NAFB Financial Consultant Update

Gene Millard, NAFB Financial Consultant

Over the past 15 years, the NAFB Board of Directors, in association with the past and current Executive Directors, have consistently approved a policy of building a sustaining financial reserve. This portion of the NAFB financial platform is to provide for sustainability of annual programs and services, as well as protecting the association from unforeseen financial challenges that could place the association in jeopardy of its mission goals and objectives. 

The industry standard for "not-for-profit organizations," such as NAFB, is to build and sustain a reserve in an amount approximate to at least two times the annual cash flow. The annual cash flow of your association is just over $1.2 million. The reserve is now almost two times annual cash flow and is providing a stable platform to execute the program of work approved by the present NAFB Board of Directors. 

The NAFB has been the beneficiary of very prudent financial management that has allocated less than 10 percent of the association's annual cash flow into the reserve investment account from 2002 until 2013. There have been no new allocations into this reserve account since 2013.   

The account is now generating enough interest and dividends to sustain itself and at the same time allow for withdrawals to finance some very significant investments in NAFB projects of research, as well to balance the operational budget approved by the Board of Directors each January. While the interest rate environment for the past decade has been near zero, the annualized rate of return in the NAFB investment portfolio has been 6.74 percent since 2009! 

Mark Mathews, Financial Advisor from Edward Jones, is a valued participant in the selection of specific investments of bonds, mutual funds and individual equities that are designed to meet our objective of balanced growth and income. The strategy is for both short-term income, when required, as well as long-term value to members over the next decade or more.    

In 2014, the opportunity arose to form a subsidiary, NAFB Properties, to purchase the office building in Platte City where NAFB has called home for the past six years. This was achieved by diversifying the investments held at Edward Jones, along with a very low interest bank loan, to invest in a high-quality real estate property that will generate a stable, above-market return on equity for the long term. The NAFB Properties LLC building will have paid for itself by 2024 and is projected to make a significant cash contribution to the association for many years into the future. 

I do believe no one can predict the economic future; however, it has been our desire to be as prudent as possible in investing NAFB resources, to support short-term needs and goals, as well as long-term sustainability and value for our membership.