USNI by the numbers

At the height of the controversy this year at the U.S. Naval Institute (which is not settled, BTW - so vote), Stephen M. Waters, Chairman of the Board at USNI stated the following;

... the Institute needs to gain financial stability ...

There and other places, the financial situation of USNI is constantly brought up by those who want to change the Mission Statement.

How does that merge with the following statement from the State of the Institute Letter,

During 2011, we will continue to “live within our means” and to keep our professional staff together, engaged and productive. Our 2011 objective is to continue the two-year trend of strong financial and operational performance. Only in this manner, can we protect our “national treasure” and see it safely through this economic downturn.

Well, which is it? Is USNI financially unstable, or has it enjoyed strong financial and operational performance? Both are signed by Mr. Waters. I'm confused.

I do have a bias though; a bias towards metrics and audited financial statements - so I will go there for clarity.

With audited financial documents you have fiduciary obligations - a land of laws and regulations. People have to be a lot more careful and accurate in what they say than they do elsewhere - in the financial world people can lose their licenses, livelihood, and perchance go to jail if they are not accurate.

One also, if one is wise, does not play "happy-talk" with financial statements of non-profits. I will make the assumption no one is.

That reality got my puzzler puzzl'n and I decided to put my education to work. Let's go play a bit on the surface of the numbers.

If you are a member, click here to get the Consolidated Financial Statements. If you are not a member, shame on you - then join first, then click.

If the Mission Statement change to make USNI an advocacy organization is so needed as a result of dire financial conditions as presently constituted, then it will show up in the financial statements. No reason to go line-by-line, but let's focus in the big picture and see if there is anything that needs to be drilled down on to find a problem.

Let's go to the numbers (click for larger image if needed).

I spent a few hours picking things apart in the Consolidated Statement of Cash Flows and other meatier parts, but then I realized who is reading this. No offense - but I know this is not a business, economics, or accounting blog. I just lost half my readers by now anyway - so I won't punish you. There is a story there - but the big pixels are fine. I will just stick to the above and point a few things out for you.

From '09 to '10;

- The cash position grew by 208%; not a sign of financial instability.
- Accounts receivable decreased by 36% (yea, better collections); not a sign of financial instability.

- Investments increased by 23%; not a sign of financial instability.

- The only significant issue I saw was an increase in inventories by 3%, I guess LEAN has not made it to USNI yet, but that is not a sign of financial instability.

- Total assets increased by 8%; not a sign of financial instability.

Check my math - percentages always kill me - but I think I got that right.

In the Consolidated Financial Statement, I did not see anywhere notes of caution or warning WRT possible financial problems. If you are not going to put such things in your Consolidated Financial Statements - then where are they so that members can review them?

Though only those involved can speak to their motivations, history shows us that most conflict and change in organizations come from one of two areas; financial or power issues. If there is no independently audited description of financial instability at USNI - then are we talking here about power?

If so, who is trying to gain power, to what purpose, as defined by what entity?

One final note on the Change in the Mission Statement. The fact remains that when these Consolidated Financial Statements were written, not only had the Mission Statement not been changed, it hadn't even been voted on - so why is this at end of the letter on the State of the Institute 2010?

With your continued strong support, we want the Institute to remain “the independent forum of the Sea Services advocating the necessity of global sea power for national security and economic prosperity.” The Sea Services and the nation need to hear our and your voices.

Remain? Dude - it hadn't even gotten there yet. Read the Mission Statement. Where is that quote coming from? Google it. Only one place will it be found - that letter. Well, two places now, natch.

Google the real USNI Mission Statement and you get a page and a half of returns for the whole thing.

Good people can disagree on what direction USNI should take, but this just smells funny. From the way the Mission Statement change was handled - the ballot clusterfrak - and now the parallel universe financial statement, someone needs to help me see what is there I don't see.

We all love the Naval Institute - why can't we have an open discussion with consistent messages? Transparencey and consistency builds trust. Opaqueness and inconsistency builds something altogether different.

Ahem. We are better than this.