Monday, November 23, 2009

Treasurer's Report 2009

Below is an edited version of my Treasurer's Report to the 2009 AGM.

RA-Aus Treasurer’s Report
AGM 2009


For the first time our turnover exceeded two million dollars. Our adjusted revenue for F09 was $2,050,681, up from $1,880,088 in F08.

Our expenses for F09 were $1,619,780.

Some of this increase in revenue was due to extra Government funding, which was approx. $130K for last year. (Normally CASA provide us with a grant of $100K to self administer around 4000 aircraft and around 9000 pilots)

The RAA Shop is underperforming. (I have my own views here for the meeting) The shop is well down on budget (around 30%) and down over $22K on last years sales.

Overall we have had a very good year in difficult financial times.


Employee expenses were $651,410, up $142,681 on last year. There will be more detailed discussion on this matter in the meeting. I have proposed a realistic increase in employee salaries, and budgeted to cover a Brisbane based Operations Area Manager should this be agreed on.

I would like to give our staff big pay increases, but I know from experience how this can rapidly get out of hand. Remember it is not just the salary increase but the add on costs as well. When comparing wages in other industries we must compare like with like. Many companies now talk of “packaged” salaries. I know from my business experience where a too rapid rate of wage increases (and hence increased add on costs) can, and will, cripple a business. It is the “rate” of increase, not the actual amount of increase that causes the problems.

Our insurance costs are $30K under budget due to our new insurer and new agreement which goes straight onto the bottom line.

One large distorting expense item was an $80K Magazine bill for F09 that actually went into the F10 period, which will distort our surplus above somewhat.

One issue which has not happened in the past is keeping a separate bank account for staff entitlements. Currently this is all lumped into our general bank accounts, but this is money that doesn’t belong to us. I have asked Maxine to open up a separate account for this purpose. Almost every week you hear of cases where a business has spent the employee entitlements money. Currently this figure is around $100K

Telephone and postage expenses are up significantly over last year and may need some consideration to keep the rate of increase under control. The Board telecard costs have always been included in the general office phone account. It is not right to put Board phone costs into the office phone expenses, so I have asked Maxine to take this expense out of office expenses and put it into Board expenses.

Balance Sheet

Our balance sheet shows the RAA with a total equity of $2,397,170. This includes our building now valued at $1,100,000.

Carried forward as a liability is our prepaid membership. I have asked Maxine to open up a separate account for this money as well. It is future money and must be allocated forward to the years where it belongs. It is not money to spend now.

(I do not like this 2 year membership thing, as it leads to real accounting issues in the office. This will become a nightmare when we start to get 2 year renewals coming through. There is also the real problem of a human tendency to spend money you have on hand that is not really yours to spend at this time. Many a good business or association has gone broke by going for prepaid money. Once you start to depend on next years receipts to pay this years expenses you are on the road to disaster. My recommendation is we seriously consider canceling this option.)

At this stage it is very hard to track our year on year renewals because of the two year distortion factor.

Holbrook Museum

There needs to be discussion on the Museum. (The museum have asked for a loan.) My personal view is we stay well away from the loan business. If we were to make a significant loan to the Museum, we must protect our members money with collateral. This becomes very messy, and a loan default lumbers us with the fallout.

I propose we offer the Museum a grant. Something like $10K to $15K would seem reasonable at this time.


The youth are our future. I propose we offer a grant here also. Equal to the Museum grant.

Lee (our CEO) did a great job in sourcing a better bank deal. We changed from St George to Westpac. The CEO and office staff could not get the one dedicated person at St George to look after our accounts, and their fees were going through the roof, up nearly 300% in one year (from $3.5K in F08 to $8.3K in F09)

With Westpac we have a dedicated account manager, and absolutely no account keeping fees on any of our accounts. We are however charged certain transaction fees, and fees like Overdraw and dishonor fees. We are also paid interest on the above accounts of between 3.05% and 3.8%

Of general interest for those with shares in St George. The local branch lost around $1.5M in deposits from us and didn’t even bother to come around or even phone to find out why!!! (Perhaps they consider $1.5M pocket change or nuisance deposits)

Proposed Fiscal 2010 Budget

Enclosed is a draft of the F10 budget. I have budgeted for a surplus of $165K.

However we must also look at restraining the rate of expenses growth
The proposed F10 budget is a Draft only and has yet to be ratified by the board.

Finally I would like to offer thanks to Lee, Maxine (our finance officer), and our office staff for the efficient running of our finances.

John McKeown
RA-Aus Treasurer.

Treasurer’s Special Report to the members at the 2009 AGM

November 2009 special AGM

This is a special update report I would like to bring up to the membership.

I am concerned that the rate of increase in Employee Expenses is unsustainable.

Our mission statement says “Minimum Bureaucracy” yet in the last two years we have allowed a significant increase in bureaucracy to occur, without a similar corresponding increase in our membership. I must state here that some of this increase in bureaucracy has been forced on us by CASA, but the majority appears to be of our making.

In Fiscal 08 our employee expenses were $508,729. In Fiscal 09 these costs jumped to $651,410, and in Fiscal 10 they are estimated to reach $825,000. This is an increase in two years of over $361K. Or an increase of 62%. All this with our membership remaining fairly static.

Of real concern to me as Treasurer, was the large salary increases granted by the Board at the recent September meeting. When most Australians received little or no wage increases in 2009 due to the economic climate, the board, as a whole chose to approve increases of between 8% for junior office staff, and up to 25% for managers. On top of these increases we must now budget for all the “add on” costs. I am the first to agree that our staff are our greatest asset, but we are a non profit association, funded in the main by member fees. It is my personal belief that we must live within our means.

However it can also be argued that we need to pay the right money to gain and keep the right staff. I see it as my duty as your treasurer to bring this matter to your attention. What you choose to do with this information is entirely up to you. You are the membership. You are the association.

To bring this into perspective we really must look at the cost per individual member.

In previous years our employee cost per member was running at around $56 to $57 per member. This jumped to $68 per member in F09 and I now estimated this to hit $90 per member in F10. An increase of over 60% in just two years.

As treasurer I believe we must seriously address the rate of increase in our employee costs. If it can be shown that some of the increase is due to CASA requirements then I believe we need to seek some cost recovery from CASA. But we, as an association need to “own” this issue, and deal with it appropriately.

Graph of employee costs per individual member over time.

Finally, I won’t be seeking re-election as Treasurer, but I would urge the incoming treasurer to be very vigilant to prevent our costs getting out of proportion to our membership levels.

However, we are an association, and you people, our membership, may be quite comfortable with these increases. But I believe, as un popular as it may be for me, it is my duty as your Treasurer to bring this matter to the attention of the membership.

John McKeown
RAA Treasurer.

Nov 2009