Decision Point Reached

By, and on behalf of the Entomological Foundation Board of Directors: Alvin Simmons (president), Bob Peterson (past president), Tim Schowalter (vice president), Susan Weller (board member and past president), Michelle Smith, BCE (treasurer), Rebecca Baldwin, BCE (board member), John Acorn (board member), Ronda Hamm (board member), and Andrine Shufran (board member)

 

Earlier this month the Entomological Foundation’s Board of Directors had a meeting with only one topic on the agenda: The future of the Entomological Foundation.

On the advice of auditors and upon reviewing the books, donor trends, and financial forecasts, the Board made the difficult decision to cease operations at their February board meeting. This action follows the Foundation’s Board of Director’s decision in November 2018 to investigate this option of dissolution.

The catalyst for examining options came from the Foundation’s auditors who made it clear that they intended to issue a “statement of going concern” in 2019. Such a statement often serves as a red flag to creditors and donors that the organization is in poor financial health and has neither the resources nor a viable pathway to approach profitability in the coming years. It is often issued shortly before a corporation liquidates their assets.

“Sadly, this day was a long time coming,” according to Dr. Alvin Simmons, 2019 President of the Entomological Foundation. “Were it not for the Herculean efforts of a small but important cadre of volunteers and donors, we would have faced this decision point years ago.”

How did we get here?

The Entomological Foundation was founded in 1991 with a large one-time corporate gift. The mission, then as now, was to build the future of entomology by supporting efforts to encourage a love of insects in young people. For years it employed full-time staff and enjoyed the efforts of a small army of volunteers to run daily operations. And while some people gave financially to support the organization, the majority of contributions were through volunteerism. On several occasions, large-scale fundraising efforts were launched that included contracted fund-raising consultants and large print and electronic campaigns. ESA twice made donations of $10,000 to support these efforts (2008, 2010), in addition to subsidizing the Foundation’s awards program with an additional annual gift of $3,840 from 2008 through 2013.

At around this same time, the cash reserves had dropped to such a point that in order to sustain operations, the management had to borrow out of restricted net assets. Though this practice was halted as soon as practical, recognizing that the Foundation was in trouble financially, the Board of Directors made the difficult decision to lay off staff and moved the operation to become fully volunteer-run. All recognized that this was a temporary solution.

Today the borrowed amount from net assets is approximately $150,000, and caused the auditors to inform the Foundation Board of Directors that a “statement of going concern” was imminent. This money would need to be paid back if the Foundation were to stay in existence.

Daily management of the Foundation came to the ESA headquarters in January 2015 by mutual agreement of the Entomological Foundation’s Board of Directors and ESA’s Governing Board. ESA is a separate 501(c)3 organization with a separate governing structure and accounting. Since the Foundation’s operations moved to ESA, the Society has been making an annual donation of approximately $15,000 in staff time and overhead to sustain Foundation operations.

The Foundation’s leadership spent four years working to simplify the business model, seeking low-investment ways to increase donations, developing a social media presence, and searching for a sustainable, workable operations model. Four years later, the data are clear: the donor community is not large enough to sustain operations. Based on an investigation of past records, annual expenses of operating the Foundation (printed materials, website, any staff support) have consistently outpaced the annual unrestricted donations. Despite a large group of dedicated volunteers, the Foundation remains financially underwater.

“The recent changes in tax law did not help our situation,” says Simmons. The tax law changes are structured in such a way that most filers will no longer itemize their taxes, making it financially disadvantageous to claim charitable contributions. The Wall Street Journal and other news sources have reported that on average, the number of charitable donors has dropped between 4 and 8% compared to the year prior.

One Good Option (Creating Lemonade out of Lemons)

One of ESA’s most active committees is the Education and Outreach committee (EOC). Members of the committee are often the same people who have served on the Foundation’s Board of Counselors or Board of Directors. The purpose of the committee, is to provide leadership and guidance to the society in getting the public interested in insects – which overlaps greatly with the mission of the Entomological Foundation. Thus, one obvious solution presented by the auditors was to fold the Foundation and move operations to the ESA under the supervision of the EOC.

“Any organization involves overhead costs – staff time, printing, mailing, websites, and so on,” said Simmons. “The Foundation was no exception. The Board was faced with the decision to consider the best way to build the future of the profession, and we opted to streamline for maximum efficiency and minimizing the expense lost to overhead.”

If programming moves to ESA then the grant-making program’s marketing and fund-raising expenses fall under the overall ESA budget which allows for cost-sharing with other ESA departments. This new model allows more of the donations to flow to grant-making than would be possible under the “separate organization” model.

While the decision as to whether the Foundation should be dissolved was the responsibility of the Foundation’s Board alone, the only decision that remains is for the ESA Governing Board to determine whether the Society will take on the Foundation’s programming—and, if so, how much.

Although the dissolution of a 26-year old non-profit is emotional, the Foundation’s mission is embraced by ESA and its members. The Foundation’s Board remains committed to finding ways to build the future of the profession through developing a love of insects among young people.

New Beginnings

The plan, which is still under development, amounts to something of a new beginning for entomological outreach and community-building under the ESA. The Foundation’s Board of Directors has proposed to the ESA Governing Board that when the Foundation is dissolved, the one viable program, micro-grants, be transferred to the EOC. In addition, any remaining assets will be either returned to donors or transferred to a new ESA endowments fund and segregated for the EOC to fund educational activities centered on youth and professional educators.

CHRYSALIS FUNDA proposal before the ESA Governing Board is to place remaining funds in a new annual public outreach fund that has tentatively been named the “Chrysalis Fund,” (with a draft logo to the right). If the Governing Board accepts this proposal, guidelines would be established that the money would solely be used for public educational purposes, with a preference for youth education.

Procedurally, there is still much to be done, however, the sunset of the Entomological Foundation represents an opportunity to build a sustainable future of public engagement through the ESA.

If the Governing Board votes to accept the programming at their April board meeting, then the transfer will proceed as outlined above. Staff will develop the donation tools for members and others who wish to support the future of the profession. Any fundraising activities that are already planned for 2019 – such as the Branch Silent Auctions – will likely continue unabated, as those funds would simply transfer over to the new fund.

“In effect, for the giving public, the only thing that may be changing is the name,” says Simmons.

We welcome your feedback on this new beginning for entomological outreach. Please visit this form if you wish to provide comments which will be shared with both the Entomological Foundation’s Board of Directors as well as with the ESA’s Governing Board.

2 thoughts on “Decision Point Reached

  1. A note about some history on the Foundation. Before the Fdn was created a company made a high six figure, potentially a seven figure, offer for youth entomology education. There was a collaborative activity to create a situation that would rule out company advertisement and control information. ESA would basically have final approval on content. The only identification on the material would be a small logo and initials by the contributor and ESA positioned side by side. The ESA GB declined the offer. Several individuals were upset as it could have been a good youth education project. Several had an evening discussing, how might one resuscitate the situation. Concesus was that it was impossible to change GB decision. Next idea was to create a Fdn, as other Societies had, that would have a broader view/opportunity to accept funds based on a definitive review. The concept was developed and presented to the GB, they approved. The Company was contacted in an effort to restore the original offer. The Company declined. Considerable time had elapsed and they had moved on to other things. It was hoped that endowments could be developed to support the science, the profession in its multiple arenas
    I understand the financial problems, had early involvement, and this is not an effort to retain the Fan, per se. Simply an effort to do a couple things: a. provide some history, b. a hope that the concept of accepting contributions as would have been done by the Fdn will will not be lost in the termination of the Fdn. There are likely to be projects that are, for example, beneficial to entomological education, through collaborative funding that can be enhanced through creative/positive negotiations.
    I was quite involved in the creation of the Fdn and its early financial challenges. Appreciate your work on this situation and sharing the current situation in a broad/open way.

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    1. All this could have been done with prior planning and taking off the awards announcement for this current year. I spent days and nights putting together and submitting my application for the ‘Presidents Prize for Outstanding Achievement in Secondary Education’ and heard about this decision that cancels the award, by chance! Very Disappointed.

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