"HMGS East financial meltdown" Topic

Not to divert too much attention away from those patting themsleves on the back over the Baltimore "mini" con but like everything else in the world the bottom line is well, the bottom line. As a former East Treasurer and a strong proponent of greater BoD oversight over convention directors expenses my biggest concern about the Baltimore move has always been the financial impact. As I've noted before, in order to gin up a crowd for Historicon in Baltimore East is going to have to spend beucoup money on advertising and promotions. Even with that investment I believe East will take a bath. In order to survive East had better be on firm financial ground. Rather than being on firm ground East appears to be standing in quicksand.

Looking over the financial reports for Historicon and Cold Wars over the last five years I was surprised and alarmed at the trend.

Historicon
Revenues Expenditures Net surplus
2005 102,096 57,140 44,956
2006 100,945 76,798 24,147
2007 101,510 63,548 37,962
2008 115,966 89,846 26,120
2009 116,387 112,604 3,783

Cold Wars

2005 65,148 38,109 27,039
2006 57,808 31,957 25,851
2007 63,937 46,259 17,678
2008 62,900 51,162 11,738
2009 62,900 59,753 1,953

You don't have to be a rocket scientist to see the clear trend. HMGS East, which has traditionally relied on the profit from Historicon and Cold Wars to support all other activities, is bleeding heavily. In the case of Historicon expenses have almost doubled while revenue has seen a modest increase. Cold Wars revenue is falling (not sure about the coincidence of exactly the same revenue over the last two years) while expenses are increasing.

The blame for this lies squarely with BoD for not exerting oversight over the exploding expenses, particularly for Historicon. The Convention Directors are also to blame but if the BoD gives them the keys to the treasury who can blame them for ing away all the money. There is apparently no accountability.

And of course this puts East in a precarious financial situation just as its about to embark on what many of us believe is a unnecessary experiment that will result in a financial bloodbath. Hang on tight its going to get much worse.

db

You have clearly not been read on to the plan. Here, drink this tasty beverage.

Allen

P.S. You mean Hal is right with the drunken sailor theory?

If I read this correctly and my recall of reading the 2008 and earlier documents myself, the net surplus is the "profit" from each of those conventions. That profit gets banked. I have not read the new documents as of yet.

If I am correct then the amount of profit that has been added to the HMGSE bank account has been declining but this does not mean that HMGSE does not still have a sizable bank account. Do the current financial statements detail the reserve cash level (bank and investments)?

IIRC 2006 was the Historicon the fees went up significantly and the response was a decline in attendance. Modifications were made the following year and then the attendance started to grow again and has since.

In 2009 there were a lot of extra exhibits and things for the 25 year anniversary.

My question is whether the explosion in costs was due to all the bells and whistles with invited guests (reenactors and b list actors) etc.

The over/under on this topic is 54 posts by the weekend.

they've still managed to make a profit each show.
yes its bleeding but they are a n/p corp =P

Not to worry, there's still plenty of dough left to hire professional event managers

HistoriGAMAgins '12 !!!

Hmmm… Purple KoolAid…..

HistoriGAMAgins '12

This is better than "Historigins"!!! Hehehe….

Is it too soon to declare Baltimore Historicon the finest convention ever?
Best intentions are everything, you know.

Last I heard making even a slight profit was not the same as "bleeding heavily". If they've got enough in the war chest to weather a Baltimore storm what they make on each show hardly matters.

Couple of factual points:

1. Re-enactors cost nothing. They are invited to add to the shows, but are not paid. They are window dressing for free.

2. Hcon this past summer did see greater expenses, but much of that was due to the anniversary celebrations, which will not be incurred again. In short, they spent some money to celebrate, and that was a corporate decision.

3. At least some of the expenses are board directed, so just looking at the numbers, you cannot assume that higher costs are being driven by convention directors. That is not always the case. You understand that db, as Timonium was a prime example of BoD decisions to pump up the spending on a con. That is a not a criticism of that event, just an illustration.

4. I suspect FI is being moved to the Host to reduce costs for that convention to help the overall bottom line.

Overall, you make good points, and yes, I agree they are of concern.

OFM: "Is it too soon to declare Baltimore Historicon the finest convention ever? Best intentions are everything, you know."

John, John, John . . .

Promises, promises . . . that's all you need these days, you know.

CC

"Is it too soon to declare Baltimore Historicon the finest convention ever?"

Absolutely, that along with Historicon is a train wreck, worst decision ever, etc.

Steve
cavalcadewargames.com
nycjadie.wordpress.com

One wonders if expenditures were not expanded into non-core items at the conventions (actors, re-enactors, etc) if the financial trend would be the same? It is possible it is due to the economy? Or is it growing expenses? If it turns out to be due to new expenses (new line items) that are not related to core activities of the convention, then they should be evaluated closely.

Of course, this leads right into what a core activity is…does it include seminars and re-enactors? Surely some people would say yes. Does it include funding "big name gamers" to attend and host events? Some would say yes. This could be an interesting conversation.

Chuck

It isn't any great guess as to why revenues crashed this year. They spent money on anniversary related expenses and it is the worst economy in a long time.

I would be curious to see the corresponding attendance numbers for each year. The other question would be were there any increase due to venue costs?

Board oversight is always a tough thing to do. You don't want to micro manage, yet you can't let an Event Manager spend money on an idea he/she loves but won't generate revenue or increase gate.

Anyone that thinks GAMA wants Historicon needs to take a deep breath. GAMA is a non-profit that struggles to keep its two conventions, GAMA Trade Show and Origins, afloat. Historical Game Companies aren't GAMA members in anything but minuscule numbers and aren't in distribution to FLGSs. If you went to the current GAMA board and asked them for info on Historicon most would be lucky to name where and what month it is in. GAMA is not in the event management business.

I personally think Baltimore will be a huge massacre. I don't think 1% attendance dry run is anyway to test the operations. Not that I think they were hoping for 1% attendance either. I hope I am wrong. I hope it does gangbusters. Because the show in the end is for us to have fun playing games.

OFM: That was such a NOBEL statement you made !!!

At this rate East will have to have a 'tail-gate' convention and rent a parking lot.

"Anyone that thinks GAMA wants Historicon needs to take a deep breath."

I don't think ANYBODY thinks that at all. Throwing that name into the mix in the lame-ass made up "Historigins" title is just a further attempt at making a joke/insult about Historicon's assumed delusions of grandeur in moving to Baltimore.

I'd much rather the con stay at the Host but since it IS moving I'm willing to give it the benefit of the doubt, unlike many on all of these discussions.

Well they can just double the dues again! We can go from $20 USD to $40 USD dollars a year….Most (on here) will say, "It's still a bargain to be part of the finest organizations which supports miniature gaming!"
It's not much different than the regular government! "Let's do what we want and tell them why afterwards, maybe, if we really want to!"
Historicalgamer, was that a pun at the current Nobel prise winner? Is the NPP even credible anymore? Nice, lets give awards for what you say you might do!

Looking over the figures you have provided, my first question is why do we see such a significant increase in expenditures on Historicon?

Revenues have increased each year a bit, but the expenses have almost doubled in five years. This seems a bit out of line, but there may be very good reason.

Are these audited figures? If not, IMHO they need to be.

Well, they didn't really need to have Duff make a cake for them – especially when the people who got cake got a piece about the size of a finger, and especially when his cakes cost thousands of dollars.

I would rather of had a can of Duff with Homer Simpson!

NO SOUP FOR YOU!!!!!!!!!!!!!!!!!!!!!!

I see this topic is not making the over…not that it's a bad thing.

Well, they didn't really need to have Duff make a cake for them

I think for a 25th anniversary the cake and other party expenses were well worth it. Who mostly pays the dues? The attendees. Who was the party for? The attendees. Direct contribution and direct benefit to the core contributors = Better Value, imho. Bob Giglio and staff did a great job putting it all together.

The rest of expenses over the years? On a case by case basis they should be reviewed for lessons learned and perhaps not to be repeated.

who the hell is duff ?

I'm glad to see someone else use the term "unnecessary experiment", as that is exactly what this is!!

Let's see, the last time we did an experiment it cost the treasury more then 22 grand, and as H-con is about 10 times the convention; well you can do the math!!

Leave us not forget that the BOD is also spending about 12 – 15,000 a year for a professional bookkeeping firm to track all this financial wizardry!!

Small example: the food vendor at the recent one day dry run was guaranteed a certain amount of income by the organizers. That vendor reported about a 50% shortfall, thus the organizers were on the hook for the difference. This same vendor has likewise been guaranteed a substantially greater income for the 2010 show! Again you can do the math!!!

I understand the "scientist" in charge of this experiment has already put at risk about 90% of the total organization's treasury. This figure also does not account for the bookkeeper's fees, or the loss in penalties, taxes, and interest when the CDs currently being held have to be cashed in early!! So you can do the math!!

If you had plans for Fall In 2010 I think you might do well to make alternate plans, just in case you can do the math!!

Paul

db and Paul: Very interesting and alarming for sure. But the peanut gallery is not heeding and trying their best to be cute and dismissive. Usually I enjoy and join in such buffoonery but this all sounds serious. How is 90% of the current treasury at risk with Historicon 2010?
Don't forget there are those out there who would relish the meltdown of HMGS East.

Those numbers are quite sobering. Yes, HMGS has some resources and no, it is not going to run out of money in the immediate future.

But two things are obvious. One, there is a sustained and consistent increase in expenses despite nearly flat revenues. It's not one year, not a cake, not an unforeseen event. It is a progressive lack of cost control over an extended period.

The other is an interesting lack of significant revenue growth in the convention that is supposedly bursting at the seams and needing a massively larger venue.

Leave us not forget that the BOD is also spending about 12 – 15,000 a year for a professional bookkeeping firm to track all this financial wizardry!!

Ah..you've found one of my gripes from years past. LOL. I may have suggested something else instead like a formal process and Quicken, following the completion of the initial audit and book straightening which as a one time expense was a good idea.

7th….Would I direct a shot at the current winner like that? And risk getting DH'd???? Not I, sir!!!!

Let's see, the last time we did an experiment it cost the treasury more then 22 grand, and as H-con is about 10 times the convention; well you can do the math!!

I have noticed Mr. Timonium hasn't chirped yet!

Can you substantiate this statement:

"Leave us not forget that the BOD is also spending about 12 – 15,000 a year for a professional bookkeeping firm to track all this financial wizardry!!

Small example: the food vendor at the recent one day dry run was guaranteed a certain amount of income by the organizers. That vendor reported about a 50% shortfall, thus the organizers were on the hook for the difference. This same vendor has likewise been guaranteed a substantially greater income for the 2010 show! Again you can do the math!!!

I understand the "scientist" in charge of this experiment has already put at risk about 90% of the total organization's treasury. This figure also does not account for the bookkeeper's fees, or the loss in penalties, taxes, and interest when the CDs currently being held have to be cashed in early!! So you can do the math!!"

First of all, the cost you mention for doing the books is a bit out of line, IMO. OK – A lot out of line.

As for the food vendor, how much money are we talking about? $400.00? $1,000.00? $2,000.00? Are there one, two, three, or more vendors involved? Are the same liabilities in place for the convention vendors of miniatures and other products that pay for space at the con?

And please enlighten me who the "scientist" is that you refer to? Who, in today's marketplace, invests money in CD's for such a small market as wargaming is? First of all, the CD return sucks; you would do better at a craps table, IMO. To lock up HMGS funds in a CD is, IMHO, pretty stupid.

All the figures/speculation I see here seems very suspect; just as the attendance figures I saw for H-Con being a plus 3% also seems suspect.

IMHO, it seems time for a good internal audit, as EVERYTHING I have seen seems to be pure speculation and heresay. No audits; no audited financials, just BS and more BS.

- Greg

> at risk about 90% of the total organization's treasury.

given the size of the treasury, that assertion needs validation before being believed.

CDs were purchased years ago when returns were good. So cashing in any would be bad.

civil,

The short list: guarantees for room nights that substantially exceed any previous convention attendence figures, guarantees for food and beverage vendors, dealers have already been promised table fees will not increase, attendees have been promised no increase in entry fees, a likely and substantial increase in daytrippers (affecting all the above), the cost for the BCC, parking, and other normal expenditures (all of which most likely will see large increases) and we don't even have a real idea on the advertising budget as yet, but as already stated it WILL be larger then ever!!

Do I think HMGS-E will go belly up over this? NO!

Can they afford to take the hit, this time? YES!

But what will follow afterwards? Best Guess!!

I'm a long time member, and I vote! Am I hoping for failure? NO!! In 25 years I've missed exactly 4 H-Cons, 2 due to military deployments, 1 due to work, and this year because I couldn't afford to go! I won't be at the 2010 show for the same reason!!

Does the membership have the right to know what's on the line? YES!! Anyone who thinks otherwise should be kicked to the curb with extreme prejudice!

It can still be a great convention, but still loose a lot of money!! So what's the point? So we can follow some "Prime Directive" as meaningless and hollow as the paper it's written on? Couldn't we accomplish the same thing by doing a "Game Day" at some VFW?

Sorry for the rant, but I've become very disappointed in the organization, it's leadership, and especially it's members!!

Greg,

Sorry man, but if you can't afford to read the organization's financial statements over the last few years you can't afford to waste time in this conversation!!

If you ARE a member you should definitely pay attention to my last line above!!

Paul

Since I'm not going to attend Historicon 2010 at the BCC, I don't have a turtle in this race. However, pancerni2 has identified a disturbing trend. Ignore him at your peril.
The Baltimore Apologists would have you believe that everything will be swell, but the costs of the convention vs. the revenue generated will be way out of whack with previous experiences.

Don't worry at least one of the most vocal apologists has disappeared. Rats on a sinking ship.

Because I was rather rude to Greg in my previous response I have sent him a PM apologizing for my above comment, and will answer his questions, which I actually overlooked, as best I can.

A number of years ago the BOD contracted the services of a professional bookkeeping firm. The original contract for these services was $10,000.00 per year plus additional charges for filing Federal and state tax returns, and other services not specified in the contract. I believe the cost for these same services has now been raised to $12,000.00 per year, and this firm IS responsible for maintaining and auditing the organizations books on a monthly basis.

Some think that the organization over pays for this service. The one draw back is the BOD doesn't always seem to get the financial reports posted in a timely manner, but that's a whole other discussion.

It's very typical for Non-Profits like HMGS-E to keep some portion of their cash reserves in CD's for tax purposes, so as to keep the cash more readily available if it were needed immediately. I think the term is liquidity.

When negotiating contracts for various aspects of a convention it's not unusual for the contracting organization to guarantee a certain level of income for the other party. It's a figure that normally is very acceptable to both parties of the contract.

What bothers me most with the move to the BCC, is none of the information regarding these guarantees has yet been revealed, and I believe that for whatever reason, these guarantees have been set far too high for the organization to meet even if the attendance is as high as hoped!!

As for the food vendors, well that service again will be provided through the BCC, just as it is through the Host. It doesn't matter if it's a couple hundred dollars here, or a few hundred there. If we loose money just having the service, why have the service to begin with?

Let's ask those who were at the 1 day dry run thing. did the BCC have that "homey" feel to it with the single food vendor there? Did a lot of people utilize the place, or did most just ignore it?

With the loss in profits over the last five years the organization should not have planned for this move to the BCC. What's worse, is they haven't planned to succeed, or fail, they have just planned so they can say they planned!!

To my mind the President of HMGS-E, who is the main driving force behind this move, could not plan, organize, lead, or even participate in a one man parade! The financial condition of the organization is evidence enough of his capabilities!!

VAGamer – I've always wanted that "homey" feeling. Is it available in 28mm and 15mm?

Chuck

Charging the vendors a percentage of their receipts, instead of a table fee, would be an interesting strategy.

It would prove that the organization is actually being run for the players and not as a cleverly camouflaged subsidy for retailers.

To my mind the President of HMGS-E, who is the main driving force behind this move, could not plan, organize, lead, or even participate in a one man parade! The financial condition of the organization is evidence enough of his capabilities!!

Even though I am HIGHLY against the BCC move, this might be considered stepping over the line. I'm sure he's doing the best he can – even if we don't agree with him.

Looking at the HMGS East budget document.

For the years 2006-2008, the actual net gain was greater than what was in the budget. In 2006 and 2007 the net gain was about 5 time what was budgeted. In 2008, it was a little more than 50% greater than the budgeted amount.

This year, 2009, is the only year I know of that HMGS East had budgeted a net loss. From the August financials, it looks like, sadly, that the net loss will be greater than budgeted.

Long Island Gamer wrote:

Even though I am HIGHLY against the BCC move, this might be considered stepping over the line. I'm sure he's doing the best he can – even if we don't agree with him.

I agree. I also am not crazy about BCC, but that is a difference of opinion. I still believe that our volunteers in HMGS-E are doing a good job. I'm just not sure I would pick the same goals that they would (move to BCC).

Chuck

Paul,

No problem; apology accepted.

From my perspective, I can only assume that those "in the know" on this are genuinely trying to do things right. What was initially brought up on expenses however is what is called by auditors (in my experience as an auditor), "a red flag".

Your standard audit and financial report will not (again, in my experience as an auditor)show whether or not these expenses are justified. They may very well be justified, but were I the one looking into this I would look at what these expenses were (line item expense review) and was the huge increase over the five year period justified, or should I recommend a change in procedures.

This is the only way I know that you can address the issue.

"Even though I am HIGHLY against the BCC move, this might be considered stepping over the line. I'm sure he's doing the best he can – even if we don't agree with him."

I understand that most people are reluctant to call out individuals but this financial crisis did not just happen. It is the result of an ongoing set of deliberate decisions made by a several individuals. As members we place responsibility with those individuals to manage the resources of the organization in a prudent manner. It is unproductive in a large sense to quibble with relatively minor financial decisions. Those who have the authority should make those decisions and then explain them to the membership.

The scope and scale of this financial situation goes well beyond my definition of minor. The decisions made or not made over the course of the last five year period represent a fundamental change in previous policy that has put the organization in a precarious financial situation. While I am not commenting one way or the other as to who bears the bulk of the responsibilty those individuals who are responsible for these actions should be held accountable.

db

Hear! Hear! Pancerni2.

To quote Stan Lee, "With great power comes great responsibility!"

[And of course this puts East in a precarious financial situation just as its about to embark on what many of us believe is a unnecessary experiment that will result in a financial bloodbath.]

ORRR… another logical conclusion is that you've been doing it over and over again, making less and less money each time… Isn't it time to try something new before you actually DO start losing money?

If the definition of insanity is doing the same thing over and over again while expecting a different result, then the Board would be insane to stay where they are, since you have clearly shown that Lancaster is obviously no longer profitable.

If the trend was the opposite: if Lancaster were making money hand over fist… Well, then you'd have a good argument. Why change something that's working well?

But if I owned a store on a shabby street corner and I kept bringing in less and less money every year, then I don't think that would be a good argument *against* moving to the shiny new mall in suburbs!

PS – your figures show that the cost of keeping the cons in Lancaster has increased more than 100% for H-Con, and about 63% for C.Wars, over the past 5 years. At that rate of increase, you simply can't stay there much longer, can you?

If your numbers are right, then the cons have to move, period.

There are some missing pieces to this discussion:

1. attendance

2. contract costs for the Host

For Hcon, it must also be remembered that they probably have been spending more money on the convention itself in order to attract more people, and there was the 25th anniversary celebrations as well.

The point being, that not all expenses (or income) are controllable. For instance, if the cost of going to the Host has built in increases, that is not something that can be controlled, nor would it be discretionary spending. Attendance is the other variable too.

The numbers are disturbing, but a deeper analysis is needed.