USCF OPERATIONS LOSES $318,000
Audited statements for the 2002-3 fiscal year, released today, showed that USCF Operations lost $318,181 while LMA investments lost $46,967, for a total decline of $364,930.
The large loss was a shock to USCF management, which was expecting a small profit. The major factor discovered by the auditors to revise these expectations was an error of $161,000 in the way multi-year membership income was reported. This income is supposed to be distributed evenly among each year of membership, but much of it was mistakenly credited to this year.
About $60,000 of the loss was due to the failure of USCF to collect for display advertising and some Tournament Life announcements for the last few months of the fiscal year, after the very unwise firing of Debi Sherry as advertising assistant. Management tried to claim this amount as accounts receivable, but this was disallowed by the auditors as no bills had been sent. Over $14,000 of this money has since been received, as Continental Chess has a credit card on file with the office to pay for ads, and I pointed out in July that USCF had neglected to charge this card for several months. The remaining $46,000 or so remains to be billed. If all this money is collected the true operating loss for the year may be down to about $258,000, but this is still a very substantial amount, a painful outcome after so many other horrible recent years, the worst being 1998-1999, 1999-2000, and 2000-2001. USCF has now lost money for its last seven consecutive fiscal years.
How long can USCF continue to survive such losses? The conclusion at the LMA Workshop was that USCF will probably realize about $500,000 from the sale of its building, and has about $300,000 in the LMA. Of this $800,000, $300,000 must be paid back to the bank, accounts payable exceeds accounts receivable by about $200,000, and about $200,000 in moving expenses are expected for the move to Crossville, Tennessee. This does not leave much for other things, and modernization of the computer system is an urgent need.
On the plus side, the audit does not reflect the land, valued at $246,000, recently donated by the city of Crossville, to USCF. The Federation will have rent free use of a building in Crossville for about a year, and plans to obtain a 15-year construction mortgage to erect its own building on the land, for which the payments will be $4500 per month.
The Finance Chair presented a budget showing a $68,000 profit, and I complained that a much larger profit should be planned, especially given USCF's poor recent history of meeting budgeted targets. The meeting agreed and appointed a committee to revise the proposed budget with a view to bringing in more money quickly. It is likely that rating fees will be raised, an overdue move. I suggested that since Burt Hochberg put out a larger Chess Life in the 1970s than we have today with just one part-time assistant and without a computer, having six employees in the USCF Publications Department is excessive.