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

5

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?

3

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?

6

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...