TREASURER'S REPORT

www.uschess.org is the Official Website of the United States Chess Federation

"Life can be understood by looking backward, but it is best lived by looking forward" — Kierkegaard

The USCF is at a historic turning point, one of those crossroads that seldom arises in the life of an organization. The chess federation of the next decade will bear as little resemblance to the USCF of the early Nineties as a telephone does to a tom-tom. The primary cause of these changes is the accelerating pace of the information explosion, powered by the Internet. Technology now exists, or will soon be developed, that will enable tournaments of thousands, or hundreds of thousands, of players every day, many participating from the comfort of their own home. This shift in the paradigm will never replace our familiar over-the-board chess, but will inevitably influence its development. In the midst of profound structural changes, the USCF must now decide the most important question it has faced since its inception — whether it will continue to confine its area of expertise to over-the-board chess, or whether it will accept the challenge to aggressively compete for market share and a leadership role in the new chess environment on the Internet. This all-important strategic decision about the future of the organization colors every other decision we make.

THE YEAR THAT WAS . . .

Because of a rollback in closing date (from June 30 to May 31), our fiscal year was only eleven months long. But this "short" year was one of the most significant and memorable in our history.

Topping the list of changes was the resignation of Executive Director Al Lawrence after eight momentous years distinguished by development of the modern marketing program and the scholastic boom. His replacement is Mike Cavallo, an extremely bright young man with the business credentials to forge a strong future for this organization. We also saw the most widely-reported chess event of a generation, the match between Gary Kasparov and IBM's Deeper Blue, and the largest chess tournament in history, the scholastic Super Nationals in Knoxville, Tennessee.

The pace of technical changes was very fast. Many improvements initiated under former president Denis Barry and treasurer Frank Camaratta bore fruit. Our accounting firm of ten years was replaced by a larger, more experienced firm, better versed in the nuances of non-profit reporting. The Professional Players' Health and Benefit Fund was at last invested in segregated interest-bearing securities. Our books were adjusted to carry the equity in our building at fair market value. Member-At-Large Fan Adams designed a profit-center accounting model to inform our strategic planning. New management reporting and evaluation methodologies were implemented to provide more timely and accurate information about staffing, budget variance, contract compliance, review of expenses and inventory control. Delegate motions to safeguard the Life Member Assets Account and to clarify its relationship to Operations were implemented.

Every financial decision made this year was influenced by the early realization that a deficit was inevitable. As early as September, I tasked the Finance Committee with developing realistic financial predictions. Committee chair Jim Pechac assigned two of the Federation's most astute financial analysts, ex-presidents Steve Doyle and Leroy Dubeck, to analyze and report on our projected deficit. Their early and very accurate analysis enabled management to take countermeasures. Throughout the fiscal year, the Finance Committee assisted with visits to the business office to review and report on various aspects of USCF operations, including the origins of the deficit, and many suggestions to improve USCF accounting and financial reporting. As a result of its many contributions, the Finance Committee was recognized as the USCF committee of the year, and its chairman, Jim Pechac, was recognized as outstanding volunteer of the year.

Because of our early realization that a deficit was unavoidable, dramatic reductions in expenditures characterized most of the year. There were many small economies. The principal big-ticket savings were:

attrition
We were able to avoid forced staff reductions, but voluntarily departing personnel were not replaced on a 1:1 basis.

renegotiation of bank loans
Our annual bank loan was not paid down as usual because of renegotiated terms.

deferral of capital expenditures
Most infrastructure modernization projects were deferred. This includes cancellation of an ambitious office upgrade of software and hardware, saving 90% of its cost.

reductions in professional fees
Fewer lawyers, fewer accountants, and the professional services line of the budget has finally begun trending in the proper direction — down.

Other items that impacted the deficit this year were a flattening in membership and in book sales, increased rental for expansion of our business office, extraordinary personnel costs associated with the retirement of Al Lawrence, and successful resolution of our debt to Informant.

THE YEAR THAT WILL BE . . .

The upcoming year is a year of opportunity. With a new management team, and expenses under control, the USCF is in a position to make decisions about how best to grow the future. Vast improvements are both possible and necessary in how we expand and improve service to our customer base, and how we reach out to the great market of unconnected but potential chessplayers.

High on the priority list is improvement of our utilization of the Internet. The USCF has been slow to respond to this new technology, and decisions made in the past year have led us away from, not closer to, our goals. We need to accord the development of this market the urgency it deserves.

We also need to develop the infrastructure to better serve our present customer base and accommodate the demands of future expansion. That requires installation of a high-speed telephone connection and upgrade of our office hardware and software. These improvements are cost-effective in the long run, and the sooner they are implemented the sooner they will start to pay for themselves.

The personnel in the office have done a magnificent job under very difficult conditions this past year. Now is the time to give them the help they need. Positions that remain unfilled should be filled, and there should be a renewed emphasis on retraining and cross-training to upgrade services to our membership at all levels. The recent effort of our senior employee, Joan Dubois, with twenty-eight years of experience, to suddenly learn computer operations and her success providing feedback to customers on the Internet is the type of response to new challenges that can make the USCF great.

The projected budget for the next fiscal year is designed to allow for a small profit. That may change as circumstances change. But clearly the USCF is on the way to a new and brighter future as a stronger and better organization. We have faced the past, confronted our problems, and positioned ourselves to be effective. If we have the will, the means are available to achieve greatness.

Tom Dorsch
U.S. Chess Treasurer

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This page was last updated June 26, 1997