Foundation Treasurer Report
Captain Bruce E. Maxon, SC, USN (retired)
Navy Supply Corps Foundation
6 May, 2017
Agenda
Treasurer Role and Responsibilities
NSCF Financial Situation
The Big Picture over the last ten years
Investment Advisory Committee Results for 2016 & 2017 1st Qtr
Budget Review
2016 Results & 2017 Status
Financial Audits
Management Response to the 2016 Internal Audit
Schedule for 2017 Internal and External Audits
Chapter Financial Reports
What/So What/Now What
NSCF Treasurer Role &
Responsibilities
Reports to the Board of Directors; Executive Committee Member
Financial Operations: reports preparation to the Board
Corpus: oversees Foundation investment activities
Budget Planning: reviews requirements and submits annual budget
Budget Execution: coordinates with CSO on budget administration
Financial Policy: development and execution, including auditing
Committee Oversight:
• Investment Advisory (Dennis Collins, Chair)
• Finance and Budget (Kurt Williams, Chair)
• Audit (Mike McCleary, Chair)
Other responsibilities as directed by the Foundation Board or Chair
Investment Portfolio over 10 years
$5,824
$4,013
$4,840
$5,430 $5,216
$5,561
$6,093 $5,872
$5,452 $5,583
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
NSCF Investment Fund Ending Balance K$
Sources and Uses of Investment
Funds over last 10 Years
-$500
-$400
-$300
-$200
-$100
$0
$100
$200
$300
$400
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Deposits and Withdrawals K$
Deposits Scholarships Other Withdrawals
Return on NSCF Investments
over 10 years:
6.74%
-28.17%
25.09%
9.72%
-3.08%
13.98% 16.51%
3.24%
-2.24%
8.14%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
ROR over last five years has been 7.71%
IAC Members
Bruce Maxon, MS, CLU (Treasurer, NSCF)
Dennis Collins, MBA, CFP, CIMA, CPWA (Chairman)
Chuck Parker, MBA, PhD (Past Treasurer)
Mike Kalas, MBA, CFP (Past Chairman)
Dan Pionk, MBA, MA (Incoming Chairman)
Craig Doyle, MBA, MA
Pete Eltringham, MBA, MS
Jack Evans (Chief Staff Officer)
John Drerup, MBA, MS
Joe Dunn, MSc, MS
Eric Schuck, MA, PhD
Matt Webster, MBA
Bill Withrow, MBA
Dennis Collins, CFP®, CIMA®, CPWA®
• BS - DePaul University; MBA- University of Denver
• Partner, Chapel & Collins Wealth Management
• Registered Principal, Raymond James Financial Services, Inc.
• 19 years of financial industry experience advising families, foundations and corporate clients
• Commander, Supply Corps, US Navy Reserve
Meet the IAC
Guide to Designations CFP® Certified Financial Planner™ AIF® Accredited Investment Fiduciary CIMA® Certified Investment Management Analyst CLU Certified Life Underwriter CPWA® Certified Private Wealth Advisor
Michael R. Kalas, CFP®, AIF®
• BS – USNA, Annapolis, MD; MBA – Southern Illinois University, Edwardsville, IL
• Owner/President, Potomac Financial Private Client Group, LLC, McLean, VA
• Registered Principal, Commonwealth Financial Network, LLC
• 18 years of financial industry experience advising families, foundations and corporate clients
• Captain (Retired), Supply Corps, US Navy
Peter S. Eltringham • BS – University of South Carolina; MBA- Bryant
University; MS – National Defense University (ICAF)
• Principal, At Turning Point LLC-1 year; Not So Silent Partner,
Nice Legs LLC Wine Distributors; Chair, Fauquier County,
Virginia Transportation – 4 years; Former Vice President, Telos
Corporation - 9 years
• 29 years of USN service - 12 in major command and headquarters staff financial/budget positions
• Captain (Retired), Supply Corps, US Navy
Daniel Pionk
• BS – Ferris State University; MA – U.S. Army War College;
MBA – Regis Jesuit University
• Self-Employed Commodities and Futures Trader
• 25 years risk management and executive management consulting to Manufacturing and Consumer Product corporations
• Captain, Supply Corps, US Navy Reserve
Charles W. Parker, III
• BA – Yale; MBA- University of Chicago; PhD – London
School of Economics
• Senior Consultant, Control Risks, Mexico City, Mexico
• Prior experience as Adjunct Professor of economics, business and international relations and as Client Executive at IBM
• Captain, Supply Corps, US Navy Reserve
John W. Drerup, Jr.
• BS – U. S. Naval Academy, MS- University of Florida; MS-Personal Financial Planning, The College for Financial Planning
• Investment Management, The Burney Company, since 2004
• Captain (Retired), Supply Corps, US Navy
Meet the IAC
Bruce Maxon
• BA – USNA, Annapolis, MS – Naval Post Graduate School, CLU – American College
• Treasurer, Navy Supply Corps Foundation
• Interim Dean, Mesa College, School of Business and Computer Science
• CFO of two non-profit corporations
• Captain, Supply Corps, USN (ret)
Joe Dunn
• BA – University of Denver; MS Finance – London Business School; MS – Naval Post Graduate School; Senior Executive Program – Columbia University
• Director, Vendor Governance, Prudential Financial
• Chartered Financial Analyst Candidate
• Captain (Retired), Supply Corps, US Navy
Matt Webster
• BS – Williams College; MBA – Tuck School of Business at Dartmouth
• Senior Investment Analyst, University of California Investment Office
• 10 year of investment experience across private markets including debt and equity
• Lieutenant, Supply Corps, US Navy Reserve
Eric Schuck
• BA – Pacific Lutheran University; MA – University of Montana; PhD – Washington State University
• Professor of Economics at Linfield College
• 18 years experience as a professor. Author of 17 journal articles and two-time Fulbright Specialist grant recipient . Expertise in agricultural and natural resource economics.
• Lieutenant Commander, Supply Corps, US Navy Reserve
Bill Withrow
• BS – University of Colorado; MBA – Harvard University
• Executive Chairman, President and CEO of Pear Track Security Systems, Inc
• Former Mayor and Councilmember, Alameda, CA
• 20+ years experience in financial industry, retiring from Wells Fargo and Company. Chairman of the Robert Lippert Foundation and current Trustee of Peralta Colleges.
• Captain (Retired), Supply Corps, US Navy
Craig P. Doyle
• BA – Arizona State University; MBA – Wharton, University of Pennsylvania; MA - U.S. Army War College
• President, Sequence Media Group
• 32 years of financial industry experience in commercial banking, and consulting to financial institutions on strategy, operations and credit risk management
• Captain, Supply Corps, US Navy Reserve
Guide to Designations CFP® Certified Financial Planner™ AIF® Accredited Investment Fiduciary CIMA® Certified Investment Management Analyst CLU Certified Life Underwriter CPWA® Certified Private Wealth Advisor
IAC Process & Methodology
Monthly Meetings
Strict investment discipline
Guided by NSCF Investment Policy Statement (IPS)
Continually improve metrics to gauge performance and allocation
Periodic evaluation of strategy vis a vis other foundations/institutions
Portfolio Performance vs the IPS Benchmark
Data as of 3/31/2017
*Benchmark Not Assigned During Three Year, Five Year and Since Inception time periods; Bechmark is composed of 5% Citigroup US treasury Bill 3 Month USD, 25% Barclays
Aggregate Bond Index and 70% MSCI ACWI (All Country World Index). Investment Policy Statement signed 9/25/2015
Last Month Year to Date One Year Three Years Five YearsSince Inception
(1/1/09)
Portfolio 0.97 5.00 13.60 4.14 6.81 8.86
IPS Benchmark 0.85 5.02 10.50 4.35 6.56 9.01
0
2
4
6
8
10
12
14
16
Ret
urn
Portfolio Performance vs. Benchmark
Portfolio vs Target Allocation
Cash & Cash Alternatives 336,892$ 5.7% 295,868$ 5.0% (41,024)$ 0.7%
Fixed Income 1,316,528$ 22.2% 1,479,342$ 25.0% 162,814$ -2.8%
Large Cap US Equity 1,770,539$ 29.9% 1,656,863$ 28.0% (113,676)$ 1.9%
Mid/Sm Cap US Equity 1,062,752$ 18.0% 946,779$ 16.0% (115,973)$ 2.0%
Non-US Equity 1,168,474$ 19.7% 1,242,647$ 21.0% 74,173$ -1.3%
Alternatives 262,182$ 4.4% 295,868$ 5.0% 33,686$ -0.6%
TOTAL 5,917,369$ 100% 5,917,369$ 100%
+/- 5%
+/- 3%
+/- 5%
+/- 5%
Current Target Variance Permitted Var.
+/- 3%
+/- 5%
7%
21%
30%
18%
19%
5%
Current Portfolio Allocation
Cash & Cash Alternatives
Fixed Income
Large Cap US Equity
Mid/Sm Cap US Equity
Non-US Equity
Alternatives
5%
25%
28%
16%
21%
5%
IPS Target Allocation
Portfolio Change In Value
Actions Taken Since Last Board Meeting
Monthly Conference calls/web conferences
Rebalanced portfolio to be aligned with investment policy statement Asset
Allocation Model
Cash Flows
Approximately $156,000 contributed to portfolio by stock donations and
cash since the last Board Meeting in November 2016. This includes
$3,950 in Dec 2016 and $152,068 in the first quarter 2017.
Our CSO, Jack Evans has alerted the IAC that he will need $280,000 in
July for Scholarships.
Discussion
Action Item for Fall 2017 Board Meeting
- Review, research, validate the Investment Policy Statement
- Review the benchmark components, asset class target weightings
- Assess active funds management vs. passive funds management
allocations strategies
- Recommend appropriate targets for active vs. passive funds
management allocations
- Brief results of the research and propose revisions to the Investment
Policy Statement
Budget: How did we do in 2016
2015 Budget 2016 Budget 31 Dec 2016 YTD
INCOME
CONTRIBUTIONS
Individuals Donations 260,000.00 225,000.00 272,993.49
Other Contributions 130,000.00 87,500.00 85,585.76
390,000.00 312,500.00 358,579.25
CORPUS INCOME 300,000.00 343,200.00 257,885.00
REGALIA SALES Income From Regalia Sales 900.00 0.00 681.10
TOTAL INCOME 690,900.00 658,700.00 617,145.35
EXPENSES
PROGRAM EXPENSES
Scholarship Program 300,000.00 284,000.00 266,356.78
Recognition Program 20,000.00 15,000.00 6,597.79
Communications Program 120,000.00 99,000.00 64,575.41
Chapter Development 25,000.00 35,000.00 28,459.93
Heritage Legacy 22,000.00 22,000.00 21,000.80
Transition Committee
2016 River Cruise Momentos 1,458.00
Humanitarian Aid 2,500.00 2,500.00 0.00
FAST 3,500.00 0.00
TOTAL PROGRAM EXPENSES 489,500.00 478,000.00 388,448.71
Development Committee
OPERATING EXPENSES 195,750.00 230,700.00 228,696.65
TOTAL EXPENSES 685,250.00 708,700.00 617,145.36
NET INCOME 5,650.00$ (50,000.00)$ (0.01)$
2017 Budget and YTD 31 Dec 2016 YTD 2017 Budget
31 March 2017
YTD
INCOME
CONTRIBUTIONS
Individual donations 272,993.49 250,000.00 120,924.40
Other Contributions 85,585.76 155,000.00 3,235.50
CORPUS TRANSFER 257,885.00 479,000.00 2,500.00
REGALIA SALES Income From Regalia Sales 681.10 1,200.00 10.19
TOTAL INCOME 617,145.35 885,200.00 126,670.09
EXPENSES
PROGRAM EXPENSES
Scholarship Program 266,356.78 291,000.00 280.25
Recognition Program 6,597.79 15,000.00 260.36
Communications Program 64,575.41 144,000.00 15,657.10
Chapter Development 28,459.93 40,000.00 3,737.50
Heritage Legacy 11,848.80 71,000.00 929.88
Transition Committee 5,000.00 0.00
2016 River Cruise Momentos 1,458.00 0.00 0.00
Humanitarian Aid 0.00 2,500.00 1,500.00
FAST 0.00 3,500.00 0.00
TOTAL PROGRAM EXPENSES 379,296.71 572,000.00 22,365.09
Development Committee 80,600.00 8,503.48
TOTAL OPERATING EXPENSE 228,696.65 231,879.95 60,359.50
TOTAL EXPENSES 607,993.36 884,479.95 91,228.07
NET INCOME 9,151.99$ 720.05$ 35,442.02$
2017 Capital Investment Projects
History Book 31 March 2017 YTD
Beginning Inventory Value 240,734.54
Shipping Expenses 0.00
Storage 929.88
Total 241,664.42
Sales 250.00
Donated Books 9,250.00
Books Consigned to Chapters 0.00
Total 9,500.00
Ending Value 232,164.42
Results of the Internal Audit by
Jim Shultz, CPA, CIA
• August 2016 Audit Rating: Satisfactory
• Prior Audit Rating: Satisfactory
• Conclusions: – Internal Control over finance & accounting is
satisfactory.
– 6 Recommendations to improve internal controls, operating policies and procedures.
– 9 best practices recommendations offered to strengthen controls, documentation, processes or procedures.
• For 2017 – Internal review will be performed in summer 2017.
Management Response to
Recommendations
1. Obtain appropriate insurance coverage to protect Foundation assets. Application for $1
million submitted to Hartford. Cost $1,200.
2. Amend Financial Ops Policy to required annual review of insurance needs. Add the following
paragraph to the Financial Operations Policy Statement IV.2)I as it covers the subjects
covered in the Annual Internal Audit. “Insurance. 1. Assess Foundation Insurance needs and
comment on the scope and adequacy of insurance coverage at the Annual Fall Meeting.”
3. Develop plans to recruit reservists and retirees to replace outgoing active duty personnel on
Chapter Boards. In updated Chapter Ops Manual.
4. Develop and Identify venues to improve recruitment. Oakleaf, web site and other on line
venues now used for this purpose.
5. Publish guidance to dispel fears of involvement in Chapter events. In new Chapter Ops
Manual as Ethics Guidance.
6. Consider using a company instead of a single person to provide web services. Using SC
spouses to provide website services has been determined to be a better option and is now in
effect.
Management Response to Best
Practice Recommendations.
1. Review & Update Strategic Plan. Done
2. Address Fund Raising Concerns. Done
3. Establish IAC Investment Goals. Equal or better than the IAC Benchmarks as a goal.
4. Discontinue classifying Corpus transfers as revenue. Done
5. Establish a requirement for annual policy review. As a precursor to the Annual Review, the
Executive Board will review for adequacy the Financial Operations Policy Statement and the
Investment Policy Statement and comment on their sufficiency at the Annual Board Meeting.
Add this requirement to each of these policies.
6. Establish guidance for Chapter donations to NSCF and other charities so that all donations
aligned to NSCF mission. Done
7. Amend Financial Ops Policies and guidance to address CSO staff credit card management.
Include a statement to the Financial Operations Policy Statement by the Annual Board
Meeting.
8. Develop CSO Continuity policies and prospective individuals. In process.
9. Document Board decisions cited in audit report. Done
Results of the External Audit by Patat and
Turner, P.C.
• The NSCF Financial Statements for the period ending
on 12/31/15 and 2014 and the related statements of
activities and cash flows for 2015 present fairly, in all
material respects, the financial position of the Navy
Supply Corps Foundation for the relevant period and
the changes in its net assets and its cash flows for the
period ending 12/31/15 are in accordance with
accounting principles generally accepted in the
United States of America.
• External Audit for period ending 12/31/16 will occur in
Fall of 2017.
Chapter Financial Report Status
& rationale for report submission
• All but 6 of our 36 chapters have submitted their 2016 Financial Reports.
• By reviewing these reports NSCF is complying with their fiduciary responsibilities to
avoid the risk of losing our 501(c)3 tax exempt status.
• 501(c)3 IRS tax code allows tax exempt status to non-profits organizations complying
with certain provisions:
– May not participate in any political or lobbying activity.
– Activities, donations and income must be focused on the purpose of the
Foundation as originally reported to the IRS.
– May not sell property of the organization to a board member for less than the fair
market value, nor may a member receive free services from the nonprofit that
others pay for.
– May not have substantial, unrelated business income.
– When holding a charitable event, must ensure attendees know what portion of
price of attendance is tax exempt.
2016 Chapter Financial Snapshot pg 1 of 2
# Chapter As of Date 12/31/16 Total Equity Revenue Expenses
Net Income
Donations to NSCF
Donations to Others
Chapter Size
1 Bay Area 12/31/2016 $1,475 $0 $60 -$60 $0 $0 111
2 Boston 12/31/2016 $1,206 $2,844 $2,821 $23 $0 $600 48
3 Colorado Rockies
4 Detroit
5 Djibouti
6 Great Lakes 12/31/2016 $0 $0 $0 $0 $2,450 $0 20
7 Great Salt Lakes 12/31/2016 $4,216 $8,491 $4,275 $4,216 $0 $0 ?
8 Groton New London 12/31/2016 $0 $0 $0 $0 $0 $0 35
9 Gulf Coast 12/31/2016 $0 $0 $0 $0 $0 $0 2
10 Hampton Roads 12/31/2016 $6,673 $42,193 $53,886 -$11,692 $0 $200 226
11 Hawaii 12/31/2016 $9,553 $17,106 $19,318 -$2,211 $5,000 $0 161
12 Iberian Peninsula
13 Indiana Crossroads 12/31/2016 $831 $0 $0 $0 $0 $0 11
14 Italy
15 Kansas 12/31/2016 $0 $0 $0 $0 $0 $0 7
16 Korea 12/31/2016 $0 $0 $0 $0 $0 $0 10
17 Jacksonville 12/31/2016 $436 $0 $0 $0 $0 $0 132
18 Japan 12/31/2016 $9,854 $24,148 $22,303 $1,845 $0 $0 98
19 Mechanicsburg 12/31/2016 $2,981 $25,775 $26,251 -$477 $8,000 $5,250 165
2016 Chapter Financial Snapshot pg 2 of 2
# Chapter As of Date
12/31/16 Total Equity Revenue Expenses
Net Income
Donations to NSCF
Donations to Others
Chapter Size
20 Memphis 12/31/2016 $1,155 $0 $0 $0 $0 $0 ?
21 Monterey 12/31/2016 $4,169 $12,613 -$13,662 -$477 $0 $0 ?
22 Newport 12/31/2016 $22 $14,600 $14,729 -$129 $0 $0 120
23 North East Georgia 12/31/2016 $0 $0 $0 $0 $0 $0 38
24 Northwest 12/31/2016 $976 $0 $0 $0 $0 $0 141
25 Ohio 12/31/2016 $299 $280 $0 $280 $0 $0 16
26 Patuxent River 12/31/2016 $1,466 $18,155 $21,014 -$2,858 $2,595 $5,000 65
27 Philadelphia 12/31/2016 $20,994 $61,651 $62,976 -$1,325 $0 $1,000 60
28 San Diego 12/31/2016 $13,162 $31,660 $44,688 -$13,029 $15,000 $0 690
29 Sasebo 12/31/2016 $0 $0 $0 $0 $0 $0 15
30 Sigonella 12/31/2016 $2,002 $5,298 $4,725 $573 $0 $0 14
31 St Louis 12/31/2016 $897 $1,640 $2,166 -$526 $0 $0 24
32 Southwest Asia
33 Tampa Bay 12/31/2016 $1,086 $1,294 $220 $1,074 $0 $0 36
34 Twin Cities 12/31/2016 $0 $0 $0 $0 $0 $0 25
35 Ventura County 12/31/2016 $485 $1,980 $1,855 $125 $0 $0 25
36 Washington DC 12/31/2016 $16,532 $93,617 $72,297 $21,320 $6,500 $0 250
Totals $100,474 $363,345 $339,921 -$3,328 $37,095 $14,500 2,545
What/So What/Now What • What?
– Deposits to the Investment portfolio have decreased and withdrawals have increased in
2016, but are meeting 2017 projections in 2017.
– IAC has followed Board approved investment target objectives.
– IAC investment performance has met the needs of the Foundation in the past.
– 2016 Budget Income was lower and expenses were higher than projections.
– 2017 Budget is aligned with the Strategic Plan.
– Internal Audit Reports report are satisfactory and management is responding to Internal
Report recommendations.
– Chapter Financial Reports have been received from 30 of 36 chapters with some
questionable donations to non-NSCF charities.
• So What? – We need to continue to receive income to ensure we can meet Strategic Planning Budget
targets or adjust expenditures as the year progresses.
– Our financial records are being properly maintained.
– Chapter Reports need to be reviewed to ensure we maintain our 501(c)3 tax exempt status.
• Now What? – Encourage all NSCF members to participate in the ongoing fund raising appeal.
– Each Committee Chairman is to carry out their 2017 budget and Strategic Plan.
– Follow-thru on Audit recommendations.
– Encourage Chapters to submit Financial Reports per the guidance.
Back-Up Slides
• Investment Portfolio Holdings
Portfolio Holdings
-
VANGUARD S&P 500 ETF - - $167,671
-
$246,278
-
-
-
-
VANGUARD INTERMEDIATE TERM INVESTMENT GRADE FUND INV
PIMCO INCOME D - $141,716
-
- -
-
-
-
-
- -
AlternativesM id/S m Cap US
E quity
-
-
-
-
- -
-
$278,693
-
-
Asset DescriptionCash & Cash
AlternativesFixed Income
Large Cap US
E quityNon-US E quity
- -
T. ROWE PRICE SPECTRUM INCOME FUND - $168,713 - -
LOOMIS SAYLES BOND FUND R - $194,268
--
-
-
$114,048
-
-
-
$77,314
PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND - -
-
-
-
-
-
-
PIMCO COMMODITY REAL RETURN STRAT INSTL - - -
LITMAN GREGORY MASTERS INTERNATIONAL FUND
-$307,575-
-
- $666,536
-VANGUARD FTSE ALL-WORLD EX-US ETF
-
-VANGUARD SELECTED VALUE FUND - -
- $372,316
ISHARES S&P 500 GROWTH -
--
$336,892 - - - --
- - - - -
- - - - $184,868-
CASH
$221,880
GLENMEDE SMALL CAP EQTY -
$204,537VANGUARD SMALL CAP ETF
VANGUARD REIT
-
VANGUARD WINDSOR II FUND INV
$187,371
-
$364,999
-
-
-
-
DODGE & COX INTERNATIONAL STOCK -
-
$305,845
-
-
-
-
-
-
-
- -
VANGUARD SHORT TERM INVESTMENT GRADE FUND INV - $332,254
AMERICAN CENTURY INTERNATIONAL GROWTH - -
$202,130 -
WESTERN ASSET TOAL RETURN UNCONSTRAINED - $277,447 - -
- -
$564,016
HARBOR INTERNATIONAL FUND INSTL -
- -
DODGE & COX STOCK FUND -