Dave Brown - A little AMA History
01-20-2003, 05:15 AM
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Dave Brown - A little AMA History
This weekend was the AMA Convention in Pasadena, CA. As usual, I had the opportunity to talk to a number of AMA officials including Dave Brown. The following is an e-mail exchange that he and I had last October, for another forum, during the last election.It is a little dated and off topic because of the initial topic, but, seems to cover a lot of what is being discussed here recently. He agreed today to allow it to be posted here.
Because the word count is too high, I will split it into two posts.
JR
October 6, 2002
Dave,
Several items have come up in discussions about the current EVP election. I
hope you can help me with some accurate information. Please do NOT consider
anything in the correspondence confidential, as it may be used in
discussion, with you as it's source.
1) Do you have any knowledge of a change in the responsibilities of the EVP?
If so, who made them and by what mechanism? Please note the difference in
the responsibilities outlined in the by-laws and the description used by Mr.
Holland in his campaign statement.
2) Does Mr. Holland hold sole responsibility for the investments the AMA
makes in the stock market? Is there any oversight or other mechanism to
control his decisions in this regard?
3)A number of references have been made to the AMA having investments in the
stock market. Can you tell me how much was made or lost on those investments
in 2001? Can you tell me how much has been made or lost, year to date, in
2002?
2)In the EC minutes of the February 9, 2002 meeting the following statement
appears:
"The EVP explained the concept of deficit financing. The Academy has been
deficit financing for 3 years but it has not experienced a deficit financing
year due to increased membership, interest in the American market, and not
spending what was budgeted. He reported that AMA should not continue to
operate that way because it does not have the earnings in the market, and
has increased expenses. (Insurance, postage, cost of living)"
Dave, can you tell me the amount of those deficits for the 3 years
mentioned, before the adjustments were made?
As always, thanking you in advance
Jean-Pierre Rondot (JR)
AMA 732
CD/Leader Member
Dave Browns Response (October 7, 2002):
I can't answer the questions you pose, with specific numbers, without a lot
of research, but I am, generally , aware of the issues. Most, if not all of
those specific numbers have been printed in the magazine at some point in
the past.
Bear in mind that I was EVP before being President, so I have some
knowledge, and responsibility ,for the increases in the responsibility of
that position.
That position HAS evolved into one of increased financial responsibility as
the organization has grown, in the financial sense.
Historically, I'll try to relate that growth. Back in the early1980's, when
AMA had little in the way of assets, the position of EVP (then it was called
Secy/Treasurer), was a position of little real influence, as the financial
decisions were small in nature, and were made, primarily, by the Controller,
in conjunction with the Executive Director. Guidelines were, occassionally,
established by the EC, but they were very general in nature. The EC members
were primarily, modelers, and left the "business" of the organization to the
hired staff. I still remember the point where that changed. At a January
meeting, the Controller was going over the finances, when we first started
thinking about owning our own Hq's building (the Reston facility was the end
result), and started listing bank, after bank, (17 if my memory serves) in
which we had money deposited. This peaked my interest, and I asked why we
were doing business with so many banks?? Bear in mind that we only had this
large amount of money for a short part of the year, when the renewals flowed
in (this is why I'm sure it was a January meeting). The answer I got,
floored me, when I was told that the EC, somewhere back in time, had decreed
that the AMA would only place it's money in insured deposits,
and, at that time, that meant passbook savings. FDIC insurance would cover
only the first $100k in a bank, so...........$100k was put into passbook
savings at each of MANY banks. Nice, secure, safe, and drawing a whopping
3% or 4%, in a time when the prime rate was running at 14%!!! This policy
was reasonable when it was drafted, but cost us a bundle in those years. I
was mortified, and realized that AMA needed some work in financial
management. Jim McNeil was the S/T at the time, and, by his own admission,
he didn't know much about finance, so I created a plan, whereby we would
create a finance committee. I still think that was the best piece of
"politicking" I ever did, as I managed to talk Jim into making the motion to
establish such a committee. The committee was formed, I was appointed
Chairman, and the wheels of fortune shined well on the financial side of
AMA. We financed the "new" building, and even managed to back a fully
funded insurance program, when that became necessary (1986?). Eventually,
that insurance program, created a considerable amount of financial
wherewithall for the AMA, and provided the basis for financial security for
the organization. Along about then, I got elected to the (now) EVP
position, and I relinquished the chairmanship of the finance committee to Ed
McCollough, who held that position until he stepped down as VP (I had
insisted that the EVP not be chairman of this committee, as a point and
counterpoint measure). In the position of EVP, I monitored the financials
of the organization, making a few decisions in terms of investment
opportunities (not my strongest suit), but leaving most of those decisions
up to the bankers, and "professionals" in the field of investment. As the
AMA's reserves grew, (needed to back the insurance program), it became
obvious that we were becoming a bigger target for lawsuits, as we were "too"
liquid, in that we had a pile of "cash", which made the organization a
lucrative target for "cash hungry" atty's. It was at this point that I
recommended to the EC that we invest in a national flying site, which,
ultimately, became the facility at Muncie. Along the way, decisions such as
dumping the self funded insurance program, when it became cheaper to,
simply, purchase insurance, were made, in consultation with professionals in
the field, as well as the finance, and insurance committees, and the AMA
continued to grow, in the financial sense. When I was elected President, it
was obvious that my "replacement" as EVP should be a professional in the
area of finance. I'm a self taught businessman, who happened to have been an
accountant in the military, I know how to run a business, but the financial
complications of AMA had started to outgrow my expertise, the AMA needs a
professional at that position. We were very fortunate to find Doug Holland
(CPA) , a modeling friend of Chuck Foreman (and Dist4 AVP, I think) , and He
was elected to the position. Doug has done a good job, in some trying times,
and, while we have had our differences in opinion, from time to time, his
expertise has kept the AMA going in the financial sense. I can't imagine
replacing him with a non-professional.
Because the word count is too high, I will split it into two posts.
JR
October 6, 2002
Dave,
Several items have come up in discussions about the current EVP election. I
hope you can help me with some accurate information. Please do NOT consider
anything in the correspondence confidential, as it may be used in
discussion, with you as it's source.
1) Do you have any knowledge of a change in the responsibilities of the EVP?
If so, who made them and by what mechanism? Please note the difference in
the responsibilities outlined in the by-laws and the description used by Mr.
Holland in his campaign statement.
2) Does Mr. Holland hold sole responsibility for the investments the AMA
makes in the stock market? Is there any oversight or other mechanism to
control his decisions in this regard?
3)A number of references have been made to the AMA having investments in the
stock market. Can you tell me how much was made or lost on those investments
in 2001? Can you tell me how much has been made or lost, year to date, in
2002?
2)In the EC minutes of the February 9, 2002 meeting the following statement
appears:
"The EVP explained the concept of deficit financing. The Academy has been
deficit financing for 3 years but it has not experienced a deficit financing
year due to increased membership, interest in the American market, and not
spending what was budgeted. He reported that AMA should not continue to
operate that way because it does not have the earnings in the market, and
has increased expenses. (Insurance, postage, cost of living)"
Dave, can you tell me the amount of those deficits for the 3 years
mentioned, before the adjustments were made?
As always, thanking you in advance
Jean-Pierre Rondot (JR)
AMA 732
CD/Leader Member
Dave Browns Response (October 7, 2002):
I can't answer the questions you pose, with specific numbers, without a lot
of research, but I am, generally , aware of the issues. Most, if not all of
those specific numbers have been printed in the magazine at some point in
the past.
Bear in mind that I was EVP before being President, so I have some
knowledge, and responsibility ,for the increases in the responsibility of
that position.
That position HAS evolved into one of increased financial responsibility as
the organization has grown, in the financial sense.
Historically, I'll try to relate that growth. Back in the early1980's, when
AMA had little in the way of assets, the position of EVP (then it was called
Secy/Treasurer), was a position of little real influence, as the financial
decisions were small in nature, and were made, primarily, by the Controller,
in conjunction with the Executive Director. Guidelines were, occassionally,
established by the EC, but they were very general in nature. The EC members
were primarily, modelers, and left the "business" of the organization to the
hired staff. I still remember the point where that changed. At a January
meeting, the Controller was going over the finances, when we first started
thinking about owning our own Hq's building (the Reston facility was the end
result), and started listing bank, after bank, (17 if my memory serves) in
which we had money deposited. This peaked my interest, and I asked why we
were doing business with so many banks?? Bear in mind that we only had this
large amount of money for a short part of the year, when the renewals flowed
in (this is why I'm sure it was a January meeting). The answer I got,
floored me, when I was told that the EC, somewhere back in time, had decreed
that the AMA would only place it's money in insured deposits,
and, at that time, that meant passbook savings. FDIC insurance would cover
only the first $100k in a bank, so...........$100k was put into passbook
savings at each of MANY banks. Nice, secure, safe, and drawing a whopping
3% or 4%, in a time when the prime rate was running at 14%!!! This policy
was reasonable when it was drafted, but cost us a bundle in those years. I
was mortified, and realized that AMA needed some work in financial
management. Jim McNeil was the S/T at the time, and, by his own admission,
he didn't know much about finance, so I created a plan, whereby we would
create a finance committee. I still think that was the best piece of
"politicking" I ever did, as I managed to talk Jim into making the motion to
establish such a committee. The committee was formed, I was appointed
Chairman, and the wheels of fortune shined well on the financial side of
AMA. We financed the "new" building, and even managed to back a fully
funded insurance program, when that became necessary (1986?). Eventually,
that insurance program, created a considerable amount of financial
wherewithall for the AMA, and provided the basis for financial security for
the organization. Along about then, I got elected to the (now) EVP
position, and I relinquished the chairmanship of the finance committee to Ed
McCollough, who held that position until he stepped down as VP (I had
insisted that the EVP not be chairman of this committee, as a point and
counterpoint measure). In the position of EVP, I monitored the financials
of the organization, making a few decisions in terms of investment
opportunities (not my strongest suit), but leaving most of those decisions
up to the bankers, and "professionals" in the field of investment. As the
AMA's reserves grew, (needed to back the insurance program), it became
obvious that we were becoming a bigger target for lawsuits, as we were "too"
liquid, in that we had a pile of "cash", which made the organization a
lucrative target for "cash hungry" atty's. It was at this point that I
recommended to the EC that we invest in a national flying site, which,
ultimately, became the facility at Muncie. Along the way, decisions such as
dumping the self funded insurance program, when it became cheaper to,
simply, purchase insurance, were made, in consultation with professionals in
the field, as well as the finance, and insurance committees, and the AMA
continued to grow, in the financial sense. When I was elected President, it
was obvious that my "replacement" as EVP should be a professional in the
area of finance. I'm a self taught businessman, who happened to have been an
accountant in the military, I know how to run a business, but the financial
complications of AMA had started to outgrow my expertise, the AMA needs a
professional at that position. We were very fortunate to find Doug Holland
(CPA) , a modeling friend of Chuck Foreman (and Dist4 AVP, I think) , and He
was elected to the position. Doug has done a good job, in some trying times,
and, while we have had our differences in opinion, from time to time, his
expertise has kept the AMA going in the financial sense. I can't imagine
replacing him with a non-professional.
01-20-2003, 05:16 AM
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Dave Browns comments continues
The position of EVP, like many others in AMA, evolved into the position it
is today, rather than "changed". Is it the same position it was 25 years
ago? No, it isn't, just like the position of accountant in any company has
changed, immensely. 25 years ago, accounting was a quill pen, and green
visor job, where a computer was used by only the largest companies.
(Ironically, I worked on computerising the Army's First Armored Division in
1970). I guess it's like a club treasurer, who starts out with a club of a
dozen,
and ends up with 400 members, he, too, will undergo some changes, and few
clubs of that size don't seek out someone with some professional experience.
The bylaws are undergoing a serious review, at this time, in order to make
them reflect the reality of this evolution. These revisions effect a lot
more than just the EVP, as you can well imagine.
Responsibility for our investments is part of the EVP's position, but it is
also part of the finance committee, and, ultimately, the EC. In our
situation, the day to day decisions are done by the banks, which hold, and
manage, the money. They do the investing, and the EVP monitors their
activities, Occassionally, the EVP may disagree with the bank's decisions,
and he will tell them to change our investments. Primarily, it's important
that the bank's get results, and it's up to the EVP to report any problems
to the EC, as well as to negotiate with anyone with whom we have a financial
relationship. An example would be the bond issue we got to finance the new
building. In the process, we consolidated all of our debt into the one bond
issue, and are paying out considerably less interest than we would if it
wasn;t for that bond issue.
Traditionally, we have realized considerable income from investments, many
of which are mutual funds, but those have performed poorly, due, in
principal, to the stock market decline. Where in the past, we could plan on
$600k per year in investment income, it's now down to $100k, and we will be
lucky to get that. I don't have the exact numbers made, or lost to date, and
even if I did, they wouldn't mean much, as some would be "real" losses,
while most would be "paper" losses, where the portfolio was worth less, but
that loss wouldn't be real unless we sold the elements which lost
value. Those losses have a compound effect, as they mean less "investment",
AND a smaller return % wise.
Deficit budgets are a fact of life, and will often be the case in the
non-profit world. For the last few years, we have been budgeting for
losses, yet, efficiencies by the HQ's staff (not hiring open positions, for
example), have lessened the impact, Even in the last couple of years, the
losses were covered, in the cash sense, by the money represented by the
"non-cash" nature of depreciation expense. In other words, the budget might
have $500k in depreciation expense, but that is not money you must spend,
but rather, reflects the decrease in value of the non-cash assets you have.
Until last year, this was sufficient, last year it wasn't, and this year we
had to increase the dues. This is a cyclical thing, avoidable only if you
change the dues each year. Our members have been plain that they would
prefer increases less often, so that means larger amopunts, and creating
some excess for a while, to "buffer" the financial picture.
I'm really proud of what AMA has accomplished in terms of financial security
for the organization. I remember the days when the organization didn't have
much more than two quarters to rub together, and would have been hard
pressed to survive if faced with todays issues. Without financial security,
the organization will fail, and if the organization fails, the sport of
aeromodeling will soon follow, as, without the voice of a strong national
organization, able to provide insurance to the clubs, and site owners, the
sport can't survive. This election, I think the modelers have a choice
between three good people, One of which, by his own admission, knows little
about the real world of finance, and two which are Certified Public
Accountants, I will vote for the one we have, as I know he will continue to
do a good job. The other accountant in this election would be a god choice
when Doug decides to step aside, but as long as Doug is willing to do the
job, I'll support him.
No one is capable of doing that job, in a vacumn. Anyone who is to do that
job, adequately, will rely on his/her cadre of outside advisers to answer
specialty questions. While it's great to have a few friends to ask these
questions of, it's more important to know what to ask, and THAT is my fear
if we do not have someone with a financial background in that position.
The biggest threat isn't the wrong answer to a question, but rather the
question you didn't know enough to ask, and I'd rather have my money being
managed by a professional, than by an amature, with an attitude. AMA isn't
"run" by the EC, and no one is able to run roughshod over the EC. The AMA
policies are the result of a concensus among the people you elect. It
doesn't matter how loud an individual member of the EC shouts, unless he/she
can attain concensus among the majority of the board, he/she can't get
anything done. All the namecalling, and berating in the world, won't do any
more that bring about stalemate, and stagnation. What's needed is someone
who can take good ideas, and mold them into action which is supported by the
majority on the EC, It requires working together, not commanding, but rather
convincing, and compromises to get the job done. Our present EVP has shown
that ability, why would we change horses now?
Dave Brown
PS for specific numbers, review the financial reports in Model Aviation, or
write to the current EVP.
is today, rather than "changed". Is it the same position it was 25 years
ago? No, it isn't, just like the position of accountant in any company has
changed, immensely. 25 years ago, accounting was a quill pen, and green
visor job, where a computer was used by only the largest companies.
(Ironically, I worked on computerising the Army's First Armored Division in
1970). I guess it's like a club treasurer, who starts out with a club of a
dozen,
and ends up with 400 members, he, too, will undergo some changes, and few
clubs of that size don't seek out someone with some professional experience.
The bylaws are undergoing a serious review, at this time, in order to make
them reflect the reality of this evolution. These revisions effect a lot
more than just the EVP, as you can well imagine.
Responsibility for our investments is part of the EVP's position, but it is
also part of the finance committee, and, ultimately, the EC. In our
situation, the day to day decisions are done by the banks, which hold, and
manage, the money. They do the investing, and the EVP monitors their
activities, Occassionally, the EVP may disagree with the bank's decisions,
and he will tell them to change our investments. Primarily, it's important
that the bank's get results, and it's up to the EVP to report any problems
to the EC, as well as to negotiate with anyone with whom we have a financial
relationship. An example would be the bond issue we got to finance the new
building. In the process, we consolidated all of our debt into the one bond
issue, and are paying out considerably less interest than we would if it
wasn;t for that bond issue.
Traditionally, we have realized considerable income from investments, many
of which are mutual funds, but those have performed poorly, due, in
principal, to the stock market decline. Where in the past, we could plan on
$600k per year in investment income, it's now down to $100k, and we will be
lucky to get that. I don't have the exact numbers made, or lost to date, and
even if I did, they wouldn't mean much, as some would be "real" losses,
while most would be "paper" losses, where the portfolio was worth less, but
that loss wouldn't be real unless we sold the elements which lost
value. Those losses have a compound effect, as they mean less "investment",
AND a smaller return % wise.
Deficit budgets are a fact of life, and will often be the case in the
non-profit world. For the last few years, we have been budgeting for
losses, yet, efficiencies by the HQ's staff (not hiring open positions, for
example), have lessened the impact, Even in the last couple of years, the
losses were covered, in the cash sense, by the money represented by the
"non-cash" nature of depreciation expense. In other words, the budget might
have $500k in depreciation expense, but that is not money you must spend,
but rather, reflects the decrease in value of the non-cash assets you have.
Until last year, this was sufficient, last year it wasn't, and this year we
had to increase the dues. This is a cyclical thing, avoidable only if you
change the dues each year. Our members have been plain that they would
prefer increases less often, so that means larger amopunts, and creating
some excess for a while, to "buffer" the financial picture.
I'm really proud of what AMA has accomplished in terms of financial security
for the organization. I remember the days when the organization didn't have
much more than two quarters to rub together, and would have been hard
pressed to survive if faced with todays issues. Without financial security,
the organization will fail, and if the organization fails, the sport of
aeromodeling will soon follow, as, without the voice of a strong national
organization, able to provide insurance to the clubs, and site owners, the
sport can't survive. This election, I think the modelers have a choice
between three good people, One of which, by his own admission, knows little
about the real world of finance, and two which are Certified Public
Accountants, I will vote for the one we have, as I know he will continue to
do a good job. The other accountant in this election would be a god choice
when Doug decides to step aside, but as long as Doug is willing to do the
job, I'll support him.
No one is capable of doing that job, in a vacumn. Anyone who is to do that
job, adequately, will rely on his/her cadre of outside advisers to answer
specialty questions. While it's great to have a few friends to ask these
questions of, it's more important to know what to ask, and THAT is my fear
if we do not have someone with a financial background in that position.
The biggest threat isn't the wrong answer to a question, but rather the
question you didn't know enough to ask, and I'd rather have my money being
managed by a professional, than by an amature, with an attitude. AMA isn't
"run" by the EC, and no one is able to run roughshod over the EC. The AMA
policies are the result of a concensus among the people you elect. It
doesn't matter how loud an individual member of the EC shouts, unless he/she
can attain concensus among the majority of the board, he/she can't get
anything done. All the namecalling, and berating in the world, won't do any
more that bring about stalemate, and stagnation. What's needed is someone
who can take good ideas, and mold them into action which is supported by the
majority on the EC, It requires working together, not commanding, but rather
convincing, and compromises to get the job done. Our present EVP has shown
that ability, why would we change horses now?
Dave Brown
PS for specific numbers, review the financial reports in Model Aviation, or
write to the current EVP.
