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EXECUTIVE SUMMARY
Summary of the Last Six Months
Report of Spring 2009 Board of
Trustees Meeting
Electronic Meetings Since Fall
Trustees’ Meeting
Executive Committee Meeting and
Chairman’s Remarks
Discussion of “Role of the
Board” Point Paper
Report of the President
Report of the Treasurer
Investment Results and Policy
Plan 2010 Report
Litigation Report
2009 Election Results
Committee Reports
Council of Class Presidents (COCP)
Report
International Chapter
Presidents’ Forum (ICOF)
Superintendent’s Address
Seating of New Board
Adjournment
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Summary of the Last Six Months
You have had several updates
from the new President, Byron Marchant, which
have been a candid status of a very serious
situation. The Board was forewarned in the
December meeting by Treasurer Hank Sanford of a
deteriorating market and the inevitable effect
on our budget. Within 4-6 weeks of that
warning, a “double-whammy” struck and greeted
our new President.
The Foundation’s largest donor
had to default on a pledge which amounted to
$12m/yr over the next three years. Most of
that money was restricted, designated for two
major projects but a portion of it was
unrestricted affecting the operating funds of
both the Foundation and the Association. The
prudent plan which anticipated a market
downturn now had to deal with this serious
unexpected “multiplier”. The lines of credit
were used to cover the financial obligations
for these projects which would have been met by
the pledged donations. Of course,
unanticipated interest expense results from
this step.
The Joint Finance Committee and
the Communications Committee were each convened
to work with management to deal with the
crisis. Along with a new budget, recommended
by the Finance Committee, a new communications
strategy was developed. As our largest
expense, the SHIPMATE costs had to be cut
back. This wasn’t the only expense reduction
undertaken but it was the most visible to
alumni.
The investment income which had
been a steady supplier of funds in recent years
stopped with the market collapse. It became
clear that our substantial operating reserve of
$3M would have to be expended to cover the
shortfall.
Worse, the several endowment
funds which the Association & the Foundation
manage went below their “corpus” or base
value. This situation, under Maryland law,
requires the fund manager to bolster these
funds by fiscal year end (6-30-09) to restore
the corpus. The Association hopes to obtain
agreement of the fund Trustees to convert these
funds into a different category which will
allow them to “ride the market” down—and back
up-- thereby avoiding this “bolstering”
requirement and regaining use of some of the
Association’s unrestricted assets.
The prudent cutbacks were timely
and the financial market decline appears to
have bottomed out and recovered slightly.
Also, unrestricted fund raising for this fiscal
year has been encouraging. So, in summary, the
serious situation appears to be under control
and a recovery plan is in place to deal with
it.
That, Shipmates, is the
situation which made preparation for this Board
meeting difficult.
Report of Spring 2009 Board of
Trustees Meeting
The complexity of the situation
has made development of this report difficult
as well. I will endeavor to report to you
the various status which were reported and
describe fairly the situation as we enter
fiscal 2010 in the below sections.
Electronic Meetings Since Fall
Trustees’ Meeting
The urgent situations since the
December Board meeting required some unusual
actions. I have already mentioned the
involvement of the Finance and Communications
Committees with management’s prudent steps to
deal with this “perfect storm” of a confluence
of financial factors. The Chairman and the
Vice Chairman were personally engaged in taking
the necessary actions. The Executive Committee
met electronically on 27 Feb 2009 to discuss
the evolving recovery. The decision was made
to not engage the full Board and the Boards’
Officers apologized several times for that to
the Board members who weren’t involved,
starting with this electronic meeting and
continuing into to the Spring Board meeting.
Executive Committee Meeting and
Chairman’s Remarks
The ExComm met in person on
4-30-09. The Chairman reported at the outset
of the Board meeting that the ExComm received a
legal update from John Simcox, reviewed a Plan
2010 update, discussed a “Role of the Board”
Point Paper and he noted, in this context, the
Board Read Ahead item on the Duties of the
Board.
The Region Trustee
Representative for the last year (Mid-Atlantic
Region Trustee, Mike Collins) will be replaced
on the Executive Committee by the Central
Region Trustee, Bob Jones, for the next year.
The Chairman welcomed his
relief, ADM Steve Abbott, and the new Trustees
and thanked the departing Board members noting
the more formal recognition of their service at
the reception at Alumni House the night
before. He acknowledged the senior alumnus
present, RADM Mike Rindskoff ‘39.
Discussion of “Role of the
Board” Point Paper
The Chairman elected to use his
portion of the agenda to introduce the
aforementioned Point Paper on The Role of the
Board which expressed the opinion that recent
events were an opportunity to point out that
the Board’s proper role is oversight. The
paper cited the SHIPMATE cutbacks announcement
and the FY 2009 Budget Revision as two
excellent examples of the Board meddling in the
prerogatives of Association management. When
the Chairman opened the floor to discussion,
the Point Paper met with vigorous but polite
opposition from Mid-Atlantic Region Trustee,
Mike Collins, who pointed out its conflicts
with the Board training paper entitled Duties
of the Board used in the training of the New
Trustees just the day before. The Western
Region Trustee backed up his colleague and
referred to a document listing the ten
essential duties of non-profit Boards and read
another excerpt from
www.BoardSource.com
regarding the duties of the Chairman in regard
to the Board’s authority over the budget. The
Vice Chairman, LTGEN Klimp, pointed out that
the Communications and Finance Committees did
perform their duty to report to the Board by
reporting via the Chair. They rebutted that
reporting to the Chairman is not the same thing
as reporting to the Board which has the sole
authority over the budget approval. The
Chairman apologized for failing to inform the
Board and that ended the discussion.
Report of the President
We eagerly anticipated our first
report from our new President. Byron Marchant
revealed that he is far more than just a pretty
face. He has already established his
credibility in the Yard. His presentation
reflected the priorities of the Supe, who is
his classmate.
Of particular interest to alumni
is Mr. Marchant’s plan to seek the guidance of
the Alumni following on the heels of his abrupt
announcement in early March to reduce SHIPMATE
without consulting the membership. In his
presentation, he listed the following short
term priorities:
-- Review the debt
policy
-- Expand annual
fund basis
-- Expand two-way
comms with Alumni/Use COCP and Chapters
-- More cooperative
relations to support Alumni Ops and Services
-- Support new USNA
Strategic Plan
-- Based on Alumni
Survey feedback prioritize critical Alumni
Services within resources
Report of the Treasurer
Hank Sanford reviewed the
financial situation in more detail and provided
information on the Recovery Plan. Because of
market conditions, there’s been a great change
in the financial situation of the Alumni Assn.,
he summarized:
-- Assets are down 23%,
--The operating reserve is gone,
-- Contribution receipts are
down and
-- We’ve had to write off a
large pledge.
The results of the Annual
Campaign are encouraging but cash is a
continuing concern for the next year. The
objective of the Recovery Plan is to recover
from the challenging situation and restore the
margin of safety. The Plan calls for continued
restructuring and retrenching to get leaner for
next two years and be ready for the market
upturn. The Assn. will use the Alumni Survey
response to prioritize services going forward.
The expense footprint will definitely be
smaller. He will ensure the Assn. has access
to cash. He mentioned that he is contacting
the endowment fund trustees to lift the
restrictions and allow depletion of the fund
corpus while continuing to expending funds on
the purpose for which the endowment was
created. By doing so, some unrestricted assets
may be available to fund operations rather than
committed to bolstering endowment funds. Hank
summarized the FY2010 budget as follows:
-- No reserve;
-- Reduced unrestricted support
for USNA,
-- Lines of credit are now an
budget item,
-- Reduced postage and printing
expense and
-- The continuing migration of
communications to the web where possible.
-- Eight issues of Shipmate are
in the budget.
After discussion, the Board
approved both the Revised FY2009 and the
proposed FY2010 budgets.
Investment Results and Policy
Dick Flannery, TIFF Investment
Manager, gave a high level market view and
explained his fund’s strategy. He stated he
has grounds for optimism: the multi-asset fund
was down 17% in the first quarter but just
about even through 2/3 of the 2nd
Quarter. He summarized the strategy as part
offensive and part defensive. The offensive
part involved buying higher risk assets which
are a bargain, in March while defensively
buying TIPS—government inflation protected
securities. He is concerned about both
inflation and deflation and the unknown
financial factors over the next 12-18 months
but he is cautiously optimistic. The funds for
these purchases have to come from sales of low
performing assets and recording those losses.
The Joint Investment Committee
conducted its annual review of the Investment
Policy and submitted an Issue Paper to the
Board for approval. The Board approved their
recommendation.
Plan 2010 Report
The Alumni Assn. Strategic Plan
entitled Plan 2010 was reassessed in 2008 and a
report with several taskings was made to the
Board. Vice Chairman Jack Klimp reviewed the
actions on those taskings with the Board for
the Executive Committee which was assigned the
responsibility for Plan 2010 implementation
since it now includes all the Committee
Chairmen.
Litigation Report
John Simcox, the counsel for the
Association, summarized the history of the
alumni lawsuit and brought the Board up to date
on the appeal. John presented our argument to
the Appeals Court on 9 March. He anticipates
a decision in 2-4 months which would be anytime
in the next two months or so.
2009 Election Results
The Board received reports from
the Board of Tellers and VR Election Services
on the results of the 2009 election. The
alumni participation was very good. The
Mid-Atlantic Region election had over 30%
participation and the Western Region recorded
above 25% participation. Just a few years ago,
participation was in the 10% range. So Alumni
are responding to the new electronic voting
capability: about 40% of the votes were
submitted via the web; about 10% via the phone
IVR and the remaining 50% via mail ballot.
The winners were:
Mid-Atlantic Region:
CDR Mike Collins USNR (Ret) ’84 [incumbent]
Western Region:
CAPT Steve Andres USNR (Ret) ’67 [incumbent]
Committee Reports
Committees are where the work
gets done.
EXECUTIVE. (Committee authorized
to act for the Board between meetings.)
Covered in Electronic Meetings, Executive
Committee and Chairman’s Remarks above.
JOINT FINANCE. (The joint
committee which oversees the consolidated
finances of the Foundation and the Alumni
Association.) Covered under several reports
above, particularly the Treasurer’s Report.
JOINT INVESTMENT. (The joint committee which
oversees the performance of the organizations
hired to invest our money.) Covered under
Investment Reports and Policy above.
JOINT COMPENSATION (The joint
committee that reviews the compensation of the
officers of the two corporations.) Deferred
action—no report received.
HOUSE. (Committee which oversees
the real estate assets of the corporation.)
The Committee reported that the Ogle Hall
project is complete. Revenue from renewed
contracted use of the facility is in the budget
for FY2010. The project budget was met but
there were two add-on projects (Tap Room and
Kitchen) which cost an additional $600,000.
Please visit your new and
improved Alumni House when you are in Annapolis
next.
COMMUNICATIONS. (Provides
oversight of the Communications functions.)
The Comms Committee met jointly with the
Governance Committee and decided to complete
the work on the electronic communications
policy no later than the Fall Trustees
meeting. It is possible that the new policy
will be ready for an electronic vote this
summer.
MEMBERSHIP/ALUMNI SERVICES
(Committee which oversees the attainment of the
membership goal and provision of services to
alumni.) Committee Chairman reported that
membership is approximately 55,000 on the goal
of 60,000. He also reported on a pilot project
being undertaken at Philadelphia and Los
Angeles Chapters to approach non-members in
those Chapters and encourage them to join the
Assn. The Committee is also looking at
membership dues. (Note: GWC Trustee serves on
this committee.)
ADMISSIONS. (Committee
responsible for the second mission element
oversight.) The Committee noted with pleasure
the remarkable rise in applications and
nominations for the Class of 2013 over last
year. The Committee offered several ways
alumni can help recruit young men and women for
USNA:
-- Identify
potential USNA visitors under the Diversity
Center of Influence program
-- Identify
candidates for Blue & Gold Officer
-- Engage community
influencers in their area
-- Mention potential
candidates
-- Identify and lead
“out-of-the-box” opportunities to increase
awareness
GOVERNANCE. (Committee
responsible for the governing documents of the
Board—the Bylaws and Operating Manual.) The
Committee discussed an Issue Paper brought
forward from the COCP and then met jointly with
the Communications Committee to decide where
the new policy should be located within the
Board governance documents. It will appear in
the Operating Manual and reference the
appropriate section of the Bylaws. The
Governance Committee encouraged a Board vote no
later than the Fall meeting.
OTHER CHAPTER (Committee which oversees the
process to select the smaller Chapter
Trustees.) This Committee has new membership
and is gearing up for the next election cycle.
Ten Chapters submitted applications last cycle
and the Committee encouraged more to apply.
The new Chairman will be CAPT Tim Myers USN
(Ret), Portland-SW Washington Trustee.
Council of Class Presidents (COCP)
Report
The Chairman of the Council of
Class Presidents, VADM Frank Donovan ’59,
reported on their recent meeting. He noted the
heavy participation of the COCP in class focus
groups as advance preparation for the upcoming
Alumni Survey. He felt that there is an
opportunity to make better use of the broad
spectrum of alumni offered by the COCP (from
1930s classes to the Class of 2008). The
President and the COCP Chairman are working on
ways to improve the two-way communications with
Classes and Chapters.
International Chapter Presidents
Forum (ICOF) Report
The ICOF was held the day before
the meeting at the same time as the Committee
meetings. No report was made to the Board on
the ICOF.
Supe's Address
VADM Fowler gave a report and patiently
answered alumni questions. By way of summary,
he noted that he was more fortunate than many
of his civilian counterparts because the basic
needs of the Academy are met by the Federal
budget. He noted during his presentation that
renovations to the King Hall Galley qualified
for Stimulus funds, with which he was pleased.
But he commented that the financial market
situation does affect the margin of excellence
programs at USNA which he looks to alumni to
provide. Several programs are in jeopardy this
year, particularly the international program.
Here are just a few of the
highlights presented in “Bullet” form.
-
He has changed the Mission
Statement: “graduate leaders” has replaced
“provide graduates”
-
2009 Service Selection once
again exceeded the USMC “16.7% cap” with
26% of the Class of 2009 (274) selecting
USMC; the Navy’s needs were met by the 749
graduates (74%) selecting Navy service
(Last year the Supe said he expected that
USMC selection would rise to 25% of the
graduating class. That comment proved
prophetic)
-
Following service selection,
they got the Firsties together with
officers representing their selected
communities
-
USNA was prominent at the
Presidential Inauguration. The Glee Club
and Gospel Choir both sang in addition to
the Brigade contingent marching in the
Inauguration Parade.
-
President Obama will give
the Commencement Address to the Class of
2009 graduation
-
USNA continues to be a
beacon in moral leadership with good
visibility within the military (e.g. War
College/command colleges) and in private
conferences
-
Dean Miller is retiring.
The new Dean will be Dr. Andrew Phillips
who taught Computer Science at the Academy
for 10 years.
-
Class of 2009 performance on
scholarship has continued strong but some
of the scholarships are cutting back
because of economic conditions and there
are just fewer opportunities offered. USNA
got 4 of 40 Marshall scholarships.
-
The Glee Club’s trip to
Chile during their Spring Leave made a big
hit internationally.
-
USNA is starting to get a
multiplier effect from its prior year
international programs as Mids who have
made international contacts are able to now
draw upon them
-
For the 4th year
in a row, USNA athletes led the country in
graduation rate. Eleven of 19 sports were
at 100% graduation rate and all were above
95%. And we are winning; Class of 2009 has
won 70% of their athletic contests
-
He stated the Brigade signed
up for 69% technical (STEM) majors, well
above the 65% expectation
-
The Summer NASS program
continues to expand. It is now at 2250
students in three sessions. 6600 student
applied for those 2250 spots. Admiral
Fowler wants kids from distant states to
attend, not those who are within driving
distance of Annapolis
-
Class of 2013 had the most
applicants ever at 15,342, up 40%
-
Preble Hall (USNA Museum,
etc) will be back in service this summer
-
A renovation of the Chapel
is underway
-
King Hall is completed and
the Galley will be next
-
Stimulus funds for the
Galley allowed the Supe to undertake
repairs to Hubbard Hall which would
otherwise been deferred
-
Next project in the Yard is
a Child Development Center (for Faculty and
staff children)
-
The Supe is undertaking a
new Strategic Plan for 2020
-
The Supe’s top priorities
are: unrestricted funds,
diversity/admissions excellence, ethical
leadership (USNA as a Beacon of Ethics),
international/cultural awareness programs
As he closed, VADM Fowler said
he had to go to Washington to discuss the N1H1
Virus with the CNO.
Seating of the New Board
Six individuals left the Board:
Glenn Montgomery ‘71, Randy Bogle ‘68, Jim
Bethmann ‘77, Lawrence Stovall ‘84, Russell
Puppe ‘66, and Carl Trost ‘53. They will be
replaced by new Trustees.
Mike Collins was re-elected as
Mid-Atlantic Region Trustee as was Steve Andres
in the Western Region. Two Chapter Trustees
were re-elected for a second term: Dave
Paddock (Hampton Roads) and Walt Draper
(Puget-Seattle).
The new Trustees are: Steve
Abbott
¹66 (Chairman), Alex Plecash ¹75 (Upper Midwest
Chapter), Kerr Smith ¹72 (Philadelphia
Chapter), Tim Myers ¹64 (Oregon-SW Wash
Chapter), Richard Folga ¹70 (Pensacola
Chapter), Chris Cooke ¹81 (San Diego Chapter),
and of course our new President/CEO Byron
Marchant ’78 who joined in February.
The new Board approved the new
Committee assignments.
Adjournment
There being no further business
to conduct and no items raised by Alumni in
attendance in open forum, the meeting was
adjourned with the singing of Navy Blue and
Gold.
The date of the Fall Trustees
meeting will be 10 Dec 2008.
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