Since the previous annual report, the financial world has had a few hurdles, but for the most part continued to move forward this year. These bumps along the road came in the form of a correction (or panic) and fears about a drop in the Chinese stock market and the potential increase of the discount rate by the Fed. After quite a bit of consternation last year from the government shutdown, it was possible the situation was going to repeat itself around October of this year; however, Congress was actually able to work through the process without a major filibuster from either side. Maybe they figured out that the average person was getting fed up with their inability to compromise and keep things moving along, which is the impetus behind Donald Trump and Ben Carson doing so well in their bids for the Republican Party presidential nomination for 2016. Most people are getting fed up with business as usual in Washington, D.C.
On the other hand, the improving U.S. economy and increase in corporate earnings are creating a positive outlook. The Fed met and decided not to change the discount rate at this moment, which is another positive sign that the economy is moving along on its own and inflation is being contained. Originally, the Fed had contemplated rate hikes sometime around mid- to end-2015; consequently, due to a flaccid recovery, it decided to keep things status quo. According to our UBS Financial Services advisor Mark Sikorski and his sources, bull markets don’t die of old age. They are killed by a recession, and recessions are brought on by the Fed increasing rates too much, too fast. Currently, with inflation metrics muted and GDP growth modest, the landscape is not ripe for the Fed to make rate movements with any substantial velocity. Ultimately, based on the economic outlook by UBS’s geniuses and Mark’s expertise, the market is not on the verge of a recession anytime soon.
Let’s move from the macro perspective to the micro by taking a look at our investments, which were no stranger to the peaks and valleys experienced by the ever-changing financial market. However, they have fared well in the current bull market. As I monitor our investments, I have a firsthand view of the good days and some of the challenging ones. Fortunately for PORAC, we are very well-diversified and managed. It is the diversification, based on the investment policy established by the Board of Directors and expert management by Mark Sikorski, that has kept us in the game during the challenging times, as well as realizing above-average returns. Obviously, Mark is constantly monitoring the health of our funds to ensure that we are in the best position possible to lessen the precipices and take full advantages of the peaks in the market. The key lies in the constant monitoring and management of the funds, along with some tweaks throughout the process to keep us on the right track. Furthermore, since Mark and I began managing these accounts, our reserves have increased from $2.05 to $5.06 million.
Last year’s audit went very well thanks to Finance and Administrative Manager Kim Busman and her efforts. Through some diligent work on Kim’s part, we were able to isolate the auditing firm’s areas of concern to just two. It is very difficult to get rid of one of the issues identified, since we have one person predominantly dealing with all of the financial transactions. The concern from the auditing firm pertains to an individual’s ability to defraud the organization, and the auditors’ goal is to make sure that we are aware of the issue and establish mitigating measures. We always take heed of the warnings from the auditors and have measures to minimize the opportunity for such an event, with numerous checks and balances established to hopefully prevent any occurrence. The President, Vice President, Budget and Fiscal Management Committees and I are all there to review Kim’s work and prevent opportunities for wrongdoing.
Consequently, this year the auditors were also concerned about the amount of monies being held by PORAC chapters with varied methods of oversight. In addition to the amount of money being held by some chapters, the auditors were concerned about the level of oversight for the disbursement of the monies. As a result of this issue being brought forth by the auditing firm, the Fiscal Management Committee tasked Kim and me with establishing guidelines for our chapters on how to properly use their funds, along with a new reporting form to be attached with the required bank statements. The guidelines were discussed and approved by the Fiscal Management Committee and, subsequently, by the Board of Directors. As such, at the beginning of the year Kim and I will establish a policy for our chapters on the approved methods and guidelines for spending their funds, along with uniform accounting methods to ease the concerns of our auditors.
PORAC’s Budget Committee, composed of Executive Committee Directors Barry Donelan, Randy Beintema, Anthony Sanders, Laren Leichliter and me, has been very busy through this budget cycle. The committee decided to take a look at portions of the budget where it felt the organization could be more efficient. While some of the choices became topics of lively discussion at the August 2015 Board meeting, the Budget Committee was focused on areas that needed to be addressed. The Budget Committee has taken its fiduciary responsibility very seriously and is not afraid to ask tough questions. Understanding that its decisions and directions are focused on doing what is best with your money, the committee targeted some areas for savings based on PORAC utilizing its money wisely and efficiently. The committee delved into an area that is very hard to overcome — changing what is known as business as usual. Therefore, it looked at areas where the budget could be streamlined, along with increasing efficiency and reducing potential unnecessary expenditures. This led to an unprecedented five meetings. The discussions revolved around the concept of cost–benefit analysis, or return on investment (ROI): While PORAC can financially sustain its current practices, is the cost of the practice outweighing the benefit to the organization? Those areas that were looked at by the committee were evaluated for ROI and whether PORAC is getting the best ROI.
Unfortunately, budget decisions are not evaluated in a vacuum, and those who are affected by the budget decisions may believe that the changes are a result of retribution, personal attacks or other ill will. Rest assured, PORAC’s budgetary decisions are never made out of ill will or retribution; they are made to ensure that those proposing the changes are being fiduciarily responsible with the members’ monies. If it means that the organization can save a few hundred or thousands of dollars by curtailing certain practices, then the organization needs to consider those changes. While those minor adjustments may seem insignificant in the greater scheme, over time they add up to significant amounts, which can be used to strengthen the organization’s financial footing or applied toward other projects.
Fiscal Management Committee
Your Fiscal Management Committee (FMC), which is composed of Board members from each region, met in May this year to review PORAC’s vouchers from last year’s Conference up to April 2015. Besides reviewing the vouchers and contracts, the FMC is in place to deal with any other issues that may arise that affect how PORAC manages your monies, as is evident with the issue addressed by our auditors. As previously mentioned in the audit portion, the auditors had some concerns pertaining to oversight of money disseminated to the chapters. As a result, your FMC was busy making recommendations to the Board of Directors.
Finally, as 2015 comes to a close and we move into 2016, I am always fully committed to being the fiscal watchdog of PORAC’s financial operations. I want to express my sincere gratitude to everyone who voted to allow me to continue managing your funds for another term. I was overwhelmed by the show of support from the delegates for the work that I have been and am doing on your behalf. I wish you and your family a safe and wonderful holiday season.