At the January meeting of the Board of Directors, the 2006-year end results were reviewed and the 2007 Budget was discussed. Due to several factors, including four consecutive years of below expected performance of the GNMA fund, the Board decided to form a Financial Committee to assess the Unitís financial goals, objectives and investment policy. The committee will report recommendations to the Board in February.
During 2006, Unit revenue was $38,803, which consisted primarily of interest and dividend income ($17,224) from the endowment and rent ($18,418) paid to the Unit by the Club Directors, in addition to the proceeds from Unit games and the Sectionals. For 2006, revenue was under budget by about $165 due to losses incurred at the Sectional and lower than forecasted revenue from Unit games.
Our 2006 expenses, which totaled $40,399, exceeded revenue by $1,596, compared to a budgeted shortfall of $4,032.† The major expense items include rent ($33,000) which will increase by 12% on July 1, 2007 per the lease agreement. The balance of the Unitís expenses consists of the costs of the property tax (approximately $3,500), our share of the running expenses, Unit games, the newsletter, maintenance and miscellaneous other expenses. The shortfall will be made up from the balance of the bequest (about $372,000). The funds are invested solely in the Vanguard GNMA Fund through Schwab and had a total return of 4.3% during 2006.
The 2007 Budget, pending board approval, is projected to be very similar to last yearís. Revenue is estimated to be $40,868; expenses are expected to be $44,300 resulting in a shortfall of $3,432. The Board is concerned that the current rate of expenditures over interest income will deplete the endowment in less than twenty years. Although the Unit has adhered to a budget discipline of not running excessive deficits, the endowment account is $20,000 less than it was four years ago. As indicated above, a Financial Committee will review all aspects of the Unitís investment strategy and report recommendations in February.
Although the 2007 Budget shows a projected loss, the Board is optimistic that with the support of the membership and Club Directors combined with strong fiscal management, positive solutions can be developed to address future deficits and slow the rate of the endowmentís depletion.
If you have specific questions about the Annual Report or 2007 Budget, please feel free to ask any board member.
Unit 550 Board of Directors