LFA Finance Committee

Those of you who are also LANA Members have received a survey from LANA. It is the USLR's position that LANA has misinterpreted the financial consequences of merger as stated in the survey. The USLR is currently preparing a response to LANA's incorrect figure analysis and will distribute it shortly. It is our firm belief that a merger is fiscally viable with little or no increase in the amounts you are currently spending as a USLR Member.

The following information is provided to apprise you of the financial work that has been done toward the unification of ALBA, LANA and the USLR into the LFA. Work continues within the Finance Committee (ALBA-Rennie Squier, LANA-Melody Hull and USLR-Lyn Schaeffer) and the latest information will be presented at the Symposium. Your attendance and input at this event will be invaluable in the unification process. Please feel free to contact me for additional information or comment.

11/2006 Work started by analyzing membership and registration/transfer activity for duplications.

1/26/2007 USLR presented a proposed unified budget (created from last year's profit & loss statements from all three groups) to the Finance Committee for review.

6/14/2007 LANA objects to budget as being too premature for distribution. LANA wants more committee work.

7/22/2007 LANA finally responds with details of objections to proposed budget that was introduced in January.

Dear Rennie and Lyn,

I have used Tom, again, as a sounding board with my concerns over the combined statistics of our three organizations, presented on the various spreadsheets and on the proposed budget. I feel like his expertise in business should be utilized since he has had the experience, not I, in doing what the LFA is attempting: working as one organization with a financially sound method. We would like to present a different interpretation, as we see it, of the figures. In an attempt to avoid confusion, we have used a color code in the body of the letter to show who is commenting about what. We hope this helps.

We've copied the recent emails, the most recent first, and the coding is for the body of the letters only.

            We agree with Rennie’s comment “Our committee report should be submitted to the boards of all three organizations when it is complete. What they do with it is up to them.”, but we do not agree with the most recent and rather optimistic interpretation of the figures. Let's keep this discussion going and perhaps presenting the various interpretations of the combined spreadsheets can be part of our report at the Lipizzan Symposium in September. Below is our response with details of why we believe the figures in the budget do not work as optimistically as we would like.

Melody (and Tom)

Dear Melody and Rennie,

I am so sorry I did not respond to this e-mail. I just found it. It must have been moved into the wrong box by mistake. Please forgive my oversight.
Please see below for my comments.

Thanks Lyn

Lyn & Tom Schaeffer
Royal View Farm
858 Piper Hill Rd.
Stewartstown, NH 03576
603/246-3492

----- Original Message -----
From:
To:
Sent: Sunday, June 17, 2007 9:38 PM
Subject: Re: Finance committee

Hi, Lyn and Rennie,

Thanks, Rennie, for responding to my concerns as you did.
Yes, I understood that we were to come up with the figures and feasibilities. However, I thought we were to present our findings and comments at the LFA meeting at the symposium in September. When Lyn proposed publishing the working draft to the public, I was caught off guard, and I felt like we stepping out of our committee's directive.

Maybe I am getting into the details, becoming a little "nit-picky." We can still present these figures, but let's--just the three of us--discuss what these figures mean, how best to interpret the figures. How I read them might very well be different than either of you. At least we can say at the meeting that not only have we collected data, but we've tried to understand the data's ramifications. We could even present several sides of a conflicting issue. The two, or three, angles on a subject are then part of our presentation.

I have looked over Lyn's tabulations. Thank you, Lyn, for shouldering the spread sheet duties. I confess that my husband Tom, who just retired as a business manager, has also looked at them because, frankly, I needed an objective eye. The outlay of 40% of our income for the professional office, for me, is scary--especially with so little room for error/other expenses. Tom agreed with me. In fact, he was shocked that I was being fiscally conservative for once.

I have listed my concerns below. Comment on them, if you like. You may see other sides of the problems presented.

1.         We should have compared more than just last year to get an appropriate budget. We don’t know if last year was average, above, or below, for any of the three groups. For LANA, it was a very expensive year and not at all typical since we absorbed the extra costs for the evaluations. Last year was average for USLR, if it was above average for LANA then a budget reflecting those inflated costs has extra built in as a cushion. 1.   To get the best picture with more accurate information, more than 1 year should be compared. Then we would have a better idea of what future finances will bring, and our estimates will be less guess work.

2.         Membership dollars are over estimated. Since we are combining memberships, we are bound to lose memberships due to duplications. LANA membership were $45 and USLR $55. Even if we increase membership to $55.00, we would have to have 340 members to meet this estimated budget. The Membership dollars were not overestimated. There were 340 unique Members between the three groups. I did remove the duplicate Members, as shown on the Membership spreadsheet that I distributed earlier. 2.             Either the membership lists are incorrect or there are a lot of free memberships included in the figures used. The boxes below show our tabulations of the membership income and approximate number of members needed to reach these figures.
LANA had 37 members which were lifetime, free, or in error.

Membership Type                  # of Members              Amount                        Total
2005                                       (3)                                $45.00                          $ 135.00
2006                                                    117                  $45.00                          $5285.00
2007                                       (7)                                $45.00                          $ 315.00
Friend                                                  10                  $15.00                          $ 155.00
Lifetime, Free, or error                      37
Grand Total                                        164                                                      $5890.00

USLR showed a membership or 301 but only 204 is accounted for in the USLR profit & loss statement. This leaves 97 members as lifetime, free, or in error.

Membership Type                 # of Members             Amount                              Total
Current Participating                         172                   $55.00                          $ 9480.00
Current Family                                    13                   $80.00                           $ 1040.00
Current Corporate                                5                    $95.00                           $ 475.00
Current Assoc.                                   14                      $35.00                           $ 490.00
Current Total                                    204                                                        $11485.00

Next Year Participating            (17)                                $55.00                          $ 935.00
Next Year Family                     (2)                                 $80.00                          $ 160.00
Next Year Corporate                (1)                                  $35.00                          $ 35.00
Next Year Other                       ?                                      ?                               $ 165.00
Next Year Total                     (20)                                                                    $1295.00

2a.       You counted membership fees for next year in the budget comparison.   Figures which should have been used for Membership in financial comparison are:
USLR- $11485.00   LANA- $5285 + $155 = $ 5440.00    ALBA - $233.00
Total = $17158.00
Combined Membership Budget Overstated by (18720 – 17158) = $1562.00
Or the better way is to use the actual paying membership count
We use current paying members from above boxes above:
LANA (117 +10)         = 127
USLR (172+13+5+14) = 204
TOTAL PAYING MEM. = 331 – (Approx. 60 Duplicate members ) = 271 Paying Members
271 x $55.00 = $14905.00
Combined Membership Budget Overstated by (18720 – 14905) = $3815.00 (When family & corporate memberships are fiqured this overstatment is closer to $3000.00)

3.         Registrations are overestimated due to duplications.   The registrations were not duplicated either as shown on the registration spreadsheet provided earlier. 3.    Tom went through the spreadsheet and found a minimum of 17 duplications that were not marked. The horses are not always registered with both groups within the same calendar year. Upon checking our database, Tom found that of the 888 purebreds registered with LANA at least 433 were also registered with USLR.

4.         Genetic kits were never used for income in LANA. Members paid directly to the U of K for the tests. LANA makes no money on these kits. Genetic kits are not an income source to the USLR. It is a pass through directly to U of D. There is an equal outlay under expenses.
4.         That may be, but the figures used showed approx. $1000.00 profit from the kits which reflects a $1000.00 overstatement in the budget.
        USLR Profit & Loss              Genetic Kits (Income) $3246.00
                                                     Genetic Kits (Expense) $2315.50
                                                 Diff. Income                $ 930.50

            Combined Budget            Genetic Kits (Income) $3560.00
                                                        Genetic Kits (Expense) $2550.00
                                                        Diff. Income                $1010.00

5.         Stallion Auction ($4000 to $6000)-- How did it suddenly increase by 50%?   The stallion auction increase I showed may be optimistic. However I believe the combined group will generate many more quality stallions to offer and many more interested bidders since we will be reaching the total Lipizzan breeding community. If done well, this could be an even larger money maker for the combined group. There were 95 unique horses registered between both groups last year. Thanks gives 95 potential breedings to be purchased. I realize that some of those horses may not have been current year foals and that many of those foals registered were from Breeders who own their own stallions but out of 95 potential breeding sales, I do not feel selling 12 breedings through the auction is too unrealistic.   5.          This is a budget and not the place to be this optimistic. This is what makes or breaks the finances. This is suppose to show a factual view of the income and not what might be or what could be optimistically. This budget should show what we know, what has been done, what honestly can be predicted, and not what we hope for.

6.         Newsletter income comes from advertising. Since we will now only have one newsletter this figure is greatly over-estimated unless fees are increased. There may be some duplication in advertising income, but since there are so many unique Members between the groups there should be substantial advertising income. 6.   There are only so many Lipizzan owner/members who will advertise in a newsletter. If the people who do advertise in their respective newsletters are duplicated we will lose one set or a partial set of ad income. The only way we can vastly increase advertising income to go after advertisers outside of our membership. This is not an easy thing to do; LANA has tried this before. While we will save on newsletter expenses, there is a touchy balancing act between what we will save and the loss or slight loss of advertising income.

7.         Last year the USLR paid out 40% of its gross income to NELA (Office). Now you are proposing a 30% increase in this expense to $22,230. (427.50 @ week). We need to shop around. This major outlay is the reason USLR needs higher fees, profit on DNA kits, and fund raisers and why it does very little promotion in equine publications. Every extra dime is funneled into paying for the office. The proposed increase was based totally on the additional number of Members, Registrations and Transfers. 7. Tom and I were at the meeting last year when the USLR approved this increase for their organization. The USLR had a 30% increase in members, registrations, & transfers the previous year? Perhaps this is another reason why we need more than just one year's history to compare and come up with a working budget.

The only way I think this budget could work safely without depending on fund raising is to raise the rates above the USLR standards on everything.

Remember, we have a 3.5% ($2043.00) margin for error in this budget. This budget gives NELA a $5130.00 raise. That is 250% of the margin for error.

If we lose just 15% of the memberships and registrations ($2808.00 + 1068.75 = $3876.75)== under this budget, we are broke and over $1800.00 in the hole. That's a little too close, too dangerous for me. I seriously doubt the feasibility of retaining the office at the new cost--and even at the old, lower cost. (There it is, the sticking point of this whole finance committee. Without the office, we wouldn't have needed the finance committee! The mediation discussions would have been almost entirely on structure of the new combined LFA organization.) Again, all the duplication was removed prior to proposing this budget.
We're not concerned about the possible duplications. We're being fiscally conservative in protecting the organization in the event of a slow economy and in light of our interpretation of # 2: there was a $1295.00 mistake (next year memberships); and in 2A: using the entire membership list and not allowing for lifetime or free memberships to reach this membership dollar figure.

Conclusion: The only way this budget would work is if we cut expenses. As much as a professional office is what would be nice, I don't think we can afford it safely, comfortably, prudently. We need to shop around for this service, if we intend to keep it, or the fee must be drastically dropped.

These are my thoughts on the figures.

Melody

At 12:06 PM 6/16/2007, Rennie Squier wrote:

Melody & Lyn,

Here are my thoughts per your email Melody:

Hi, Lyn,
I think it is much too premature to show this budget, or any proposed LFA budget for that matter, out of committee and certainly to the general public on the net. I am resolute about this. Our committee report should be submitted to the boards of all three organizations when it is complete. What they do with it is up to them. There are a lot of things we (I mean more than the three of us) need to address first: the differences in the types of memberships offered by each organization and their differing rates; the different costs each organization has; the different services provided by each at what costs; the money owed by each group (as in the money owed by USLR to LANA for the aborted evaluations); the compromises that might be possible, etc. We've just exchanged figures. I think that these item are decisions to be made by the board of the LFA or the boards of the three organizations going in. If we provide an average value for membership and registry fees, and a reasonable approximation of expenses it should give a realistic view of whether the LFA can start in a financially feasible position.

We haven't talked about the pros/cons/what-ifs/circumstances, or even mentioned the "sticking point"--USLR's demand for continuation of the professional office. We (I know I haven't) even looked into a cost comparison from around the country for a professional office like the one Nancy operates. I think that should be done before we go much further. After all, LFA need not continue with Nancy's operation if another elsewhere will do the same for less. If the LFA continues with a professional office and can find it for less than Nancy's, fine. If not, we have allowed for it in the proposed budget. Nothing personal about Nancy, it is just that "business is business." Let's be business-like. If some type of unification is the most important thing on our plate, let's be completely objective about everything--including the office. Personally, at this point, let me, the LANA treasurer, be forthright and blunt: as I see it, the continuation of the professional office is the crux of our financial differences so much so that it may be the most difficult point to resolve--unless we can figure out a compromise which will, of course, demand research and discussion.

To really present a business comparison, we should have looked at five years of finances [I know: how late can you get, but the one year is what we were asked to do], and the only point at which we should publicize is when we have a total comparison, not just of finances, but of assets and property as well. A comparison of the complete business picture of each group is the stage at which I feel we have arrived. Perhaps this stage can be organized at the annual meeting with more than just the finance committee. (I know this isn't according to the schedule devised last year, but I think it is more important to get the entire picture right than be constrained by a calendar.)

What assets and property do the USLR and ALBA bring to the table besides dollars and cents? As I stated in my previous email, ALBA has no assets beyond it's bank account.

Melody

I see no reason we as a committee can't come up with suggested fees etc. I think that one reason a committee is formed is so that a smaller group of people can work on a particular issue and present the results to the rest of the organization. So, let's get back to it as necessary.

Rennie

To Rennie & Lyn,

Our Summary:

            The proposed budget shows a $2043.00 surplus (margin of error). I believe the following to be overstated.
1.         Paying Membership overstated by 20-25% = Overstatement of $1500.00 to $3000.00
2.         Genetic Kits were meant to be a break-even item when, in actuality, the figures given show an income of $1000, thus another $1000.00 overstatement in the budget.
3.         Stallion Auctions 50% increase overstating the budget by $2000.00. The budget should be determined by history, not by optimism.
4.         Advertising income overstated-- unknown amount
5.         Increase in NELA (office) expense-- If the increase the USLR granted for this last year was based on the increase of members, registrations, and transfers as stated above, what will the expense be after the organizations unite?

         Adding all the above overstated figures together :
Stallion Auction $2000 +
Genetic Kits $1000 +
Membership $1500 to $3000
TOTAL = $4500.00 - $6000.00 overstatement of budgeted income puts us
$2450.00 - $4000.00 overdrawn, in the hole, negative, not counting possible advertising loss and possible NELA (office) expense increase.
The math makes us conclude that this proposed budget is unacceptable as it is shown.

Melody (and Tom)