May 1 - October 31, 2008 CFC Deficit - Where from Here?
CFC President, David Lavin, in GL # 3, in the President’s Message, states in relation to the 2008-9 first 6 months financials:
“ …we do have a paper loss of over $8,000 …“.
One might quibble a bit and say he should have said slightly under $ 9000, since the deficit is actually $ 8,717.
But the real issue is how will we reduce this deficit to zero in the second half of 2008-9 ?
On the surface one could say the deficit of the first 6 months of 2007-8 was $ 16,626 ( ½ the annual loss ). So it appears the executive have shaved about $ 8,000 off the 6 month deficit. That would definitely be an improvement. But looking more deeply into the revenue and expenses figures shows :
1. that most savings come from only 1 item being cut. We had a major decrease in expenditures with the cessation of the print Chess Canada magazine - $ 18,500 ( for 6 months ), and we have incurred to date no expenses directly related to the on-line Chess Canada ( on the “ Publications “ line ). [ It may be that the $ 3,000 the President mentions as going to the new “ interim editor “, Vincent Chow, is included in “ Salaries, Benefits and Staff Travel “, rather than being a direct on-line magazine expense ].
2. that we are losing revenue. Roughly speaking, this 6 months we lost significant revenue:
Shipping & Handling charges - $ 700
Membership Fees - $ 2,000
Publication Sales and Advert. - $ 2,400
Donations - $ 4,000
Canadian Open Surplus - $ 2,500
Total Decrease - $ 11,600
So as can be seen, if everything else in Expenses stayed relatively the same the one disappearance of the “ publications “ expense item, covers all the revenue loss, and gives approximately only $ 6,900 to lessen the anticipated first 6 months 2008-9 deficit.
The deficit anticipated for first 6 months 2008-9 ( if all stayed the same ), was $ 16,625 ( ½ the annual 2007-8 deficit ). Taking off the $ 6,900 gained by no print publication would reduce the anticipated 6 month 2008-9 deficit to approx. $ 9,700.
Now we can also reduce this anticipated deficit by other savings we made on other expenses ( since they all did not remain the same ):
Building and Equipment Expenses - $ 2,000
Office - $ 1,500
Programs – International - $ 1,500
Contributions to Chess Foundation - $ 700
Total Savings - $ 5,700
This would decrease the anticipated deficit to $ 4,000. And we show on the books, the first 6 months 2008-9 deficit as $ 8,700 ( the difference is due to increased staff expenses ). So the analysis above does show mainly where revenue dropped and expenses dropped.
But where are we going to get increased revenue to offset this deficit for the second half of 2008-9?
David Lavin in GL # 3 asks:
“ Thirdly, we need to review revenues from membership and ratings. Can we realistically and reasonably raise any of these fees? “
Will the membership stand for increases in either of these fees, after the print magazine has been cut, and they see little benefit in membership directly to them, other than the national rating system?
And can we not expect that revenue from “ Sales of books, equipment and software “ will drop from the first half amount of $ 37,900, now that the book business has gone to Amazon.com and the equipment has gone to FEN? This makes our need for increased revenue in the second 6 months even more dramatic. Our commission arrangements will definitely generate much less than our business. The whole point of the sale of the retail business was to be able to cut staff hours, since the business was eating up ½ our staff time on some estimates . So does the CFC now need to look seriously at cutting staff, which have remained the same, in order to balance off this loss of revenue?
Since there are no other sources of income, to reduce the deficit requires dramatically cutting expenses. There will hopefully be savings from the sale of the building. We will lose some of the expense “ Building and equipment expenses ( $ 7,600 ) “. But will we see “ Office “ expenses rise from $ 12,000 if we have to go to now renting office space, now that the building is sold? And how will CFC be able to afford introducing expenses back in under “ Publications “ with the new on-line Chess Canada?
So, the staff cuts are the ones that stand out as being the only place to save sufficient money to eliminate the deficit. This will not be easy. I note that the expense “ Salaries, Benefits and Staff Travel “ have actually risen almost 20% in the first 6 months of 2008-9 ( from $ 34,000 to $ 40,300 ). This is unsustainable. We need cuts, not increases. And it may be questionable whether we can afford an on-line Chess Canada editor salary/contract. Maybe all CFC can afford is an enhanced CFC “ News “ website section, and a monthly CFC e-bulletin to all members highlighting Canadian events, maintained by the ED ( this was the preference of the Grassroots’ Campaign , in its “ Restructuring “ platform ).
I realize this is a difficult program to have to follow, but I see no other areas where expenses can be reduced sufficiently to eliminate the second half deficit.
So yes the situation has improved, but because so much of that improvement has been from the dropping of the print magazine, it has masked the great difficulty CFC has in trying to move forward to eliminating the second half 2008-9 deficit. Some tough decisions ahead.
[ Note: I am not the greatest at reading financials, so please make corrections if I have muffed some stuff. ]
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Originally Posted by Bob Armstrong
