Northern California Shambhala Financial Update

Northern California Shambhala Financial Update

August 22, 2018

Dear Northern California Shambhala Community,

The leadership of Northern California Shambhala (including the Regional Board, Center Directors and Board Advisors from various centers) has asked us to report to you on the financial health and status of Northern California Shambhala (NCS). This report is a step toward fulfilling a long-held goal of financial transparency, and we hope it will facilitate open and ongoing conversation about finances in the region.

What follows is an explanation of financial activity from January 1 to June 30, 2018 in the “Unified Entity” which is made up of Northern California Shambhala, Berkeley, San Francisco, and Silicon Valley. While the other NorCal Shambhala centers—Davis, Santa Rosa, Sonoma, and Tamalpais—are subsidiaries of the regional legal entity, Northern California Shambhala Inc., their finances are held in separate accounts and managed locally. The Unified Entity represents roughly two-thirds of the financial activity in the region.

Summary

  • The Unified Entity’s financial performance for the first half of 2018 was on track with expectations.
  • Budget projections for July–December are based on a strong second half—with our usual successful Fall fundraising and strong program attendance.
  • The current situation in Shambhala (relating to allegations against the Sakyong) have created some uncertainty about whether the budget forecast will be achieved.
  • In order to build on the regional support structure that NorCal has developed over the past decade, we must continue to come together as a region to meet our goals.
  • At the end of this email, there is a note about how to pursue questions.

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Context
Recent operational changes give us a foundation of financial independence and resilience. In the past several years, NCS has implemented a regional governance model that centralizes many key operational functions—finance, communications, marketing, program planning and support—and it also provides us with unique legal and financial protections. This model has already increased flexibility and resilience in the region.

Because NCS incorporated in 2017, our region is able to operate with relative independence, which contributes to our stability in this time of uncertainty. We are less likely to be swept away by any legal or financial turmoil experienced by Shambhala USA. Centrally coordinated activity has enabled the region to provide centers with support through the efforts of paid employees and dedicated volunteers with expertise in specific areas. These staff allow centers to operate with a higher level of competence, freeing up volunteer resources that can be deployed elsewhere, while reducing burnout and improving financial performance. For example:

  • Finance Manager Karen Walls now does the financial accounting for NCSI, Berkeley, San Francisco and Silicon Valley (the Unified Entity), with the assistance of Kelsey Brown, Scott Tracy, Gary Heyman, and Chris Bacon.
  • A regional Programming team now coordinates programs, eliminating competition between centers.
  • Communications Director Kathryn Rile has refined and expanded our marketing and communication efforts region-wide.

While the benefits of regionalization are substantial, they come at a cost. Our financial overhead has increased with the number of paid regional positions, and this has occurred during a period of steeply increasing rental prices for our centers. Therefore, we entered 2018 with finances that were not yet in balance. In order to sustain a regional organization in an area with high real estate costs, we acknowledged that we must operate at a slightly larger scale. To support that growth, earlier this year the Board approved a budget for 2018 that forecasted a year-end financial deficit of slightly over $15,000. Because we have approximately $80,000 in current assets (cash in the bank), that deficit seemed acceptable as an investment in the growth that will allow us to be sustainable.

However, our current financial situation now seems more precarious in light of Shambhala-wide events and uncertainty. As you will see below, we could face a substantial monthly deficit for the remainder of the year. In response, we are developing contingency plans that will allow us to change course as information about our present situation presents itself. Our goal is to reduce (and eventually eliminate) deficits in order to preserve our savings. At the same time, we want to work with the community to create programs that both inspire the sangha and generate revenue.

Financial Report

Table 1
Budgeted versus Actual Income and Expense, January 1–June 30, 2018
(and Forecasts for the balance of the year)

Table 1A

Table 1A: Compares the January through June Budget to Actual financial performance, and column 3 shows the difference between them. The first half-year deficit ($27,669) is large, but roughly in line with our expectations (only exceeding the budgeted loss by $1,901).

Table 1B

Table 1B: Forecasts July through December: Original Budget, Revised Budget and “Downside” Budget (this “downside” scenario shows what would happen if we experience a 50% decline in fundraising, 50% decline in program income, and 25% reduction in program costs).

1C

Table 1C: Forecasts the entire 12 months of 2018: Original Budget, Actual 1-H (first half) + July-Dec Revised Budget, and Actual 1-H (first half) + July-Dec Downside Budget.

Table 2
Pie chart view of the above Table 1A
Budgeted versus Actual Income and Expense, January 1–June 30, 2018
Pie charts


Notes to the Tables 

Income

  • Since most fundraising occurs in the second half of the year, our Fall and Winter fundraising will be more important than ever.
  • Positive signs: rental income, program income and Dzong Steward donations are all slightly above the forecasted levels.
  • We continue to monitor dues, Dzong Steward donations and Unified Giving transfers from the other NorCal centers. The Unified Giving model is working.

Expense

  • “Program expenses” are far higher than budgeted, mainly because winter weekthun expenses were logged into the system in 2018, while the income was logged in 2017 (teacher and staff expense of over $7,000 were entered in January 2018, while income was entered in 2017).
  • “Other” expenses are $6,000 higher than forecast, including $3,000-$4,000 of large, non-recurring bills that came due. This category is the accumulation of many non-trivial expenses, such as bank service fees, advertising, community events, professional fees.  We need to continue to exercise discipline to monitor and reduce these less-visible expense.
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Looking Forward

Some Predictable Changes to the Budget

  • Because fundraising in our region typically happens in the second half of the year, the budget forecasts a break-even second half of 2018. However, that budget was created before the current crisis in Shambhala—which may have an effect.
  • The budget does not include one significant expense: NCS pays for utilities on Stevenson (SF) based on the percentage of the building our center occupies, and the landlord bills us retroactively. Based on the larger space we occupied in 2016, our share of the utilities came to $10,000. We have just repaid $6,000 of that amount and include the remainder in our second-half expenses. This will be a non-recurring expense, since our reduced space means reduced utility fees of $2,000/year (to be billed in early 2019).
  • The budget included net income from a Sakyong-led program that has since been canceled.
  • The region’s salary commitment has been increased by a total of $2200 ($367/month) in the second half due to salary adjustments and staff departure.
  • On August 13, 2018, the NCS Board voted to temporarily suspend Unified Giving payments to Shambhala. This will give us breathing room during uncertain times, allowing an additional $800/month to remain in the region. (Individual donations to Shambhala from members of the region are almost 5x as much as the region’s UG donation—and those will not be affected.)
  • We had budgeted for a rental space in Silicon Valley, which we have not pursued. This saves us $600/month relative to the budget.
  • We secured $500/month in additional donations to offset salary adjustments.
  • Unified Giving transfers to the region from local centers will decline by $1600 ($167/month) in the second half.

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Modeling a “Downside” Scenario

  • The second-half downside scenario reflects what would happen if we experience a 50% decline in fundraising, 50% decline in program income, and 25% reduction in program costs. This is not a guess of what will happen, but rather a representation of how quickly a rapid contraction would affect the financial situation.
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Discussion
In some ways, what we need to do has not changed since January. Our financial health continues to depend on maintaining the strong foundation we have built and expanding where possible. However, our annual projected deficit persists and the situation in Shambhala has created many new uncertainties. No one knows how the allegations about the Sakyong and the resulting leadership transition at Shambhala International will affect our circumstances here in NorCal.

If our second half financial performance falls significantly short of expectations, this will lead to a significant and unsustainable erosion of our savings. Given the uncertainty about what will happen in the second half, we will be closely monitoring our finances and will be ready to adapt to changing conditions. Director McGough has formed a Contingency Planning Group to determine how to know when it has become necessary to cut costs and to identify the most beneficial/least harmful way to reduce the scale of our operations, if such steps are necessary.

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Going Forward
We are at a crossroads in terms of the state of our regional finances and governance model. Going forward we must:

  • Support our continued programming. We will monitor and evaluate community interest and registrations, and adjust our programming plan accordingly.
  • Plan and carry out a successful 2018 fundraising campaign.
  • Identify opportunities to generate income. A great example is subleasing our spaces when they’re not being used. This is proving to be a successful model at the Berkeley Shambhala Center.
  • Support giving to the NorCal region, including: membership dues in Berkeley, San Francisco and the Silicon Valley Shambhala centers; Unified Giving transfers from non-unified centers; and direct giving from Sharchen Dzong Stewards.
  • Be creative; what ideas do you have?

We are committed to creating a sustainable budget for 2019. If necessary, opportunities for reducing expenses include a more part-time or volunteer Regional Director position and incrementally reducing overall staff expenses. We do not foresee any immediate danger to our center spaces and will always prioritize our Berkeley and San Francisco spaces over staff expenses.

Opportunities for Questions and Comments
While we hope that the report is self-explanatory in many ways, it is natural that you may also have questions. Our finance team will host zoom “office hours” during which all are welcome to join and ask questions. If you prefer, you may also email your questions to Chagdzö David Rapson at ncs.chagdzo@gmail.com.

Our first office hours will be Tuesday, September 4, 2018 from 5 to 6:30 PM via Zoom

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In basic goodness,
Cody McGough, NCS Board Chair and Regional Director
Gale Young, NCS Board Vice Chair
Dave Rapson, NCS Chagdzö
Karen Walls, NCS Finance Manager
Scott Tracy, Berkeley Chagdzö and Board Advisor

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