Press Your Luck: IT Expenses and a Whammy

Back in May, I wrote a blog post about GSUSA’s IT expenses called “We’re Spending HOW Much on IT?”  This post serves as a follow-up, so it would really be best if you take a few minutes to read Part 1 if you haven’t already before continuing so you can see how this all fits together.  I’ll wait here while you do so.  It’s not that long, I promise.

<<waits for a few minutes>>

Welcome back.

A few weeks ago, GSUSA hosted a webinar featuring the 2021 Stewardship Report.  Normally a Stewardship Report is held every three years during the National Council Session itself (but beforehand last year due to everything being virtual), but in the spirit of transparency, GSUSA decided to now host an annual one.  I don’t believe there was much publicity for it even though it was open to any member, so I only found out about it because of some friends who are National Delegates in other councils.  I registered just in time before the deadline. Additionally, anyone was welcome to submit questions in advance that could be answered during the report.  I submitted five. I would have submitted more, but I figured five was more than enough. To GSUSA’s credit, all five were answered thoroughly, which was greatly appreciated.  You can download the report and watch the recording on GSUSA’s website.

For one of my questions, I asked how much we spent on IT capital and expenses in FY2020 and FY2021 since the figures weren’t detailed in the written report like they had been in past ones.  After writing Part 1, I was very interested in whether IT expenses stayed high compared to past years.  The answer:  for FY2020, we spent $8.8 mil in capital and $18 mil in expenses for a total of $26.8 mil.  In FY2021, we spent $7.7 mil in capital and $15.4 mil in expenses for a total of $23.1 mil.  So nerdy me charted this out starting with FY2014:

And here’s an update detailing the spending and percentage change:

So unfortunately, IT expenses HAVE remained high, even with them slightly coming down from a peak in FY2019.  This is a huge issue, especially considering Volunteer Systems 2.0 (formerly known as CEI) isn’t exactly the smoothest ride.  I wrote a strongly worded letter to the National Board, Judith Batty (our interim CEO), and Karen Layng (our National President) earlier this year about all of its issues and bugs and how it was impacting our membership.  I never received a reply, but I heard from multiple sources that some much larger fish wrote them a few days after I did, so I didn’t expect to hear anything after that news.  I got the impression GSUSA heard the message loud and clear.  From the big fish, not minnow me.  Actually I don’t even think I’m a minnow.  More like a fish egg.  But not the caviar kind.

And now for the whammy.  I wrote about this originally in the Convention Chat Facebook group right after the Stewardship Report, and I stated I wasn’t going to share this news on my blog.  But after giving it some thought, I changed my mind.

A few months ago, I took a look at the FY2020 GSUSA Annual Report.  I noticed that we had taken out $7 mil on our line of credit.  This got my attention, because I’ve always heard borrowing against your line of credit could be a red flag.  Note that this is NOT a PPP loan.  GSUSA received a $9.3 million PPP loan for FY2020, and $7.3 mil of it has been forgiven so far.  But with COVID and all, I didn’t worry too much about our borrowing against the line of credit just due to circumstances.  However, I was still curious about it, so for one of my Stewardship Report questions, I asked, “According to the 2020 Annual Report, $7 million was taken out on our line of credit.  This is an area of concern.  Was this paid off, and if not, was more taken out for FY2021?”

Honestly, I didn’t expect GSUSA to have paid it off.  In fact, I figured we might have even taken out a little more, and the debt would be up to $10 or $12 million.  Well, I was wrong.  We were told that for FY2021, we took out an additional $13 million on the first line of credit to max it out at $20 mil, and then took out a second line of credit and borrowed $4 million against it.  So that makes a total of $24 million.  I was so shocked I could barely write down the dollar figures.

I really don’t know what to say, y’all.  Angela Olden, GSUSA’s Chief Financial Officer, stated on the webinar that they made the decision to borrow versus liquidating assets with a plan to pay this off by 2023.  However, the National Board approved a deficit budget for FY2022.  So are they anticipating taking out even MORE money?

You might ask where all of this money is going.  Based on what we’ve looked at when it comes to IT expenses, that’s the source in my opinion.  All of my questions from Part 1 still stand.

I realize I’m not privy to what the National Board sees when it comes to finances, but I really don’t see how they’re going to pay this off without a substantial membership dues hike in the next few years if assets aren’t or can’t be liquidated. CircleAround certainly isn’t bringing in any revenue, especially considering the National Board approved $1 million more to be sent its way for FY2022. This is pure speculation on my part, but don’t be surprised to see a proposal come to the 2023 National Council Session asking for a huge dues raise.  If you’re not aware, National Delegates handed over authority regarding membership dues to the National Board at the 2020 NCS, but it cannot raise dues more than 25% without approval from the National Council.  How much?  I don’t know, but to pay off that $24 million, I’m guessing at least another $25 which would bring annual dues to $50.

If a proposal of this sort does make it onto the NCS agenda, the National Board & GSUSA will sweet talk National Delegates into believing that if they don’t approve this large of a raise, the organization will be in deep doo doo.  And most likely, it’ll pass because some National Delegates will feel guilted into it or they’ll be antsy to get to their dinner plans and shopping at Disney, so just scrap discussion and rubberstamp that baby!  Frankly, if the delegate body approves it and you’re against this, part of your outrage needs to be directed at them since they supposedly represent us and not solely at GSUSA.

Unfortunately, this will just set a precedent.  I see it as the equivalent of someone racking up a big credit card bill, expecting Mom & Dad to pay it off, and then going right back to spending.

There’s not a way to stop them from doing this again once dues are raised substantially because they won’t need National Council approval at that point. The 25% guardrail goes from a limitation of a $6 raise (with $25 dues) to one of $12 (with $50 dues) and higher and higher from there on as dues bump up. The checks & balances regarding finances in our governance structure have been removed, thanks to the 83% of National Delegates who passed Proposal 2 last year.  When the National Council fully controlled dues, GSUSA came to a NCS with a detailed multi-page explanation of why it needed the money for the next triennium, and it worked within whatever increase was approved.  Now, the money is spent first, to the tune of a $24 million debt.  With no accountability.  Can’t say I didn’t warn you.

Ideally, this blog post should have been published closer to the 2023 NCS to make the point if a dues raise proposal does come to pass, but I’m not going to get involved in NCS topics like I have in the past for a variety of reasons which I won’t rehash, so I wanted to go on and get this out there.  And I have a feeling I won’t find out about the 2022 Stewardship Report until after it’s over; therefore, there’ll be no follow-up questions from me anyway.

So there you go, folks.  Now keep in mind that this scenario is pure speculation on my part.  Maybe I’m overreacting, and they will liquidate a bunch of assets to pay off the debt in 2023 instead of the membership doing so via much higher membership dues.  But either way, I don’t see a way to make the National Board and GSUSA answerable for spending so much in the first place, and I do think a dues raise of some sort is inevitable in the future whether it’s a big one at the 2023 NCS or a smaller one that the National Board enacts on its own.

But c’mon!  No whammies!