Post on 13-Apr-2017
transcript
Organizational Health Task Force Output
“We were not taught financial literacy in school. It takes a lot of work and time to change your thinking
to become financially literate.”
-Robert Kiyosaki
[PLEASE READ]
“AIESEC United States Inc. Financial Breakdown”
FIRSTFinancial Literacy is KEY
“Financial planning is a process, not a product.”
-Financial Planning Association
AIESEC in….(Local Health)
Local Policies in AIESEC US
What??? MORE policies?
1
Financial Policies for AIESEC - Topic
There is no system in place to officially bind members to the rules of the association
Financial Policies for AIESEC - What are the risks?
▪ We are open to legal liability and financial risk and as such need more protection
▪ Not enough transparency in financial and compendium policies, i.e Members are unsure what could be reimbursed and what is not
Financial Policies for AIESEC - Why are they risks?
▪ Members are able to take legal action against LCs in the event of dispute which will cause financial ruin beyond their chapter, i.e reimbursements are denied, members could take legal action under the current structure
▪ Not enough transparency in local financial and compendium policies causes confusion and lowers efficiency
Financial Policies for AIESEC - Legislation
▪ Require all members of AIESEC/Global Leader program to sign an acknowledgement of national policies
▪ Attach a copy of all signatures to the leadership of AIESEC United States with every SONA
▪ Financial Subcommittee will judge the repercussions for misreporting members or not gathering signatures (minimum $50 per member)
Local Committee External Bank Accounts
2
What is the topic?
AIESEC United States does not have information on the total assets held by LCs
What are the risks?
- Lack of transparency among stakeholders of the organization
- Legal implications of having bank accounts potentially tied to AIESEC United States as a whole
- Insufficient accountability in maintaining funds in local accounts
Why is it a risk?
LC funds could be misused as there is no accountability and risk management system
Why should there be more transparency into LC Accounts?If an organization does not know its assets, how does it measure its own health?
Recommendation
- Local Committee’s external bank accounts will not bear the name of “AIESEC”
- LC’s external Bank Account statements should be submitted along with SONA every quarter- Failure to submit LC Bank Account
statements within 30 days after SONA deadline would result in immediate disbandment
- External Bank Accounts should not exceed a total balance of $2,000- The local committee will have to submit an
application which is evaluated by the Finance subcommittee should their current balance exceed $2,000
- Upon Approval, local committees will have to submit bank account statements monthly for monitoring purposes
Recommendation
- LCPs and VPFs will sign a contract that indicates if any findings of unreported bank accounts are proven to be true. It will result in immediate disbandment and investigation into fraudulent practices.
Recommendation
Association Fee Calculations
What are all of the steps of the Association Fee Calculations?
What does it all mean for your LC?
3
Who are the ones deciding LC’s Association Fees?
▪ The MCVPF currently holds sole responsibility of calculating the Association Fees
▪ No checks and balance system is currently in place to audit or verify the accuracy of the calculations
▫ The Finance Subcommittee is vital in
creating this checks & balances system (See next slide for legislation)
Legislation #1: Checks & Balance
▪ Legislate (Insert 4.2): The Finance Subcommittee is responsible for auditing the association fee calculations for each LC, provided by the MCVPF. Any discrepancy in calculations are to be brought to the attention of the MCVPF and the recalculated amount be presented to the LC it concerns.
Legislation #2 & 3: Checks & Balance
▪ Legislate (Insert 4.2): After the audit of the Association Fee amounts for every LC is completed by the Finance Subcommittee, the Finance Subcommittee must send out the calculated amounts
▪ Legislate (Insert 4.2): Upon receipt of the Association Fee amounts, LCs will be given two weeks to review the amount being allocated. Feedback is to be provided to the Finance Subcommittee.
“Optimism is the faith that leads to achievement. Nothing can be done without hope and confidence”
-Helen Keller
AIESEC in United States(National Health)
The current Financial Model
The breakdown of what is included in the financial model.
1
National Affiliation Fee Model - What is the Risk
The current financial model does not promote consistent LC growth.
National Affiliation Fee Model - Why is this a risk?
We need a more sound model in AIESEC to prevent unfavorable growth trends.
We want to avoid losing future exchanges and AIESEC entities.
Comparing and suggested model
Comparing the different models and which we think is best!
2
National Financial Model - Topic
There are three potential models we considered for the financial model.
1. Affiliation Fee
2. Commission Model
3. Hybrid (Franchise Model)
The purpose of the model
The model should be fair and keep LCs accountable of the costs that are associated to be an AIESEC entity
Affiliation Fee
We compared the three models and ruled out affiliation fee due to LC feedback.
Without significantly increasing the affiliation fee model, increased LC performance would hurt the organization.
Commission Model
We determined that full commission would be impractical because it would go back to the past model.▪ This would lead to national and local
instability.
Franchise Model
Franchise model was determined to be the best fit for AIESEC due to the model being:
▪ Industry proven ▪ Best reflected local realities but covers
fixed costs at the same time
Decision Making Process
▪ Franchise model makes sense because LCs have expenses that are a result of LC needs. ▪ i.e. the more exchanges you have
the more you use fluidreview▪ If we stick to only association fees it
penalizes high performing LCs.
Decision Making Process
▪ The allocation model needs to better adjusts to short-term changes in LC revenue and exchange.
▪ But if we only use the franchise model then the organization has necessary costs that are fixed which users have to pay for.▪ i.e. Global Affiliation Fee, IPM, IC, (things
that are needed for AIESEC US to exist)
Association Fee Breakdown
The first part of the Franchise Model
3
Association Fee = $287,800
Association Fee Percentage
Category Contribution Percentage
Global Affiliation Fee 100%
Marketing 100%
Systems IT/Accounting 100%
Coaching/NTT 100%
Financial Upkeeping 100%
MCP 100%
IPM for MCP 100%
Association Fee Breakdown
Global Affiliation Fee - 100% LC Contribution▪ The overall affiliation fee is based off of how much exchange
the LCs complete. The benefit of exchange does not go to the MC, and thus the exchange numbers are solely the LCs. This warrants the GAF being paid for entirely by the LCs instead of the MC.
Association Fee Breakdown
Marketing (Website) - 100% LC Contribution▪ The website upkeep is mainly for local sales
Association Fee Breakdown
System IT/Accounting - 100% LC Contribution▪ The accounting and fluidreview systems audits and
automates LC operations, meaning the LC does not have to expend resources on doing these tasks.
Association Fee Breakdown
Coaching/NTT - 100% LC Contribution▪ If the NTT becomes a completely separate entity from the
MC, the LCs must be responsible for funding and supporting the NTT.
▪ What does this provide?
TtT, Coaching Visits, and Education and NTT management
Association Fee Breakdown
Financial Upkeep - 100% LC Contribution▪ This pays for the Finance Assistant’s salary, who directly
assists LCs with their financial processes.
Association Fee Breakdown
MCP - 100% LC Contribution▪ 100% of the MCP’s salary will be paid based on the
consideration of the JD of the MCP and the direct impact on LCs.
Association Fee Breakdown
IPM/IC for MCP - 100% LC Contribution▪ The International President’s Meeting and International
Congress must be attended by the MCP for AIESEC US to remain an entity and for LCs to exist. Thus, contributing to the MCP’s travel and delegate fees for both is necessary.
How is the association fee distributed?
How do we ensure fair percentage allocation of Association Fee?
4
Issue
- One year’s performance determine the percentage of the association fee. A sudden drop/rise in performance causes drastic percentage changes
- It is difficult to forecast the upcoming year’s association fee with drastic changes
Solution
We determined that the Association Fee needs to be allocated in a new method to keep it fair to all LCs and consistent throughout the year for
proper financial planning
And tables to compare data
Pros Cons
Student PopulationFactors in the easy access to the
student population and thus higher growth potential
Many other important variables such as demographics, multiple campus locations under one university, decision to include or disinclude nearby
universities, development of university study abroad
GDP per capitaFactors in local wealth of the community
which affects difficulty of executing exchanges
Outliers skew the data, a lot of research and labor used in order to keep every variable up to date
Revenue of last year Accurate read of LC reality and financial standing at a given time
Takes into account only recent data and allows the Association Fee to be volatile from year to year from excellent
and off years
Number of ExchangesAccurate read of of LC reality and contributions towards AIESEC’s
purpose
Takes into account only recent data and allows the Association Fee to be volatile from year to year from excellent
and off years
Here are some of the different factors and variables we discussed about including when determining Association Fee allocation
Solution
We decided to use average revenue & exchange over the past three years to
calculate percentage allocation
RoyaltiesThe second part of the Financial Model
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Royalty
▪With the new association fee, there is still a portion of budget in AIESEC U.S that needs to be covered ▪We calculated that the leftover portion can be covered with a royalty weighed around 25% to the MC given expected revenues of all LCs
Commission Suggestion
We did research on other franchises to gather new ideas and base a model after
Examples of other Franchises
Royalty
Supercuts 10-12%
Hilton Differs by Product
H & R Block 30%
Liberty 19%
Vanguard 10%
UPS 3.5%
External Uses of Franchise Model
Hilton Hotel:- Paid a fix amount- Different % commission based on
products
Supercuts:- Paid a fix amount- Different % commission based on the age
of the franchise (Newer franchises have higher percentage)
Commission Suggestion
From our research, we suggest that the commission should not be a flat 25%
across LCs and products
Why?
- As LCs grow larger they become more independent from the MC (IGs require more maintenance than Full Members)
- iGIP has more administrative costs on the MC than OGX
Commission Suggestion
Taking this into account, we propose two different models for royalties:
The Supercuts Model vs. The Hilton Model
The Supercuts Model
The Supercuts Model is based around a royalty that is correlated with the membership of a chapter and addresses the issue that expansions need more assistance from the MC
This is what we propose:
The Hilton Model
The Hilton Model is based around a royalty that is correlated with the administrative costs of OGX vs ICX
This is what we propose:
Commission Suggestion
At WNC 2015-16, if our Financial Model is legislated, we will also determine which
royalty model to legislate
$262,100 Weighed ~ 25% per
exchange
This is not the ORIGINAL BREAKDOWN yet! Think...EXPA STAGE 1!
https://docs.google.com/spreadsheets/d/16oPfRXj2VProJ3HoDF47JULkK3G8zYhxGwMNMj
cGECs/edit?usp=sharing
“The rich man plans for tomorrow, the poor man for today.”
-Chinese Proverb
AIESEC United States Inc(Organizational Health)
Travels1 What are the risks of the current form of allocating funds for travel?
Why are these risks necessary to fix now?
Why is travel spending high?
What is the current risk of travel from a financial perspective?
▪ The travel policy and system allows people to choose convenience over cost.
Why is it important to address this risk now?
▪ The current pool of funds and systems for travel cost and the policies associated with traveling causes members to choose the most convenient option over the most cost-effective option.
Topic: Why is spending on traveling high?
▪ There is no cap on the budget of travel for the MC.▪ Recommendation: Suggest that the MC create allocation for
their travel funding, and establish a method for transparency and restricting excessive spending within the team
To address this as a plenary
▪ Legislation (Insert 4.8): All members are responsible for booking flights through coordination with LC Account Responsible (Presidents and VP Finances) within 48 hours of travel being confirmed.
Conference2
Conference Reality
Every year,
▪ $250,000 expense▪ Conference experience losses ▪ 2nd largest expense of AIESEC US▪ Changing venues
Risks and Why Important
▪ Continue losing money
▪ Conflicts between the hotel and delegates
▪ Inconsistent AIESEC Experience
▪ High opportunity cost for member development
▪ Impaired Reputation to our brand
Our Recommendations
Legislations
The national conference venue must be finished registering at least 5 weeks in advance of the actual conference, changes to the venue will result in fines for the host and there will be no exceptions made for late delegate registrations besides facilitators if approved by the OC and a majority of the LCPs.
Our Recommendations
MandateTo maintain the stability and financial health of the conference system in AIESEC US, national conferences must have the same venue every year with a partner hotel. Changing of the venue must be made 6 months in advance and requires the approval of 3/4th of the LCPs and the unanimous approval of the MC.
Note: In many regions, AIESEC LC is NOT able to form partnerships with hotels due to poor standards for delegates behaviors.
Our Recommendations
MandateEstablish rules of behavior and attach fines towards violations of these rules.
RecommendationsTo have an additional damage fee with the delegate fee, which can be returned if the hotel doesn’t charge the conference.
National Support FundIt’s a huge fund, so how do we get everyone to use it?
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What is the topic?
The NSF is not fully utilized, should it be saved in assets or some other support fund?
What is the risk?
The risk is that money is not being properly utilized despite LCs all contributing to the fund.
Why is it a risk?
There are LCs that could be aided with funding their goals due to the existence of the NSF, however, they are not utilizing the funds
30,000$That’s how much money is in the NSF
~50%of the NSF is utilized each year
1,000s of potential beneficiaries
Recommendations
1. Legislation: The NSF application should be applied at least 6 weeks before the event/expenditure.
a. The MCVPF will review the application and decide on the eligibility of granting a hearing.
b. LCs that receive funds MUST have a meeting, with the MCVPF and Finance Subcommittee within 30 days of project completioni. Failure to schedule results in losing all grant
money.
Recommendations Cont.
2. We recommend that the National Support Fund should be won, not granted.
▪ Therefore we recommend to have NSF hearings for LC VPFs to address why they need the funds, and expected returns.
▪ The Finance Subcommittee decide how many funds are going to be allocated to each LC (events).
▫ Note: Won means that LCs must demonstrate that they deserve the funds. This means that the FSC reserves the right to deny requests if the FSC deems the project is not at the appropriate stage of development.
National Travel Funds
Is the National Travel Fund still serving its purpose?
4
National Travel Fund - Topic
Currently the NTF is not fulfilling its original purpose in providing equality in
travel costs and ultimately fostering higher conference attendance
National Travel Fund – What are the risks?
▫ The NTF allocation is not large enough relative to costs to create an impact
▫ Conference venue location are constantly changing, therefore clouding the fair allocation of funds
▫ The NTF does not take into account the net amount of delegates each chapter sends to National conferences
National Travel Fund – Why are they risks?
▫ Due to the small impact, the usage of labor and efforts in the implementation is not a favorable usage of resources
▫ Due to the dynamic location of conferences and NPR, the NTF doesn’t serve its original purpose of equating costs, i.e In a given year, if NPR is at Yale & Appalachian State, then West Coast LCPs are at a disadvantage still despite the NTF
▫ The NTF is distributed to LCs even when no members attend conferences/NPR which defeats the purpose of the NTF and is not financially sound
$2,600NTF Fund in 2015
$90 Average amount allocated to all LC’s in 2015 for all conferences/NPR
29 LCs Number of Full/General Members in AIESEC U.S
National Travel Fund - Legislation
▪Due to the ineffectiveness of the National Travel Fund, we legislate that we remove 4.7. National Travel Fund.
Travel Support Fund
As such, we recommend to implement a “Travel Support Fund (TSF)”
▫ The TSF is intended to first cater to making the affordability of a conference a reality, and to promote high member interest.
▫ The TSF will have a more favorable budget to make a more substantial impact and will factor in number of delegates from every LC in addition to the distance a LC is away from a given conference or NPR
Travel Support Fund
4.7. Travel Support Fund4.7.1. The Travel Support Fund (hereinafter referred to as
“TSF”) is intended to make travel and delegate costs equitable between LC’s in regard to the location of national conferences and NPR
4.7.2. Every LC with an MC managed account will contribute 4% of all revenue earned each year as defined by the Finance Subcommittee to the TSF. This fee will be deducted from every LC’s MC managed account in January
Travel Support Fund
4.7.3. The Finance Subcommittee will oversee the fund and divide the total allocation of the fund towards each LC
4.7.4. The fund will be distributed to each MC-managed LC account based on the distance from each LC’s location and number of delegates to each conference and NPR. The proportion and formula to be used will be set by the Finance Subcommittee to be reviewed at every NLM
4.7.5. Alumni and other outside donors can donate into this fund in order to assist in delegate conference and attendance
National Trainers Team
5How do we maximize the use of trainers in AIESEC US?
$7,000Trainer Funds every year
50 %Unutilized Funds every year
66Trainers available
What is the topic?
- Clarification of structure- Allocation of funds towards the NTT- Distribution of funds should it still be
available at the end of the year- Yearly capped NTT Funds
What are the risks?
- Misunderstanding in the extra funds available at the NTP at the end of the year
- Inefficiency in the allocation of funds
Recommendation
- We recommend that this upcoming year, the NTT is under the guidance of the MC and have it prepared to be the proposed team structure in 2017.
Recommendation (2017)
- The NTT shall consistof the Director of NTT, Finance Manager, Education Manager, Conference Manager, TtT Manager.
- The National Trainers Team will oversee the fund and decide the allocation of the funds towards the training of development programs
Legislation
- National Trainer funds are capped at $7,000 per year
- Unused funds will be carried over to the National following year
NTT StructureTtT Management
National Trainer Team Director
Conference Management
Education Management
Finance Management
Excess Funds Simulation
Beginning of the year (From NAF)
$1,000
End of the Year
$7,000 $7,000
Following Year
Only $6,000 will be allocated from NAF
Evaluation of Strategic Returns
What do we get out of our national activities?
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The Big Questions
▪ What benefits are the LCs receiving from the MCs activities
▪ Are the activities providing the benefits intended?
There is little insight into the effects of bringing in CEEDers, developing functions, etc.
What’s Missing? The LC P.O.V.If the MC does not know how the LCs are impacted, how can they determine if the projects are sound financial investments?
Our process is easy
MC report monthly to the LCs what projects
were undertaken with a short description of
what each project was intended for
LC(P)s report back what
effects they have seen from these projects
(if any)
The MC can now evaluate
the impact they have on the local level
The Result
▪ Evaluations into what works and what doesn’t provides insight into what should be done in the future
▪ LCs gains visibility into what the MC is doing with their contribution
Supplies7
How do we ensure maximum efficiency in the use of office supplies?
What is the topic?
Maximizing the use and reducing waste of supplies
What are the risks?
Unnecessary purchase and lack of tracking in office supplies
Why is it a risk?
Unsustainable use of Finances
Recommendation
- All office/conference supplies should be located in a designation area
- Create an inventory tracker which is updated monthly
Recommendation
- Purchase of office supplies would require approval from the Manager
- MCVP Finance should assess the effectiveness in the use of supplies on a quarterly basis
5 year Financial Sustainability Plan
Current Reality of AIESEC US
Current Operational Budget $2,000,000
Current Assets $1,000,000
What is the purpose of this plan?
Create a solid financial platform to ensure that we have the funds to take
on more future opportunities and prepare for setbacks
Sustainable Asset = 1.5x Operational Budget1. 5x$2,000,000 = $3,000,000
Yearly Goals
MC 1516 $129,000
MC 1617 $241,000
MC 1718 $353,000
MC 1819 $516,000
MC 1920 $756,000
MC 15-16 Quarterly goals
Q2 2015 - $40,000
Q3 2016 - $43,000
Q4 2016 - $47,000
What are our plans?
1
Current Products
SNC 2016
RoKS Spring 2016
WNC 1617
More Packaged Products!
Reinvestments (18%)
MC 1516 MC 1617 MC 1718 MC 1819 MC 1920Reinvestment $23,236.20 $43,363.80 $63,490.68 $92,958.30 $136,101.78
BD Managers Cost 0 0.5 1 1.5 2$40,000 20000 40000 60000 80000
Product Packages 10 10 10 15 25
$1800 18000 18000 18000 27000 45000
Total 18000 38000 58000 87000 125000
Reduction $5,236.20 $5,363.80 $5,490.68 $5,958.30 $11,101.78
More Details ...2
How will my LC benefit from this?
With more funds available, AIESEC US will be able to reinvest back the funds
back into the LCs. This could even possibly lower NAF.
What does 1.5 BD Manager mean?
This means that we will have a full time BD manager who will work for
half a year
Why are we trying to grow profit and plan to only sit on it?
Taking on new initiatives as a nation require more funds and we need to ensure we have that when we are
ready to innovate
Why do we currently need this?
As we increase our exchange every year, we receive less profit from GC
and therefore need another source of profit
What now?
We need to mandate the BD plan into the compendium to be evaluated
every year and ensure the financial success of our organization.
“You are not entitled to your opinion. You are entitled to your informed opinion. No one is entitled to be
ignorant.”
-Harlan Ellison
Finally...