Benchmarking Finance and Business Operations

transcript

The Finance and Administration Roundtable

May 24, 2006

PRESENTERS

• Bron Prokuski

VP, Business Operations

National Defense Industrial Association

• Nat Bartholomew, CPA

Principal

LarsonAllen

FRAME THE DAY

• What is Benchmarking?

• Group Benchmarking Exercise

• Sources of Benchmarking Data: Sample Financial Benchmarks Sample Policy Benchmarks

• Demonstration on Use of Benchmarking Data

WHAT IS BENCHMARKING?

• Comparison of like attributes or metrics from similar demographic data samples– People, process, technology, business

processes/practices/strategies

• A baseline for performance improvement

• Opportunity to gain best practices – Measurement by fact rather than opinion

Benchmarking - When You Want To…

• Answer “How do I compare?”

• Determine financial health

• Obtain a single version of the truth

• Make better informed decisions

INTERESTED PARTIESA DIFFERENCE IN PERSPECTIVES

• THE BOARD - Profitability, Reserves, New Business Ventures, Mergers & Acquisitions

• THE STAFF - Compensation, Benefits, Working Environment

• THE AUDITOR - Financial Health, Risk Assessment, Management Advisory Services - Best Practices

• THE MEMBERS - Needs, Service, Value, Measuring Your Industry - Sector Analysis

• SERVICES AND SUPPLIERS - Quality, Performance, Competitiveness

• EXPLORE POSSIBILITIES -

STRATEGIC PRIORITIES

• Financial Health• Quality Events for Member/Sponsor Needs• Awareness/Action on Advocacy Issues• Member & Participant Growth and Activity• Knowledge and Information Transfer• Broadened Programmatic Coverage• Professional, Positive Work Environment

OBJECTIVE / GOAL DETERMINATION

ies BOARDSTAFFAUDITORMEMBERS

SERVICESSUPPLIERS

Financial Health

Quality Events for Member/Sponsor Needs

Awareness/Action on Advocacy Issues

Member & Participant Growth and Activity

Knowledge and Information Transfer

Broadened Defense & National SecuritySector Coverage

Professional, Positive Work Environment

Business/Mission Success

Strategic Plan

Goal 1 Goal 2 Goal 3 Goal 4

CANDIDATE AREAS

• Service quality• Asset use• Staff performance• Program performance• Operating efficiency• Customer satisfaction• Return on investment• Project time to benefit

GROUP EXERCISE

• What are you trying to measure?

• How do your currently measure it?

• How often do you measure it?

• Is it helping you to improve performance?

• If not, how can you fine tune your measurement?

Sources For Benchmarking Data

• ASAE & The Center’s ORR

• ASAE & The Center’s P&P

• Compensation & Benefit Studies

• GuideStar – More than just 990s

• Customized Data Collection

USE OF BENCHMARKING TOOLS

ASAE’s Operating Ratio Report

Twelfth Edition, Vol I & II

What’s In There?

What is ASAE’s ORR

• Compilation of financial data from participating associations

• First published in 1953

• Collected via Federal Forms 990 and survey supplements

What Data is in the 12th Edition?

• Approx. 7,000 associations were requested to send in data in April 2003

• Reminders sent in May and June• By the end of June 628 valid surveys were

utilized to compile the statistics enumerated in the 12th Edition – 9% response rate

• Therefore 95% certain that results are within +/- 4% (when data is supported by the full sample size)

How Do I Extract Data That Is Relevant to My Association?

Data Categories• Membership Type• IRS Tax Status• Total Ass’n Gross Revenue• Geographic Scope (Int’l/Nat’l or

Regional/State/Local)• Metropolitan Area (e.g., DC, NYNY, etc.)• Industry Sector/Interest Area

Content Sections – Vol I

• Revenue and Expense Information

• IRS Form 990 Information

• Balance Sheet Information

• Specialized Sections– Industry Sector– Metropolitan Area– Geographic Scope

Content Sections – Vol II

• Expense Information

• 10-Year Trend Analysis 1993-2003– Revenue and Expense– IRS Form 990 Schedule– Balance Sheet Information

• Reserves and Investment Information

Dues As Percentage of Revenue(Dues Reliance)

By membership type (all organizations):Mainly Company/Institutional Members = 39.2%Mainly Individual/Professional Members = 30.1%

By size / by membership type & size:Gross Revenue All Orgs C/I I/P$500K or less = 62.4% 63.5% 56.4%$500K - $1M = 30.1% 37.0% 25.8%$1M - $2M = 35.5% 38.2% 29.5%$2M - $5M = 35.0% 36.1% 34.1%$5M - $10M = 29.2% 32.2% 29.0%$10M+ = 30.4% 41.4% 23.7%

Dues as Percentage of Revenue(Dues Reliance)

38.20%44.60%

62.90%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Company/Institutional Members

Educational

Healthcare/Medical

Social / Cultural /Recreational

Dues as Percentage of Revenue(Dues Reliance)

19.20%

32.10%

26.50%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Individual/Professional Members

Educational

Healthcare/Medical

Social / Cultural /Recreational

Salaries & Benefits

• Average Salaries - Geographically

• Average Benefits - By Size ($)

• Average Salaries and Total Revenue per Staff Member – By Industry Sector

Average Benefits By Size ($)

$4,625

$6,668$7,187

$9,000$10,019

$11,935

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Up to $500K

$500K - $1M

$1M - $2M

$2M - $5M

$5M - $10M

Trend Analysis - Investment Composition

(as a percentage of total assets)

1993 1996 1999 2003

Invested Securities

Invested Cash

Trend Analysis – Meetings Sponsorship Revenue

(Percentage of Total Revenue)

1993 1996 1999 2003

Trend Analysis – Periodical Advertising

4.13.6

1993 1996 1999 2003

Trend Analysis –Personnel Benefits(Percentage of Total Revenue)

3.7 3.73.9

1993 1996 1999 2003

Trend Analysis –Personnel Benefits(Average Benefits per Staff Member)

$4,774

$6,917 $6,729

$9,010

$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000$9,000

$10,000

1993 1996 1999 2003

Trend Analysis – Printing & Photocopying Costs

1996 1999 2003

Average Reserve Target

Reserves defined as total net assets and as a percent of annual operating budget

• 501(c)(3) 76%

• 501(c)(6) 59%

Investment Policies

All Assns 501(c)(3) 501(c)(6)

Cash Investments 21% 24% 20%

S-T Investments 23% 19% 26%

L-T Investments 53% 58% 53%

Other Investments 3% 0% 1%

USE OF BENCHMARKING TOOLS

ASAE & The Center’s

Policies and Proceduresin Association Management

(A Benchmarking Guide)

• 7,403 membership organizations were sent questionnaires in mid-April 2005

• Responses were closed on June 30, 2005• 1,111 associations responded (15%

response rate compared to 8% in 2001)• Over 600 tables of benchmarking data in

seven volumes• 95% confidence of 4% margin of error (just

like 12th Edition of ORR)

Respondents

• 46% Trade Associations / 54% Individual Member Organizations

• 56% 501(c)(6) / 37% 501(c)(3)

• 68% budgets <$5M

• Median annual budget = $1.9M

• Median FTEs is 10 (actual FTEs 1 – 182)

Best “Average” Measure

Median – ½ respondents above; ½ belowMean – sum of all cases / total # of respondents

Median is a better measure for average when the upper limit is theoretically infinite (e.g., # members, annual budget), as the mean can be strongly affected by very high values.

# Members (Mean = 58,687 / Median = 1,500)Annual Budget (Mean = $6.4M / Median = $1.9M)

International Benchmarking Trends

2001 2005

International Members

0%2%4%6%8%

12%14%16%18%

2001 2005

International Offices

Healthcare All Other Total

Related Foundations?

IMO Trade Total

ARE MEMBERS PERMITTED TO PAY DUES IN INSTALLMENTS?

HOW MUCH OF REVENUE IS MADE UP OF DUES?

2001 2005

Median percent of total revenue derived from member dues

40% 35%

• Dues as a percentage of total revenue are inversely related to size by number of FTE’s

ACCEPTING ONLINE PAYMENTS

39% 39%

2001 2005

TRADE IMO TOTAL

CURRENTLY ACCEPT MULTI-YEAR MEMBERSHIP

19% 43%* 32%

EXPECT TO ACCEPT MULTI-YEAR MEMBERSHIPS OVER THE NEXT TWO YEARS

82% 79% 81%

* Up from 26% in 2001

MEMBERS ARE PERMITTED TO UPDATE THEIR

OWN RECORDS

MEMBERSHIP RECORDS ARE

THE RESPONSIBILITY

OF THE MEMBERSHIP DEPARTMENT

WHO UPDATES MEMBER RECORDS?

46% 51%

MEDIAN I.T. BUDGET

33,500

62,250

50,000

10,000

20,000

30,000

40,000

50,000

60,000

70,000

BALLOTS ONLINE FOR DIRECT VOTING

ACCEPTANCE

TELECOMMUTING

• 55% - TELECOMMUTING FROM HOME IS PERMITTED

• 64% - ORGANIZATIONS WITH MORE THAN 30 FTE’S ALLOW TELECOMMUTING

• 43% - PROVIDE COMPUTERS AND EQUIPMENT

TECHNOLOGY TRAINING

0%10%20%30%40%50%60%70%80%90%

<2 3~5 6~10 11~29 30~99 100<

# of FTE's

MEMBER COMMUNICATION

98% 95%

TYPE OF COMMUNICATION

WEBSITE

VOICEMAIL

TECHNO-MARKS

• 68% - USE WINDOWS XP

• 62% - USE # OF WEBSITE HITS TO EVALUATE EFFECTIVENESS

• 33% - USE SURVEYS AND ONLINE FEEDBACK TO MEASURE WEBSITE EFFECTIVENESS

• 44% - UPDATE WEBSITE DAILY• 31% - UPDATE WEBSITE WEEKLY

Financial Policy Metrics

• 56% of the reporting associations have fiscal years coinciding with the calendar year

• Median liquid reserves are 26%• 79% of the reporting associations publish a

flagship periodically issued publication• 87% report that their organization is subject to

an annual independent audit• 5% report they have been audited by the IRS in

the last three years• Median percentage of non-deductible dues is

estimated at 11%

Sarbanes Oxley (SOX)

• Whistleblower Policy– 22% have– 74% adopted after SOX

• Audit Committee– 52% have– 24% in place after SOX

• Staff Ethics Statement– 48% have– 18% adopted after SOX

Board of Directors

• Respondents report a median of 16 voting members

• 63% report that their chief elected officer serves a term of one year or less

• Most organization’s boards meet quarterly (27%) or semi-annually (21%)

• 12% pay elected officers for their service• 74% of volunteers receive “on the job”

training

ASAE Association Compensation& Benefits Study

Questions?

Benchmarking Finance and Business Operations

Documents