Monday, October 1, 2007

Happy New (Fiscal) Year...


Well, today is October 1st, the first day of RFE/RL's new fiscal year. Our fiscal year is in synch with the FY of the US government, which makes sense since we get 100% of the money we spend from Congress. I started work in mid-August last year, so the end of that fiscal year was pretty much a blur. I hadn't been there to prepare for it, and I was so involved in just figuring out what my job was that I don't think I did much good (or bad) as it ended.

Like the government and other entities that it funds, money from a current fiscal year has to be spent by the end of that fiscal year or you lose it. I won't get into the nuts and bolts too much, but by "spent" I don't mean that things have to be paid for, but there has to be either an order placed by September 30th or you have to have received the goods or services by September 30th. There is absolutely no incentive to spend a penny less than your budget, even if you spend money on things you don't really need. If you don't spend your full budget this year, the perception (and maybe the reality) is that you don't need as much money as last year (and we can't have that).

Congress being as efficient as they are (do I need to use the //sarcassm// warning?) we won't actually get a new budget passed and signed by the President until January or February. What do we do until then? There is something called a continuing resolution. Congress basically allows the US government (and grantees like RFE/RL) to continue to operate at last year's funding level until they get around to passing a real budget. But if the real budget comes in lower than last year, you are in a pickle because you have been spending as if you would get the same amount as the previous year.

There is a huge difference between the end of the fiscal year at RFE/RL (a non-profit grantee of the US government) and a company like ATK (my last employer). On the private side there are so many more factors in play that the complexity and work involved can be enormous. Take how much you spend in the year. At RFE/RL what we spend is equal to the budget that Congress gives us. When the budget is passed we get the full amount dropped on us at one time (albeit a little later than the actual start of the fiscal year). A private company has to actually 1) sell things, 2) deliver things, 3) invoice for the things that it delivered, and then 4) get paid. If you sell less than you projected you will take in less cash than you projected. Even if you are right about how much you sell, if you deliver later than planned it means that some of the money you thought you would get paid this year will actually be paid next year. Then there's the whole profit thing. The price of steel (or aluminum or tungsten) goes up unexpectedly and all of the sudden you are selling items at a loss. Of course, the price of steel could go down, except that isn't likely. Prices rarely go down.

The other big difference between a non-profit, government funded company like RFE/RL and a company like ATK is stockholders. How much cash, sales and profit you estimate to generate this year is noted by the Wall Street analysts and these figures are then used to gauge how well you are running your company. If you come in at or very close to expectations the company management proves that it knows what it is doing. Coming in with better than expected numbers is good too. But come in under expectations and Wall Street will assume you don't know what you are doing and the result is that the stock will get pounded.

I'm not complaining about this system since it has worked very well over these many years. But these additional influences make for a busier end of the fiscal year, with greater pressures and frustrations, but also greater rewards. A stock price is a solid way to gauge how well you are (collectively) doing your job. There is no similar way to gauge effectiveness when you work for a government funded non-profit.

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