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Report of the Vice President - Finance

Policy Council Meeting

July 1999

Wellington, New Zealand

(1) A PERSONAL NOTE

First, I would like to begin my report by apologizing for not being present in person. My wife's family is experiencing medical problems and I felt it necessary to stay in Albany. Second, I wish to thank Roberta Spencer and Jennifer Rowe for the very professional manner in which they are keeping the Society's books, managing its income operations, and supporting the budget process.

(2) AUDITED FINANCIAL REPORT FOR 1998

MOTION: I move that the Policy Council Approve the Auditor's Review of Financial Statements for the System Dynamics Society, Inc. for December 31, 1998 and 1997.

DISCUSSION: Our accountant, Andrew F. Hall has reviewed the books kept at the Society's home office. His audited report is very close to our books as presented at the February meeting. The differences that occur are due to several small amounts being posted or not being posted near the end of the fiscal year and to how depreciation is taken on the home office computer. We are making the changes in our books so that they will match the audit report. The Administrative Committee of the Society has already reviewed and approved this audited report

(3) MID-YEAR FINANCIAL REPORTS FOR 1999

DISCUSSION: I believe that no formal motion is needed to approve the mid-year financial reports. I should note that the Society is performing very much as projected at our meeting last summer in Quebčc. At that time we had projected an overall loss for 1999 due to a projected loss from the conference at a site that may not draw attendance. I now believe that we will end the year better than projected because of the much stronger than expected attendance at the New Zealand conference. I congratulate all involved in this conference for doing such a fine promotion.

The June 30 loss of $16,575 is not as much cause for alarm as it might seem. All of the administrative expenses for the Society are made in January, so this cash loss will lesson as the year continues on. I should note, however, that sales of products (especially the beer game) are off this year, reinforcing the observation that the Society needs to look away from sales to support core operations and redouble its efforts to use conference surpluses to support core operations.

The Profit and Loss statement by cost center shows a familiar picture. For the first six months of this year, the core operations of the Society has posted a loss of $40,049 with most of this loss being offset by surpluses in conference activity and sales activity.

I project that core operations will both remain the heart of the Society and will continue to lose funds. We are fortunate to have income sources that can support increasingly strong core operations. This year we have been able to invest in web site development, increasing emphasis on member services, greater concentration on services to sponsors, and a sorely needed update to the bibliography while still maintaining support for the journal. I urge members of the policy council to read the comparative balance sheets with caution. Right around this time of year, the Society experiences relatively large surges of income and expenditures associated with the annual conference. Shifts in the balance sheet can change rapidly at this time of the year.

The two stable patterns that you need to notice are:

our balance sheet is down from last year (reflecting a projected loss) and
we have around a quarter of a million dollars in cushion, so this decline is not an immediate threat to the financial health of the Society.

(4) PROPOSED BUDGET FOR THE YEAR 2000

MOTION: I move that the Policy Council approve the budget for 2000 as presented by the Vice President for Finance and approved by the Administration Committee of the Society.

DISCUSSION: The budget that I am presenting to the Policy Council has been reviewed and approved by the Administrative Committee at its June 30 meeting. The largest single item of expenditure in the budget is the proposed contract with the University at Albany to provide administrative support to the Society. The majority of this budget goes to supporting our executive director, Roberta Spencer, at a 90% level as well as the assistant to the director, Jennifer Rowe at 60%. This year's budget contains a merit pay increase of 10% for Ms. Rowe. The proposed budget is nearly balanced, showing a projected loss of only $8580. Overall, income is budget to rise by 35% from the amended 1999 budget (the amendment was the merit pay raise for Ms. Spencer added in by the policy council last summer and approved in February) with expenditures rising only 5%.

Again, I will urge caution in reading the budget because it very much depends on how well the 2000 conference in Bergen performs. The budget as presented assumes that the conference will be able to repay a projected $31,050 in Society effort given to the conference and in addition return a $15,000 surplus to the Society. I must stress that the overall financial strategy of the Society increasingly relies on conference surpluses to subsidize core operations.

Respectfully submitted,

David Andersen
Vice President - Finance