Member-Driven Activities
Budgeting & Expenditure Management Process
Preliminary Results and Way Ahead
Council of
Directors (CoD)
Tom Duerr
AIAA Resources Working Group
May 2017
Technical Activities
Committee (TAC)
Region and
Section Activities
Committee (RSAC)
Aerospace Interest
Committee (AIC)
Executive Summary
• AIAA has an historic opportunity to review and revise budgeting processes for
“Member-Driven Activities” under the Council of Directors – TAC, RSAC, AIC
• Why fund Member-Driven Activities:
 Enable grass-roots innovation leading to new products, services, and markets
 Incentivize volunteer contributions to AIAA products and services
 Reimburse volunteer costs for generating AIAA products and services
• How to fund Member-Driven Activities:
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

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Plan and execute from the bottom-up
Guide and manage from the top-down
Re-allocate budgeted funds flexibly during the fiscal year
Use the chain of command to preempt and resolve issues
• Key process features:
 Frequent feedback and transparent control mechanisms in the process
 Periodic self-reflection and review about the process
Recommendations to inform ongoing BoT and CoD strategic planning
2
Outline
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Resources Working Group (RWG) purpose
Legacy budget process and outcomes
Assessment of alternatives
A new process
Comparison of legacy and new processes
Next steps
3
RWG Purpose
• Chartered by James Maser, AIAA President, under Governance Transition efforts
• Purpose: Design clean-sheet budgeting process for Member-Driven Activities
 Enable funding of innovative, strategic activities beyond customary expenses
 Develop a process and guidelines to budget, allocate, and manage expenditures
• Scope: All Member-Driven Activities
 Technical Activities Committee (TAC)
 Region and Section Activities Committee (RSAC)
 Aerospace Interests Committee (AIC)
• Output: Recommendations
 Process and guidelines draft document
 Summary briefing to BoT
Example Customary Expenses
• TAC
 Meals
 A/V support at meetings
 TC/PC initiatives
• RSAC
 Networking events
 STEM activities
 A/V support at meetings
Define new, enabling funding process for TAC, RSAC, & AIC
4
Legacy Budgeting Process and Outcomes (1 of 2)
• Staff generates the TAC and RSAC budgets based on traditional guidelines and
submits it for BoT approval
• Origins and rationale of allocation guidelines are undocumented
• RSAC allocation guidelines
 “Section rebate” based on percentage of dues and membership numbers
 Further sub-divided by RSAC into Categories I-IV
• TAC allocation guidelines
 1 meal per Technical Committee (TC) and Program Committee (PC) and audio/video
support at face-to-face meetings at Forums
 Comparatively small TAC discretionary fund
• Allocation guidelines differ between RSAC and TAC, but total dollar amounts are
close
• Historically the total “Member-Driven Activities” budget is about 2.7% of the
operating budget, less than $600k
5
Legacy Budgeting Process and Outcomes (2 of 2)
• The legacy process had several undesirable outcomes for the volunteers
• For Technical Committees and Program Committees in TAC:
 No flexibility in how to spend the funds allocated to cover meals
 Incentivized search for alternative sources of revenue outside AIAA
 “Successful” TCs/PCs could accumulate substantial funds that were unused or
unreported – ramifications for AIAA non-profit status
 “Unsuccessful” TCs/PCs could incur liabilities that were passed along to AIAA
• For Sections and Regions in RSAC:
 Lack a mechanism to obtain additional funds beyond the rebate
 Budgetary isolation fosters activity silos and inhibits synergistic planning
6
Assessment of Alternatives – Overview
The RWG adopted an assessment of alternatives approach. The
legacy process will serve as a baseline against which alternatives
will be assessed.
The RWG established a 5-step approach:
1)
2)
3)
4)
5)
Review legacy budgeting and monitoring processes
Develop statements of objectives – establish criteria for a “good” process
Research and generate process alternatives
Assess alternatives with respect to objectives
Develop recommendations
Stakeholder feedback at multiple points in the assessment
7
Assessment of Alternatives
Objectives for the Budget Process
• Based on President Maser’s initial questions and RWG experience, the RWG
drafted a set of 15 objectives
• RWG surveyed TAC and RSAC leadership for reaction. Average of 48
responses indicates consensus agreement with all draft objectives; “somewhat
agree” to “strongly agree” with 14 of 15
• The top six objectives, with strong agreement:
1.
2.
3.
4.
5.
6.
Minimize legal and ethical issues
Minimize conflict of interest
Maximize budget sufficiency
Maximize strategic value to the Institute
Maximize fairness across stakeholder groups
Maximize stakeholder control over expenditures
• Comment adjudication is ongoing
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Assessment of Alternatives
Process Alternatives
• The RWG recognized the need for two distinct but linked processes to achieve the
objectives: 1) budget planning and 2) expenditure management
• Budget planning alternatives: identified 54 budget planning features addressing 4 levels
of the Member-Driven organization
 Each feature prescribes a method for allocating funds to a given level of the organization
 Features are taken in combination to generate budgeting alternatives
 Whole alternatives and individual features were assessed for support to the objectives
• Expenditure management alternatives: considered open-loop and closed-loop
expenditure management styles
 Open-loop reflects the legacy process, once allocated there is no review and re-allocation
until the end of the fiscal year
 Closed-loop reflects best practices as followed in industry and government
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A New Process – Budget Planning
• The following were assessed to be the highest-value features of budget planning
 Management margin. Compensate for shortfalls where actual costs exceed planning
estimates. Enable action on unplanned opportunities.
 Incentive fee. Discretionary funds allocated in recognition of contributions toward AIAA
products and services, based on prior year actual performance and “incentive fee table.”
May be spent on new value-added activities, committee team-building, or any other
allowable expense in accordance with AIAA legal and ethics policies.
 Proposals. Funds to cover actual costs for new, innovative events, products, or services.
Proposals must satisfy acceptance criteria as stipulated by CoD, TAC, RSAC, or AIC.
Funding priorities for proposals are established at the TAC/RSAC/AIC level.
 Cost of business. Funds to cover actual expenses to be incurred to contribute toward
AIAA products and services in accordance with an "allowed costs table" and “AIAA
products and services inventory.”
• TCs, PCs, and Sections typically also have external funding sources. TAC and
RSAC guidelines may apply.
• The RWG drafted a detailed budgeting process around these features – further
information can be provided in follow-up discussions
10
A New Process – Expenditure Management
• Flexibility and accountability require pro-active management of expenditures in a
closed-loop review and re-allocation process
• Key features include:
 Spending plan at TC/PC/Section level at no less than quarterly granularity
 Quarterly or triannual reviews to allocate management margin, re-allocate unused
funds to areas of shortfalls, and monitor status with respect to plans
 Issues resolved at lowest possible level in the chain of command
 End of year sweep-up – unused operating funds transferred to Portfolio to prevent
accumulation of AIAA “profit”
– All unspent cost-of-business and proposal-based funds
– Portion of unspent incentive fee funds that exceed an annual carry-over limit or a total
balance ceiling
– All unspent donations – may be returned to sender or transferred per donor direction
• The RWG drafted a detailed expenditure management process around these
features – further information can be provided in follow-up discussions
11
New Process – Principal Roles and Major Milestones
Organization Level
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
1) Budget planning – next year
BoT
Management*
Budget Approval
Planning
Controls Update
TC/PC/Section
Staff
Initial Review
Plan Approval
Budget Request
Planning
Initial Plan
Annual Plan
Support
2) Expenditure management – current year
Management*
TC/PC/Section
Staff
Monitor
Budget Allocation
Status Review
Spend i.a.w. plan
Status Review
Quarterly Plan
Audit
Audit
Support
Sweep-up
* Includes Technical and Region Directors; TAC, RSAC and AIC; and Council of Directors
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Comparison of Legacy and New Processes
Objective
Legal & ethical
COI
Sufficient
Strategic value
Fair
User-controlled spending
Accountability
User-controlled budget
Flexibility
Support innovation
Volunteer value
Low process effort
Avoid mixing fund types
Coordination
Minimize expenses
Legacy Process
Some anomalies
Not observable
Fixed amounts
Fixed purpose
Accepted as tradition
Differs for TAC and RSAC
Differs for TAC and RSAC
No user input to budget plan
Small margin available
Fixed-purpose allocations
Accepted as tradition
”Autopilot”
Not monitored
No visibility
2.7% of budget

New Process
Periodic reviews

Periodic reviews

Vary with justification

Annual update of guidance

Same rules for everybody

User spend plan

Periodic reviews

Planning and proposals

Margin and re-allocation

Proposals and margin

Incentives, proposals, re-allocation

Learning curve
Strong oversight

Published spending plans

Start at 2.7% of budget
13
Future Stakeholder Survey Topics
Survey Technical and Region Directors for draft process guidance; three key items
1. AIAA products & services inventory
 Identify and prioritize AIAA value-added products and services enabled by volunteers
 A preliminary list for process proof-of-principle – will be revised as strategic planning unfolds
 New budget planning process includes an annual review and update
2.
Allowed costs table
 Identify volunteer activities essential to delivering the AIAA products and services
 Need staff support to estimate actual incurred costs of these essentials
 Annual budget will cover actual costs incurred up to these allowed amounts
3.
Incentive fee table
 Identify amounts of discretionary funds to be provided based on contributions to the AIAA
products and services
In addition, survey Directors for “challenge” scenarios to support process testing
 Identify historical and potential future budgeting and expenditure issues
 RWG will examine how the new process would accommodate the issues
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Next Steps
• Complete comment adjudication on objectives
• Survey Technical and Region Directors
 AIAA products and services inventory, and essential volunteer activities
 Challenge scenarios
 Incentive fee table
• Test the process with respect to the scenarios
• Brief BoT
May
May-Aug
May
Jun
Aug
Jul-Aug
Sep
RWG recommendations will be incorporated into ongoing strategic
plan development in the BoT and CoD
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Backup
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RWG Members have Diverse Backgrounds
Name
Employer & Location
Region
AIAA Experience
Andy Amram
Associate Fellow
Software Engineering Institute
Carnegie Mellon University
Los Angeles, CA
VI
TAC
Troy Downen
Associate Fellow
Gulfstream Aerospace Corporation
Savannah, GA
II
RSAC, TAC,
Student
Tom Duerr (RWG Chair)
Associate Fellow
The Aerospace Corporation
Chantilly, VA
I
BoD, TAC
David Elrod
Associate Fellow
Jacobs Technology
Tullahoma, TN
II
TAC
Jeff Laube
Associate Fellow
The Aerospace Corporation
Los Angeles, CA
VI
RSAC, TAC
David Levy
Associate Fellow
Sierra Nevada Corporation
Centennial, CO
V
RSAC, TAC
Sandy Magnus
Associate Fellow
AIAA
Reston, VA
I
Executive Director
Andrew Neely
Associate Fellow
University of New South Wales
Australian Defence Force Academy
Canberra, Australia
VII
RSAC, TAC
Shamim Rahman
Associate Fellow
NASA Johnson Space Center
Houston, TX
IV
BoD, RSAC, TAC,
Student
Jayant Ramakrishnan
Associate Fellow
Bastion Technologies, Inc.
Houston, TX
IV
BoD, RSAC, TAC
Members were selected to
represent the diversity of
AIAA stakeholder
communities
• Academia, government,
industry
• Technical and Section
activities
• AIAA regions
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Assessment of Alternatives
Objectives for the Budget Process
Average Agreement with Objectives
•
Minimize legal or ethical issues
Minimize conflict of interest
Maximize budget sufficiency
Maximize strategic value to the Institute
•
Maximize fairness across stakeholder groups
Maximize stakeholder control over expenditures
Maximize stakeholder accountability
Maximize stakeholder influence over budgets
Maximize flexibility for the unpredictable
Maximize innovation and experimentation
Maximize tactical value to volunteers
•
Minimize level of effort to generate the budget
Minimize mixing Institute funds
Maximize coordination of like activities
•
Minimize total budgeted expenses
0
No Opinion
0.5
1
Somewhat Agree
Average Score (range -2 to 2)
1.5
Based on President Maser’s
initial questions and RWG
experience, the RWG drafted
a set of 15 objectives
RWG surveyed TAC and
RSAC leadership for reaction.
Average of 48 responses
indicates stakeholders
“somewhat agree” to “strongly
agree” with 14 of 15 draft
objectives
Respondents weakly agreed
with minimizing total
expenses
Comment adjudication is
ongoing
2
Strongly Agree
18
The Big Picture
Two parallel processes every year: management of current
year expenditures and planning for next-year budget
Constitution
By-laws
Strategic plan
FY(N) budget
Generate
FY(N+1)
budget
Controls
Inputs / Outputs
Organizations
Bold outline =
further
decomposition
FY(N+1) budget
1
Legal requirements
BoT, CoD, CC,
AC, OU, Staff
Manage FY(N)
expenditures
FY(N) actuals
2
CoD, CC, AC, OU
Staff
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1.0 Generate FY(N+1) Budget
Three-stage budget planning process. Updating budgeting guidelines (1.1) may
occur at other than annual periodicity. Other steps are annual.
Controls
Inputs / Outputs
Organizations
Constitution
By-laws
Strategic plan
FY(N) budget
Update budget
guidelines
Bold outline =
further
decomposition
Proposal criteria
Incentive fee schedule
“Listed activities” & costs
Top-line funding
guidance
1.1
CoD, CC, Staff
Generate
budget request
FY(N+1) budget
request
1.2
Process feedback
CoD, CC, AC, OU,
Staff
Negotiate final
budget
FY(N+1) budget
1.3
BoT, CoD, CC
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2.0 Manage FY(N) Expenditures
Iterative process for oversight and re-allocation of resources.
Expense procedures
Controls
Inputs / Outputs
Organizations
Plan variance
FY(N)
budget
Bold outline =
further
decomposition
Expend funds
End of year
plan Variance
2.1
OU, Staff
Margin
request
Review
expenditures
2.2
Allocated margin
+/- Re-allocation
CoD, CC, AC
End-of-year
sweep-up
Sweep-up
funds for
Portfolio
2.3
CoD, CC, AC, OU,
Staff
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A View of TC/PC/Section Funding Sources
• Magnitude of funds
represented by size of
bubble
• Guaranteed sources solid,
optional sources hashed
• Distance from center
indicates primary,
secondary, and tertiary
Plans
External
TC/PC/Section
funds
Incentive
Fee
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