Books, Account Debits - Q's for FinallyFree (or anyone)!

[lkwdblds]

A look at all this from 1973.

Standard accounting practice would be to not recognize the revenue until it was used (e.g. spent for books or used for service).

Scn does not follow standard revenue recognition which is how it's so easy for them to be out-exchange with the public.

Thetanic - I think that your paragraph above and below are tremendously astute and eye opening comments! Was this any way to run a Navy?

Think about it, if staff didn't get paid until the service was at least started or the books delivered, the focus would immediately shift from regging to delivery.

I was fully hatted in Treasury and was very involved with all this back in 1973. Pretty much everything which has been said so far is spot on. I was never FBO. I applied for the post and was turned down due to internal politics. I know that Mike Goldstein of Idenics fame was the senior FBO of the entire FBO network and was posted on the Apollo as such in 1972 and 1973. All FBO's were under his command chain during those years. On the HCO Book account, it is just as everyone has stated so far. The book moneys were collected by the FBO and transfered into a special Book Account at the local level. Div 3, treasury, never disbursed the Book Account Money's. They were handled separately by other parts of the Org. The Book account money was counted as part of the Gross Income statistic but was not part of the Corrected Gross Income. The same went for an automatic 10% which was skimmed right off the top to be sent to Flag plus there was 10% which went to a Building Fund account and acted as a local Org reserve. Finally, I believe that the FSM commissions were subtracted off as well. When all these subtractions were made, typically 50% was left as the CGI and from this the Org's expenses were paid including Staff Salaries, Rent, Food, Phone Utilities, Office Supplies and 14% of the CGI went towards promo. In a typical week at CCLA in 1973 the GI might be $8,000. $800 was sent to Flag as Sea Org reserves or as a management fee, $800 went into the Org's building fund account, , maybe $800 would go into the Book Account and FSM commissions would be perhaps $800. Deducting these from the $8,000 left $4,800 as the Orgs Corrected Gross income. Of that 14% went to promotion which would be around $700, the staff payroll was typically about $1,800 for approximately 150 staff, the phone bill was large, perhaps $700 and the rent was $800, food averaged about $800 a week to feed perhaps 120 staff. That used up the $4,800 and that was it. I did this 37 years ago but I did it every week for 2 years so though some of the figures may be off, this was pretty close to the average numbers. To account for inflation multiply all numbers by 5.7. I just found this figure on the internet recently - one dollar around 1973 was worth $5.70 in today's money.
Lakey

 

[dchoiceisalwaysrs]

Super on the examples Paul. What criteria are used to ascertain the amount going to Flag? And I would guess that,(Flag) was at it's inception Ron on his ships in the Med and thereabouts.

Interesting all this money shipped around the world without any taxes taken out of it.

And yes I do believe it was rare, but in the early 70's I got my landlord a none scientologist to donate to at least as I was told "the Building fund"

 

[fisherman]

Paul and Lakey,

Thanks so much! This is all very helpful and interesting information. For an outsider like myself, gaining an understanding of the "nuts and bolts" really adds perspective to what you all experienced.

I mean... Lakey... less than $8 per person per week to cover ALL meals? Incredible!

Best, fisherman

 

[Dulloldfart]

Here's a useful 2001 post from alt.religion.scientology on the subject, giving a far more detailed example and some relevant Hubbard policy quotes:

http://groups.google.com/group/alt.religion.scientology/msg/a72995151500a729?pli=1

Paul

 

[lkwdblds]

Wow that detailed FP brings back old memories!

Here's a useful 2001 post from alt.religion.scientology on the subject, giving a far more detailed example and some relevant Hubbard policy quotes:

http://groups.google.com/group/alt.religion.scientology/msg/a72995151500a729?pli=1

Paul

Wow that FP brings back old memories. Well my thumbnail sketch was reasonably accurate for an overall view but the link gives the fine details in much greater detail. I notice a couple of things which changed after I left. Sea Org reserves definitely took 10% of GI when I was there and 7 or 8 years later, it was up to 20%. We did not have the Service Completion Awards in 1973. Yes there was 10% taken to pay back bills. All the bills were arranged in date order and the 10% was used every week to cover the oldest bills on the dateline. Hubbard's policy forbid making partial payments. Say a printer was owed $128 as a back bill and the set aside for back bills had $100 in it, disbursements could not mail out the $100 because Hubbard thought it showed weakness in the Org's financial strength. The $100 would be left in the back bills account and the entire $128 would be paid the following week.

Can you believe that from a staff earning $50,000 in one week, the amount going to staff pay was only $2211 and of that only $711 went to Sea Org pay for 100 people. WHAT A ROTTEN, SHORT SIGHTED, MISGUIDED SYSTEM OF MANAGEMENT! IT IS SUPPOSED TO REWARD PRODUCTION except when production is done by S.O. Staff, who are loyal and dedicated. If Flag Reserves would have been left at 10% and Staff pay was given the 10% boost instead, I bet Scn would be a lot larger today than it is and more stable too. Treating your most loyal and dedicated people as expendible pieces of garbage is probably the worst misjudgement error made by Hubbard in designing his management system. 100 staff able to keep only $711 dollars out of $50,000 which they earned and they were supposed to be clearing the planet. Who is kidding who? What an utter crock of B.S.! I remember Pierre Ethier writing that he as Flag's top Class XII audited 40 hours a week every week of the highest levels of auditing and Flag was able to obtain $1,000 per hour for his sessions and those of a few other top Class XII's. Ethier generated $40,000 per week Gross Income for the Flag Land Base and his pay was $40 per week. Flag got to keep $39,960! Just think about that. In one year he would personally generate $2,080,000 and he would receive $2,080 and Flag would keep $2,077,920. Out of a whole year of him auditing 2080 hours, he got to keep 2 hours worth of audting for himself and Flag kept the entire revenue for 2078 of those hours. Then, they decide they want him gone and trump charges up against him and off load and declare him Suppresive. "Is this any way to run a Navy?"

When looking at food allotment, at CCLA the food was very good. Breakfast was usually toast and eggs with coffee and there was also a lot of granola with milk available and one could eat as much as they wanted. Lunch was similar to lunch in a school cafeteria or maybe the army mess hall and dinner was pretty damn good. An LRH policy had mandated salads and fresh vegetables for every lunch and dinner and this was followed. There was a main course, mainly chicken, pork or fish plus rice and a vegetable along with bread and butter and coffee. tea, or milk to drink. There was always a dessert with dinner. YOU HAVE TO REMEMBER TO MULTIPLY BY 5.70 TO GET TODAYS PRICES. CCLA spent maybe $45 per week for each person in today's money. We did not have the big warehouse stores to buy from but there were alternates available. Tony Klock of estates arranged all the food purchasing and he was a genius at getting good deals. Tony and Val Garcia always pitched us as a Church and often we got donations or heavy discounts for being such. Also, a lot of the shopping was done at the huge Grand Central Market in downtown L.A. which offered large lots of goods and some tremendous bargains were available if you purchased in bulk. Tony arranged for us to use Alta Dena dairy products which is a premium and more healthy brand but they gave us a church discount which made them cheaper than the standard brands. Also things such as catchup, mustard, spices, mayo, salt and the other condiments were purchased in bulk lots from S.E. Rykoff Co. at very good prices.

 

[Dulloldfart]

Ethier generated $40,000 per week Gross Income for the Flag Land Base and his pay was $40 per week. Flag got to keep $39,960! Just think about that. In one year he would personally generate $2,080,000 and he would receive $2,080 and Flag would keep $2,077,920.

Actually Flag (Flag Service Organization here) kept 0 of it. It all went uplines. FSO was (and is) run from accommodations income, as far as I know. Like Jay Leno living off his stand-up comedy income and not his Tonight Show main income.

Paul

 

[fisherman]

Paul and Lakey,

This is really fascinating stuff guys!

And lakey, NO I CAN'T BELIEVE THIS!

Can you believe that from a staff earning $50,000 in one week, the amount going to staff pay was only $2211 and of that only $711 went to Sea Org pay for 100 people.

I would expect payroll to absorb 40% to 50% of that $50,000. Comparing to payrolls I helped with in the early 80's, $20m would seem pretty standard. In round numbers, I'd guesstimate the value of "room and board" at 40% of that figure. After deducting for "R&B", I'd expect each staff member to clear about $120 a week.

--------------------

Lakey, I can't figure out how (or at what org levels) payables are recorded and liquidated. Does the org have a book-keeper tracking gross and net margin? Where's the liabilities side of the income statement?

It all seems to work off "gross income" with certain arbitrary expenses "coming off the top". With all the formulas, such as "corrected gross income", "10% to this" and "10% to that"... I can't see how the bills get paid. If the GI drops maybe you can't afford "10% to this" and "10% to that" and need to focus on getting the electricity bill paid for!

There may be an accounting program underneath all this that runs like a swiss watch, but I'm having trouble seeing the machinery. You guys were there "making it happen" so I'm probably just missing what you already understand.

Still, the very existence of these "off the top" allotments would tend to suggest an organization with very lush margins.

fisherman

 

[thetanic]

I would expect payroll to absorb 40% to 50% of that $50,000. Comparing to payrolls I helped with in the early 80's, $20m would seem pretty standard. In round numbers, I'd guesstimate the value of "room and board" at 40% of that figure. After deducting for "R&B", I'd expect each staff member to clear about $120 a week.

Even in a Class V org, payroll's limited by policy to 30% of CGI. If some people have alternate arrangements (e.g., minimum wage), those come off the top before figuring out what everyone else gets.

 

[Dulloldfart]

It all seems to work off "gross income" with certain arbitrary expenses "coming off the top". With all the formulas, such as "corrected gross income", "10% to this" and "10% to that"... I can't see how the bills get paid. If the GI drops maybe you can't afford "10% to this" and "10% to that" and need to focus on getting the electricity bill paid for!

The 10%'s were set in concrete. FP was almost always a tremendous hassle, with vital items being cut.

Paul

 

[lkwdblds]

Hubbard detested the double entry system of accounts

Paul and Lakey,

This is really fascinating stuff guys!

And lakey, NO I CAN'T BELIEVE THIS!



I would expect payroll to absorb 40% to 50% of that $50,000. Comparing to payrolls I helped with in the early 80's, $20m would seem pretty standard. In round numbers, I'd guesstimate the value of "room and board" at 40% of that figure. After deducting for "R&B", I'd expect each staff member to clear about $120 a week.

--------------------

Lakey, I can't figure out how (or at what org levels) payables are recorded and liquidated. Does the org have a book-keeper tracking gross and net margin? Where's the liabilities side of the income statement?

Hubbard detested the double entry system of accounting where every entry is posted as a credit somewhere and a debit somewhere else. Hubbard said double entry accounting was a suppresiive system. There is is no accountant at all at the local org level. The Director of Disbursements balanced the checkbooks with the monthly bank account statements. All cancelled checks were taped back onto their stubs in the check book. There was no profit and loss statement, no tracking of gross and net profit margins. The Orgs operated on a weekly basis. All money which was taken in within a given week was spent that same week. The Org had to pay their management fee to SeaOrg reserves and a percentage of income to FSM commissions. The only thing which the Org kept was a percentage which went into Org reserves. If there was a big windgall one week which was rare but did happen, the excess monies were usually used for payroll bonuses or to pay down the back bills and move the dateline closer to present time. By the way, any excess monies where always left in a checking account earning no interest. They could have been put into savings accounts but Hubbard did not believe in capitalism where idle money earned interest without producing a product.

I toyed with opening a savings account to place the excess monies into an interest earning savings account so as to earn the interest on the money, When the Org finally wanted to spend the money, I would have transfered the money back into the main disbursement checking account and then written checks as required. I think I may have been able to pull this off and might have made $300 to $400 a year in interest without hurting the Org in any way. I was aftraid I might be caught so I never attempted this.

It all seems to work off "gross income" with certain arbitrary expenses "coming off the top". With all the formulas, such as "corrected gross income", "10% to this" and "10% to that"... I can't see how the bills get paid. If the GI drops maybe you can't afford "10% to this" and "10% to that" and need to focus on getting the electricity bill paid for!

Lots of times, there was a very low Gross Income. For CCLA in the early 70's $3,000 was about the lowest ever. The first thing to go was Payroll. If the GI was $4,000 maybe we would receive half pay, $5 per week. At $3,000 GI there would be no pay. The second thing to go was the food allowance. We would cut to rice and beens at perhaps $250 per week instead of our usual $800. Usually, if there was a very low week the next week would rebound. On the very low weeks there was usually some large sale which missed the THursday at 2:00 PM cut off date but perhaps came in Friday morning. When this happened the CO and the FBO would put through a "Rush Purchase Order in the middle of the week. so maybe over the weekend if only $250 was allocated for food, that was brought up to $800 in the middle of the week. The Church was supposed to be a not for profit Corporation so no one tracked margins and profits. All monies collect for the week were spent or went into reserves.

Emergency P.O. were initiated to keep the phones on or a roof over the head of the Org.

There may be an accounting program underneath all this that runs like a swiss watch, but I'm having trouble seeing the machinery. You guys were there "making it happen" so I'm probably just missing what you already understand.

It was just a single entry system keeping track of everything spent for the week. and making sure all moneys collected were spent on smething or put in Sea Org and/or Org Reserves.

Still, the very existence of these "off the top" allotments would tend to suggest an organization with very lush margins.

fisherman

We were supposed to be non profit so no margins of profits were calculated,

 

[thetanic]

We were supposed to be non profit so no margins of profits were calculated,

Not for profit doesn't mean that there is no profit, it just means it's not the point of the organization.

 

[lkwdblds]

Is a non profit taxes if it makes a profit.

Not for profit doesn't mean that there is no profit, it just means it's not the point of the organization.

Interesting. If a non profit company makes a profit, are they then tax exempt or do they have to pay a tax on the profit.
Lakey

 

[thetanic]

Interesting. If a non profit company makes a profit, are they then tax exempt or do they have to pay a tax on the profit.
Lakey

They are tax exempt (so long as the profit doesn't go to the shareholders as it would in a for-profit company).

 

[MrNobody]

Interesting. If a non profit company makes a profit, are they then tax exempt or do they have to pay a tax on the profit.
Lakey

I'd say they have to re-invest it. Or save it for when bad times come.

 

[thetanic]

It's easiest if you understand there to be a "of the shareholders" at the end.

So for profit = "for the profit of the shareholders"

and non-profit = not for profit = "not for profit of the shareholders"

Quite possibly one of the reasons LRH was never a shareholder....

 

[fisherman]

Paul and Lakey,

I've been reading up on Hubbard's "proportional pay play proposal". May I please ask/restate these questions to help me get something straight?

Gross Income is total revenue for an org:

"Gross Income: is the complete income for any given week for the HASI less repayment of loans to HASI".

"the HASI" referred to is the local org? And therefore, gross Income means total revenue to a single org. Is this correct?

The second "HASI" referred to above. Is this a parent operation loaning money to an org?

"Allocation Sum: is the gross income less the Congress, books and tapes sum"

"The Congress Books & tapes sum (The CBT): is the total receipts of Congresses, Book and Tape sales, before any expense reduction is made."

"The Salary Sum: is 50% of the Allocation Sum (which is gross income less C.B.T). This is calculated by first deducting part time and then proportioning balance to staff by units."

If I understand correctly, the VALUE of books, tapes, etc is deducted "off the top" of gross income. THEN, staff shares in 50% of this adjusted gross income, which is called the "allocation sum" or what you gentlemen refer to as "corrected gross income"

Is this correct? Books and tapes sales are deducted FIRST and are never INCLUDED in the "salary sum"

Follow-up questions:

"CBT" = "is the total receipts of Congresses, book and tape sales..."

What are "Congresses and why are they deducted along with books and tapes?

How are books, tapes, etc. VALUED when they are deducted? Are they valued at the full sale price or wholesale cost to the org? Paul said that the org buys books at discount, so if the CBT deduction is made at full sale price, it's simply a formula to calculate the "salary sum" and has nothing to do with the P/L. Is that right?

I'm sorry to burden you folks with my questions, but I have been trying to do my proper homework! ;-)

fisherman














Corrected Gross Income DOES

 

[Dulloldfart]

Policy changed over the years. HASI has not been part of the corporate scene since, oh I don't know, the 60s I think. I'm not going to interpret historical data for you Fisherman that doesn't apply really any more. If you want to study it then study the OEC volumes, and look at the dates of issues.

A 1958 issue may or may not apply in 1985, depending on if the topic has been covered by later policy. After you've been working in an org you soon learn what is current. Without that experience, it can be hard to pick it up from books.

Paul

 

[fisherman]

Paul,

No problem, I think I found the answer. The 1957 "proportional pay policy" appears to be in force, subject to later amendments, such as approval for "staff pay sum" to fall as low as 30% of "corrected gross income". Over time, I notice a broadening of scope to the 1957 policy, but the fundamentals remain the same.

Thanks for your help!

fisherman

 

[thetanic]

No problem, I think I found the answer. The 1957 "proportional pay policy" appears to be in force, subject to later amendments, such as approval for "staff pay sum" to fall as low as 30% of "corrected gross income". Over time, I notice a broadening of scope to the 1957 policy, but the fundamentals remain the same.

Yep, when I was in and serving on AdCouncil it was 30%.