MEMO. Dean Dietrich, Becky Murray, John Thompson, Becky Henkel. September 20, 2011 Finance Committee teleconference

Transcription

1 MEMO To: Cc: From: WisTAF Finance Committee Members: Tricia Knight, Chair Joel Bailey Hon. Marc Hammer Nick Zales Robert Zellers Dean Dietrich, Becky Murray, John Thompson, Becky Henkel De Ette Tomlinson, Executive Director Date: September 14, 2011 Re: September 20, 2011 Finance Committee teleconference The Finance Committee will meet via teleconference on Tuesday, September 20, 2011, at 1:00 p.m. The teleconference is scheduled to last an hour. Teleconference #: Passcode: Finance Committee Meeting Materials (Available on the WisTAF website: please see directions below to access them) September 20, 2011 Cover Memo (this document) August 30, 2011 Finance Teleconference Minutes 2012 Budget Proposal with Balanced Alternatives August 31, 2011 Charles Schwab Investment Statement August 31, 2011 Thompson Investment Management Portfolio Review Materials about reserve and reserve disbursements from Florida, New Hampshire, and a summary of IOLTA "Lean Years" actions during 2002 recession Instructions for logging into the WisTAF website to view Board materials, including Finance Committee materials To access the online materials, simply login to the WisTAF website at In the upper right corner of the homepage, you should see two boxes (in white) to enter your User name and Password. A user name and password have already been set up for you. User name: Enter your first initial and last name in lower-case letters. (Example: jsmith)

2 Password: Your current password is iolta. Feel free to change this password as you see fit. (Example: iolta) After you have entered your User name and Password, click the login button. You should now see a welcome message, beneath which is a link titled Member area. Click this link to access all board member materials presently online, including the Finance Committee meeting materials. (Go to Finance Committee, then click on the link to the August 30 teleconference/meeting.) The tentative agenda for the teleconference is: A. Discussion with John Thompson regarding reserve liquidation options B. Discuss and approve a 2012 budget proposal to WisTAF Board C. Discuss and approve a 2012 IOLTA grant level recommendation to the Grants/Evaluation Committee and the WisTAF Board D. Discuss how to go forward to explore use of reserves for grants Teleconference information Please use the following toll-free number to dial into the meeting: The passcode is If you have any questions, please contact me toll-free at , or in Madison at (608) Thank you!

3 Wisconsin Trust Account Foundation, Inc. Finance Committee Teleconference Minutes August 30, 2011 Participating: Tricia Knight (chair), Joel Bailey, Nick Zales, Bob Zellers, Dean Dietrich, De Ette Tomlinson, Becky Murray July 31, 2011 Financial Statements Tomlinson presented the July 31, 2011 financial statements. IOLTA funds are not meeting projections; expenses are on budget. Tomlinson borrowed another $50,000 against the line of credit to pay third quarter IOLTA grant disbursements, bringing the total outstanding principal balance to $200, Draft Budget Proposal Tomlinson presented a draft of the 2012 WisTAF budget to the committee for discussion. The budget projected $400,000 in IOLTA income (down from $500,000 projected for 2011); $250,000 in IOLTA grants (frozen at 2011 level); and $246,000 in operating expenses (down from $248,745 in 2011). The draft budget projected a deficit of $96,000, which Tomlinson proposed to be funded from grant reserves. There was discomfort with a deficit budget proposal, so Tomlinson was instructed to put together three balanced budget options, all of which paid back the $200,000 outstanding principal. Option #1: Total deficit made up through cuts to IOLTA grants. Option #2: 75 percent of deficit made up through cuts to IOLTA grants; 25 percent of deficit made of cuts to operations. Option #3: 50 percent of deficit made up through cuts to IOLTA grants; 50 percent of deficit made of cuts to operations. Repayment/Management of Line of Credit Tomlinson reported that M&I wants to change the terms of our current line of credit when the current agreement comes due on December 1, In light of the loss of the state funding, M&I wants WisTAF to do one of two things: 1. Pay back outstanding $200,000 on December 1, 2011, or 2. Freeze the line of credit at the current $200,000 that's been borrowed against it, and give M&I a business plan that generates $200,000 in the first six months of If accepted, the outstanding $200,000 would be payable on June 30, M&I indicated that it would be willing to consider extending the line of credit, but at a greatly reduced limit, such as $20,000 for operations. Has stated that it does not want to extend the line for grants at this time. 1

4 Discussion as to whether to pay the principal back on December 1, 2011 or to try to put together a business plan to generate funds and extend the payback to June 30, No decision reached. Consensus reached to ask M&I to extend the line of credit at a reduced limit, perhaps by pledging to maintain $1 million in reserve assets to obtain another $200,000 line, otherwise to maintain a lower line for operations. Reserve Use for IOLTA Grants Dietrich asked the Finance Committee to create several scenarios of ways the reserve could be used to fund future IOLTA grants, indicating a preferred scenario, and present it to the WisTAF board. Tomlinson was instructed to research innovative ways that other IOLTA programs are using their reserves. Discussion for next teleconference: 2012 balanced budget alternatives; approval of 2012 budget proposal to send to the WisTAF Board Approval of 2012 IOLTA grant level proposal to send to the Grants/Evaluation Committee and the WisTAF Board Strategy to work out new line of credit agreement Method/Strategy for drawing down reserves for grant-making while maintaining assets to anchor a lower line of credit. Next teleconference: Tuesday, September 20, 2011 at 1:00 p.m.; materials to be distributed. 2

5 Wisconsin Trust Account Foundation, Inc Draft Budget Proposal v. 3 Balanced Budget Options January through December 2012 Overview Proposed 2012 Budget Balanced Budget Option #1: 100% of cuts to IOLTA grants Balanced Budget Option #2: 75% of cuts to IOLTA grants and 25% of cuts to ops Balanced Budget Option #3: 50% of cuts to IOLTA grants and 50% of cuts to ops Ordinary Income/Expense Income 4010 Trust Account Interest Income 400, , , , Interest Income Public Interest LS Fund 870, , , , State Appropriation Total Income 1,270,000 1,270,000 1,270,000 1,270,000 Expense 5010 Grant Awards 5011 Foundation Grant awards 250, , , , Public Interest LS Fund 870, , , , State Appropriation Grants Total 5010 Grant Awards 1,120,000 1,024,000 1,048,000 1,072, Office Expense 5102 Office Overhead 4,000 4,000 4,000 4, Office Rent 19,900 19,900 15,000 15, Office Supplies 1,500 1,500 1,500 1, Postage & Mail Expenses 2,500 2,500 2,500 2, Printing Telephone 4,500 4,500 4,500 4, Utilities 2,700 2,700 1,350 1, Board and Committee Expenses 1,500 1,500 1,500 1, Travel and Meeting Expenses 2,000 2, Training and Conferences 3,000 3, Memberships Salaries 133, , , , Employer FICA/Medicare 10,200 10,200 10,050 10, Fringe Benefits 29,200 29,200 25,600 1, Temporary Help Publicity and Public Relations 10,000 10,000 2,500 2, Bank IOLTA Processing Charges 2,500 2,500 2,500 2, Line of Credit Interest Bank Compliance Equipment, Maint & Support 6,000 6,000 6,000 6, Depreciation draft budget v. balanced options Page 1 of 2

6 Wisconsin Trust Account Foundation, Inc Draft Budget Proposal v. 3 Balanced Budget Options January through December 2012 Overview Proposed 2012 Budget Balanced Budget Option #1: 100% of cuts to IOLTA grants Balanced Budget Option #2: 75% of cuts to IOLTA grants and 25% of cuts to ops Balanced Budget Option #3: 50% of cuts to IOLTA grants and 50% of cuts to ops 5160 Insurance 3,000 3,000 3,000 3, Legal, Audit & Professional Ex 9,000 9,000 9,000 9, Miscellaneous Expenses Total 5100 Office Expense 246, , , ,000 Total Expense 1,366,000 1,270,000 1,270,000 1,270,000 Net Ordinary Income (96,000) Subtotal Net Income (96,000) Other Income/Expense Line of Credit Principal Repayment 200, , , ,000 **** - Money Pledged to Reserves Total Other Expense 200, , , ,000 Final Net Income (296,000) (200,000) (200,000) (200,000) Summary of Cuts: IOLTA Grants (96,000) (72,000) (48,000) Ops Office Rent - move to sf (4,900) (4,900) Utilities - 1/2 as much for 1/2 as much space (1,350) (1,350) Travel & Meeting - ED donates all mileage/meal reimburse. (1,500) (1,500) Training & Conferences - none (3,000) (3,000) Salaries - Freeze ED, PM & PA salaries (2,000) (2,000) FICA - from salary savings (150) (150) Fringe Benefits - ED pays 50% of medical/dental premiums (3,600) (3,600) Publicity & PR - electronic (no cost) annual report, small PP (7,500) (7,500) Additional Fringe Benefit Cuts - ED, PA pay full medical/ dental premiums; no IRA payments for ED, PM or PA (24,000) Total: (96,000) (96,000) (96,000) 2012 draft budget v. balanced options Page 2 of 2

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21 THE FLORIDA BAR FOUNDATION GRANT PROGRAM RESERVE DESCRIPTION Background The Foundation's board of directors approved re-establishment of the Grant Program Reserve at its September 2005 meeting. The action was recommended by the Foundation's grant program committee. The Foundation's board of directors first established the Reserve in the early 1990s because they recognized that IOTA revenue would rise and fall based on IOTA account balances and short-term interest rates. At that time, the goal of the Reserve was to maintain grant allocations for up to two years. In 2005, the board extended the goal to maintaining grant allocations for up to four years. Grant Program Reserve The specific goal for the Grant Program Reserve is to prevent cuts in annual allocations for Legal Assistance for the Poor/Law Student and Administration of Justice grants for up to four years once IOTA revenue goes into its next down cycle. Annual IOTA grant allocations are based on IOTA revenue and expenses in the prior year. When that amount is less than the year before, Reserve funds will be tapped to make up the difference. Calculating the amount of Reserve funds needed to maintain grant allocations for up to four years is done annually. In , it was calculated as follows (numbers are actual, but rounded for simplicity in this example): To maintain grant allocations at the level for up to four years: a LAP/LSA and AOJ grant allocation $17 million b. Subtract the worst-case scenario for the prior $11 million) 12 months of IOTA revenue/funds available for grants c. One-year shortfall in IOTA funds available for grants $ 6 million d. Multiple shortfall by four x 4 e. Amount of funds needed to maintain the grant $24 million allocation of $17 million for up to four years In each subsequent year of increasing IOTA revenue, this calculation is repeated with updated information. For example, the calculation of the required amount in Reserve for would start with the $25.8 million allocated for LAP/LSA and AOJ in , subtract the $11 million worst-case scenario for IOTA funds available for grants (or whatever amount is considered the "worst-case scenario" at the time), which leaves a shortfall of $14.8 million. Multiply the one-year short-fall by four which equals $59.2 million. That is the amount required in the Reserve to maintain grant allocations at the level of $25.8 million for up to four years.

22 IOLTA Reserve Policy Adopted January 15, 2004 Purpose of an IOLTA Reserve The IOLTA reserve has been established to provide a source for grants and to meet grant commitments during a fiscal year when IOLTA income has fallen below projections, and to provide grants as needed at a time of low performance or the loss of the IOLTA program, and to assist grantees who experience fiscal crisis due to unforeseen circumstances. Adding to the Reserve The goal amount of the IOLTA reserve is $750,000, the New Hampshire Bar Foundation board in its discretion may place IOLTA funds in excess of the amount committed to grants, IOLTA expenses, IOLTA operating cash balance, in the current fiscal year in reserve until the goal amount is reached. Maximum Reserve The current reserve will not exceed $750,000. If at any time the IOLTA reserve exceeds $750,000, the excess funds will be distributed to the grantees as part of distributions for the next fiscal year, as recommended by the IOLTA Grants Committee and approved by the Bar Foundation Board. Distribution of the Reserve Except in extreme circumstances no more than 25% of the IOLTA reserve may be distributed to assist grantees who are experiencing fiscal crisis during a fiscal year. IOLTA Reserve Investment Plan The Foundation s risk tolerance for the IOLTA reserve is very low; thus the investment window should be one year or less, funds should be exposed to minimal ups and downs, and the reserve should, over time, be moved to 100% cash and cash equivalents.

23

24

25

26

27

28