REPORT TO THE AOG MEMBERSHIP

July 2008

The last twelve months have been a busy period for the AOG Board as we have worked diligently to assimilate governance changes for the AOG, to address economic challenges brought about in part by the fallout from the last Board Election, and to seek a rational long range perspective that will lead to strategic plans to guide the AOG in the years ahead. It has been a challenging year; and it is appropriate to render a progress report to the stakeholders, the AOG members and supporters.

Realizing that not every relevant question can be covered in a brief status report, the Board settled on eight questions that touch on the key current issues being addressed. We invite you to read and reflect on the questions and the brief answers. Our hope is that we will foster thoughtful discussions among the members and that the membership will share your views with the Board, the AOG Staff, and the Class Advisory Senate.

Since being seated in July 2007, this Board has had to deal with a number of environmental factors that were not anticipated or predictable. From each of these challenges, the Board has attempted to make incremental decisions in the best interests of the AOG and the membership. 

1. Assimilation of six new elected directors, the appointment of two directors per the Bylaws, and the resignation of three directors, two of whom have been replaced with one vacancy still open.
   
2. Resignation of the CEO and other key staff members, including two who were working on the Development Staff and who have subsequently been hired by the USAFA Endowment (UE).
   
3. Resignation of several members of the Campaign Steering Committee, which caused the Board to dissolve that Committee. A sense of competition, confusion, and perceived strife caused by the formation of the UE by former members of the AOG Campaign Steering Committee.

Over the last year the Board has come to better understand the opportunities and challenges presented by the three elements of the AOG mission, staff and director departures, the new governance model, and the emergence of an Academy focus on the requirement for philanthropic giving and private financial support to meet major unfunded needs of the Academy now and in the future. At this point, after climbing a very steep learning curve, the Board is now able to provide information in many critical areas. It is important to note that the answers provided are reflective of change still in progress and are intended to give the membership a sense of where their association is headed and why.

1. Does the Board intend to continue to execute the current AOG mission or will the Board recommend to the members that the AOG Mission Statement be changed?

This Board intends to continue to pursue the AOG mission as approved by the membership and contained in the AOG Bylaws. This means the Board will be working with the staff and members to use resources available to achieve the right balance of the three AOG mission elements based upon the goals and objectives of a new strategic plan. Those mission elements include: support for the Academy, support and services for members, and promotion of the heritage of the Long Blue Line.

2. What is the state of the AOG's finances? What is the projected situation? 

The Association of Graduates is fiscally sound. The AOG fiscal year ended June 30, and unrestricted reserves available for operations are projected to be approximately $2.1 million at that time. Investment performance due to the generally poor economy and lower contributions during the FY08 fiscal year have resulted in our using approximately $440,000 from reserves despite significant expense  cuts made by this Board shortly after being seated. The AOG is fortunate to have a very talented group of investment experts to manage the funds entrusted by the members. In the year just ended, the AOG  investment portfolio has performed better than all major indexes; and, of note, this management service is provided to the AOG at significantly below market cost. 

At its May meeting, the Board approved an operating budget for FY 2009 that balances projected income with planned expenses to preclude any use of unrestricted reserves in the year. The Board will review this plan quarterly and ensure the staff takes the necessary actions to achieve the plan while protecting the AOG's reserves.

The FY 2009 plan contains a modest increase in staff of one advertising specialist which returns one major giving officer to full-time development duties to improve the AOG's fund raising capability to support its mission accomplishment and associated operations. The plan commits to improve member outreach and communications; it increases chapter development and provides for better internet communications capabilities including electronic access to the Register of Graduates which will not be printed this year to reduce expenses. Additionally, the budget contains modest expenditures for the upkeep and maintenance of Doolittle Hall over and above those already provided by the Ackerman Trust.

3. How does the Board intend to accomplish the multifaceted AOG mission?

The 2007-2011 AOG Strategic Plan is being revised and the new plan will be completed once the new CEO is on board. Concurrent with the development of the strategic plan, the Board and staff are developing a case statement centered on the fund raising efforts that are necessary to support the AOG mission. Attachment 1 lists Member Services currently provided by the AOG.

The FY 2009 budget continues the mission element of support by the AOG to the Academy. Attachment 2 lists the many Academy support programs administered by the AOG. These programs are supported by previously raised, endowed, or restricted funds managed by the AOG. The AOG expects to provide direct financial support to the Academy from restricted funds of approximately $1.6 million during FY 2009.  Additionally, the Board plans to provide additional support to the Academy of $250,000 from unrestricted funds. The Board will review the progress of unrestricted fund raising and investment performance during the year to determine if additional support to the Academy can be provided over and above this amount.

At the May meeting, the Board voted to re-establish the Heritage Committee to bring increased focus and direction to this mission element. While there are no major new heritage projects scheduled to start in FY 2009, the AOG maintains the capability to facilitate Class giving in support of heritage projects and to execute projects already in the fund raising, funds management, and execution phases.

In addition, the Board supports the continued development of the Class Advisory Senate (CAS) and is steadily increasing its use of the CAS for broad-based input from the members on significant issues of policy and services. The Board thanks each member of the CAS for their service.

4. What is the status of the AOG staff? Is the AOG going to hire a new CEO?

The AOG staff has recently been reorganized to more effectively perform the AOG mission without adding additional personnel. The AOG is currently operating with a fixed headcount that requires the CEO to seek Board approval for any additions. We are fortunate to have a very talented, dedicated, and committed staff; and the Board is aware of the requirement to provide positive, stable guidance to improve morale and retention of key staff members.

A search for the next CEO of the AOG is in progress and the Board will undertake a final review leading to a decision at the August Board Meeting.  The CEO Search Committee is composed of three directors and two at-large AOG members selected by the Board. Funding is contained in the FY 2009 budget for this hire based on the assumption that this person will join the AOG shortly after a final decision is made. We began the process with over 30 candidates and wish to acknowledge the professional assistance being rendered pro bono to the Association by Randy Jayne '66 and Bob Edmonds '90 of Heidrick and Struggles.

5. What is the AOG position on other non-profit entities which support or are attempting to support the Academy? Does the AOG have a position on the efforts of the USAFA Endowment (UE)? 

The Board recognizes that several not-for-profit entities have been and are active in the philanthropic area generating private financial support for the Academy. The AOG has positive working relationships with each of them and manages funds for some of our nonprofit partners. The AOG acknowledges the many contributions of the other nonprofits, and we view their existence and efforts as positive and consistent with our own mission responsibility for Academy support.

The Board will cooperate with all of the members of the Academy nonprofit support community, including the USAFA Endowment.   To that end, the Board is participating in a Joint Working Group composed of representatives from the AOG Board and the UE Board to develop a process and plan for working together in a manner that emphasizes the strengths of both groups and precludes redundant costs. At the May meeting, the Board reviewed the initial proposal offered by the UE for cooperation. The Board has responded constructively to this proposal and continues to work to define a project for collaboration which will help define the structure for a longer term relationship.

The Board recognizes that in any philanthropic effort there are real cash costs associated with raising funds from donors, managing and accounting for funds, and overseeing the expenditure of funds for their intended purpose. The Board intends to ensure that agreements made by the AOG for cooperative efforts in the area of fund raising recognize and reimburse the AOG for any and all costs it may incur if it is, in fact, responsible for all or a part of these functions.

Further, the Board believes that greater transparency is required for the administration of entrusted funds. While outside audits have confirmed that the AOG is following its policies and procedures to the letter, it is clear from member feedback that communication about the cost of fund raising, fund administration, and endowment payout rates must be more clearly articulated and benchmarked against nationally accepted indices for similar activities. 

Finally, the Board is sensitive to requests to shift donated funds from the AOG to other not-for-profit entities supporting the Academy. The Board will deal with these requests fairly, but there are two concerns that must be addressed: First, the Board is intent on preserving the AOG's status as a not-for-profit organization. Second, interest income from these donated funds is part of the operational funding for the current operations of the AOG. If these funds are shifted, the Board must balance the loss of this income with funds from other sources.

6. What percentage of graduates are currently members of the AOG? What is being done to increase this participation?

As of 1 May 2008, 57.7% of USAFA graduates are members of the AOG. This compares to 83% at the NavalAcademy. The West Point AOG considers all graduates to be members, and members must subscribe to publications and pay for other services. Their subscription rate is 35%. Available information on other universities indicates that participation rates from 8% - 30% are the norm.

The key to Navy's success is their Life Membership at Graduation (LMAG) program. Until recently, the AOG was seeing significant increases in participation with our own LMAG. The key to the program is that cadets have periodic payments withheld from their cadet pay. Unfortunately, recent changes to the cadet pay system have curtailed this program and future participation rates are likely to drop dramatically.

The Board intends to pursue increased membership participation through Chapter Outreach, Class Reunions, and by improving the AOG's overall capability to facilitate networking, job opportunities and career development advice, and mentoring programs consistent with building a world-class alumni association. The Board has enlisted the Class Advisory Senate in the review of AOG membership issues and looks forward to receiving their input as new initiatives are formulated and evaluated.

7. What percentage of AOG members make a contribution to the AOG other than dues? What success is the AOG having in its current Annual Fund and Sabre Society campaigns? What is being done to improve this result in the future?

Currently, about 8.5% of graduates contribute to the Annual Fund/Sabre Society. These funds are used to accomplish the member services mission and to support the Academy programs outlined in the needs list received each year from the Superintendent. The overall participation rate for gifts of any kind is 12.09%. The Board recognizes that this participation rate is below that of our sister academies and very low compared to other topflight private institutions. 

The Board plans to increase the participation rate through enhanced communications with all graduates aimed at developing a sense of responsibility to "give back". The clear goal is to increase the number of graduates making contributions and to increase the size of their donations over time.

Further, the Board has directed the Development staff to realign the Sabre Society program to provide for a tiered approach that recognizes members of recent Classes who give at a lower level than is currently required for Sabre Society membership. The Board believes that this will increase overall participation and start the habit of giving earlier.

8. How well are the BRC recommended, member approved Bylaws working ?

The Bylaws Review Committee of the Board is currently engaged in the mandated biannual review of the AOG Bylaws. Experience since the BRC recommended Bylaws were approved by the membership in 2006 has made it clear that refinements and changes are needed in some key areas. We are fortunate to have very able member volunteers working with the Bylaws Committee to conduct this review, and the membership can anticipate voting on recommended changes in conjunction with the 2009 Board Election. 

Summary

The Board has made notable progress in many areas and is moving forward systematically after a period of significant change and graduate uncertainty over the role and effectiveness of the AOG. It is noteworthy that graduates who found themselves on opposite sides of the governance debate of recent years are now working together to try to help shape the AOG into the world-class alumni organization it can be.

Our hope and expectation is that we will continue to see improvements on all fronts. The Board, the AOG Staff, the AOG membership, and the graduate community must continue to work together and with the Superintendent and the Academy Staff to support the efforts, accomplishments, and camaraderie of all who value the US Air Force Academy.

Attachment 1:  Member Support Services

• Affinity Group Support
  • AcademyWomen; Rugby; Silver Falcons; Space Group; Way of Life
• Cadet Area Access
  • Assist with access and tours
• Career Opportunities/Networking
  • SACC; iSABRD; JSAJE Plus; Resume Services
• Chapter Support
  • Geographic Chapters and Associations
• Checkpoints Magazine
  • Four issues annually
• Class Rings
  • Administer Ring Contracts
  • Retrieve and return lost rings
• Class Support
  • Maintain Class Admin Funds and Gift Funds
• Deceased/Next of Kin Support
  • Class notification; Next of Kin contact
• Distinguished Graduate Award
  • Facilitate selection and award
• Founders' Day Celebration
  • Plan and execute Founders' Day celebration
• Golf Reservations
  • Provide limited access to non-DOD ID card holders
• Graduate Dependent Scholarships
  • Facilitate selection and award of scholarship
• Graduate E-mail forwarding service
• Graduate Records
  • Register of Graduates; Database Management; Graduate Locator
• Humanitarian Fund
• Jabara Award
  • Plan and execute Jabara Award Dinner
• Legacy Program
  • 100s Night; Ring Dining-Out; In-processing; Acceptance Parade; Commitment Dinner; Exemplar Dinner
• Membership
  • Membership Maintenance; Member Affinity Program Maintenance
• Merchandise
  • AirForceAcademy and AOG merchandise
  • Class specific merchandise for reunions
• National Event Planning
  • Away Game tailgate support; Bowl Game support; Chapter speaker support
• Photo Galleries
  • USAFA events captured for history/heritage
• Post Graduate Scholarships immediately after graduation
• Reunion Support
  • 10th; 20th; 25th; 30th; 35th; 40th; 45th; 50th
• Saber Rentals
• Special Functions in Doolittle Hall
  • Weddings; Retirements; Meetings
• Travel Programs
  • Falcon Travel; JointAcademy Travel

Attachment 2:  Support to the Academy

• Cadet Cultural Immersion Summer Travel
• Chair, Space and Defense Policy
• Summer Recruiting Seminar
• NCLS
• Vector
• R&R
• Lift
• Aces
• Cadet Commanders' Leadership Enrichment Seminar
• Visiting Lecturers
• Support for Athletics
• Falcon Heritage Forum
• Honor Education
•  Small Satellite Research
• Academy Assembly
• Cadet Clubs
• Contrails