1. Tom Duerr AIAA Resources Working Group May 2017
Member-Driven Activities Budgeting & Expenditure Management Process Preliminary Results and Way Ahead
Council of Directors (CoD)
Technical Activities Committee (TAC)
Region and Section Activities Committee (RSAC)
Aerospace Interest Committee (AIC)
Tom Duerr
AIAA Resources Working Group
May 2017

2. Recommendations to inform ongoing BoT and CoD strategic planning
Executive Summary
AIAA has an historic opportunity to review and revise budgeting processes for “Member-Driven Activities” under the Council of Directors – TAC, RSAC, AIC
Why fund Member-Driven Activities:
Enable grass-roots innovation leading to new products, services, and markets
Incentivize volunteer contributions to AIAA products and services
Reimburse volunteer costs for generating AIAA products and services
How to fund Member-Driven Activities:
Plan and execute from the bottom-up
Guide and manage from the top-down
Re-allocate budgeted funds flexibly during the fiscal year
Use the chain of command to preempt and resolve issues
Key process features:
Frequent feedback and transparent control mechanisms in the process
Periodic self-reflection and review about the process
Recommendations to inform ongoing BoT and CoD strategic planning

3. Outline
Resources Working Group (RWG) purpose
Legacy budget process and outcomes
Assessment of alternatives
A new process
Comparison of legacy and new processes
Next steps

4. RWG Purpose
Chartered by James Maser, AIAA President, under Governance Transition efforts
Purpose: Design clean-sheet budgeting process for Member-Driven Activities
Enable funding of innovative, strategic activities beyond customary expenses
Develop a process and guidelines to budget, allocate, and manage expenditures
Scope: All Member-Driven Activities
Technical Activities Committee (TAC)
Region and Section Activities Committee (RSAC)
Aerospace Interests Committee (AIC)
Output: Recommendations
Process and guidelines draft document
Summary briefing to BoT
Example Customary Expenses
TAC
Meals
A/V support at meetings
TC/PC initiatives
RSAC
Networking events
STEM activities
Define new, enabling funding process for TAC, RSAC, & AIC

5. Legacy Budgeting Process and Outcomes (1 of 2)
Staff generates the TAC and RSAC budgets based on traditional guidelines and submits it for BoT approval
Origins and rationale of allocation guidelines are undocumented
RSAC allocation guidelines
“Section rebate” based on percentage of dues and membership numbers
Further sub-divided by RSAC into Categories I-IV
TAC allocation guidelines
1 meal per Technical Committee (TC) and Program Committee (PC) and audio/video support at face-to-face meetings at Forums
Comparatively small TAC discretionary fund
Allocation guidelines differ between RSAC and TAC, but total dollar amounts are close
Historically the total “Member-Driven Activities” budget is about 2.7% of the operating budget, less than $600k

6. Legacy Budgeting Process and Outcomes (2 of 2)
The legacy process had several undesirable outcomes for the volunteers
For Technical Committees and Program Committees in TAC:
No flexibility in how to spend the funds allocated to cover meals
Incentivized search for alternative sources of revenue outside AIAA
“Successful” TCs/PCs could accumulate substantial funds that were unused or unreported – ramifications for AIAA non-profit status
“Unsuccessful” TCs/PCs could incur liabilities that were passed along to AIAA
For Sections and Regions in RSAC:
Lack a mechanism to obtain additional funds beyond the rebate
Budgetary isolation fosters activity silos and inhibits synergistic planning

7. Assessment of Alternatives – Overview
The RWG adopted an assessment of alternatives approach. The legacy process will serve as a baseline against which alternatives will be assessed.
The RWG established a 5-step approach:
Review legacy budgeting and monitoring processes
Develop statements of objectives – establish criteria for a “good” process
Research and generate process alternatives
Assess alternatives with respect to objectives
Develop recommendations
Stakeholder feedback at multiple points in the assessment

8. Assessment of Alternatives Objectives for the Budget Process
Based on President Maser’s initial questions and RWG experience, the RWG drafted a set of 15 objectives
RWG surveyed TAC and RSAC leadership for reaction. Average of 48 responses indicates consensus agreement with all draft objectives; “somewhat agree” to “strongly agree” with 14 of 15
The top six objectives, with strong agreement:
Minimize legal and ethical issues
Minimize conflict of interest
Maximize budget sufficiency
Maximize strategic value to the Institute
Maximize fairness across stakeholder groups
Maximize stakeholder control over expenditures
Comment adjudication is ongoing

9. Assessment of Alternatives Process Alternatives
The RWG recognized the need for two distinct but linked processes to achieve the objectives: 1) budget planning and 2) expenditure management
Budget planning alternatives: identified 54 budget planning features addressing 4 levels of the Member-Driven organization
Each feature prescribes a method for allocating funds to a given level of the organization
Features are taken in combination to generate budgeting alternatives
Whole alternatives and individual features were assessed for support to the objectives
Expenditure management alternatives: considered open-loop and closed-loop expenditure management styles
Open-loop reflects the legacy process, once allocated there is no review and re-allocation until the end of the fiscal year
Closed-loop reflects best practices as followed in industry and government

10. A New Process – Budget Planning
The following were assessed to be the highest-value features of budget planning
Management margin. Compensate for shortfalls where actual costs exceed planning estimates. Enable action on unplanned opportunities.
Incentive fee. Discretionary funds allocated in recognition of contributions toward AIAA products and services, based on prior year actual performance and “incentive fee table.” May be spent on new value-added activities, committee team-building, or any other allowable expense in accordance with AIAA legal and ethics policies.
Proposals. Funds to cover actual costs for new, innovative events, products, or services. Proposals must satisfy acceptance criteria as stipulated by CoD, TAC, RSAC, or AIC. Funding priorities for proposals are established at the TAC/RSAC/AIC level.
Cost of business. Funds to cover actual expenses to be incurred to contribute toward AIAA products and services in accordance with an "allowed costs table" and “AIAA products and services inventory.”
TCs, PCs, and Sections typically also have external funding sources. TAC and RSAC guidelines may apply.
The RWG drafted a detailed budgeting process around these features – further information can be provided in follow-up discussions

11. A New Process – Expenditure Management
Flexibility and accountability require pro-active management of expenditures in a closed-loop review and re-allocation process
Key features include:
Spending plan at TC/PC/Section level at no less than quarterly granularity
Quarterly or triannual reviews to allocate management margin, re-allocate unused funds to areas of shortfalls, and monitor status with respect to plans
Issues resolved at lowest possible level in the chain of command
End of year sweep-up – unused operating funds transferred to Portfolio to prevent accumulation of AIAA “profit”
All unspent cost-of-business and proposal-based funds
Portion of unspent incentive fee funds that exceed an annual carry-over limit or a total balance ceiling
All unspent donations – may be returned to sender or transferred per donor direction
The RWG drafted a detailed expenditure management process around these features – further information can be provided in follow-up discussions

12. New Process – Principal Roles and Major Milestones
Organization Level
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
1) Budget planning – next year
BoT
Management*
TC/PC/Section
Staff
2) Expenditure management – current year
Annual Plan
Controls Update
Plan Approval
Budget Approval
Support
Planning
Initial Review
Budget Request
Initial Plan
Quarterly Plan
Status Review
Audit
Sweep-up
Monitor
Spend i.a.w. plan
Support
Budget Allocation
* Includes Technical and Region Directors; TAC, RSAC and AIC; and Council of Directors

13. Comparison of Legacy and New Processes
Objective
Legacy Process
New Process
Legal & ethical
Some anomalies
Periodic reviews
COI
Not observable
Sufficient
Fixed amounts
Vary with justification
Strategic value
Fixed purpose
Annual update of guidance
Fair
Accepted as tradition
Same rules for everybody
User-controlled spending
Differs for TAC and RSAC
User spend plan
Accountability
User-controlled budget
No user input to budget plan
Planning and proposals
Flexibility
Small margin available
Margin and re-allocation
Support innovation
Fixed-purpose allocations
Proposals and margin
Volunteer value
Incentives, proposals, re-allocation
Low process effort
”Autopilot”
Learning curve
Avoid mixing fund types
Not monitored
Strong oversight
Coordination
No visibility
Published spending plans
Minimize expenses
2.7% of budget
Start at 2.7% of budget

14. Future Stakeholder Survey Topics
Survey Technical and Region Directors for draft process guidance; three key items
AIAA products & services inventory
Identify and prioritize AIAA value-added products and services enabled by volunteers
A preliminary list for process proof-of-principle – will be revised as strategic planning unfolds
New budget planning process includes an annual review and update
Allowed costs table
Identify volunteer activities essential to delivering the AIAA products and services
Need staff support to estimate actual incurred costs of these essentials
Annual budget will cover actual costs incurred up to these allowed amounts
Incentive fee table
Identify amounts of discretionary funds to be provided based on contributions to the AIAA products and services
In addition, survey Directors for “challenge” scenarios to support process testing
Identify historical and potential future budgeting and expenditure issues
RWG will examine how the new process would accommodate the issues

15. Next Steps Complete comment adjudication on objectives May
Survey Technical and Region Directors May-Aug
AIAA products and services inventory, and essential volunteer activities May
Challenge scenarios Jun
Incentive fee table Aug
Test the process with respect to the scenarios Jul-Aug
Brief BoT Sep
RWG recommendations will be incorporated into ongoing strategic plan development in the BoT and CoD

16. Backup

17. RWG Members have Diverse Backgrounds
Name
Employer & Location
Region
AIAA Experience
Andy Amram
Associate Fellow
Software Engineering Institute
Carnegie Mellon University
Los Angeles, CA VI
TAC
Troy Downen
Gulfstream Aerospace Corporation
Savannah, GA II
RSAC, TAC, Student
Tom Duerr (RWG Chair)
The Aerospace Corporation
Chantilly, VA I
BoD, TAC
David Elrod
Jacobs Technology
Tullahoma, TN
Jeff Laube
RSAC, TAC
David Levy
Sierra Nevada Corporation
Centennial, CO V
Sandy Magnus
AIAA
Reston, VA
Executive Director
Andrew Neely
University of New South Wales
Australian Defence Force Academy
Canberra, Australia
VII
Shamim Rahman
NASA Johnson Space Center
Houston, TX IV
BoD, RSAC, TAC, Student
Jayant Ramakrishnan
Bastion Technologies, Inc.
BoD, RSAC, TAC
Members were selected to represent the diversity of AIAA stakeholder communities
Academia, government, industry
Technical and Section activities
AIAA regions

18. Assessment of Alternatives Objectives for the Budget Process
Based on President Maser’s initial questions and RWG experience, the RWG drafted a set of 15 objectives
RWG surveyed TAC and RSAC leadership for reaction. Average of 48 responses indicates stakeholders “somewhat agree” to “strongly agree” with 14 of 15 draft objectives
Respondents weakly agreed with minimizing total expenses
Comment adjudication is ongoing

19. The Big Picture
Two parallel processes every year: management of current year expenditures and planning for next-year budget
Constitution
By-laws
Strategic plan
Controls
Inputs / Outputs
Organizations
Bold outline = further decomposition
Generate
FY(N+1) budget 1
FY(N) budget
FY(N+1) budget
Legal requirements
BoT, CoD, CC, AC, OU, Staff
Manage FY(N) expenditures 2
FY(N) actuals
CoD, CC, AC, OU Staff

20. 1.0 Generate FY(N+1) Budget
Three-stage budget planning process. Updating budgeting guidelines (1.1) may occur at other than annual periodicity. Other steps are annual.
Constitution
By-laws
Strategic plan
Controls
Inputs / Outputs
Organizations
Bold outline = further decomposition
Proposal criteria
Incentive fee schedule
“Listed activities” & costs
Update budget guidelines
1.1
Top-line funding guidance
FY(N) budget
Generate budget request
1.2
FY(N+1) budget request
CoD, CC, Staff
Negotiate final budget
1.3
CoD, CC, AC, OU, Staff
FY(N+1) budget
Process feedback
BoT, CoD, CC

21. 2.0 Manage FY(N) Expenditures
Iterative process for oversight and re-allocation of resources.
Expense procedures
Controls
Inputs / Outputs
Organizations
Bold outline = further decomposition
Expend funds
2.1
Plan variance
FY(N) budget
End of year plan Variance
Margin request
Review expenditures
2.2
OU, Staff
End-of-year sweep-up
2.3
Allocated margin
+/- Re-allocation
Sweep-up funds for Portfolio
CoD, CC, AC
CoD, CC, AC, OU, Staff

22. A View of TC/PC/Section Funding Sources
TC/PC/Section funds
Plans
Incentive Fee
Proposal
Director Margin
TAC, RSAC Margin
CoD Margin
External
A View of TC/PC/Section Funding Sources
Magnitude of funds represented by size of bubble
Guaranteed sources solid, optional sources hashed
Distance from center indicates primary, secondary, and tertiary