Writing Boots reader: I obtained the 2013 IABC Audit Report about a month ago—well ahead of next Tuesday's Annual General Meeting at the World Conference in Toronto, where the results of the report will be shared with members who choose to attend.
I forwarded the report to a couple of trusted sources familiar with IABC's finances. They pegged the numbers on a scale from "grim" to "shocking."
I asked one source whose reaction I knew everyone associated with IABC would trust—Julie Freeman, who took the association over in the immediate wake of its last financial crisis, in 2001 and ran it with the steadiest fiscal hand until her retirement in 2011—for her analysis.
Knowing Julie from having reported on IABC over the period of her presidency, I was sure her guest post would place the most relevant facts in proper context, refrain from unwarranted conclusions, and present clear questions that any responsible IABC leader would ask to get facts that any informed IABC member would need to know.
I hope IABC leaders and members use this piece over the next week to come to a collective understanding of the association's financial health. —DM
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For IABC members, time to ask questions
When IABC members travel to World Conference or open up the latest edition of Communication World, it is usually not because they are eager to review the annual audit report.
But even if members are not enthused about financial reports, they have found value in IABC’s conferences, content and community of friends and fellow professionals. Without a sound financial base, however, IABC cannot continue to provide its members with the resources they need to do their jobs and advance their careers.
I recently reviewed the 2013 Audit Report—formally titled The Consolidated Financial Statements and Independent Auditors Report for the Years Ending December 31, 2013 and 2012. I see some troubling trends that threaten our association. I know from experience working with past International Executive Boards (IEB) and staff that restoring an organization to financial health requires discipline, sound planning and sacrifice. And it is a multi-year process. I would hope that the association does not have to travel that path again.
I urge IABC members attending the AGM or reviewing the audit report to ask some hard questions and demand some clear, truthful answers from the IEB. Members have a right to know.
Some headlines:
• IABC finished 2013 with a net loss of $529,073. This follows a net loss in 2012 of $122,168.
• 2013 revenue was $692,486 less than in 2012. Deferred revenue—funds collected in 2013 for future obligations--was $128,889 less than in 2012.
• Most significant is a decrease of $245,036 in dues cash intake, indicating a substantial loss of membership.
• IABC financed its expenditures by selling investments assets, using $100,000 of IABC’s Line of Credit and incurring a loan of $350,000 to fund a new website.
Questions that need to be asked:
1. Where did revenues fall short of budget and why?
2. What were IABC’s major expenditures in 2013? How did these expenses serve members?
3. General and administrative expenses increased 56% in 2013. What was the reason for this huge increase in expenses in this area?
4. Board expenses increased 25%. Faced with declining revenues, how can the Board justify this increase?
5. At the end of 2013, IABC’s cash and cash equivalents were $42,172, a decline of $495,117 from 2012. Does IABC have sufficient cash to make its debt payments and pay ordinary operating expenses in 2014? How will it do so?
6. The Consolidated Statements of Financial Position (the Balance Sheet) includes Intangible Assets of $552,067. What does that include? How was that determination made?
7. Several years ago the IEB approved establishment of an operating reserve and a special project reserve. How much should be in each of those funds? How much is currently there?
8. What is the contract dispute related to the website development? How can members be assured that new web developer will not have the same issues? When can members expect a new website?
9. What impact will the association’s current financial position have on its ability to recruit a qualified Executive Director? What is the status of that search?
10. What is the current IABC membership? How does that compare to prior years?
11. What is IABC’s current financial situation? What is the IEB doing to ensure that IABC will finish 2014 with a positive net? And will it keep members updated about finances before June 2015?
Professional communicators know the value of transparent, candid communications and have for many years advocated that leaders in their organizations and in their clients’ organizations communicate frequently and openly to their stakeholders. IABC leaders should adopt the same practices in communicating with IABC members.
Julie Freeman, ABC, APR
IABC President 2001-2011
It should be an interesting AGM this year. I'll be there. Thanks, Julie, for putting this together, and thanks David, for posting it.
IABC has a history of going through these kinds of financial issues, but getting through them requires -- in addition to what Julie listed -- transparency. I'm looking forward to hearing candor from the association's leaders when these questions arise at the AGM.
Posted by: Shel Holtz | June 05, 2014 at 09:25 AM
That’s an interesting and insightful post from Julie.
Our financials were posted, as usual, in April and we have been responding promptly to member questions as they have come in.
We are going to cover all this off in full at the AGM for members, and still will of course, but since this has been raised here’s the low down:
The bottom line is that our half-million-dollar-plus deficit posted for 2013 recognises two significant investments : in back office infrastructure, and in creating member value for the next few years.
The most expensive issues the Association has dealt with in recent history comprise:
• Data infrastructure: in ten years from 2001 to 2011 there was very little investment in data infrastructure on either the hardware or software sides. Thus the need to replace came together and, in the case of the hardware catching fire, quite suddenly. This has been an £$$$k investment, but of course critical to our operation.
• IABC is modernising its website – this costs. It’s not been helped by the fact that the vendor originally selected for the job has not delivered to IABC’s satisfaction, so this has prolonged the time and the costs.
Of all associations, IABC is expected to have a proper website, so needs to invest properly. The new website, and all its back end, will go live shortly.
• We also found that the website, which was launched in the period 2001 – 2011, had a number of one-off programs, written for just one thing – this has been disproportionately expensive to replace but we now have with a much simpler approach going forward.
Some of these approaches to data handling are still being uncovered – and not just on the website.
We are committed instead to quality, and standardised software that integrates with other programs and can be upgraded appropriately and cost effectively.
• Board expenses are up because of a decision taken a couple of years ago that Board members should not be disproportionately out of pocket as a result of service to the Association. The Board is now competency-based rather than filled by those who can simply afford to serve from their own pocket.
Our Association is proudly international, as are our Board, and increasing costs of travel and accommodation has resulted in increased expenses although of course, we maximise use of virtual meeting techniques where sensible to do so.
• Severance agreements for staff who were let go. The staff changes were costly, but they were one-time expenses and were necessary in the case where many staff no longer fitted the changed skills requirement of the Association.
Many staff had been at IABC for over a decade, so severance was higher than normal, and while it was a bold move by the former ED, Chris Sorek, to effect such changes all together, and caused some concerns among our members at the time, the incoming staff are creative, innovative and have already set about challenging old and inefficient ways of doing things which are no longer delivering the value needed for IABC and its members – both professionally and in cash terms. It is extremely unlikely IABC will go through staff changes of this extent in the near future.
• IABC has continually lost money on our former Accreditation programme (ABC), going back for several years. In five years, this posted a loss of $270,000 with the greatest losses in the latter years.
The losses were due to a relatively small number of applications versus a significant staff time and expense of processing applicants; coordinating evaluators; the expense of hosting evaluator circles to evaluate applications en masse; and to try to get everyone through the pipeline expeditiously.
This was one reason driving our closure of the ABC programme but it is being superseded by the Global Certification Program which is more relevant for today’s professional environment, more portable (you don’t have to be an IABC member to enrol and keep it) and, we intend, should be to globally-accredited ISO standards. Moreover, the business model delivers both significant value to the profession and revenue to the Association
• The single greatest ongoing expense for IABC is remains the office lease, which is currently at a whopping $430,000 pa. This was signed in the last decade and locks us in till 2016. But we are urgently looking for ways out of this – and ahead of 2016 if we can.
We are also actively examining, including with staff, how we expect our Headquarters to operate in today’s modern working environment - which is more virtual and less reliant on expensive office space, including in very expensive San Francisco.
A real estate professional has been looking (at no cost to us) at whether we could sublet part of the space, a fair amount of which is unused, and whether we could get smaller space in the same building to bring down the cost.
So far, those efforts have not paid off but we continue to persevere.
The bottom line is that we want our staff to have a safe, productive working environment and don't need to spend $430,000 per year to provide it!
IABC has had the resources (as investments and reserves) to address these challenges. The money will be replaced as the investment in our website, our programmes and our staff are realised.
We are also looking hard at our general business model - of receiving revenue from conferences and membership dues which then cross subsidises the value given back to members through programmes and professional development etc.
Associations around the world recognise that this type of model is becoming increasingly ineffective on financial grounds.
This reflects fewer general loyalties of younger generations, leading to less desire to be ‘a member’ of associations as such and, following the Global Financial Crisis, a reassignment of what is ‘value’ in delivering the costs of professional programmes etc.
IABC’s International Executive Board is focused on creating alternate business models as part of our 2014 - 2017 Strategy (which has been open to member consultation during the last year) and our new Executive Director, when onboarded, will also be required to focus on short-term revenue generation as a primary objective, to help us make up the difference on lower income from membership dues and conference income.
Finally, the one thing we continue to need to get better at is, ironically, communication.
Our member communication is now much better than it was – and thanks to our hard working staff for that. The journey continues however – there is way more to go - and I personally am committed to further and rapid improvement.
Posted by: Russell Grossman | June 06, 2014 at 05:01 PM
Russell, thanks for your response here, which allows communicators inside and outside the association to glimpse the state of the association and its prospects for the future as you, the incoming chairman, see it.
Also yesterday, IABC announced a new executive director, to be formally introduced at the conference this week. As wise members have been calling for, Carlos Fulcher has an association management background (at the Drug Information Association, and the American Society of Plastic Surgeons).
http://news.iabc.com/pdf/IABC_Exec_Director_FINAL_6_June.pdf
This is no doubt a dangerous moment for the association, which by your own admission has financial, logistical and even existential problems. After all, a membership organization that believes it is living in a world of non-joiners must question its own legitimacy.
I don't really think it's as bad as all that. I think communicators will always need a professional community with more gravitas and social richness than a LinkedIn Group ... and I think people will always need to belong to something: for the sense of security, order and meaning that it provides.
It's not membership that people object to, it's membership in IABC. You need to remake IABC into a club they can be proud of, rather than an outfit that's struggling to identify and retain strong leadership, failing to offer relevant programming, bumbling operationally and chronically and lamely claiming its problem is "communication."
That's gonna take more than plastic surgery. It might even require some drug information. It will definitely take some bold and no doubt controversial leadership from you and Carlos Fulcher.
Do you think you can pull it off?
We'll be watching. And wishing you the very best.
Posted by: David Murray | June 07, 2014 at 07:32 AM