U.S. Figure Skating Financial Accountability

by George Rossano

With the tomahawks already flying our way from commenting on U.S. Figure Skating Governance, we might as well drop the other shoe and address the other major issue in U.S. Figure Skating governance that get's my panties in a wad -- fiscal responsibility and accountability.

Two years ago at the 2010 Governing Council meeting, many delegates, myself included, strenuously urged the Association management to address the long term budget deficits that have plagued U.S. Figure Skating since the good days funded by the ABC contract ended.  We asked that a long term business plan be developed to balance the budget, and the Association management listened.  At the 2011 meeting they brought forward a plan that largely resolved this issue, though work still remains to be done.

To balance the budget, the Association now to relies on income produced by the U.S. Figure Skating Foundation.  This Foundation was funded by a portion of income during the years of the ABC contract.

Although management talks about principal and interest for the Foundation, that is not really how it works.

The Foundation is not money in the bank earning interest.  It is mostly investments in stocks, bonds and investment funds, with only a small portion in cash.  Its current value is about $70 million.  The value of the fund grows or declines from year to year depending on market conditions.  Historically the long term growth of the Foundation is pegged at an average of 5% per year by the Association.

It is from the the growth in value that the Association is currently drawing income to fund its operations. Currently that is about 3% of the growth.  This is a bit more than it should be to maintain the inflation adjusted value of the Foundation, and allow for small growth -- say 1% real growth per year.  To allow for 1% real growth, the Association should be pulling no more than about 2% out of the Foundations, when core inflation is running around 2%, as it has now for many years.  To reach that goal the Association needs to cut its expenses by about $700,000 per year, or generate additional annual income in that amount.

The desire to reduce the annual drain on the Foundation is what has motivated the effort to reduce expenses at the annual meeting.  There are some that would like the draw down from the Foundation to be reduced to zero, and have it only used in emergencies.  The Foundation, however, was created to be a regular source of income after the good times from the ABC contract ended.  But is has to be used prudently, by at least maintaining it's long term inflation adjusted value -- and better yet allowing for some small long term real growth.

There is no doubt there is waste in some Governing Council expenses, and we again assert there are substantial savings to be had without crippling the governance of the Association under Exhibit D.  The most egregious of these is the rulebook.  The annual cost of the rulebook is put at over $120,000 by the Association, and the breakdown of costs shows that only $15,000 is for staff costs. Over $100,000 a year is spent on the distribution of hard copies of an electronic document that anyone can print out.  I have not seen a hard copy of a rulebook in a rink in ages.  Pretty much every one I know uses the searchable PDF version of the rule book that they keep on their laptops, iPads, and the like.

When I first became a judge it was expected that you would purchase a copy of the rulebook every year.  Some clubs purchased them in bulk at a discount to give or sell to their officials and perhaps others.  During the flush times of the ABC contract, when the Association was rolling in money, the policy began to give the rulebooks away to more and more officials and others for free.  This was a nice gesture, but it's time for it to stop.  At the time the giveaways began, electronic distribution did not exist.  It does now, and we are no longer rolling in money.  Further there is no reason the membership fees of the many members who do not need a rulebook should subsidize the few people who want a hard copy to the tune of $100,000.  The cost of printing out a rulebook on your home computer is about $3.  Compared to what I paid for a rulebook each year when I started judging, that's a bargain.

Going back to 2010 now, a second fiscal issue raised by the delegates then was how do we track and evaluate whether we are getting value for the money we spend on projects and programs within the Association.  At the time, the athletes were coming to us hat in hand asking for $80,000 (if I recall correctly) for a new project they wanted instituted.  How, I asked at the time, were they going to define their goals and evaluate whether the money was being effectively used?  They did not have an answer.  But I can't fault them too much.  There is never an answer to that question for Association projects, and there is rarely a clear accounting given the delegates for many big-ticket expenses of the Association.

At the 2010 meeting, I related how project accountability works in the real world.

In the real world, you have to tell the grant agency, or your company, what you are going to do, say how you are going to do it, provide a schedule, and identify your success metrics.  When you are done you have to report what you actually accomplished measured against your success metrics.  If you do not meet your goals as measured against your success criteria, your chances of getting funding in the future are greatly reduced.  If you are have a multi-year project, annual reviews are required where project progress towards goals and adherence to the budget are evaluated.  In my world of science and engineering, these reviews are presented to funding agency project managers, and independent reviewers.  That last part is very important.  Success is evaluated by independent parties who have no dog in the hunt.

This is not the case in U.S. Figure Skating.  These reviews as outlined above to not take place, and while groups come to the delegates asking for money, they rarely come back and tell the delegates the outcome from how the money was spent.  For example, if a project is funded to increase membership, does anyone come back to the delegates and say, 'we spent this much money to increase membership in the following ways, and we got this many new member.'  No, that doesn't happen.

Currently fiscal accountability resides in the Board, which is also the body that picks and chooses what projects get funded in the first place.  Two observations on this.  First, this is asking the group that makes the funding decision to also admit it made a mistake if a project goes south, something human nature is loathe to do.  Second, because everybody has a dog in the hunt, my observation is that no one wants to gore anyone else's ox.  If I kill your pet project now, you might try to do that to mine later.  It's the U.S. Figure Skating version of pork barrel funding.

If U.S. Figure Skating is to reduce expenses by $700,000 per year, it will have to start cutting real programs, and not just eliminate waste.  Competition for project dollars is going to increase.  One person's essential is another person's luxury and another person's wasteful spending.  How will the Association decide what stays and what goes, what's effective and what's not?  Currently the Association does not have a quantifiable, rigorous method of doing that, and it needs to adopt one.

As examples we offer some big ticket examples of activities whose cost effectiveness is a mystery.

Rise.  There has been no detailed accounting provided to the delegates of how much was spent to produce and distribute the movie, where the funding came from, where it went to, and how much income it has produced.  Based on some top level budget information, some inside dope I acquired along the way, and some other comments from Association officials, it seems that about $1.5 million was spent to generate about $500,000 of income to the Memorial Fund.  I may have this wrong, because this estimate involves some guess works, and connecting of dots.  But the main point is the delegated deserve a detailed accounting.  It's our money.  We agreed to fund it and we deserve to know how it really turned out.

IceNetwork.  Ever since IceNetwork was created (for the purpose of producing income for the Association) I have asked in the budget meeting whether IceNetwork has produced a profit for the Association, and every year the answer has been no.  Is the Association funding IceNetwork at a loss?  Where does the money come from and where does it go?  A proper accounting has never been given the delegates.  What value does IceNetwork really bring to the Association?  Maybe it brings a justifiable value, maybe it doesn't.  We just don't know because it seems to be treated like a state secret.

New membership software.  In 2010 the Governing Council approved $1 million for new membership software to be funded out of Foundation money, which was to be a two year project.  At the time an attempt was made to defer this as not essential at a time of recession, and a significant budget deficit.  The delegates were told that this was absolutely essential and would be money well spent.  Well has it been?  How much has actually been spent?  What has been accomplished in the past two years?  What have we gotten for our money?  The fear in 2010 was that software projects almost always run over budget and beyond schedule. Maybe this project has provided great value, maybe not.  The important issue, is we (the delegates) have the right to the complete picture for this project as a matter of course, and not have to pull teeth to find out.  If it's not going well we need to be told why, and what is being done to fix it.  If it's going well we will give you an attaboy. Promise

Athlete development.  We spend a lot of money on athlete development at headquarters.  The Association has a $12 million dollar total annual budget.  This year we won one medal at Worlds.  By that success metric we are not getting much value for our money.  Maybe we are getting value from these programs.  Maybe not.  As far as I know there are no independent assessments or reviews that evaluate success or value of each athlete development program to the Association.  Where is the evaluation for these programs that say 'we spent this amount on athlete development and we won one medal at Worlds, and we got this other value from the projects.'  As far as I know it doesn't happen.

The point of the above is not that the above projects should not have taken place.  It's that once projects are approved by the delegates, they disappear into the mist, with no detailed accounting back to the delegates afterwards of what we got for our money.  If the Association is to grow, with more clubs, more members, more medals, we need to stop managing our programs like they are hobbies, and start managing them using rigorous accountable quantifiable methods that tell us how we are doing and point the direction to future growth.

And oh, athletes, what did you accomplish with that $80,000?  We'd like to know that too.

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Copyright 2012 by George S. Rossano