2014Q1 Reports: Treasurer

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Treasurer's Report to ACL Executive for year ended 2013-12-31

Interim report, February 2014

Graeme Hirst, Treasurer

1. Introduction

This is an interim report, as the books for 2013 will not be completed until perhaps May 2014. We aim to have things ready in time to allow our new accountant (see below) make our U.S. IRS return by the deadline of 15 May.

2. Conference results

The first reconciliation that we received from Sofia contained errors. The quality of the data has since been much improved, but key questions still remain. I am actively working with Svetla Koeva to resolve these problems. The present indications are that we might have made a modest surplus on the conference, but this is still very uncertain; a deficit remains possible but a better-than-modest surplus seems quite unlikely.

I do not yet have any indications of the results of NAACL-2013 Atlanta or EMNLP-2013 Seattle.

3. Accountant

After long dissatisfaction with the accounting services that we had been getting from the firm of Regan, Levin, Bloss, Brown, & Savchak, last year we sought a replacement. In July 2013, the Exec ratified the engagement of Mr Tom Dartnell of Nisivoccia LLP, who has extensive experience with U.S. federal and state filings for non-profit organizations in New Jersey. We accepted Mr Dartnell's recommendation that he begin his service with an audit, which we have not had for years, with the subsequent filing of returns for calendar year 2012. We (barely) managed to complete this task by the (doubly extended) IRS deadline of 15 November.

AUDIT: The audit was satisfactory (i.e., we passed), and copies of the audit document were submitted to the Exec in November 2013. For the benefit of new members in 2014, it is also attached to this report. Nonetheless, the auditors' investigation into our policies (or absence of policies) made me realize that there are some things that we could be doing better, and, following some suggestions from Mr Dartnell's assistant Steven Cimino, I make a number of recommendations below (section 5).

SUCCESSION PLANNING: The audit, and our issues with regard to our European assets (see below), are also a reminder that we need to be more mindful of the need for succession planning. This is a difficult problem in an organization that is partly virtual and internationally distributed, as succession difficulties often relate not only to organizational knowledge but also to geographic ties -- for example, my use of a bookkeeper who is necessarily in Toronto, our European investments in Mike Rosner's home country of Malta, Priscilla's physical office and records, and even the fact that we are legally a U.S. and New Jersey organization. We need to keep the problems of succession for all key administrative positions in mind, and think about mechanisms for eventual transitions to new people.

4. ACL's unsustainable financial relationship with chapters and SIGs

I have commented in past years that we need to rethink how conferences interact with chapter finances, but no action has been taken. The matter is becoming urgent, as the (albeit uncertain) ACL conference results for 2013 show. It seems that, regardless of the final outcome of ACL 2013 Sofia, we at best made little or no income in 2013 beyond that needed for basic operations; any surplus from the NAACL and EMNLP conferences goes solely to the NAACL chapter and SIGDAT. For some years, central ACL has been getting poorer while the proportion of the organization's assets that are held in the subaccounts of chapters and SIGs has been increasing.

Under the present arrangement, it is the chapters, not top-level ACL, that take most of the surplus or loss of our conferences. Specifically, the chapters get 100% of the surplus or loss of their own conferences, and 50% of that of the international conference when it is held in their territory. Only when the ACL conference is held in Asia and not joint with IJCNLP does ACL get 100%.

The rationale for this arrangement made sense at the time it was made. Central ACL and the journal were largely self-supporting, and this arrangement gave the chapters a little revenue for Good Works. This is no longer the case; central ACL operations require more funds, and, arguably, the chapters require less -- or, at least, they do not require half or all of the 15% surplus that we must assiduously aim for in future conferences. Equally, in view of the large loss that NAACL made a few years ago in Los Angeles, the chapters might wish to be more insulated from such losses. I therefore propose that we make a new arrangement with chapters, including (a) a sort of levy on chapter conferences of perhaps 50% of any surplus in return for a picking up, say, 30% of any loss and (b) reducing the chapter's cut of any ACL conference surplus from 50% to perhaps 20% but not passing on to them any losses. The explicit goal is to make chapters poorer and central ACL richer, because this is necessary for the organization's goals. It is quite reasonable to assume that participants in NAACL and EACL conferences wish to support central ACL as well the host chapter. The chapters' income would be reduced, but, in compensation, the income stream would be more reliable. Similarly, I propose that large SIG events (primarily EMNLP) should be expected to contribute some part of any surplus to central ACL's activities such as journals. This proposal remains on the table for further discussion and parameter-setting.

5. New pro forma policies

Our position as a U.S. non-profit organization requires us to ideally(*) have and declare (in our IRS filing) certain administrative policies for records retention, financial conflicts of interest, and whistle-blowing. Templates for policies for non-profit organizations to use without encumbrance are available from several support organizations. I have reviewed a number of these and have attached copies of those that I recommend that we consider for adoption. I don't think that any of them will be controversial. We just need to choose one of each and parameterize them to us. Records retention, Conflict of Interest 1, Conflict of Interest 2, Whistle-blowing

In the case of the first template for a financial conflicts of interest policy, I am proposing that we would use Sample A; the issues mentioned relating to California don't seem to affect us. Note that Code Section 4958, referred to in the sample, is the section of the U.S. tax code that provides penalties for people and non-profit organizations that engage in "excess benefit" transactions (i.e., hands in cookie jar). To find out more, you can read the gory details in the Wikipedia entry on intermediate sanctions ([1])

INVESTMENTS POLICY: A policy for allowable investments, which we also need, may require a little more thought. I attach two of them, the second of which was suggested to us by our accountants. Most of what they say merely codifies our present implicit understanding, but there are serious parameters to be set about allowable investments and diversification. Also, they are implicitly U.S.-centric, which we would need to alter (see also section 6 below). Investment policy 1, Investment policy 2

CHEQUE-SIGNING POLICY: According to our accountant, it's normal for an organization like ours to require two signatories, or some kind of two-person sign-off, on all cheques [or checks, in the U.S.] and online transactions over perhaps $2000 or $5000 or so. We have never had anything like that, even though we routinely deal with some very large amounts to pay hotels and conference centers. Implementing this idea could be difficult; although there are apparently various online mechanisms to facilitate it, it still requires the (or a) second authorized person to be readily available. We need to investigate further how to implement this without it becoming a serious administrative difficulty.

(*) "Ideally" means that while the IRS doesn't *require* that we have these policies, they ask whether we do. More generally, they care about proper governance of bona fide non-profit organizations, and having these policies is helpful in reassuring them.

6. Maltese investments

About half of ACL's assets are kept in longer-term euro-denominated investments in Malta, where they are overseen by the EACL Treasurer, Mike Rosner, of the University of Malta. (But they are ACL, not EACL assets; however, EACL's euro-denominated subaccount is included in these assets.) Last year, I commented that our exposure to a single small economy, however well-managed, is probably not a good idea, and that we need to diversify; and this is also a geographic issue for succession planning. In addition, managed investment funds in Malta seem to be expensive because they are relatively small. However, diversification is somewhat difficult because most of the investments are term deposits and bonds of limited liquidity. So when an investment matures, it just gets rolled over to something else in Malta. Also, there may be tax consequences of investments in other jurisdictions (we were at one point apparently in danger of being taxed in Malta, but that seems to have been dealt with).

Mike has recently suggested moving some of our assets from the Bank of Valletta to another Maltese bank named Mediterranean Bank, which appears to offer better opportunities for investment in non-Maltese entities, with lower charges and online trading. They claim to be claim to be a "specialist bank" focusing on the "affluent" sector, not a regular retail bank. (They are a component of a London-based group named AnaCap Financial Partners, [2].) I propose to the Exec that we consider this.