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#1
September 26th 06, 09:14 PM
posted to rec.aviation.soaring
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SSA in Crisis: Can It Heal Itself? [LONG]
(with apologies to non-U.S. readers)
Most of the postings on this subject follow a predictable pattern: "what a bunch of stupid/unethical/indifferent (pick one) idiots we have at SSA; why don't they just [fill in the blank with your favorite brilliant solution]" A few (including mine) urge patience, support, and a chance to let the process work. Reluctantly I'm now changing my position from "be patient" to "do something." For the specifics, skip to the ACTION ITEM at the end. The rest of this is just a long-winded description of a discouraging journey the past few weeks. My new stance may seem like heresy given my past support of SSA. But after more than three weeks of working with and communicating with SSA directors, including the Executive Committee (ExComm), I confess I no longer have complete confidence that the current organization can deal properly with this crisis. Like most, I learned about SSA's tax filing/remittance problems from Dianne Black-Nixon's letter 3 1/2 weeks ago. While publicly urging patience, I also offered help to directors I know, including ExComm members. I agreed with most of their decisions but nevertheless had concerns. Soon I found myself working behind the scenes with several directors who shared these concerns, which were centered around maintaining the confidence and trust of SSA members during a time when their faith in SSA would be tested. Disclosures by ExComm implied that certain SSA funds were misappropriated by SSA's Chief Financial & Administrative Officer (CFAO), who has since been fired. But even if the CFAO were guilty, others may share responsibility for allowing this to happen. And as ExComm continued their investigation, the primary reason for our concern was conflict of interest. In the corporate (and non-profit) world, a conflict of interest exists whenever there is an incentive for people in positions of power and trust to take actions contrary to the best interests of those who have placed their trust in these individuals. It does not matter whether said individuals are trustworthy or competent or even whether they yield to these temptations. If there's an incentive for them to do the wrong thing, they are said to be conflicted and those conflicts must be properly addressed. The conflicts of interest with SSA's crisis relate to the fact that those working to resolve it--i.e., ExComm, the Budget and Finance Committee (FinComm), and SSA's accounting firm--potentially share responsibility for allowing it to occur. I would include SSA Executive Director Dennis Wright (ED) in this group but ExComm has been careful to give the impression that they are managing this situation, not the ED. Much outcry on this forum has focused on the decision to forgo annual audits. In my opinion, this misses the mark. To the best of my recollection as a former director (for nine years in the mid 1990s through early 2002, including service on ExComm), previous FinComms elected to have annual reviews performed by Johnson, Miller, SSA's public accounting firm (CPA) because they were much less expensive than a full audit (if I recall correctly, on the order of $20,000 less) yet provided some assurance that material problems would be uncovered. For those of you without financial backgrounds, there are three levels of involvement by a CPA with a client. For a "compilation," the CPA simply cranks out standard-format statements using the client's books and records. If the numbers add up, the CPA doesn't do much checking; they just make it look pretty. For a "review," (which is what I believe SSA had in prior years), the CPA goes a step further and attempts to uncover material problems. They offer no guarantees but at least the accountants look under the hood, so to speak. An "audit" (called for by the By-Laws) involves many more tests and checks based on which the CPA expresses an opinion as to whether the results conform to generally accepted accounting principles. An audit provides the highest level of assurance but, of course, costs the most, because of the extra work involved and also the liability assumed when expressing an opinion. In the past, the annual review plus the close relationship between the CPA and FinComm--who played a very active role in the SSA's finances at that time--plus performing an occasional full audit made the question one of economics as well as the By-Laws. In effect, FinComm made the decision to self insure, judging that an occasional loss, though unlikely, would still be less than the accumulated added cost of doing an audit every year. I suspect that may still turn out to be true despite the magnitude of the potential loss. I recall that the Board was made aware of this policy (but not asked to approve it, per se) on at least one occasion while I was a director but I cannot be certain. In my opinion, then, the critical question is whether FinComm retained Johnson, Miller to continue preparing SSA's annual financial statements, and more specifically to do annual reviews. ExComm's disclosures indicate they did not. Here's where the potential conflicts arise. Good governance calls for FinComm to retain the CPA, who would report directly to them (not to the CFAO or the ED or ExComm or Board), to prepare the annual financial statements (with a review or, under the By-Laws, an audit). ExComm meeting minutes note that Johnson, Miller appears not to have been retained to do any such work after 2002. If FinComm did retain them, in writing or orally, then Johnson, Miller may (and I emphasize the word "may") have some culpability and there is an inherent conflict with their continuing to work on the SSA account. In that case, it gets messier: ExComm meeting minutes indicate that Johnson, Miller selected the lawyer in Hobbs that SSA engaged. This attorney quickly recommended that SSA give Johnson, Miller "carte blanche to do what they needed with the SSA financial records." On the other hand, if FinComm did not retain Johnson, Miller, then FinComm itself may (again, "may") have some culpability, perhaps shared by ExComm and the Board (although directors could argue they acted in reliance on FinComm) and there is an inherent conflict with their playing a key role in this investigation. It's very important to reiterate that competence and trustworthiness are irrelevant to this discussion. It doesn't matter whether the CPA or FinComm or ExComm did anything wrong, intentionally or otherwise. And I'm not suggesting they did. On the contrary, I've been generally impressed with the work done by ExComm so far. What matters is that people who may have legal liability and therefore a vested interest in the outcome are deeply involved in this investigation. That's a classic conflict of interest. And it's a recipe for losing the confidence of SSA members at a time when we need it most. One remedy for conflict of interest is disclosure. Depending on your point of view, disclosure to date has been adequate but sometimes reluctant. Another remedy is bringing in new people to do the investigative and remediation work. This is risky. Those who know the most about SSA and are in the best position to help are probably already involved. It's difficult enough to get competent volunteers, much less to work for free in Hobbs going through accounting records and meeting with attorneys, bankers, the IRS, etc. A third and, I believe, best remedy is an independent group to monitor the actions of ExComm, the accountants, the attorney(s), staff, and others involved. This is where the discussions with the concerned directors quickly arrived. Ultimately this resulted in a formal proposal for an Oversight Task Force (OTF). Four SSA members were prevailed upon by these directors to serve on the OTF: myself and three other individuals--a highly experienced accountant, an attorney, and a successful businessman. Because of my prior Board service, I initially declined to serve on the OTF but was persuaded by the two concerned directors because of my knowledge of SSA, my business background, and the fact that my tenure ended in early 2002, prior to the Larry Sanderson affair. The OTF proposal was made to the full Board by one of these concerned directors approximately two weeks ago with, unfortunately, a generally negative reaction. How could this happen? Well, some directors had genuine questions about certain provisions in the OTF proposal but I believe the negative reaction was due in great part to misunderstanding the OTF's purpose. Instead of oversight (i.e., monitoring, not decision making), some saw this as an attempt to usurp power from the Board or ExComm. Some feared it could interfere with and/or delay the investigation or reveal confidential information. Others viewed it as a no-confidence vote. In frustration, I "recused" myself from participation on the OTF and made a direct appeal to the Board explaining OTF's purpose in more detail and arguing that it was the Board's fiduciary duty to take action to oversee the activities of ExComm, FinComm, and others who were conflicted. With this clarification, responses to our proposal were gratifyingly more favorable. In fact, ExComm subsequently expressed their support for the OTF. To be fair, at least some ExComm members (including Dianne Black-Nixon) had voiced support all along. That was nearly two weeks ago. Since then, nothing much has happened. ExComm continues to manage the investigation and to make decisions. My sense is that there may be debate even within ExComm on how to proceed. More than a week ago, one ExComm member emailed me to say it would be not be practical to hold a tele-conference special Board meeting for all 26 directors and suggested delaying action on the OTF until the scheduled Board meeting at the end of this month. My response was that with every passing day, decisions were being made that could be criticized by SSA members and should be overseen by an independent body. I often participate in conference calls with at least that many people dispersed over the U.S. and India and do not think a properly managed special meeting--with one agenda item--would be terribly difficult. Rightly or wrongly, I interpreted this as foot dragging. If ExComm had supported the OTF with the same admirable alacrity with which they jumped on the initial disclosure of the tax problems, the OTF would already be at work and I would not be writing what some will doubtless interpret as a disloyal or disruptive public posting. ExComm believes it would be inappropriate for them to charter the OTF without full Board approval. They have a point, but this reasoning leads inexorably to the conclusion that, absent oversight, ExComm should not be making major decisions about the investigation or corrective action, either. Ironically, with one troubling exception (see below), I'm less concerned with what ExComm is actually doing in Hobbs than with how SSA members may come to perceive or question their actions. To date, ExComm has moved decisively to manage a tough problem and it's difficult to quarrel with their actions. But many members still have a sense that a previous ExComm attempted to cover up the Larry Sanderson expense account scandal three years ago. We cannot afford the same cynicism, or worse, now. While most members understand that some things must remain confidential for legal reasons, they are uncomfortable or angry if they suspect they are not getting the real story. And on that score, ExComm's inaction is troubling. I mentioned an exception, and it's a big one: how responsibility for this problem is being assigned. ExComm's communications have emphasized the ED's failure to inform the Board of the non-filing of tax information returns. At the same time, however, ExComm has minimized the "errors of omission" of the ExComm/FinComm/Board in not retaining the CPA to examine the SSA's annual financial statements. In fact, both lapses are errors of omission. Yet my impression is that the ED is being positioned as the one most responsible for allowing this crisis while FinComm's failure to act is being dismissed. For that matter, ExComm admits that the CFAO reported directly to the Board, not the ED, until mid 2005 so there is ample reason to share responsibility for this. While I do not have the facts available to ExComm, the questions raised are precisely the reason that independent oversight is needed over those who find themselves in conflicted positions, for their sake as well as the members'. And it is needed immediately, not next week or the week after that or after the next major staff or organizational decision is made. If this were a public corporation, plaintiffs' attorneys would already be circling like vultures with the prospect that directors could be sued and found guilty of breach of their fiduciary duty, in particular those on FinComm and, likely, ExComm. But there's not enough money here to interest them. Nor do I believe we should necessarily seek to punish whomever may have contributed to this debacle. This was a failure, albeit a predictable one, of a flawed system. Yet I don't think we ought to sweep anything under the rug, either. I believe most SSA members would readily forgive the unwitting errors of volunteer directors so long as they believe they are being dealt with forthrightly. I apologize to those I know and respect on the Board and ExComm who are dedicated, well intentioned, and working hard in thankless positions. But I fear that some of them do not fully understand the danger that their inaction will increase the cynicism and apathy already evident in many SSA members. The lack of urgency and reluctance to initiate oversight by ExComm and the directors alike suggest that some of them still don't "get it." Despite protestations to the contrary, there is a tendency in times like this for ExComm and the Board to "circle the wagons." It's a natural human response to threats, both from the original problem and from outraged SSA members who want someone, anyone, to pay in blood. It is a tendency against which we must fight hard if we are to maintain the trust of our members. Sadly, at this point individuals who generously agreed to serve on the OTF weeks ago are growing cynical about the willingness of SSA to address its problems. Clearly I am, too. On a positive note, I see this unfortunate crisis as a wonderful opportunity to make major changes to SSA to improve its financial position and increase its effectiveness. The current Board structure is indeed cumbersome and ineffective. It also makes sense to examine which functions the SSA should perform and whether some of these should be outsourced. And I agree with those who believe we should explore locations other than Hobbs. We have a chance to "start over" with a clean sheet of paper...without losing those elements of SSA that are critical. Yet what I have seen in the past 3+ weeks leaves me worried that we will squander this opportunity. ACTION ITEM: Please contact your directors and, while offering your continuing support and trust, urge them to demand the Oversight Task Force or something like it be put in place immediately. All of us--members, directors, ExComm, and staff alike--need the clarity and assurance that only an independent observer can provide. In the meantime, please maintain the degree of civility on this forum that I hope you would if the discussion were taking place in person. Ironically, the offensive and irresponsible behavior of some participants on rec.aviation.soaring alienates most SSA members and encourages our leadership, with some justification, to dismiss these critics as just a bunch of loudmouth idiots. Those who insist on popping off indiscriminately with wild allegations, accusations, and statements of opinion-as-fact serve no one but their own egos. Their actions--presuming they actually care about the future of SSA and the great things it has and can still do for soaring pilots in this country--are counterproductive. Chip Bearden SSA Member since 1965 
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#2
September 26th 06, 10:21 PM
posted to rec.aviation.soaring
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SSA in Crisis: Can It Heal Itself? [LONG]
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#3
September 26th 06, 10:58 PM
posted to rec.aviation.soaring
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SSA in Crisis: Can It Heal Itself? [LONG]
Chip;
Thank you for the time it took for you to carefully write your message. There was much to digest, and I have several thoughts/responses. 1. Overall, I got the impression that you were going "public" with some of your thoughts because you tried working from the inside and got nowhere against an entrenched power that was circling the wagons. This represents one of the great mistakes that continues to plague the ssa. A small minority of power players simply cannot run a non profit organization which depends upon the support of members, many of whom feel disenfranchised. 2. I have written to the excom on several occasions. Immediately upon reading the first note from the chair, I strongly urged the entire board to resign and to have a master appointed to oversee the reorganization, preferably under court supervision. At that point the ssa was insolvent and it was appropriate for a bankruptcy court to appoint a master. Since the financial issue of the unpaid taxes has evidently been resolved via a loan from the soaring foundation ( which is controlled by the excom), I am not sure if bankruptcy is still a viable option for getting a master involved. HOWEVER, for the board to have decided to borrow from the foundation is another decision which has conflict written all over it and in the long run may NOT have been in the best interests of the ssa or the foundation. Non payment of federal withholding is a PERSONAL LIABILITY to the ED, AND TO THE BOARD!!!. So lets be real clear about what they did.. They paid the taxes and got out from under personal liability. In my opinion, this was a major driver in their decision making over the last few weeks. They chose to MANAGE the situation themselves rather than to expose themselves to leins from the IRS. They have cloaked this decision in rhetoric that is thin at best. I have not recieved any responses from the excom to several messages. 3. I somewhat DISAGREE with your analysis of the situation re the accountants. a. the BOARD DECIDED to forgo the audit. it was an act of COMMISSION that they have publically acknowledged. Not an act of OMISSION. b. The association, the board,the excom and the ED are all controlled by the bylaws. Being a volunteer does not excuse noncompliance, especially when done OVERTLY. c. I believe that you are a bit off track when you imply that the LEVEL of service purchased from the accountants limits their ( the accounts) liability. Likewise, i believe that your implication that the accountants worked for someone other than the ASOCIATION is off track. While the finance committee or the ED or the chair could be responsible for the selection and determination of the scope of services purchased, THE ACCOUNTANTS WORK FOR THE ASSOCIATION. Regardless of the scope of the assignment, they evidently had knowledge for years that returns and reports were not being filed in a timely manner. The chair informed us that they complained several times to the ed that they were not recieving adequate information from the cfo.. He was evidently unable or unwilling to address these questions from the accountants. It is my belief that ethical and responsible standards of conduct REQUIRE them to have brought these problems to the attention of the fin com and or to the chair of the board. I cannot understand how a firm could NOT have done this when faced with the certain knowledge that timely reports were not being prepared and filed. At the very least they should have formally RESIGNED the account when faced with continued inaction. Not doing so puts them right in the middle of the problem. Having them do the forensic accounting puts them further in the hole. 4. In my opinion, the real short term problems stems from the SSA insurance policy which insures against fraud and misdeeds by inside officers and probably the board as well. The society will be reimbursed for monies lost due to fraud and other willful acts. BUT THE INSURANCE COMPANY WILL GO AFTER THOSE RESPONSIBLE!! So to the extent that the CFO or the ED or the Board took actions which cause the insurance company to pay out a claim to the society, THEY WILL BE SUED by the insurance company. The concept of "deep pocket" applies here. It is my opinion that the attorney who, by your account, was suggested by the accountants, has explained this in detail I find it interesting that NO mention of insurance coverage has been made by the chair to date.. My conclusion is that perhaps all involved are seeking to resolve the financial problems WITHOUT accessing the policy because they have been informed of their legal liability. As an aside, most directors policies do NOT cover legal expenses resulting from acts that were unlawful. In plain english... if the board files a claim, they are probably going to get sued individually by the insurance company and neither the ssa nor the insurance co will be able to pay their legal costs of defense. This is why they should have resigned, but, imho did not. 5. you wrote "plus performing an occasional full audit made the question one of economics as well as the By-Laws. In effect, FinComm made the decision to self insure, judging that an occasional loss, though unlikely, would still be less than the accumulated added cost of doing an audit every year. " You have just hit upon a key issue. A small group of people made a decision to self insure and to make a decision out of economic necissity. This was ILLIGAL. economics do not trump the bylaws. restated, .. the fincom and the board choose to violate the bylaws. they choose not to AMEND them. What they did was wrong, irrisponsible, actionable and is biting them in the ass. 6. you wrote "Sadly, at this point individuals who generously agreed to serve on the OTF weeks ago are growing cynical about the willingness of SSA to address its problems. Clearly I am, too." just how cynical do you feel the average member is today?? How is that member going to feel about having his dues raised or his pretty magizine eliminated so that the ssa can repay the debt to the foundation?? especially if the board decides not to access the insurance money??? Again a single MASTER with authority vested by a court could resolve these issues, call a general reorganization election and present several alternative business/governance models to the membership and do an impartial job of restructuring. It would be expensive, some people would get sued, but the society would have a chance. As thing are going now, members are feeling less and less a part of the process, mistakes are being compounded and the situation is getting worse. Who in their right mind is going to volunteer to be a director?? Rather than tap the soaring foundation trust fund to pay the taxes, it would be more appropriate for the society to collect from the insurance company and then tap into the foundation for expenses related to the restructuring and reorganization. I would support that, and am very opposed to using the resources of the foundation to get those in power off the hook with the irs. The underlying problem remains that a very small group of insiders continues to run the organization and, as you stated, circles the wagons when confronted with major problems. wrote in message ups.com... (with apologies to non-U.S. readers) Most of the postings on this subject follow a predictable pattern: "what a bunch of stupid/unethical/indifferent (pick one) idiots we have at SSA; why don't they just [fill in the blank with your favorite brilliant solution]" A few (including mine) urge patience, support, and a chance to let the process work. Reluctantly I'm now changing my position from "be patient" to "do something." For the specifics, skip to the ACTION ITEM at the end. The rest of this is just a long-winded description of a discouraging journey the past few weeks. My new stance may seem like heresy given my past support of SSA. But after more than three weeks of working with and communicating with SSA directors, including the Executive Committee (ExComm), I confess I no longer have complete confidence that the current organization can deal properly with this crisis. Like most, I learned about SSA's tax filing/remittance problems from Dianne Black-Nixon's letter 3 1/2 weeks ago. While publicly urging patience, I also offered help to directors I know, including ExComm members. I agreed with most of their decisions but nevertheless had concerns. Soon I found myself working behind the scenes with several directors who shared these concerns, which were centered around maintaining the confidence and trust of SSA members during a time when their faith in SSA would be tested. Disclosures by ExComm implied that certain SSA funds were misappropriated by SSA's Chief Financial & Administrative Officer (CFAO), who has since been fired. But even if the CFAO were guilty, others may share responsibility for allowing this to happen. And as ExComm continued their investigation, the primary reason for our concern was conflict of interest. In the corporate (and non-profit) world, a conflict of interest exists whenever there is an incentive for people in positions of power and trust to take actions contrary to the best interests of those who have placed their trust in these individuals. It does not matter whether said individuals are trustworthy or competent or even whether they yield to these temptations. If there's an incentive for them to do the wrong thing, they are said to be conflicted and those conflicts must be properly addressed. The conflicts of interest with SSA's crisis relate to the fact that those working to resolve it--i.e., ExComm, the Budget and Finance Committee (FinComm), and SSA's accounting firm--potentially share responsibility for allowing it to occur. I would include SSA Executive Director Dennis Wright (ED) in this group but ExComm has been careful to give the impression that they are managing this situation, not the ED. Much outcry on this forum has focused on the decision to forgo annual audits. In my opinion, this misses the mark. To the best of my recollection as a former director (for nine years in the mid 1990s through early 2002, including service on ExComm), previous FinComms elected to have annual reviews performed by Johnson, Miller, SSA's public accounting firm (CPA) because they were much less expensive than a full audit (if I recall correctly, on the order of $20,000 less) yet provided some assurance that material problems would be uncovered. For those of you without financial backgrounds, there are three levels of involvement by a CPA with a client. For a "compilation," the CPA simply cranks out standard-format statements using the client's books and records. If the numbers add up, the CPA doesn't do much checking; they just make it look pretty. For a "review," (which is what I believe SSA had in prior years), the CPA goes a step further and attempts to uncover material problems. They offer no guarantees but at least the accountants look under the hood, so to speak. An "audit" (called for by the By-Laws) involves many more tests and checks based on which the CPA expresses an opinion as to whether the results conform to generally accepted accounting principles. An audit provides the highest level of assurance but, of course, costs the most, because of the extra work involved and also the liability assumed when expressing an opinion. In the past, the annual review plus the close relationship between the CPA and FinComm--who played a very active role in the SSA's finances at that time--plus performing an occasional full audit made the question one of economics as well as the By-Laws. In effect, FinComm made the decision to self insure, judging that an occasional loss, though unlikely, would still be less than the accumulated added cost of doing an audit every year. I suspect that may still turn out to be true despite the magnitude of the potential loss. I recall that the Board was made aware of this policy (but not asked to approve it, per se) on at least one occasion while I was a director but I cannot be certain. In my opinion, then, the critical question is whether FinComm retained Johnson, Miller to continue preparing SSA's annual financial statements, and more specifically to do annual reviews. ExComm's disclosures indicate they did not. Here's where the potential conflicts arise. Good governance calls for FinComm to retain the CPA, who would report directly to them (not to the CFAO or the ED or ExComm or Board), to prepare the annual financial statements (with a review or, under the By-Laws, an audit). ExComm meeting minutes note that Johnson, Miller appears not to have been retained to do any such work after 2002. If FinComm did retain them, in writing or orally, then Johnson, Miller may (and I emphasize the word "may") have some culpability and there is an inherent conflict with their continuing to work on the SSA account. In that case, it gets messier: ExComm meeting minutes indicate that Johnson, Miller selected the lawyer in Hobbs that SSA engaged. This attorney quickly recommended that SSA give Johnson, Miller "carte blanche to do what they needed with the SSA financial records." On the other hand, if FinComm did not retain Johnson, Miller, then FinComm itself may (again, "may") have some culpability, perhaps shared by ExComm and the Board (although directors could argue they acted in reliance on FinComm) and there is an inherent conflict with their playing a key role in this investigation. It's very important to reiterate that competence and trustworthiness are irrelevant to this discussion. It doesn't matter whether the CPA or FinComm or ExComm did anything wrong, intentionally or otherwise. And I'm not suggesting they did. On the contrary, I've been generally impressed with the work done by ExComm so far. What matters is that people who may have legal liability and therefore a vested interest in the outcome are deeply involved in this investigation. That's a classic conflict of interest. And it's a recipe for losing the confidence of SSA members at a time when we need it most. One remedy for conflict of interest is disclosure. Depending on your point of view, disclosure to date has been adequate but sometimes reluctant. Another remedy is bringing in new people to do the investigative and remediation work. This is risky. Those who know the most about SSA and are in the best position to help are probably already involved. It's difficult enough to get competent volunteers, much less to work for free in Hobbs going through accounting records and meeting with attorneys, bankers, the IRS, etc. A third and, I believe, best remedy is an independent group to monitor the actions of ExComm, the accountants, the attorney(s), staff, and others involved. This is where the discussions with the concerned directors quickly arrived. Ultimately this resulted in a formal proposal for an Oversight Task Force (OTF). Four SSA members were prevailed upon by these directors to serve on the OTF: myself and three other individuals--a highly experienced accountant, an attorney, and a successful businessman. Because of my prior Board service, I initially declined to serve on the OTF but was persuaded by the two concerned directors because of my knowledge of SSA, my business background, and the fact that my tenure ended in early 2002, prior to the Larry Sanderson affair. The OTF proposal was made to the full Board by one of these concerned directors approximately two weeks ago with, unfortunately, a generally negative reaction. How could this happen? Well, some directors had genuine questions about certain provisions in the OTF proposal but I believe the negative reaction was due in great part to misunderstanding the OTF's purpose. Instead of oversight (i.e., monitoring, not decision making), some saw this as an attempt to usurp power from the Board or ExComm. Some feared it could interfere with and/or delay the investigation or reveal confidential information. Others viewed it as a no-confidence vote. In frustration, I "recused" myself from participation on the OTF and made a direct appeal to the Board explaining OTF's purpose in more detail and arguing that it was the Board's fiduciary duty to take action to oversee the activities of ExComm, FinComm, and others who were conflicted. With this clarification, responses to our proposal were gratifyingly more favorable. In fact, ExComm subsequently expressed their support for the OTF. To be fair, at least some ExComm members (including Dianne Black-Nixon) had voiced support all along. That was nearly two weeks ago. Since then, nothing much has happened. ExComm continues to manage the investigation and to make decisions. My sense is that there may be debate even within ExComm on how to proceed. More than a week ago, one ExComm member emailed me to say it would be not be practical to hold a tele-conference special Board meeting for all 26 directors and suggested delaying action on the OTF until the scheduled Board meeting at the end of this month. My response was that with every passing day, decisions were being made that could be criticized by SSA members and should be overseen by an independent body. I often participate in conference calls with at least that many people dispersed over the U.S. and India and do not think a properly managed special meeting--with one agenda item--would be terribly difficult. Rightly or wrongly, I interpreted this as foot dragging. If ExComm had supported the OTF with the same admirable alacrity with which they jumped on the initial disclosure of the tax problems, the OTF would already be at work and I would not be writing what some will doubtless interpret as a disloyal or disruptive public posting. ExComm believes it would be inappropriate for them to charter the OTF without full Board approval. They have a point, but this reasoning leads inexorably to the conclusion that, absent oversight, ExComm should not be making major decisions about the investigation or corrective action, either. Ironically, with one troubling exception (see below), I'm less concerned with what ExComm is actually doing in Hobbs than with how SSA members may come to perceive or question their actions. To date, ExComm has moved decisively to manage a tough problem and it's difficult to quarrel with their actions. But many members still have a sense that a previous ExComm attempted to cover up the Larry Sanderson expense account scandal three years ago. We cannot afford the same cynicism, or worse, now. While most members understand that some things must remain confidential for legal reasons, they are uncomfortable or angry if they suspect they are not getting the real story. And on that score, ExComm's inaction is troubling. I mentioned an exception, and it's a big one: how responsibility for this problem is being assigned. ExComm's communications have emphasized the ED's failure to inform the Board of the non-filing of tax information returns. At the same time, however, ExComm has minimized the "errors of omission" of the ExComm/FinComm/Board in not retaining the CPA to examine the SSA's annual financial statements. In fact, both lapses are errors of omission. Yet my impression is that the ED is being positioned as the one most responsible for allowing this crisis while FinComm's failure to act is being dismissed. For that matter, ExComm admits that the CFAO reported directly to the Board, not the ED, until mid 2005 so there is ample reason to share responsibility for this. While I do not have the facts available to ExComm, the questions raised are precisely the reason that independent oversight is needed over those who find themselves in conflicted positions, for their sake as well as the members'. And it is needed immediately, not next week or the week after that or after the next major staff or organizational decision is made. If this were a public corporation, plaintiffs' attorneys would already be circling like vultures with the prospect that directors could be sued and found guilty of breach of their fiduciary duty, in particular those on FinComm and, likely, ExComm. But there's not enough money here to interest them. Nor do I believe we should necessarily seek to punish whomever may have contributed to this debacle. This was a failure, albeit a predictable one, of a flawed system. Yet I don't think we ought to sweep anything under the rug, either. I believe most SSA members would readily forgive the unwitting errors of volunteer directors so long as they believe they are being dealt with forthrightly. I apologize to those I know and respect on the Board and ExComm who are dedicated, well intentioned, and working hard in thankless positions. But I fear that some of them do not fully understand the danger that their inaction will increase the cynicism and apathy already evident in many SSA members. The lack of urgency and reluctance to initiate oversight by ExComm and the directors alike suggest that some of them still don't "get it." Despite protestations to the contrary, there is a tendency in times like this for ExComm and the Board to "circle the wagons." It's a natural human response to threats, both from the original problem and from outraged SSA members who want someone, anyone, to pay in blood. It is a tendency against which we must fight hard if we are to maintain the trust of our members. Sadly, at this point individuals who generously agreed to serve on the OTF weeks ago are growing cynical about the willingness of SSA to address its problems. Clearly I am, too. On a positive note, I see this unfortunate crisis as a wonderful opportunity to make major changes to SSA to improve its financial position and increase its effectiveness. The current Board structure is indeed cumbersome and ineffective. It also makes sense to examine which functions the SSA should perform and whether some of these should be outsourced. And I agree with those who believe we should explore locations other than Hobbs. We have a chance to "start over" with a clean sheet of paper...without losing those elements of SSA that are critical. Yet what I have seen in the past 3+ weeks leaves me worried that we will squander this opportunity. ACTION ITEM: Please contact your directors and, while offering your continuing support and trust, urge them to demand the Oversight Task Force or something like it be put in place immediately. All of us--members, directors, ExComm, and staff alike--need the clarity and assurance that only an independent observer can provide. In the meantime, please maintain the degree of civility on this forum that I hope you would if the discussion were taking place in person. Ironically, the offensive and irresponsible behavior of some participants on rec.aviation.soaring alienates most SSA members and encourages our leadership, with some justification, to dismiss these critics as just a bunch of loudmouth idiots. Those who insist on popping off indiscriminately with wild allegations, accusations, and statements of opinion-as-fact serve no one but their own egos. Their actions--presuming they actually care about the future of SSA and the great things it has and can still do for soaring pilots in this country--are counterproductive. Chip Bearden SSA Member since 1965
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#4
September 26th 06, 11:12 PM
posted to rec.aviation.soaring
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SSA in Crisis: Can It Heal Itself? [LONG]
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#6
September 27th 06, 01:15 AM
posted to rec.aviation.soaring
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SSA in Crisis: Can It Heal Itself? [LONG]
Bill Daniels wrote: "It would be nice if there were a forum less public than this one where internal matters of the SSA could be discussed by the membership. That there isn't such a forum is perhaps a small part of the problem." I remember there used to be such a forum on the SSA web site. Apparently it was lost when the site was "upgraded" a year or two ago.
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#7
September 27th 06, 01:33 AM
posted to rec.aviation.soaring
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SSA in Crisis: Can It Heal Itself? [LONG]
wrote in message ups.com... Bill Daniels wrote: "It would be nice if there were a forum less public than this one where internal matters of the SSA could be discussed by the membership. That there isn't such a forum is perhaps a small part of the problem." I remember there used to be such a forum on the SSA web site. Apparently it was lost when the site was "upgraded" a year or two ago. As far as I can tell, it is still there, (news.ssa.org) but it has fallen into disuse. That may not be the best place for such a frank discussion; things could get ugly and the existence of the discussion itself could unnecessarily become a political issue. I have seen it happen! While I understand the feelings of others, this is a vital subject! RAS is the only place I know of where the proper "critical mass" of SSA members can be found on a daily basis to have a meaningful discussion. Vaughn
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#8
September 27th 06, 01:44 AM
posted to rec.aviation.soaring
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SSA in Crisis: Can It Heal Itself? [LONG]
wrote:
Bill Daniels wrote: "It would be nice if there were a forum less public than this one where internal matters of the SSA could be discussed by the membership. That there isn't such a forum is perhaps a small part of the problem." I remember there used to be such a forum on the SSA web site. Apparently it was lost I don't think it was lost, but discarded because it was so little used. This was particularly noticable during the Sanderson episode, when everyone used ras instead of the SSA newsgroups. when the site was "upgraded" a year or two ago. "Upgraded" in quotes? You don't think the site is much better in the last two years? I think it's got a lot more content that is easier to find, and it looks great. Do you really wish we had the site from two years ago? -- Note: email address new as of 9/4/2006 Change "netto" to "net" to email me directly Eric Greenwell - Washington State, USA "Transponders in Sailplanes" on the Soaring Safety Foundation website www.soaringsafety.org/prevention/articles.html "A Guide to Self-launching Sailplane Operation" at www.motorglider.org
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#9
September 27th 06, 07:06 AM
posted to rec.aviation.soaring
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SSA in Crisis: Can It Heal Itself? [LONG]
Chip
I could not agree with you more. No stone should be left unturned in getting to the bottom of this. Unfortunately, the only way to use a 'broad brush" and clean this mess up would be to sweep out the "insiders" and replace them with people that will eventually become insiders. We seem to elect our directors now, so I am at a loss to tell you if we are all misinformed when we vote, or we have been all lead astray. I repeat what I said in an earlier post, and that is, the people that I know on the Excomm and the board are above reproach. That being said, does that make every member that voted for their directors culpable in this situation? If that is so, what is to stop an insurance company from coming after all of us. The answer: NOTHING! I did indeed vote for my current director, and have every confidence that the job being done by this person is in the best interests of all of us in the society. Hindsight is really 20\20 and we are all going blind trying to say what should have been done differently. It is too late to cry over spilled milk. That being said, I need to point out, in light of the Sanderson problem, the computer problem, and now this, we seem to be an organization that takes 3 steps forward, and 2 back. Somehow, we must solve this. Do I have all the answers, no, but all of us together can make it work. I also said this earlier, but it bears repeating as well. Everyone elected to run the SSA need to vote for the good of the society, and not their buddies\clubs best interests. This is most times harder than it seems, just look at Congress. SSA caters to a lot of different facets of soaring. All will be worse off if we don't stop this type of thing for good. Many people have done a lot of good for us over the years, many have also looked good while quietly serving their own agenda. It is time to think of the big picture, and the big agenda. I think you have done that. I applaud that! Now let's all do that. Stop whining, stop trying to blame everyone. Figure out where the money went, who misused it, and put in place a real and lasting sytem of checks and balances. Someone has already been sent packing over improper financials and the like. More should follow. This clearly did not start OR end with the CFO. The board and the Excomm are only as good as the people who work and report to them. If we can not trust those people, then new ones that we can trust should be hired. Until then (and this is not aimed at you Chip) get off the boards back and let them do what we elected them to do. Have trust in them. They are us. Members, elected by us, who have NO REASON to purposely mismanage their OWN money. After all, these people care as much about soaring as we all do. Action will be had soon. This situation did not happen overnight, and will not be solved by one conference call. Rome was not built in a day, nor did this situation take only a month or so to build. This started years ago. One phone call among the board will not make that much difference. Until then, we all need to contact our directors and offer to help. Who knows, one of us could make all the difference. Brian Glick Mifflin, PA wrote in message ups.com... (with apologies to non-U.S. readers) Most of the postings on this subject follow a predictable pattern: "what a bunch of stupid/unethical/indifferent (pick one) idiots we have at SSA; why don't they just [fill in the blank with your favorite brilliant solution]" A few (including mine) urge patience, support, and a chance to let the process work. Reluctantly I'm now changing my position from "be patient" to "do something." For the specifics, skip to the ACTION ITEM at the end. The rest of this is just a long-winded description of a discouraging journey the past few weeks. My new stance may seem like heresy given my past support of SSA. But after more than three weeks of working with and communicating with SSA directors, including the Executive Committee (ExComm), I confess I no longer have complete confidence that the current organization can deal properly with this crisis. Like most, I learned about SSA's tax filing/remittance problems from Dianne Black-Nixon's letter 3 1/2 weeks ago. While publicly urging patience, I also offered help to directors I know, including ExComm members. I agreed with most of their decisions but nevertheless had concerns. Soon I found myself working behind the scenes with several directors who shared these concerns, which were centered around maintaining the confidence and trust of SSA members during a time when their faith in SSA would be tested. Disclosures by ExComm implied that certain SSA funds were misappropriated by SSA's Chief Financial & Administrative Officer (CFAO), who has since been fired. But even if the CFAO were guilty, others may share responsibility for allowing this to happen. And as ExComm continued their investigation, the primary reason for our concern was conflict of interest. In the corporate (and non-profit) world, a conflict of interest exists whenever there is an incentive for people in positions of power and trust to take actions contrary to the best interests of those who have placed their trust in these individuals. It does not matter whether said individuals are trustworthy or competent or even whether they yield to these temptations. If there's an incentive for them to do the wrong thing, they are said to be conflicted and those conflicts must be properly addressed. The conflicts of interest with SSA's crisis relate to the fact that those working to resolve it--i.e., ExComm, the Budget and Finance Committee (FinComm), and SSA's accounting firm--potentially share responsibility for allowing it to occur. I would include SSA Executive Director Dennis Wright (ED) in this group but ExComm has been careful to give the impression that they are managing this situation, not the ED. Much outcry on this forum has focused on the decision to forgo annual audits. In my opinion, this misses the mark. To the best of my recollection as a former director (for nine years in the mid 1990s through early 2002, including service on ExComm), previous FinComms elected to have annual reviews performed by Johnson, Miller, SSA's public accounting firm (CPA) because they were much less expensive than a full audit (if I recall correctly, on the order of $20,000 less) yet provided some assurance that material problems would be uncovered. For those of you without financial backgrounds, there are three levels of involvement by a CPA with a client. For a "compilation," the CPA simply cranks out standard-format statements using the client's books and records. If the numbers add up, the CPA doesn't do much checking; they just make it look pretty. For a "review," (which is what I believe SSA had in prior years), the CPA goes a step further and attempts to uncover material problems. They offer no guarantees but at least the accountants look under the hood, so to speak. An "audit" (called for by the By-Laws) involves many more tests and checks based on which the CPA expresses an opinion as to whether the results conform to generally accepted accounting principles. An audit provides the highest level of assurance but, of course, costs the most, because of the extra work involved and also the liability assumed when expressing an opinion. In the past, the annual review plus the close relationship between the CPA and FinComm--who played a very active role in the SSA's finances at that time--plus performing an occasional full audit made the question one of economics as well as the By-Laws. In effect, FinComm made the decision to self insure, judging that an occasional loss, though unlikely, would still be less than the accumulated added cost of doing an audit every year. I suspect that may still turn out to be true despite the magnitude of the potential loss. I recall that the Board was made aware of this policy (but not asked to approve it, per se) on at least one occasion while I was a director but I cannot be certain. In my opinion, then, the critical question is whether FinComm retained Johnson, Miller to continue preparing SSA's annual financial statements, and more specifically to do annual reviews. ExComm's disclosures indicate they did not. Here's where the potential conflicts arise. Good governance calls for FinComm to retain the CPA, who would report directly to them (not to the CFAO or the ED or ExComm or Board), to prepare the annual financial statements (with a review or, under the By-Laws, an audit). ExComm meeting minutes note that Johnson, Miller appears not to have been retained to do any such work after 2002. If FinComm did retain them, in writing or orally, then Johnson, Miller may (and I emphasize the word "may") have some culpability and there is an inherent conflict with their continuing to work on the SSA account. In that case, it gets messier: ExComm meeting minutes indicate that Johnson, Miller selected the lawyer in Hobbs that SSA engaged. This attorney quickly recommended that SSA give Johnson, Miller "carte blanche to do what they needed with the SSA financial records." On the other hand, if FinComm did not retain Johnson, Miller, then FinComm itself may (again, "may") have some culpability, perhaps shared by ExComm and the Board (although directors could argue they acted in reliance on FinComm) and there is an inherent conflict with their playing a key role in this investigation. It's very important to reiterate that competence and trustworthiness are irrelevant to this discussion. It doesn't matter whether the CPA or FinComm or ExComm did anything wrong, intentionally or otherwise. And I'm not suggesting they did. On the contrary, I've been generally impressed with the work done by ExComm so far. What matters is that people who may have legal liability and therefore a vested interest in the outcome are deeply involved in this investigation. That's a classic conflict of interest. And it's a recipe for losing the confidence of SSA members at a time when we need it most. One remedy for conflict of interest is disclosure. Depending on your point of view, disclosure to date has been adequate but sometimes reluctant. Another remedy is bringing in new people to do the investigative and remediation work. This is risky. Those who know the most about SSA and are in the best position to help are probably already involved. It's difficult enough to get competent volunteers, much less to work for free in Hobbs going through accounting records and meeting with attorneys, bankers, the IRS, etc. A third and, I believe, best remedy is an independent group to monitor the actions of ExComm, the accountants, the attorney(s), staff, and others involved. This is where the discussions with the concerned directors quickly arrived. Ultimately this resulted in a formal proposal for an Oversight Task Force (OTF). Four SSA members were prevailed upon by these directors to serve on the OTF: myself and three other individuals--a highly experienced accountant, an attorney, and a successful businessman. Because of my prior Board service, I initially declined to serve on the OTF but was persuaded by the two concerned directors because of my knowledge of SSA, my business background, and the fact that my tenure ended in early 2002, prior to the Larry Sanderson affair. The OTF proposal was made to the full Board by one of these concerned directors approximately two weeks ago with, unfortunately, a generally negative reaction. How could this happen? Well, some directors had genuine questions about certain provisions in the OTF proposal but I believe the negative reaction was due in great part to misunderstanding the OTF's purpose. Instead of oversight (i.e., monitoring, not decision making), some saw this as an attempt to usurp power from the Board or ExComm. Some feared it could interfere with and/or delay the investigation or reveal confidential information. Others viewed it as a no-confidence vote. In frustration, I "recused" myself from participation on the OTF and made a direct appeal to the Board explaining OTF's purpose in more detail and arguing that it was the Board's fiduciary duty to take action to oversee the activities of ExComm, FinComm, and others who were conflicted. With this clarification, responses to our proposal were gratifyingly more favorable. In fact, ExComm subsequently expressed their support for the OTF. To be fair, at least some ExComm members (including Dianne Black-Nixon) had voiced support all along. That was nearly two weeks ago. Since then, nothing much has happened. ExComm continues to manage the investigation and to make decisions. My sense is that there may be debate even within ExComm on how to proceed. More than a week ago, one ExComm member emailed me to say it would be not be practical to hold a tele-conference special Board meeting for all 26 directors and suggested delaying action on the OTF until the scheduled Board meeting at the end of this month. My response was that with every passing day, decisions were being made that could be criticized by SSA members and should be overseen by an independent body. I often participate in conference calls with at least that many people dispersed over the U.S. and India and do not think a properly managed special meeting--with one agenda item--would be terribly difficult. Rightly or wrongly, I interpreted this as foot dragging. If ExComm had supported the OTF with the same admirable alacrity with which they jumped on the initial disclosure of the tax problems, the OTF would already be at work and I would not be writing what some will doubtless interpret as a disloyal or disruptive public posting. ExComm believes it would be inappropriate for them to charter the OTF without full Board approval. They have a point, but this reasoning leads inexorably to the conclusion that, absent oversight, ExComm should not be making major decisions about the investigation or corrective action, either. Ironically, with one troubling exception (see below), I'm less concerned with what ExComm is actually doing in Hobbs than with how SSA members may come to perceive or question their actions. To date, ExComm has moved decisively to manage a tough problem and it's difficult to quarrel with their actions. But many members still have a sense that a previous ExComm attempted to cover up the Larry Sanderson expense account scandal three years ago. We cannot afford the same cynicism, or worse, now. While most members understand that some things must remain confidential for legal reasons, they are uncomfortable or angry if they suspect they are not getting the real story. And on that score, ExComm's inaction is troubling. I mentioned an exception, and it's a big one: how responsibility for this problem is being assigned. ExComm's communications have emphasized the ED's failure to inform the Board of the non-filing of tax information returns. At the same time, however, ExComm has minimized the "errors of omission" of the ExComm/FinComm/Board in not retaining the CPA to examine the SSA's annual financial statements. In fact, both lapses are errors of omission. Yet my impression is that the ED is being positioned as the one most responsible for allowing this crisis while FinComm's failure to act is being dismissed. For that matter, ExComm admits that the CFAO reported directly to the Board, not the ED, until mid 2005 so there is ample reason to share responsibility for this. While I do not have the facts available to ExComm, the questions raised are precisely the reason that independent oversight is needed over those who find themselves in conflicted positions, for their sake as well as the members'. And it is needed immediately, not next week or the week after that or after the next major staff or organizational decision is made. If this were a public corporation, plaintiffs' attorneys would already be circling like vultures with the prospect that directors could be sued and found guilty of breach of their fiduciary duty, in particular those on FinComm and, likely, ExComm. But there's not enough money here to interest them. Nor do I believe we should necessarily seek to punish whomever may have contributed to this debacle. This was a failure, albeit a predictable one, of a flawed system. Yet I don't think we ought to sweep anything under the rug, either. I believe most SSA members would readily forgive the unwitting errors of volunteer directors so long as they believe they are being dealt with forthrightly. I apologize to those I know and respect on the Board and ExComm who are dedicated, well intentioned, and working hard in thankless positions. But I fear that some of them do not fully understand the danger that their inaction will increase the cynicism and apathy already evident in many SSA members. The lack of urgency and reluctance to initiate oversight by ExComm and the directors alike suggest that some of them still don't "get it." Despite protestations to the contrary, there is a tendency in times like this for ExComm and the Board to "circle the wagons." It's a natural human response to threats, both from the original problem and from outraged SSA members who want someone, anyone, to pay in blood. It is a tendency against which we must fight hard if we are to maintain the trust of our members. Sadly, at this point individuals who generously agreed to serve on the OTF weeks ago are growing cynical about the willingness of SSA to address its problems. Clearly I am, too. On a positive note, I see this unfortunate crisis as a wonderful opportunity to make major changes to SSA to improve its financial position and increase its effectiveness. The current Board structure is indeed cumbersome and ineffective. It also makes sense to examine which functions the SSA should perform and whether some of these should be outsourced. And I agree with those who believe we should explore locations other than Hobbs. We have a chance to "start over" with a clean sheet of paper...without losing those elements of SSA that are critical. Yet what I have seen in the past 3+ weeks leaves me worried that we will squander this opportunity. ACTION ITEM: Please contact your directors and, while offering your continuing support and trust, urge them to demand the Oversight Task Force or something like it be put in place immediately. All of us--members, directors, ExComm, and staff alike--need the clarity and assurance that only an independent observer can provide. In the meantime, please maintain the degree of civility on this forum that I hope you would if the discussion were taking place in person. Ironically, the offensive and irresponsible behavior of some participants on rec.aviation.soaring alienates most SSA members and encourages our leadership, with some justification, to dismiss these critics as just a bunch of loudmouth idiots. Those who insist on popping off indiscriminately with wild allegations, accusations, and statements of opinion-as-fact serve no one but their own egos. Their actions--presuming they actually care about the future of SSA and the great things it has and can still do for soaring pilots in this country--are counterproductive. Chip Bearden SSA Member since 1965
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#10
September 27th 06, 10:12 AM
posted to rec.aviation.soaring
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SSA in Crisis: Can It Heal Itself? [LONG]
brian;
you wrote "get off the boards back and let them do what we elected them to do. Have trust in them. THEY DID NOT DO WHAT WE ELECTED THEM TO DO!!! They did not supervise the ed or the cfo adequately. They made some very bad choices ( in DECIDING to forgo the audit for several years). They are digging their collective holes deeper by continuing to try to MANAGE this problem. Well intentioned and "above reproach" as they may be, they are responsible, legally, morally and ethically. you wrote "The board and the Excomm are only as good as the people who work and report to them. NOT SO!! A board is only as good as its individual and collective members choose to make it by diligent exercise of their responsibilities, as defined by the bylaws, to the members who elected them. This board FAILED, as did the previous board and evidently several prior boards, to exercise their authority and to live up to the expectations of management oversight by the members who voted for them and required by the bylaws under which they serve. Your statement re the insurance company coming after those who voted for a director is naive at best and a diversion at worst. The question really will be, at the outset, was the DECISION to forgo the audit made in direct violation of the bylaws, a material contributory part of the alleged misappropriation of funds over a period of time. This will be argued in court if the insurance company is asked to reimburse the missing funds because of misconduct by officers and (maybe ) directors). the next question will be, were subsequent decisions by the board to "borrow " funds from the foundation and to cause the foundation to lend the funds done in the interests of the society or in the interest of members of the board?? CONFLICT OF INTEREST and coverups go hand in hand. Ask yourself WHY did the board immediatly tap into the foundation funds??? The IRS and the State would have waited for an insurance settlement. Why have we heard nothing about this??? Perhaps the BOARD DECIDED to save money and not to insure the society against misconduct??? That is a truely troubling thought. Perhaps the cfo decided not to pay the insurance premiums.. The point is that we are NOT BEING TOLD anything. Stop whining and stop trying to blame everyone you suggest... Well what should we do??? remain silent while the same group who presided over this mess that threatens the very organization meets in closed session with an attorney recommended by the accountants who should have blown the whistle several years ago? Should we stand by in silence and not make suggestions ( mine remains to have a court appoint a master to sort things out) ?? Should we stand by silently should the board make the decision not to ask the insurance company to reimburse the society? Should we stand by in silence while the attorney hired with our dues reviews and spins information given to the membership? should we maintain our trust in the board that failed to do its job to actually come up with a program that is actually in the best interests of the SSA while the attorney is probably scaring the hell out of them in terms of potential personal liability?? Under these circumstances, transparancy is an illusion. Even assuming 100% good intentions, the APPEARANCE of conflict will poison any meaningful conclusions/suggestions put out by the board going forward. you wrote "Have trust in them. They are us. Members, elected by us, who have NO REASON to purposely mismanage their OWN money" I do NOT TRUST THEM. they have individually and collectively mismanaged the ssa into a potential disaster. They are continuing their basic mismanagement by not resigning immediatly. They are, by staying in power, in basic conflict with the interests of the general membership. Well meaning as they are, the current board is learning a very tough lesson in board governance and responsibility. The lesson from Nixon trying to coverup watergate, to Scooter libby covering for Cheney and all of the scandals in between is that the coverup digs the hole deeper. The further lesson is that when a scandal erupts in washington, an INDEPENDENT ( ok sometimes not so unbaised and independent!!) investigation is called. Another lesson most politicians have not learned is that MANAGING a scandal rarely works. recent history is repleat with failed attempts to stonewall or to spin a problem. 5bg "Brian Glick" wrote in message ink.net... Chip I could not agree with you more. No stone should be left unturned in getting to the bottom of this. Unfortunately, the only way to use a 'broad brush" and clean this mess up would be to sweep out the "insiders" and replace them with people that will eventually become insiders. We seem to elect our directors now, so I am at a loss to tell you if we are all misinformed when we vote, or we have been all lead astray. I repeat what I said in an earlier post, and that is, the people that I know on the Excomm and the board are above reproach. That being said, does that make every member that voted for their directors culpable in this situation? If that is so, what is to stop an insurance company from coming after all of us. The answer: NOTHING! I did indeed vote for my current director, and have every confidence that the job being done by this person is in the best interests of all of us in the society. Hindsight is really 20\20 and we are all going blind trying to say what should have been done differently. It is too late to cry over spilled milk. That being said, I need to point out, in light of the Sanderson problem, the computer problem, and now this, we seem to be an organization that takes 3 steps forward, and 2 back. Somehow, we must solve this. Do I have all the answers, no, but all of us together can make it work. I also said this earlier, but it bears repeating as well. Everyone elected to run the SSA need to vote for the good of the society, and not their buddies\clubs best interests. This is most times harder than it seems, just look at Congress. SSA caters to a lot of different facets of soaring. All will be worse off if we don't stop this type of thing for good. Many people have done a lot of good for us over the years, many have also looked good while quietly serving their own agenda. It is time to think of the big picture, and the big agenda. I think you have done that. I applaud that! Now let's all do that. Stop whining, stop trying to blame everyone. Figure out where the money went, who misused it, and put in place a real and lasting sytem of checks and balances. Someone has already been sent packing over improper financials and the like. More should follow. This clearly did not start OR end with the CFO. The board and the Excomm are only as good as the people who work and report to them. If we can not trust those people, then new ones that we can trust should be hired. Until then (and this is not aimed at you Chip) get off the boards back and let them do what we elected them to do. Have trust in them. They are us. Members, elected by us, who have NO REASON to purposely mismanage their OWN money. After all, these people care as much about soaring as we all do. Action will be had soon. This situation did not happen overnight, and will not be solved by one conference call. Rome was not built in a day, nor did this situation take only a month or so to build. This started years ago. One phone call among the board will not make that much difference. Until then, we all need to contact our directors and offer to help. Who knows, one of us could make all the difference. Brian Glick Mifflin, PA wrote in message ups.com... (with apologies to non-U.S. readers) Most of the postings on this subject follow a predictable pattern: "what a bunch of stupid/unethical/indifferent (pick one) idiots we have at SSA; why don't they just [fill in the blank with your favorite brilliant solution]" A few (including mine) urge patience, support, and a chance to let the process work. Reluctantly I'm now changing my position from "be patient" to "do something." For the specifics, skip to the ACTION ITEM at the end. The rest of this is just a long-winded description of a discouraging journey the past few weeks. My new stance may seem like heresy given my past support of SSA. But after more than three weeks of working with and communicating with SSA directors, including the Executive Committee (ExComm), I confess I no longer have complete confidence that the current organization can deal properly with this crisis. Like most, I learned about SSA's tax filing/remittance problems from Dianne Black-Nixon's letter 3 1/2 weeks ago. While publicly urging patience, I also offered help to directors I know, including ExComm members. I agreed with most of their decisions but nevertheless had concerns. Soon I found myself working behind the scenes with several directors who shared these concerns, which were centered around maintaining the confidence and trust of SSA members during a time when their faith in SSA would be tested. Disclosures by ExComm implied that certain SSA funds were misappropriated by SSA's Chief Financial & Administrative Officer (CFAO), who has since been fired. But even if the CFAO were guilty, others may share responsibility for allowing this to happen. And as ExComm continued their investigation, the primary reason for our concern was conflict of interest. In the corporate (and non-profit) world, a conflict of interest exists whenever there is an incentive for people in positions of power and trust to take actions contrary to the best interests of those who have placed their trust in these individuals. It does not matter whether said individuals are trustworthy or competent or even whether they yield to these temptations. If there's an incentive for them to do the wrong thing, they are said to be conflicted and those conflicts must be properly addressed. The conflicts of interest with SSA's crisis relate to the fact that those working to resolve it--i.e., ExComm, the Budget and Finance Committee (FinComm), and SSA's accounting firm--potentially share responsibility for allowing it to occur. I would include SSA Executive Director Dennis Wright (ED) in this group but ExComm has been careful to give the impression that they are managing this situation, not the ED. Much outcry on this forum has focused on the decision to forgo annual audits. In my opinion, this misses the mark. To the best of my recollection as a former director (for nine years in the mid 1990s through early 2002, including service on ExComm), previous FinComms elected to have annual reviews performed by Johnson, Miller, SSA's public accounting firm (CPA) because they were much less expensive than a full audit (if I recall correctly, on the order of $20,000 less) yet provided some assurance that material problems would be uncovered. For those of you without financial backgrounds, there are three levels of involvement by a CPA with a client. For a "compilation," the CPA simply cranks out standard-format statements using the client's books and records. If the numbers add up, the CPA doesn't do much checking; they just make it look pretty. For a "review," (which is what I believe SSA had in prior years), the CPA goes a step further and attempts to uncover material problems. They offer no guarantees but at least the accountants look under the hood, so to speak. An "audit" (called for by the By-Laws) involves many more tests and checks based on which the CPA expresses an opinion as to whether the results conform to generally accepted accounting principles. An audit provides the highest level of assurance but, of course, costs the most, because of the extra work involved and also the liability assumed when expressing an opinion. In the past, the annual review plus the close relationship between the CPA and FinComm--who played a very active role in the SSA's finances at that time--plus performing an occasional full audit made the question one of economics as well as the By-Laws. In effect, FinComm made the decision to self insure, judging that an occasional loss, though unlikely, would still be less than the accumulated added cost of doing an audit every year. I suspect that may still turn out to be true despite the magnitude of the potential loss. I recall that the Board was made aware of this policy (but not asked to approve it, per se) on at least one occasion while I was a director but I cannot be certain. In my opinion, then, the critical question is whether FinComm retained Johnson, Miller to continue preparing SSA's annual financial statements, and more specifically to do annual reviews. ExComm's disclosures indicate they did not. Here's where the potential conflicts arise. Good governance calls for FinComm to retain the CPA, who would report directly to them (not to the CFAO or the ED or ExComm or Board), to prepare the annual financial statements (with a review or, under the By-Laws, an audit). ExComm meeting minutes note that Johnson, Miller appears not to have been retained to do any such work after 2002. If FinComm did retain them, in writing or orally, then Johnson, Miller may (and I emphasize the word "may") have some culpability and there is an inherent conflict with their continuing to work on the SSA account. In that case, it gets messier: ExComm meeting minutes indicate that Johnson, Miller selected the lawyer in Hobbs that SSA engaged. This attorney quickly recommended that SSA give Johnson, Miller "carte blanche to do what they needed with the SSA financial records." On the other hand, if FinComm did not retain Johnson, Miller, then FinComm itself may (again, "may") have some culpability, perhaps shared by ExComm and the Board (although directors could argue they acted in reliance on FinComm) and there is an inherent conflict with their playing a key role in this investigation. It's very important to reiterate that competence and trustworthiness are irrelevant to this discussion. It doesn't matter whether the CPA or FinComm or ExComm did anything wrong, intentionally or otherwise. And I'm not suggesting they did. On the contrary, I've been generally impressed with the work done by ExComm so far. What matters is that people who may have legal liability and therefore a vested interest in the outcome are deeply involved in this investigation. That's a classic conflict of interest. And it's a recipe for losing the confidence of SSA members at a time when we need it most. One remedy for conflict of interest is disclosure. Depending on your point of view, disclosure to date has been adequate but sometimes reluctant. Another remedy is bringing in new people to do the investigative and remediation work. This is risky. Those who know the most about SSA and are in the best position to help are probably already involved. It's difficult enough to get competent volunteers, much less to work for free in Hobbs going through accounting records and meeting with attorneys, bankers, the IRS, etc. A third and, I believe, best remedy is an independent group to monitor the actions of ExComm, the accountants, the attorney(s), staff, and others involved. This is where the discussions with the concerned directors quickly arrived. Ultimately this resulted in a formal proposal for an Oversight Task Force (OTF). Four SSA members were prevailed upon by these directors to serve on the OTF: myself and three other individuals--a highly experienced accountant, an attorney, and a successful businessman. Because of my prior Board service, I initially declined to serve on the OTF but was persuaded by the two concerned directors because of my knowledge of SSA, my business background, and the fact that my tenure ended in early 2002, prior to the Larry Sanderson affair. The OTF proposal was made to the full Board by one of these concerned directors approximately two weeks ago with, unfortunately, a generally negative reaction. How could this happen? Well, some directors had genuine questions about certain provisions in the OTF proposal but I believe the negative reaction was due in great part to misunderstanding the OTF's purpose. Instead of oversight (i.e., monitoring, not decision making), some saw this as an attempt to usurp power from the Board or ExComm. Some feared it could interfere with and/or delay the investigation or reveal confidential information. Others viewed it as a no-confidence vote. In frustration, I "recused" myself from participation on the OTF and made a direct appeal to the Board explaining OTF's purpose in more detail and arguing that it was the Board's fiduciary duty to take action to oversee the activities of ExComm, FinComm, and others who were conflicted. With this clarification, responses to our proposal were gratifyingly more favorable. In fact, ExComm subsequently expressed their support for the OTF. To be fair, at least some ExComm members (including Dianne Black-Nixon) had voiced support all along. That was nearly two weeks ago. Since then, nothing much has happened. ExComm continues to manage the investigation and to make decisions. My sense is that there may be debate even within ExComm on how to proceed. More than a week ago, one ExComm member emailed me to say it would be not be practical to hold a tele-conference special Board meeting for all 26 directors and suggested delaying action on the OTF until the scheduled Board meeting at the end of this month. My response was that with every passing day, decisions were being made that could be criticized by SSA members and should be overseen by an independent body. I often participate in conference calls with at least that many people dispersed over the U.S. and India and do not think a properly managed special meeting--with one agenda item--would be terribly difficult. Rightly or wrongly, I interpreted this as foot dragging. If ExComm had supported the OTF with the same admirable alacrity with which they jumped on the initial disclosure of the tax problems, the OTF would already be at work and I would not be writing what some will doubtless interpret as a disloyal or disruptive public posting. ExComm believes it would be inappropriate for them to charter the OTF without full Board approval. They have a point, but this reasoning leads inexorably to the conclusion that, absent oversight, ExComm should not be making major decisions about the investigation or corrective action, either. Ironically, with one troubling exception (see below), I'm less concerned with what ExComm is actually doing in Hobbs than with how SSA members may come to perceive or question their actions. To date, ExComm has moved decisively to manage a tough problem and it's difficult to quarrel with their actions. But many members still have a sense that a previous ExComm attempted to cover up the Larry Sanderson expense account scandal three years ago. We cannot afford the same cynicism, or worse, now. While most members understand that some things must remain confidential for legal reasons, they are uncomfortable or angry if they suspect they are not getting the real story. And on that score, ExComm's inaction is troubling. I mentioned an exception, and it's a big one: how responsibility for this problem is being assigned. ExComm's communications have emphasized the ED's failure to inform the Board of the non-filing of tax information returns. At the same time, however, ExComm has minimized the "errors of omission" of the ExComm/FinComm/Board in not retaining the CPA to examine the SSA's annual financial statements. In fact, both lapses are errors of omission. Yet my impression is that the ED is being positioned as the one most responsible for allowing this crisis while FinComm's failure to act is being dismissed. For that matter, ExComm admits that the CFAO reported directly to the Board, not the ED, until mid 2005 so there is ample reason to share responsibility for this. While I do not have the facts available to ExComm, the questions raised are precisely the reason that independent oversight is needed over those who find themselves in conflicted positions, for their sake as well as the members'. And it is needed immediately, not next week or the week after that or after the next major staff or organizational decision is made. If this were a public corporation, plaintiffs' attorneys would already be circling like vultures with the prospect that directors could be sued and found guilty of breach of their fiduciary duty, in particular those on FinComm and, likely, ExComm. But there's not enough money here to interest them. Nor do I believe we should necessarily seek to punish whomever may have contributed to this debacle. This was a failure, albeit a predictable one, of a flawed system. Yet I don't think we ought to sweep anything under the rug, either. I believe most SSA members would readily forgive the unwitting errors of volunteer directors so long as they believe they are being dealt with forthrightly. I apologize to those I know and respect on the Board and ExComm who are dedicated, well intentioned, and working hard in thankless positions. But I fear that some of them do not fully understand the danger that their inaction will increase the cynicism and apathy already evident in many SSA members. The lack of urgency and reluctance to initiate oversight by ExComm and the directors alike suggest that some of them still don't "get it." Despite protestations to the contrary, there is a tendency in times like this for ExComm and the Board to "circle the wagons." It's a natural human response to threats, both from the original problem and from outraged SSA members who want someone, anyone, to pay in blood. It is a tendency against which we must fight hard if we are to maintain the trust of our members. Sadly, at this point individuals who generously agreed to serve on the OTF weeks ago are growing cynical about the willingness of SSA to address its problems. Clearly I am, too. On a positive note, I see this unfortunate crisis as a wonderful opportunity to make major changes to SSA to improve its financial position and increase its effectiveness. The current Board structure is indeed cumbersome and ineffective. It also makes sense to examine which functions the SSA should perform and whether some of these should be outsourced. And I agree with those who believe we should explore locations other than Hobbs. We have a chance to "start over" with a clean sheet of paper...without losing those elements of SSA that are critical. Yet what I have seen in the past 3+ weeks leaves me worried that we will squander this opportunity. ACTION ITEM: Please contact your directors and, while offering your continuing support and trust, urge them to demand the Oversight Task Force or something like it be put in place immediately. All of us--members, directors, ExComm, and staff alike--need the clarity and assurance that only an independent observer can provide. In the meantime, please maintain the degree of civility on this forum that I hope you would if the discussion were taking place in person. Ironically, the offensive and irresponsible behavior of some participants on rec.aviation.soaring alienates most SSA members and encourages our leadership, with some justification, to dismiss these critics as just a bunch of loudmouth idiots. Those who insist on popping off indiscriminately with wild allegations, accusations, and statements of opinion-as-fact serve no one but their own egos. Their actions--presuming they actually care about the future of SSA and the great things it has and can still do for soaring pilots in this country--are counterproductive. Chip Bearden SSA Member since 1965
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