For a long time, people were questioning the status of the holes in the UMCA financial reports. Due to pressure from UMCA members, the belated 2003, 2004, and 2005 financial reports were finally published in the Jan-Feb 2007 UMCA magazine. UMCA members were skeptical of the reports, as one publicly put it:
I just got Ultracycling in the mail and I also had a chance to peruse Seana Hogan's website (http://www.ultracycling.us/newsletter03.html). Thanks Seana! If her information is correct, then the UMCA financial statements are wrong. I'm an MBA, not an accountant, so a CPA could probably spell this out better, but I'll take a stab at it.
John Hughes receives two full page ads in every issue of Ultracycling as part of his compensation. In this post-Enron, post-Worldcom era, everybody should recognize that 2 full pages of advertisement has value and that value should be reported as income to John Hughes and as an expense to the UMCA. Since the UMCA is on a cash basis, I think they only have to report the amount that JH actually uses (while an accrual basis would require writing off the whole amount whether he used it or not). The total annual value of this perk is a maximum of $1350. Not much unless you consider that to be almost 10% of his old cash salary. Does he sell his space to advertisers when he's not using it?
Next. John Hughes has a license to use the UMCA brand for Jerseys, windbreakers, etc. while the contract doesn't specify what this is worth, it does have value and the IRS would probably want to know what the value is and therefore it should be listed in the financial statements or at least addressed in the written explanation that accompanies the statements. Any accountants want to take a stab at valuing the brand? I'm guessing that the IRS would assign some percentage to the actual jersey and commemoratives sales. I, like Seana, am shocked that money spent on UMCA jerseys does not go to the UMCA.
Finally. Back issues of ULTRACYCLING...This has value and should be reported, John makes money off of the back issues and this should be reported as compensation to him, after all the printing costs are listed as an expense to the UMCA. Again, I'm shocked that money spent on back issues of Ultracycling does not benefit the UMCA. Are there any checks in place to make sure JH isn't purchasing more than is necessary? Is the UMCA paying the shipping on these magazines(if so, talk about pure, no risk profit)?
Individually, it might not seem like a lot. he might not make a lot on the advertising, or the jerseys, or the back issues, but add it up and there is a big gaping hole in the UMCA financial statements, maybe not WORLDCOM big, but big enough to make me wonder...if the financial statements don't show a measly $1300 bump to his salary, what else don't we know? What other things are hidden? What other ethical lapses are there?
P.S. this is not a joke.