up to $15.95 toward the cost of internet service is offered. Total expenditure in FY11 was just over $38k

■ Dial-up service almost inadequate for eServices and WMIRS

■ Initially over 1,000 accounts - today fewer than 200 units (<15%) participate

■ Workload to process receipts and reimbursement payments for NHQ and wing administrator staffs is considerable and exceeds value of reimbursement

■ Requirement is not established in any Air Force, CAP or board-approved policy

The Finance Committee recommends to the NEC cancellation of the Internet service reimbursement program, effective 1 Oct 11 and application of funds to be directed to training or other programs.

■ Ten Wings have implemented procedures to scan all documents into QuickBooks utilizing a utility called SmartVault

■Wings which have implemented SmartVault vary in size■All Wings now have scanners

■ Scanning financial documents supports National Board proposal to adopt paperless processes

■ Allows auditors, WFA’s and Finance Committee to review documents

The Finance Committee recommends to the NEC that all Wings implement SmartVault by 1 September 2011.

Executed 100% of our budget for the last four years - never received funding this late before

Most wings now have plans in place to execute budgets

Must now fly 60+% of budget in the last 3rd of the year

By 1 August, Regions/Wings need to identify funding for training and orientation flights that will not be executed by 14 September

The Finance Committee recommends that the NEC authorizes NHQ an early recovery of unobligated funds for FY-11in WMIRS on or after 1 August 2011.

■ Wings have begun to utilize online banking for bill payments■Online bill pay ■EFT/ACH Payments

■ Process saves time and is more efficient

■ CAPR 173-1 lacks guidance to ensure internal controls are in place

The outcome from the FM Summit will develop guidance to include in CAPR173-1 to provide for procedures and internal controls for online banking.

Restricted UnrestrictedBeginning Cost 188,131 4,897,175(30-September-2010)

Interest & Dividends 3,317 114,974Additions -0-

100,653Withdrawals (8,095) (55,095) Scholarships

Realized G(L) from Sales (2,641) (261,429)

Ending Cost 180,712 4,796,278

Market Value 182,168 4,891,420

Gain (Loss) 1,456 95,142

Restricted Unrestricted

Change in Market Value 0.77% 1.94%

(Excludes Interest and Dividends)

Interest & Dividends 1.76% 2.35%

Total Return 2.54% 4.29%(Includes Interest and Dividends)

Dow Jones Industrial Average: 14.18%

S & P 500: 15.95%

■ IRS requires documentation to support travel expense and meals and entertainment ■ WFA and auditor review has indicated most

travel is not being fully documented■ Lack of consolidated travel voucher is

especially common if the individual holds a credit card

■ Entertainment expenses are also not being documented

FM Summit will develop in language to include in CAPR173-1 to provide clarification of the documentation required to ensure compliance with IRS requirements.

■ 80 Units visited since 1 June 2010

■ Sample of units is too small to project trends

■ 19% of units visited had no reportable issues

■ ORMS Value of items reviewed:Aircraft 504,814Vehicle 290,794Supplies & Equipment 676,514 Communications 847,000Total Value $2,319,122

■ Non-tagged items—41%■ Items not located—25%■ Not updating ORMS timely—18%■ Items on site not in ORMS for unit—16%■ Items assigned to individuals not present at audit—

13%■ Improperly tagged items—8%■ Non-expendable purchases not in ORMS—6%■ Incorrect Serial Number in ORMS—5%■ No property number assigned in ORMS—5%■ Personal storage at unit—1%

■ No budget—23%■ Missing finance committee minutes—19%■ Not receiving timely reports from Wing—8%■ Late in submitting year end reporting to wing—5%■ Incorrect year end reporting—5% ■ No finance officer—4%■ Not submitted list of approvers to wing—3%■ Not providing credit card receipts to wing—3%■ No finance committee/incorrect members—3%■ No credit card policy—1%■ Fundraising for Booster club in CAP uniform-1%

QUESTIONS

The NEC approve $26,000.00 from the Vanguard account toward the purchase of a new winch for PCR glider program