Benchmarking Finance and Business Operations

1. Benchmarking Finance and Business Operations The Finance and Administration Roundtable May 24, 2006

2. PRESENTERS • Bron Prokuski VP, Business Operations National Defense Industrial Association • Nat Bartholomew, CPA Principal LarsonAllen

3. FRAME THE DAY • What is Benchmarking? • Group Benchmarking Exercise • Sources of Benchmarking Data: • Sample Financial Benchmarks • Sample Policy Benchmarks • Demonstration on Use of Benchmarking Data

4. WHAT IS BENCHMARKING? • Comparison of like attributes or metrics from similar demographic data samples • People, process, technology, business processes/practices/strategies • A baseline for performance improvement • Opportunity to gain best practices • Measurement by fact rather than opinion

5. Benchmarking - When You Want To… • Answer “How do I compare?” • Determine financial health • Obtain a single version of the truth • Make better informed decisions

6. INTERESTED PARTIESA DIFFERENCE IN PERSPECTIVES • THE BOARD - Profitability, Reserves, New Business Ventures, Mergers & Acquisitions • THE STAFF - Compensation, Benefits, Working Environment • THE AUDITOR - Financial Health, Risk Assessment, Management Advisory Services - Best Practices • THE MEMBERS - Needs, Service, Value, Measuring Your Industry - Sector Analysis • SERVICES AND SUPPLIERS - Quality, Performance, Competitiveness • EXPLORE POSSIBILITIES -

7. STRATEGIC PRIORITIES • Financial Health • Quality Events for Member/Sponsor Needs • Awareness/Action on Advocacy Issues • Member & Participant Growth and Activity • Knowledge and Information Transfer • Broadened Programmatic Coverage • Professional, Positive Work Environment

8. OBJECTIVE / GOAL DETERMINATION Interested Parties BOARD STAFF AUDITOR MEMBERS SERVICES SUPPLIERS Financial Health Quality Events for Member/Sponsor Needs Awareness/Action on Advocacy Issues Member & Participant Growth and Activity Knowledge and Information Transfer Broadened Defense & National Security Sector Coverage Professional, Positive Work Environment

9. Business/Mission Success Strategic Plan Goal 1 Goal 2 Goal 3 Goal 4

10. CANDIDATE AREAS • Service quality • Asset use • Staff performance • Program performance • Operating efficiency • Customer satisfaction • Return on investment • Project time to benefit

11. GROUP EXERCISE • What are you trying to measure? • How do your currently measure it? • How often do you measure it? • Is it helping you to improve performance? • If not, how can you fine tune your measurement?

12. Sources For Benchmarking Data • ASAE & The Center’s ORR • ASAE & The Center’s P&P • Compensation & Benefit Studies • GuideStar – More than just 990s • Customized Data Collection

13. USE OF BENCHMARKING TOOLS ASAE’s Operating Ratio Report Twelfth Edition, Vol I & II What’s In There?

14. What is ASAE’s ORR • Compilation of financial data from participating associations • First published in 1953 • Collected via Federal Forms 990 and survey supplements

15. What Data is in the 12th Edition? • Approx. 7,000 associations were requested to send in data in April 2003 • Reminders sent in May and June • By the end of June 628 valid surveys were utilized to compile the statistics enumerated in the 12th Edition – 9% response rate • Therefore 95% certain that results are within +/- 4% (when data is supported by the full sample size)

16. How Do I Extract Data That Is Relevant to My Association? Data Categories • Membership Type • IRS Tax Status • Total Ass’n Gross Revenue • Geographic Scope (Int’l/Nat’l or Regional/State/Local) • Metropolitan Area (e.g., DC, NYNY, etc.) • Industry Sector/Interest Area

17. Content Sections – Vol I • Revenue and Expense Information • IRS Form 990 Information • Balance Sheet Information • Specialized Sections • Industry Sector • Metropolitan Area • Geographic Scope

18. Content Sections – Vol II • Expense Information • 10-Year Trend Analysis 1993-2003 • Revenue and Expense • IRS Form 990 Schedule • Balance Sheet Information • Reserves and Investment Information

19. Dues As Percentage of Revenue(Dues Reliance) By membership type (all organizations): Mainly Company/Institutional Members = 39.2% Mainly Individual/Professional Members = 30.1% By size / by membership type & size: Gross RevenueAll OrgsC/II/P $500K or less = 62.4% 63.5% 56.4% $500K - $1M = 30.1% 37.0% 25.8% $1M - $2M = 35.5% 38.2% 29.5% $2M - $5M = 35.0% 36.1% 34.1% $5M - $10M = 29.2% 32.2% 29.0% $10M+ = 30.4% 41.4% 23.7%

20. Dues as Percentage of Revenue(Dues Reliance)

21. Dues as Percentage of Revenue(Dues Reliance)

22. Salaries & Benefits • Average Salaries - Geographically • Average Benefits - By Size ($) • Average Salaries and Total Revenue per Staff Member – By Industry Sector

23. Average Benefits By Size ($)

24. Trend Analysis - Investment Composition(as a percentage of total assets)

25. Trend Analysis – Meetings Sponsorship Revenue(Percentage of Total Revenue)

26. Trend Analysis – Periodical Advertising(Percentage of Total Revenue)

27. Trend Analysis –Personnel Benefits(Percentage of Total Revenue)

28. Trend Analysis –Personnel Benefits(Average Benefits per Staff Member)

29. Trend Analysis – Printing & Photocopying Costs(Percentage of Total Revenue)

30. Average Reserve Target Reserves defined as total net assets and as a percent of annual operating budget • 501(c)(3) 76% • 501(c)(6) 59%

31. Investment Policies All Assns501(c)(3)501(c)(6) Cash Investments 21% 24% 20% S-T Investments 23% 19% 26% L-T Investments 53% 58% 53% Other Investments 3% 0% 1%

32. USE OF BENCHMARKING TOOLS ASAE & The Center’s Policies and Procedures in Association Management (A Benchmarking Guide)

33. P & P • 7,403 membership organizations were sent questionnaires in mid-April 2005 • Responses were closed on June 30, 2005 • 1,111 associations responded (15% response rate compared to 8% in 2001) • Over 600 tables of benchmarking data in seven volumes • 95% confidence of 4% margin of error (just like 12th Edition of ORR)

34. Respondents • 46% Trade Associations / 54% Individual Member Organizations • 56% 501(c)(6) / 37% 501(c)(3) • 68% budgets <$5M • Median annual budget = $1.9M • Median FTEs is 10 (actual FTEs 1 – 182)

35. Best “Average” Measure Median – ½ respondents above; ½ below Mean – sum of all cases / total # of respondents Median is a better measure for average when the upper limit is theoretically infinite (e.g., # members, annual budget), as the mean can be strongly affected by very high values. # Members (Mean = 58,687 / Median = 1,500) Annual Budget (Mean = $6.4M / Median = $1.9M)

36. International Benchmarking Trends

37. Related Foundations?

38. ARE MEMBERS PERMITTED TO PAY DUES IN INSTALLMENTS?

39. HOW MUCH OF REVENUE IS MADE UP OF DUES? • Dues as a percentage of total revenue are inversely related to size by number of FTE’s

40. ACCEPTING ONLINE PAYMENTS

41. * Up from 26% in 2001

43. MEDIAN I.T. BUDGET

44. BALLOTS ONLINE FOR DIRECT VOTING

45. TELECOMMUTING • 55% - TELECOMMUTING FROM HOME IS PERMITTED • 64% - ORGANIZATIONS WITH MORE THAN 30 FTE’S ALLOW TELECOMMUTING • 43% - PROVIDE COMPUTERS AND EQUIPMENT

46. TECHNOLOGY TRAINING

47. MEMBER COMMUNICATION

48. TECHNO-MARKS • 68% - USE WINDOWS XP • 62% - USE # OF WEBSITE HITS TO EVALUATE EFFECTIVENESS • 33% - USE SURVEYS AND ONLINE FEEDBACK TO MEASURE WEBSITE EFFECTIVENESS • 44% - UPDATE WEBSITE DAILY • 31% - UPDATE WEBSITE WEEKLY

49. Financial Policy Metrics • 56% of the reporting associations have fiscal years coinciding with the calendar year • Median liquid reserves are 26% • 79% of the reporting associations publish a flagship periodically issued publication • 87% report that their organization is subject to an annual independent audit • 5% report they have been audited by the IRS in the last three years • Median percentage of non-deductible dues is estimated at 11%

50. Sarbanes Oxley (SOX) • Whistleblower Policy • 22% have • 74% adopted after SOX • Audit Committee • 52% have • 24% in place after SOX • Staff Ethics Statement • 48% have • 18% adopted after SOX