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AIESEC in Ukraine

MC-LC Financial Relations: LC fees Model April’09

AIESEC in Ukraine 08-09 │ Financial Model Re-view Project


Current situation (08-09) MC – is a strategic body the main aim of which is to serve Local Committees and support them in their growth and goals achievement. The difficulty on getting fund raising to MC is that it takes time that could be used in LC Development. While the structure of MC is build according to its ultimate role – so that only one person in MC team (MC VP ER) is working on MC needs, while the rest positions are focusing on the LCs support. Current contribution of LCs to MC budget is about 7% (634227 UAH divided on 42715 UAH received from LCs), which in fact covers only AI fee 42000 UAH, leaving 715 UAH for covering other MC administrative and operational costs, as well as infrastructure development and strategic growth investments. So in this case the rest 93% of money are supposed to be covered from MC ER area, which shows enormous dependability of MC (and as a consequecy - the whole country) from external environment and supplementary activities. If to take LCs realities into the consideration, the situation is turned out to be vice versa.

Around 60% of its profits LCs get from core activity – X, what is financially sustainable and healthy. Actually business logic of any sustainable organization is that it should get return on its investments and its main activity.

Financial Model/LC fees proposal New financial model is designed, according to mentioned already points during the Spring LCPs meeting, as well after the working group meeting in Kyiv in April’09 (LCPs Kyiv, Odessa, Simferopol, MCP (c), MCP (e), MC VP Fin (e)) adjustments, with following aims and characteristics: 

Enable MC focus on supporting LCs to achieve performance and growth;

AIESEC in Ukraine 08-09 │ Financial Model Re-view Project


  

Reduce MC dependability on external environment and create interdependency between our goals and our incomes, fostering motivation to goals achievement; Establish interconnection between costs for LCs coaching and profit from core product – cancelation of regional fund and including this item into the X component of LC fees. Ensure healthier financial inflow from LCs to MC in order to correspond to AIESEC Ukraine and Global Assossiation financial operations.

LCs fee is proposed to be comprised of 3 elements: 1st Element: AI fees - payable twice a year according to the the LC cluster*. Payable in Q2 invoice Payable in Q4 invoice Affiliation fee

50%

50%

Global IS fee Strategic development fee X Mngt support fee Talent Mngt support fee Country development fee Global fund contribution International trademark fund Mngt contribution Individual assessment Tool contribution Strategic Meetings Travel Fund Contribution Growth Network Fund Contribution

50% 50% 50% 50% 50% 50%

50% 50% 50% 50% 50% 50%

50%

50%

50%

50%

50%

50%

50%

50%

*Reconsidered LC cluster system in order to balance payments up to the clusters (5 LCs in each cluster), as well as it is taking into the consideration not only external measures, but also internal.

# 1 2 3 4 5 7 6 8 9 10

Local Committee Kiev Ternopil' Lviv Dnipropetrovs'k Donets'k Odesa Kharkiv IvanoFrankivs'k Sevastopol' Simferopol'

Number of students in city (A)

Number of companies (B)

423400 17762 86000 88430 84903 76402 107224

219633 7778 30965 53785 41351 43011 55798

35000 28000 55000

9434 12847 17492

31 61 29 22 15 8 8

Number of members in LC (D) 91 79 55 48 47 36 20

Coefficient (Coef)

Measures

18 10 8

39 35 30

0,2123 0,1683 0,1676

Number of X Re

0,8770 0,4864 0,3560 0,3355 0,2878 0,2258 0,2146

Cluster #1

Cluster #2

AIESEC in Ukraine 08-09 │ Financial Model Re-view Project


11 12 13 14 15

Mariupol' Lugansk' Berdyans'k Uzhgorod Rivne

25000 47892 7000 14882 21000

8189 18348 2956 4874 8660

12 3 8 6 6

19 17 24 18 15

0,1255 0,1082 0,1062 0,0884 0,0881

Cluster #3

Coef  ( Ai / max[ A1 : An ])  0,25  ( Bi / max[ B1 : Bn ])  0,25  (Ci / max[ C1 : Cn ])  0,25  ( Di / max[ D1 : Dn ])  0,25 Where: A - Number of students in the city (should be up-dated on the yearly basis – here data from 2008) B - Number of companies (should be up-dated on the yearly basis – here data from 2008) C - Number of X RE in the previous calendar year (here - 2008) D - Number of members in LC average for previous calendar year (taken from 4 2008 quarterly Talent Audits as an average) n - Quantity of LCs in country i - LC for which coefficient is calcutated 2nd Element: Exchange fee X component will be counted as fixed sum of money – 300 UAH - taken for each REALIZED TN and each RAISED EP. Where this money will be applied:  LCs coaching expenses;  Support for MC Human Resourses (MCP, MC VP LCD, MC VP Fin);  Travel and Fee of Legislation Meetings (IC and IPM) to the MCP ;  Legal issues (trademark registration and MC re-registration);  Basic costs of MC (Infrastructure and maintenance; partial administrative costs). 3rd Element: Development Fund Development fund is a restricted fund, which is introduced to support specific MC and LCs initiatives and activities in terms of:    

International cooperation development – promo materials for international conferences and cooperations, participation at the international Growth Days, others GNs conferences etc.; CEED programs establishment – incoming and outgoing; LCs legality improvement and case solving; Infrastructure development ( 20% of the total amount of money in the fund will be allocated to such expensesn coverage). The maximum amount of fund proposed to be legislated as 20 000 UAH. The payments are made by LCs eah quarter in the amount of 330 UAH. The minimum amount of money in the fund at the end of one AIESEC year is 1000 UAH. The application and reporting processes are regulated by the compendium.

AIESEC in Ukraine 08-09 │ Financial Model Re-view Project


Proposal in numbers Assuming that AIESEC in Ukraine is commited to minimum of 800 X RE we have: 800*300 UAH = 240 000 UAH Money for AI fee are calculated according to the invoice sent by AI annually in the end of July. The sum is divided between LCs according to cluster – appr. 42000 UAH - and allocated to 2 payment periods – before IC and before IPM (accordingly – in Q2 and Q4 LC fees). Sum of money in the Development fund we will not count, as it is restricted fund and the total amount of money in it and its target usage will be decided through legislation process. Total amount : 240 000 + 42000 = 282 000 UAH This amount would be used: Description

Value, UAH

Comments

LC coaching

16 000

Based on MC and NST LC coaching visits expenses

Travel and Fee IPM and IC

28 838

Based on the value for 0809

HR costs for MCP, 2VPs

36 000

Administrative costs

143 567

Representative costs

19 130

Rent and infrastructure maintenance costs: average 12 000 UAH per month. Based on the value for 0809 Based on the value for 0809

AI fee

42000

Based on the value for 0809

Legal

35 000

Trademark registration costs and MC legality

Total

320 535

So in the end the final result of the application of this value would be: 320 535 UAH - 282 000 UAH = - 38 535 UAH Basic MC costs Value collected In proposed model MC costs (AI related, basic administrative and representative costs and cost connected with LC coaching) are covered on 87% by 3 elements of LC fees.

Main Conclusions - The LC’s participate in the MC budget allowing to its members to focus more on who to leverage the results on LC’s (LC Coaching) - This system should use also regular reports on where the money is being applied in order to increase the accountability .

AIESEC in Ukraine 08-09 │ Financial Model Re-view Project


Main Next Steps - During next 10 days the questions are appreciated – to the MCP current and elect, MC VP Fin elect, LCPs working group. - On the 1st week of May LCPs 08-09 should conduct virtual legislation of the proposed model. - The LC fees Q2’09 are calculated: 1) with old X fees (15 € per X RE), and 2) old LC clusters for the last part of AI fee 08-09 distribution. Proposition : to make X fees Q2’09 calculation for the period of time from 15th March’09 till 25th June’09 including (instead of 15th March-15th June). So releaze the calculated LC fees for Q2’09 on 25th June, and LCs to make payments till 30th June. Reasons: a lot of X of term 08-09 will be RE after 15th of June; MC 08-09 current financial situation and striving to leave positive balance for the MC 09-10 and no debts. - Taking into account transformation period from old to new model, the 1st part of AI fee 09-10 to be included into LC fees Q2’09 calculations (based on the new LC clusters for AI fee distribution). Reasons: MC 09-10 able to pay 1st amount of AI fee in time at IC 2009 and meet this membership criterion. - LC fees Q3’09 will be calculated already with new fee per X RA (EPs) and RE (TNs), and new amounts of LCs contribution to the Development fund. - LC fees Q4’09 will include 2nd part of AI fee 09-10, taking into consideration currency exchange rates adjustments and final AI invoice for country fees received at the end of July’09.

For any questions: anastasiya.avdeyeva@gmail.com, anastasiya.tokareva@gmail.com, tetyana.mkhl@gmail.com, emirshevkiev@gmail.com, nataliya.voloshyna@gmail.com, nebellicht@gmail.com.

AIESEC in Ukraine 08-09 │ Financial Model Re-view Project


Financila Model Project_April'09 input paper