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SIOP Finances Q&A Part 2 With President Wang and Financial Officer/Secretary Heggestad

The SIOP Executive Board met on September 23-24, 2022, for its triannual meeting. To provide transparent updates to the SIOP membership, the Executive Board will select one or more major activities post-meeting to report on via a SIOP Source article. For this edition, we revisit the latest in SIOP finances with President Mo Wang and Financial Officer/Secretary Eric Heggestad as a follow up to our May article on the topic.

President Mo Wang:
Thanks for agreeing to another interview with me, Eric!

Financial Officer/Secretary Eric Heggestad:
Well, you are the President, Mo, so I’m not sure I had a choice.

Fair enough. 😊

So, it’s no secret that there are financial challenges right now with inflation, a wild stock market, a looming recession, and continued economic uncertainty. With all this in mind, what do you think is important for SIOP members to understand about our financial position?

Well, first I will confirm that SIOP is solvent, although we are not insulated from the economic environment that surrounds us. Fortunately, we continue to see good membership and event participation and employer use of our I-O Job Network, so our major revenue sources are holding, albeit not returning to prepandemic levels.

We do, however, seek to improve how SIOP funds its operations. All of us on the Executive Board take our fiduciary duty seriously, and so I am pleased at the strategic conversations we had at the recent board meeting to navigate SIOP through these continued uncertain financial times.

I agree. I too am pleased with the board’s attention to maintaining SIOP’s financial strength so that we can continue to meet member needs and advance the I-O profession. But let’s talk real numbers. How much money does SIOP have? What are we spending it on? and so on.

SIOP’s fiscal year ended June 30, 2022, so let’s use those numbers. As of that date, we had $927,438 in operating funds (checking, money market, certificate of deposit) and $4,012,502 in reserves (long term investments) for total assets of $4,939,940. Although that’s a significant drop from June 30, 2021, when we had $5.7M in total assets, it wasn’t unexpected given market performance year over year (like I said before, SIOP is not insulated from the economic environment that surrounds us). And we still have more assets today than we did on June 30, 2020, or June 30, 2019, or all the years before that.

So, no need to panic?

Right, no need to panic, however, we can’t fall asleep on this. See, when we put together the FY22-23 budget this summer, we had the same concerns we have had the past few years. SIOP is forever trying to do more and better for our members. We are experimenting and accommodating and reaching out. We are rebuilding our technology and staff infrastructures. And although we, the Executive Board, feel this is the right thing to do, it comes at a price. Have I mentioned that SIOP is not immune to the economic environment that surrounds us? Like all consumers, we are paying more for products and services that we buy to provide member services, run a conference, maintain our software, and so on. Like all businesses, we are having to compete for talent and increase wages and benefits to meet market demands.

In a nutshell, our projected expenses may be returning to prepandemic levels, but our revenue is not. And so, for the third year in a row, the Executive Board passed a deficit budget. In the first two of those years, if you look at operating dollars, we thankfully ended essentially breakeven each year (the investments are a different story). We will have to do the same hard work as the past few years of driving revenue to the extent we can while also looking for areas to cut expenses without negatively impacting member experience.

We can celebrate those two breakeven years and do our best to avoid the deficit this year again, but we don’t want deficit budgeting to become a habit.

Exactly. We’d like to establish a position where we are bringing in a small but meaningful net income each year to bolster our reserves but also elevate our offerings and meet future needs instead of playing catchup to current or longstanding needs.

We talked about reserves in our last Q&A. Can you give an update on that and remind our members what reserves are for?0

In April 2022, we passed a revised Financial Reserves policy. You can read it in its entirety here if you are interested, but the summary is that SIOP has committed to analyzing our reserves annually. This analysis positions us in one of three scenarios:

  1. We have so much money saved up we should reinvest some of it in the organization by spending it on something of strategic value.
  2. We have a nice amount saved up and it’s best to leave it where it is for now.
  3. We don’t have enough saved up and we need to figure out how to fix it before it becomes a problem.

To figure out which of these scenarios we are in, we look at how much contract liability we have with meeting venues during the fiscal year, plus a portion of budgeted expenses we have for the fiscal year, plus any prior year earmarked reserves. If we have more in reserves than all those values combined, we have excess reserves (scenario #1). If we have notably less in reserves than those values combined, we launch a financial task force to get us back on track (scenario #3). This year, we are in scenario #2.

That’s not a bad place to be.

Not at all, especially given the market hit year over year. Plus, we were able to preserve the money earmarked for the major, multiyear technology project we are undertaking that involves a completely new database, website, and other tools that will elevate our digital experience and better meet member expectations.

Yes, well, as you said earlier, SIOP is always trying to do more and better for our members. Thank you for being watchful of SIOP’s finances and considerate of how we manage and use our wealth to advance our profession and support our members.

And thank you, Mo, for using your presidential platform to help keep members informed about how we are caretaking their investment in this organization we all value so much.

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