[Plaintext version 1.0, 17 September 1999] TO THE READER: Scientology is a religious philosophy containing pastoral counseling procedures intended to assist an individual to gain greater knowledge of self. The Mission of the Church of Scientology is a simple one - to help the individual acheive greater self-confidence personal integrity, thereby enabling him to really trust and respect himself and his fellow man. The attainment of the benefits and goals of Scientology requires each individual's positive participation, as only through his own efforts can he achieve these. This is part of the religious literature and works of the Founder of Scientology, L. Ron Hubbard. It is presented to the reader as part of the record of his personal research into Life, and should be construed only as a written report of such research and not as a statement of claims made by the Church or the author. Scientology and its sub-study, Dianetics, as practiced by the Church, address only the spiritual side of Man. Although the Church, as are all churches, is free to engage in spiritual healing, it does not, as its primary goal is increased knowledge and personal integrity for all. For this reason, the Church does not wish to accept individuals who desire treatment of physical illness or insanity, but refers these to qualified specialists in other organizations who deal in these matters. The Hubbard Electrometer is a religious artifact used in the Church confessional. It, in itself, does nothing, and is used by Ministers only, to assist parishioners in locating areas of spiritual distress or travail. We hope the reading of this book is only the first stage of e personal voyage of discovery into the positive and effective religion of Scientology. THE BOARD OF DIRECTORS Church of Scientology This book belongs to _____ Date _____ The Organization Executive Course AN ENCYCLOPEDIA OF SCIENTOLOGY POLICY by L. Ron Hubbard FOUNDER OF DIANETICS AND SCIENTOLOGY TREASURY DIVISION 3 PUBLICATIONS ORGANIZATION Published by the CHURCH OF SCIENTOLOGY OF CALIFORNIA PUBLICATIONS ORGANIZATION 2723 West Temple Street Los Angeles California 90026 U.S.A. The Church of Scientology is a Non-Profit Organization. Dianetics(R), and Scientology are Registered Names. Copyright (c) 1970, 1971, 1972, 1973, 1974 1950, 1951, 1952, 1953, 1954, 1955, 1956, 1957, 1958, 1959 1960, 1961, 1962, 1963, 1964, 1965, 1966, 1967, 1968, 1969 by L. Ron Hubbard ALL RIGHTS RESERVED Scientology is an Applied Religious Philosophy No part of this book may be reproduced without permission of the copyright owner. First U.S. Printing 1974 Second U.S. Printing 1976 Complete Set ISBN 0 8840W33-X Volume 3 ISBN 0-88404-028-3 The E-Meter is not intended or effective for the diagnosis, treatment or prevention of any disease. Dianetics and Scientology are the trademarks of L. Ron Hubbard in respect of his published works. Printed in the United States of America by Kingsport Press, Inc. CONTENTS TREASURY DIVISION 3 1965 Treasury Division 3 Org Board Outline 1 26 Aug. 1959 Promotional Functions of Dept of Accts 2 27 Nov. 1959 Dept of Accounts (excerpt) 2 20 Nov. 1965 The Promotional Actions of an Organization (excerpt: Treasury Division 3) 3 30 Sept. 1965 Statistics for Divisions (excerpt: Org Division 3) 3 30 Sept. 1970 Credit Collections Defined 4 5 Feb. 1971 Org Gross Divisional Statistics Revised (excerpt: Treasury Division 3) 4 12 Mar. 1971 Treasury Divisions GDSes - All Orgs 5 9 Nov. 1956 Accounting & Financial (HCOB) 6 11 Mar. 1957 Income Reports (Financial Procedure Letter) 7 27 Nov. 1958 Basic Financial Policy - HCO 6 6 Feb. 1959 HCO Accounts Worldwide 7 5 June 1959 Income Report Required 8 27 Jan. 1960 Accounts Policies 9 14 Feb. 1961 The Pattern of a Central Organization (excerpt: Dept of Material, Dept of Accounts, Admin Report Forms) 11 23 Nov. 1961 Accounts 13 10 Apr. 1964 Balancing Income-Outgo - Paper, Postage and Printing Vol. 2 - 98 6 May 1964 Accounts Policies 17 15 May 1964 Accounts Policies (Addenda to 6 May 1964) 20 29 Mar. 1965 Staff Member Loans Vol. 0 - 53, Vol. 1 - 587 23 Jan. 1966 Accounting Policies of Scientology Companies 21 30 Jan. 1966 Accounts Procedures 23 2 Aug. 1966 Graph Change - Ad Council Statistic 25 16 Oct. 1969 Finance Course - Vital Action 25 FINANCIAL MANAGEMENT - FINANCIAL PLANNING "Financial Planning is an activity that is shared in by the head of each Division" - LRH, January 1971. 1 May 1958 Financial Management (reissued 15 May 1970) 26 2 June 1959 A Comment on Finance 27 3 June 1959 Financial Management 29 19 July 1959 Accounts Inspection 31 24 Feb. 1964 Org Programming - Solve it with Scientology 26 18 Jan. 1965 Financial Management - Building Fund Account 32 19 Jan. 1965 Finance - Org Accounts - Building Fund Account 37 20 Jan. 1965 Currency Regulations and 10%s 164 28 Jan. 1965 How to Maintain Credit Standing & Solvency 39 2 Mar. 1965 Purchase Order Filing 43 4 Mar. 1965 Reserved Payment Account 44 28 Mar. 1965 Emergencies and Account Personnel 46 26 Apr. 1965 Cancellation of 19 Jan. 1965 47 26 Nov. 1965 Financial Planning 48 21 Dec. 1965 LRH Financial Relationships to Orgs 51 4 Jan. 1966 LRH Relationships to Orgs 53 15 Jan. 1966 Office of the Treasurer 59 15 Dec. 1966 Financial Planning 61 25 June 1967 Scientology Orgs Tax and Balance Sheets 63 22 May 1968 Hiring Personnel - Line for (14 Jan. 1966 revised & reissued) 57 20 Apr. 1969 AO-SH Financial Control 67 16 June 1969 AO-SH Finance Control (amends 20 April 1969) 69 11 Nov. 1969 Accounts and PRO 71 4 Nov. 1970 Estimated Purchase Orders 73 13 Feb. 1971 Financial Planning Tips 79 27 Feb. 1971 First Financial Policy 81 v PRICES, ESTABLISHMENT OF 1 May 1958 Financial Management (The cost of an item) 26 16 Apr. 1959 Books, Cost of 82 14 May 1959 How to Establish Price of Books and Tapes 83 10 Feb. 1961 Professional Charges 84 14 June 1962 Professional Charges (amends & amplifies 10 Feb. 1961) 84 23 Sept. 1964 Policies: Dissemination and Programmes (excerpt: Cost of Service) 85 10 Feb. 1965 Ad & Book Policies (excerpt: Book Pricing Formula) 83 9 May 1965 Auditing Fees - Preferential Treatment of Preclears Scale of Preference 86 12 Oct. 1967 Charges 88 27 Sept. 1970 Cutative Prices 89 31 Jan. 1971 FSM Contest Awards (modifies 27 Sept. 1970) 90 PRICE ENGRAM 27 Apr. 1965 Price Engram 91 18 Apr. 1965 Prices Lowered Because of New Organization Streamline 93 19 Oct. 1964 Pricing Formulas 95 30 Oct. 1964 Mailing Lists for Franchise Holders 102 31 Oct. 1964 Current Policies Orgs & Franchise 106 3 Dec. 1964 Pricing Meetings Final Policy 109 23 Dec. 1964 Field and Public Programming 117 15 Mar. 1965 Only Accounts Talks Money 120 22 Mar. 1965 Saint Hill Services, Prices and Discounts 127 22 Mar. 1965 Current Promotion and Org Programme Summary 128 15 Mar. 1968 Student & Staff Program 135 27 Sept. 1970 Cancellation (of 15 Mar. 1968) 136 27 Sept. 1970 Cutative Prices 89 ALLOCATIONS Banking - Funds Handling - Percents to WW 19 Apr. 1957 Proportionate Pay Plan 295 27 Apr. 1959 Why New Books are Few 137 21 May 1959 HCO Monies and Book Stocks 139 28 May 1959 Promotional Writing Fund 140 9 June 1959 HCO Special Fund 141 24 June 1959 Status of HCO Offices and HCO Secs and HCO Volunteer Secs in US 142 22 July 1959 Monies Intended for Scientology Research & Investigation Fund 143 25 July 1959 Membership Monies 143 10 Aug. 1959 Franchise 10%s to WW 144 24 Aug. 1959 HCO Financial Arrangements Altered 145 3 Sept. 1959 HCO Book Account 147 14 Oct. 1959 Division of HCO Percentage Revised 148 23 Oct. 1959 Recording of Taped Lectures at 1st Melbourne ACC and Pre-ACC Congress Vol. 2 - 217 29 Oct. 1959 International Membership 150 18 Nov. 1959 HCO Central Org Financial Modifications 151 30 Dec. 1960 Revision of HCO Percentages (cancels 14 Oct. 1959) 152 6 Apr. 1961 Remittance of HCO Monies to HCO WW 152 9 Aug. 1961 Book Sales 259 17 July 1962 Accounts: Bank Charges on Remittances 153 19 Sept. 1962 HCO WW Form AC 1 154 26 Sept. 1962 HCO WW Form AC 1 154 AC 1 Form 155 vi 26 Sept. 1962 ACCs and Special Events Courses 156 26 Sept. 1962 Memberships 157 26 Sept. 1962 Hubbard Scientology Research Foundation 157 1 Feb. 1963 HCO Area 5%s 158 AC 1 Form 159 13 Feb. 1963 HCO 10%s Due to WW 160 16 Apr. 1963 Revision of Congress Payments to HCO WW 160 14 Jan. 1964 Continental and Area HCO Finance Policies 161 30 Nov. 1964 HCO Book Account 162 19 Jan. 1965 Finance - Org Accounts - Building Fund Account 37 20 Jan. 1965 Currency Regulations and 10%s 164 4 Mar. 1965 Reserved Payment Account 44 26 Apr. 1965 Cancellation of 19 Jan. 1965 47 11 May 1965 HCO Book Account Policy 165 9 Dec. 1965 HCO Income - Memberships - Congresses - Tape Plays 168 21 Dec. 1965 LRH Financial Relationships to Orgs 51 4 Jan. 1966 LRH Relationships to Orgs 53 26 Apr. 1966 South Africa 10%s 168 3 May 1966 Reserve Fund 169 6 Oct. 1966 Addition to HCO Div Account Policy (amplifies 11 May 1965) 170 15 Feb. 1967 Allocation of Income 172 15 May 1968 Reserve Fund (reissue & amendment to 3 May 1966) 175 28 May 1968 Books 176 17 June 1968 HCO Book Account 176 SAINT HILL Treasury policies originally issued for the Saint Hill Organization 24 July 1959 Handling of Monies 177 25 Aug 1959 Purchase Order System (reissued 20 June 1961) 178 13 Oct. 1959 Invoicing, Accounts, Project 12 179 21 Mar. 1960 Economy Wave 181 31 Mar. 1960 Accounts Lines 181 28 July 1960 Losses 182 3 Aug. 1960 Purchasing 182 6 July 1961 Accounts 183 11 July 1961 Purchase Orders 186 4 Aug. 1961 Private Mail and Telephone Calls 186 13 Sept. 1961 General Office Orders 357 16 Oct. 1961 Income Records 187 20 Sept. 1962 Part-Time Staff and Over-Time 190 4 Oct. 1962 Signing POs and Cheques 191 6 Oct. 1962 Accounts Irregularities 191 7 Jan. 1964 Payment of Monies for Overtime and/or Materiel 192 2 Mar. 1964 Contracts and Services 192 8 May 1964 Transport 193 13 May 1964 Transport (adds to 8 May 1964) 193 26 June 1964 Staff Bonuses 194 15 Nov. 1964 Transport Arrangements Vol. 1 - 293 17 Nov. 1964 Bonus 198 12 Nov. 1965 Transfers from SHSBC to Solo Audit Course 199 6 Jan. 1966 Credit and Discounts 200 7 Jan. 1966 Credit (modifies 6 Jan. 1966) 201 3 Feb. 1966 Legal, Tax, Accountant & Solicitor, Mail and Legal Officer 202 10 Feb. 1966 Bonuses for Service Delivery 204 9 May 1966 Bonuses Adjusted (correction to 10 Feb. 1966) 206 14 July 1966 Dismissal of Staff 207 22 Aug. 1966 Bonuses Adjusted (amendment & addition to 9 May 207 1966) 11 Oct. 1966 Legal, Tax, Accountant & Solicitor 203 Mail Incoming & Out-going (amends 3 Feb. 1966) 208 13 Oct. 1966 Invoice Routing (cancels 12 Jan. 1966) 209 17 Oct. 1966 Bonuses 21 Nov. 1966 Addendum to HCO Pol Ltr of 17 October 1966 "Bonuses" 211 18 Nov. 1967 Blue and Green Accounts Invoices (amends 13 Oct. 1966) 212 27 Nov. 1967 Bonuses Adjusted (addition to 17 Oct. 1966, 111 cancels 22 Aug. 1966) 353 21 Jan. 1968 Chartered Accountants vii PES ACCOUNT 12 Nov. 1969 PES Account versus HCO Book Account 213 10 Dec. 1969 PES WW Account 215 24 Dec. 1969 PES Account Amended 216 19 Apr. 1970 PES WW Account (cancels 10 Dec. 1969) 217 29 Apr. 1970 PES Account Revised (cancels 12 Nov. 1969) 218 12 June 1970 PES Account (cancels 12 Nov. 1969 & 29 Apr. 1970) 221 DEPARTMENT SEVEN DEPARTMENT OF INCOME 18 Apr. 1969 Org Division - Income Dept 222 23 Nov. 1961 Accounts - Income Division 13 6 May 1964 Accounts Policies - The Income Section 17 15 May 1964 Accounts Policies (Addenda to 6 May 1964) 20 21 June 1965 Orgs are SH FSMs Vol. 2 - 325, Vol. 6 - 325 15 Sept. 1965 Only Accounts Talks Money Vol. 0 - 275 7 Nov. 1965 Reception Log-in-the-Org List Vol. 1 - 73 5 Aug. 1966 Registered Mail Vol. 1 - 178 CASHIER - 1 TRAINING AND PROCESSING CHARGES 10 Apr. 1958 Re: 5th London ACC (Administrative Directive) 223 22 Sept. 1958 ACC Accounts and Payments 224 19 Jan. 1959 Extra Weeks on HPA Course 225 11 May 1959 HPA/BScn "Retreads" 225 27 Oct. 1959 Processing of Children on the HGC 226 29 Mar. 1960 HGC and Academy Prices for Minors (cancels & replaces 27 Oct. 1959) 226 20 May 1960 Extension Course Prices see - 227 24 May 1960 Extension Course Prices (corrects 20 May 1960) 227 2 Nov. 1960 HPA/HCA Course 227 27 Feb. 1961 Free Courses 228 13 Mar. 1961 Free Courses (revises 27 Feb. 1961) 228 7 Dec. 1961 Inter-Org Exchange of Students 229 19 Dec. 1961 Saint Hill Retreads see - 230 14 Feb. 1962 Saint Hill Retreads (amends 19 Dec. 1961) 230 24 July 1962 Academy Extra Weeks 230 23 Nov. 1962 Saint Hill Retread Fee 231 10 May 1963 Student Rates for HGC Auditing in SA Orgs 231 23 July 1963 Retreads on Saint Hill Special Briefing Course 232 8 Oct. 1963 New Saint Hill Certificates and Course Changes 233 6 July 1965 Releases 234 1 Sept. 1965 Saint Hill Services and Prices 235 30 Dec. 1965 PTS Auditing and Routing (S & D price) Vol. 1 - 439, Vol. 4 - 578 3 Apr. 1966 Dianetic Auditors Course Vol. 2 - 120, Vol. 4 - 228 18 Jan. 1969 Advanced Org Awards 236 19 May 1969 Hubbard Standard Dianetics Course Policy Vol. 2 - 286, Vol. 4 - 241 3 June 1969 Dianetic Course Pricing 236 10 July 1969 Org Personnel Recruitment Vol. 1 - 88 2 Sept. 1969 Old ACC Students 237 3 Sept. 1969 Former HDAs, HPAs 238 3 Sept. 1969 Successful Class VIIIs 238 15 Nov. 1969 Class VIII Retread 239 28 Nov. 1969 Class VIII Retread (corrects 15 Nov. 1969) 239 6 Dec. 1969 Inter-Org Exchange of Students (clarifies 7 Dec. 1961) 240 10 Dec. 1969 Student Rescue Intensive Pricing 240 14 Dec. 1969 Org Protection 241 11 Jan. 1970 Pricing - Rescue Intensive (cancels 10 Dec. 1969) 241 13 Jan. 1970 Org Personnel Recruitment (Revised) Vol. 1 - 93 20 Jan. 1970 Class VIII Retread (corrects 28 Nov. 1969 & 15 Nov. 1969) 242 15 July 1970 Retreads 242 20 July 1970 Internships and Case Supervisors 243 CASHIER - 2 MEMBERSHIP 25 July 1959 Membership Monies 143 23 Oct. 1959 Attention Registrars and Book Administrators 258 26 Oct. 1959 Memberships 245 29 Oct. 1959 International Membership 150 18 Nov. 1959 HCO Central Org Financial Modifications 151 28 Dec. 1959 Membership Discounts 246 3 May 1960 Keeping Memberships in Force 246 6 July 1960 LT Membership Privileges 247 13 July 1960 LT Membership Privileges (amends 6 July 1960) 247 28 July 1960 International Membership Privileges 248 25 Oct. 1960 Membership Restrictions 249 22 Nov. 1960 There will be no professional rates... (SA only) 249 29 Dec. 1960 Membership Change 250 27 Oct. 1961 Professional Rates Restored 250 29 May 1962 Professional Rates (adds to 27 Oct. 1961) 251 5 June 1962 Permanent Staff Privilege 251 26 Sept. 1962 Memberships 157 11 Apr. 1963 Memberships (cancels 26 Sept. 1962) 252 31 Oct. 1964 Current Policies Orgs&Franchise 106 21 Apr. 1965 Membership - Attestations 252 11 May 1965 HCO Book Account Policy Receipt and Use of Membership Monies 165 1 Sept. 1965 Current Policy - Franchise 253 1 Sept. 1965 Membership Policies 254 INVOICING 1 Apr. 1957 Always Register and Invoice 255 21 Apr. 1957 Income 255 16 May 1957 Invoicing Items 255 23 May 1957 Ordering People to Processing or Training 255 27 Nov. 1958 Basic Financial Policy - HCO 6 4 June 1959 Invoicing and Collection of Money 256 27 June 1959 Invoicing 257 23 Oct. 1959 Attention Registrars and Book Administrators 258 1960 Book Orders (LRH Despatch) 258 27 Jan. 1960 Accounts Policies - Invoicing 9 9 Aug. 1961 Book Sales 259 31 Oct. 1963 Reception Hat (excerpt: invoicing) 260 24 Sept. 1965 Free Release Check 263 4 Jan. 1966 LRH Relationships to Orgs 53 30 Jan. 1966 Accounts Procedures - Minus Invoices 23 11 Feb. 1966 Shipping Charges 263 16 Feb. 1966 Invoice Routing 264 1 Aug. 1966 Sign Ups and Discounts Vol. 2 - 280, Vol. 5 - 198 23 Dec. 1966 Accounts Invoices - Names on Invoices 265 20 Feb. 1967 Security of Invoices 266 11 Mar. 1971 Registrar Invoicing Line 268 MAIL OPENING AND INVOICING 3 Aug. 1956 Mail Line (HCOB) 271 15 May 1957 Method of Opening & Invoicing Mail, Modified (HCO Procedure Letter) 272 3 Sept. 1957 Method of Opening & Invoicing Mail Vol. 1 - 173 31 Aug. 1965 Mail Opening 274 ix COLLECTIONS 1957 What Your Money has Bought (Letter issued by HASI Accounts, London) 275 9 Dec. 1958 Regarding Accounts Receivable (HASI Finance Policy Letter) 276 26 Dec. 1958 Collection of Accounts (HCO Secretarial Letter) 277 27 Jan. 1960 Accounts Policies - Statements Files 9 16 Aug. 1965 Collection from SPs and PTSs 279 7 Nov. 1965 Reception Log (Use of In-the-Org List) Vol. 1 - 73 26 Nov. 1965 Financial Planning - Income Note Collections Summary 48 13 Feb. 1968 Collections Letters 280 9 Oct. 1969 Publications Depts and Orgs - How to Straighten Out Vol. 2 - 210 DEPARTMENT EIGHT DEPARTMENT OF DISBURSEMENTS PURCHASING Jan. 1957 Mass Purchases and Work Contracts 281 17 June 1957 Authorization Required for all Expenditures (Association Secretary Directive) 281 1 June 1958 Purchase Orders (HASI London Administrative Directive) (reissued 15 May 1970) 282 2 June 1959 Purchasing Liability of Staff Members 283 27 Jan. 1960 Accounts Policies 9 2 Mar. 1965 Purchase Order Filing 43 4 Mar. 1965 Reserved Payment Account 44 28 Mar. 1965 Emergencies and Account Personnel 46 26 Nov. 1965 Financial Planning 48 20 Dec. 1969 Trading Prohibited 283 4 Nov. 1970 Estimated Purchase Orders 73 BILLS HANDLING AND DISBURSEMENT 27 Nov. 1958 Basic Financial Policy - HCO 6 5 June 1959 Handling of Bills 284 27 Jan. 1960 Accounts Policies 9 12 Sept. 1961 Payment for Materials 284 23 Nov. 1961 Accounts - Disbursement Division 15 21 Apr. 1964 Org Payments for Tape-Recorded Lectures 285 6 May 1964 Accounts Policies - The Disbursement Section 17 11 June 1964 Central Organization & City Office Tape Service 285 28 Jan. 1965 How to Maintain Credit Standing & Solvency How You Pay Your Bills - Paying by Dateline 40 2 Mar. 1965 Purchase Order Filing 43 4 Mar. 1965 Reserved Payment Account 44 28 Mar. 1965 Emergencies and Account Personnel 46 21 Oct. 1965 Bills Payments 286 26 Nov. 1965 Financial Planning - Disbursement Section & Action 48 21 Dec. 1965 LRH Financial Relationships to Orgs 51 30 Jan. 1966 Accounts Procedures 23 CHEQUE SIGNING 27 Nov. 1958 Basic Financial Policy - HCO 6 21 Oct. 1965 Bills Payments 286 21 Nov. 1965 Cheque Signing 287 26 Nov. 1965 Financial Planning - Cheque Signing 50 30 Jan. 1966 Cheque Signing Procedure 288 30 Jan. 1966 Accounts Procedures 23 6 Feb. 1971 Transferring Funds 289 x ORG SHSBC STUDENTS 31 July 1962 Org Payments for St Hill Students 290 14 Feb. 1963 Saint Hill Special Briefing Course Reimbursement Arrangements 291 5 May 1963 Staff Member Enrolments 292 14 Dec. 1969 Org Protection PAYROLL 5 Apr. 1957 Proportionate Pay Plan Proposal 293 17 Apr. 1957 Advisory Committee Endorsement 297 18 Apr. 1957 Minutes of Staff Meeting 296 19 Apr. 1957 Proportionate Pay Plan295 19 Apr. 1957 Trustee Endorsement of 18 April 1957 Staff Meeting Minutes 297 19 Apr. 1957 Note on source of Income 297 14 May 1957 Hat Turnover 298 10 Jan. 1958 Inspection of Hat Folders 298 26 Mar. 1958 Salary and Unit Pay 299 9 July 1958 All clears on staff... 300 27 Nov. 1958 Pay List 299 9 Dec. 1958 Staff List - Notification to Payroll (HASI Finance Policy Letter) 299 27 Jan. 1960 Accounts Policies - Disbursement Vouchers 10 28 Apr. 1960 Yearly Salary Increments 300 13 July 1960 Sick Leave 300 3 Oct. 1960 Holiday Pay and Sick Leave 301 19 Feb. 1961 Accounts: How to do a Payroll 302 24 Mar. 1961 Units for Assn Sec and HCO Sec 306 28 Mar. 1961 Personnel Policies - Staff Post Qualifications Permanent Executives to be Approved 307 22 July 1961 Executives' Pay 310 23 Oct. 1961 Pay of Executives (modifies 22 July 1961) 310 23 Nov. 1961 Accounts - Disbursement Division 15 5 Apr. 1963 Audit of Organizational Books 311 4 Nov. 1963 Pay Card 312 29 Apr. 1965 Bonuses 313 14 Sept. 1965 Units and Bonuses for Org Exec Secs and HCO Exec Secs (revises 24 Mar. 1961) 315 12 Oct. 1965 Advisory Committees 317 14 Jan. 1966 Hiring Personnel - Line for (amended 22 May 1968) 57 21 July 1966 Proportional Pay Plan 1966 318 15 Sept. 1967 Examiner Bonuses 322 1 Jan. 1968 Hat Write-Ups and Folders - Inspection of Hat Folders Vol. 0 - 68 10 Dec. 1968 LRHED 64 INT (concerns HCO P/L 10 Dec. 1968) 323 10 Dec. 1968 Percentage Adjustments and Fixed Salaries 324 31 Jan. 1969 Percentage Adjustments and Fixed Salaries (Guardian Finance Order 12) 326 FSMs 9 May 1965 Field Auditors Become Staff (revised & reissued 14 Jan. 1968, cancels 26 March 1965 & 30 March 1965) 328 21 June 1965 Orgs are SH FSMs Vol. 2 - 325 15 Oct. 1965 Field Staff Member Selection Papers and Commissions 334 30 Aug. 1966 Selection Regulations (addition to 26 Mar. 1965) 333 10 Nov. 1966 Field Staff Member (corrects 26 Mar. 1965) 336 9 Jan. 1967 FSM System Administration in Organizations (modifies 9 May 1965 & 15 Oct. 1965) 337 14 Jan. 1968 Field Auditors Become Staff (9 May 1965 revised & reissued) 328 17 Feb. 1968 Field Staff Member Commissions 342 5 June 1968 FSM Commissions 342 xi REFUND 4 June 1961 Refund of Fee Policy see - 343 12 Oct. 1961 Refund of Fee Policy Revised (revises & replaces 4 June 1961) see - 343 27 Feb. 1962 Refund of Fee Policy Revised (revises & replaces 12 Oct. 1961) 343 23 Oct. 1963 Refund Policy (cancels 12 Oct. 1961 & 27 Feb. 1962) 344 23 May 1965 Rebates 346 30 Jan. 1966 Accounts Procedures - Minus Invoices 23 31 July 1966 Refund Notice 347 1 Aug. 1966 Refund Addition (adds to 31 July 1966) 347 3 Feb. 1969 Legal Standard Waiver Vol. 1 - 582 23 May 1969 Dianetic Contract Vol. 2 - 287, Vol. 4 - 247 5 Feb. 1970 Scientology Refunds - Writ of Expulsion and Waiver Vol. 1 - 583 DEPARTMENT NINE DEPARTMENT OF RECORDS, ASSETS AND MATERIEL BANKING - SIGNATORIES ON BANK ACCOUNTS 27 Nov. 1958 Basic Financial Policy - HCO 6 3 Sept. 1959 HCO Book Account 147 27 Jan. 1960 Accounts Policies - Banking 10 30 Nov. 1964 HCO Book Account 162 18 Jan. 1965 Financial Management - Building Fund Account 32 19 Jan. 1965 Finance - Org Accounts - Building Fund Account 37 20 Jan. 1965 Currency Regulations and 10%s 164 4 Mar. 1965 Reserved Payment Account 44 26 Apr. 1965 Cancellation of 19 Jan. 1965 47 26 Nov. 1965 Financial Planning - Bank Reconciliation Section 49 3 May 1966 Reserve Fund 169 13 June 1966 Signatories on Bank Accounts see - 348 3 Aug. 1966 Correction to HCO Policy Letter of 13 June 1966 see - 348 2 Apr. 1968 Signatories on Bank Accounts (cancels 13 June 1966) 348 15 May 1968 Reserve Fund (reissue & amendment to 3 May 1966) 175 20 June 1968 Commodore and Founder as Signatory on Every Bank Account (modifies 1 Sept. 1966 & 2 Apr. 1968) 348 RECORDS AND AUDITS 23 Apr. 1959 Jack Parkhouse Writes from South Africa 349 25 Sept. 1959 Accounting Records and Bills 350 27 Jan. 1960 Accounts Policies 9 13 June 1960 Accounts Procedure 351 23 Nov. 1961 Accounts - Bank Statements 15 19 Jan. 1965 Finance - Org Accounts - Building Fund Account 37 20 Jan. 1965 Currency Regulations and 10%s 164 2 Mar. 1965 Purchase Order Filing 43 26 Apr. 1965 Cancellation of 19 Jan. 1965 47 21 Dec. 1965 LRH Financial Relationships to Orgs 51 9 Jan. 1966 Accounts, Invalidating 352 13 Jan. 1966 Records of Bank Deposits 353 30 Jan. 1966 Accounts Procedures 23 25 June 1967 Scientology Orgs Tax and Balance Sheets 63 21 Jan. 1968 Chartered Accountants 353 xii SUPPLIES, KEYS, EQUIPMENT 11 Aug. 1959 Cost of Supplies (HCOB) 354 7 Jan. 1960 HCO Inventories 355 3 Feb. 1960 HCO Keys 356 12 Mar. 1961 Supplies of Central Organization Forms 356 13 Sept. 1961 General Office Orders - Supplies 357 15 Feb. 1964 The Equipment of Organizations 358 2 Apr. 1965 Heed Heavy Traffic Warnings Vol. 0 - 111 20 Aug. 1965 Scientology Org Uniforms Saint Hill 360 8 Sept. 1965 Supply Officer 362 22 Sept. 1965 Keys 363 3 Nov. 1965 Equipment 363 15 Nov. 1965 Reporting of Theft and Action to be Taken 364 7 Jan. 1966 Leaving Post - Writing Your Hat Vol. 0 - 70 18 Nov. 1969 Disposal of Org Assets 365 Note: The materials in this volume are listed mainly in order of appearance. Additionally, some policies are listed in more than one section (with page numbers in italics), as they deal with more than one area of operation. Relevant policies from other OEC volumes are also listed, with volume and page numbers in italics A complete date order index appears in the back of the book, starting on page 366. xiii YOUR POST A post in a Scientology Organization isn't a job. It's e trust and a crusade. We're free men and women - probably the last free men and women on Earth. Remember, we'll have to come back to Earth some day no matter what "happens" to us. If we don't do a good job now we may never get another chance. Yes, I'm sure that's the way it is. So we have an organization, we have a field we must support, we have a chance. That's more than we had last time night's curtain began to fall on freedom. So we're using that chance. An organization such as ours is our best chance to get the most done. So we're doing it! L. RON HUBBARD xiv [Org chart] ORG ORG EXEC SEC DISSEMINATION DIVISION 2 DISSEMINATION SECRETARY DISSEMINATION SEC. SEC. UNDERSTANDING ENLIGHTENMENT Department 5 Department 6 DEPARTMENT OF REGISTRATION Director of Registration TREASURY DIVISION 3 TREASURY SECRETARY TREASURY SEC. SEC. ENERGY ADJUSTMENT Department 7 Department 8 DEPARTMENT or DEPARTMENT OF . INCOME DISBURSEMENT Director of Disbursements TECHNICAL DIVISION TECHNICAL SECRETARY TECHNICAL SEC. SEC 1 ACTIVITY Department 11 DEPARTMENT OF TRAINING Director of Training BODY PREDICTION Department 9 Department 10 DEPARTMENT OF DEPARTMENT NT OF RECORDS, ASSET TECHNICAL & MATERIEL SERVICES Director of Director of Records, Assets Technical & Materiel Service DEPARTMENT OF PUBLICATIONS Director of Publications Copyright (c) 1965, 1969 by L. Ron Hubbard ALL RIGHTS RESERVED 1 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 26 AUGUST AD9 CenOCon [excerpt] PROMOTIONAL FUNCTIONS OF DEPT OF ACCTS Accounts is commonly so snowed under with Bookkeeping and Prop income that it doesn't think of itself as a promotional unit. But it is. Snappy and accurate accounting, quick and accurate and even tough rendering of statements is all promotion of a sort. We are accustomed to thinking of an Accts Dept as being figure-figure non-reach sort of department but this is far from true. (That's figure-figure.) Accounts is promotional just by rendering bills properly and on schedule. And they're promotional by making sure the public contributes to the organization in money; by thoroughly backing up the PrR, Accounts does a lot of promotion. Further, there is another thing that an Accounts Dept can do in the promotion line. We are usually undermanned in the Accounts Dept and seldom realize that lack of people in it is one of the most foolish economies we can make. it's lack of people in the Accounts Dept rather than lack of willingness that keeps our Accounts in a turmoil. There should be one person on Statements, one person on Current Bills book and one person on Prop Income breakdown even if one or two of these people are part-time. If there are three - and there should be - part of the work of each would be promotion as follows: Statements - noticing that credit is good on some person in the Statements book, should write and tell the person so and give a list of such people to the Dir of PrR. Current Bills, who should handle purchasing and filing too, probably, has a public relations function in handling the merchants with whom we deal and getting them interested in what we are doing rather than allowing a purely trade relationship to exist. Prop income, who also usually does the invoicing, has a promotion function in making sure that the receipts get back to the payee along with some kind of pat on the back for helping Scientology along. MONEY is the attention unit of this society. A lot of Scientologists say 'how mercenary' when I start talking about money. They don't believe in it to the degree that they don't want to attract any attention personally. And that's the crude truth. We've got to get over that attitude. The commonest sense tells us that if we had enough money we could advertise and build and hire our way straight up the line ten times as fast as we are doing. Well one of the ways we fail is to fail to use money as a promotion factor and to fail to fully utilize commercial transactions and monetary exchanges as promotional avenues. Think that over and buy the Dir of Materiel the new building he wants and see how they start crowding in. The Dept of Accounts is our most neglected promotional sphere and this we must overcome. L. RON HUBBARD LRH:brb.rd Copyright (c) 1959 by L. Ron Hubbard ALL RIGHTS RESERVED [Excerpted from HCO P/L 26 August AD9, Promotional Functions of Various Depts. A complete copy is in Volume 7, page 135.] PURPOSE DEPT OF ACCOUNTS [From HCO Policy Letter of 27 November 1959, Key to the Organizational Chart of the Founding Church of Scientology of Washington DC] To keep the business affairs of the organization in good order, to maintain the good business repute of the organization and to see to it that the business activities of Scientology are up to date in an excellent condition. To make sure that income exceeds outgo. L. RON HUBBARD LRH:js.rd Copyright (c) 1959 by L. Ron Hubbard ALL RIGHTS RESERVED [A complete copy of this Policy Letter is in Volume 7, page 138.] 2 THE PROMOTIONAL ACTIONS OF TREASURY DIVISION 3 (From HCO PL 20 November 1965, The Promotional Actions of an Organization. These are given complete for all divisions in Basic Staff Volume 0, starting on page 84.) 41. ORGANIZATION SECRETARY - Co-ordinates and gets done the promotional functions of Division 3. 42. DEPARTMENT 7 (Dept of Income) - Persuades payment of cash or increase in purchase whenever possible. 43a. Collects outstanding notes by monthly statements. 43b. Collects outstanding notes through Field Staff Members via Dept 17. 44. Gets all mail orders invoiced and/or collected so they can be shipped at once. 45. DEPARTMENT 8 (Dept of Disbursement) - Keeps bills paid in such a way that the org is in excellent credit repute. (Promotes with good credit rating.) 46. Gets salaries accurately and punctually paid to keep staff happy. 47. DEPARTMENT 9 (Dept of Records, Assets and Materiel) - Gets proper quarters to make the org look good, whether for momentary or permanent use for all divisions. 48. Keeps materiel of org bright. 49. Acquires reserves to give a reputation of stability to org. 50. Keeps staff clothing issued and in good order (in those orgs providing uniforms). L. RON HUBBARD HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 30 SEPTEMBER 1965 STATISTICS FOR DIVISIONS [Excerpt/ Org Division 3 - Credit collections vs Bills paid. It will be seen that gross income is established by many in the Org but collections as a special income is purely the Org Division's. Bills paid require gross money in, so reflects the gross - no money in, no bills paid. This is a dual statistic which shows the industry of the Division in general. It even touches materiel as no bills paid equals no supplies. Monies paid into Reserve Payment do not count as Bills Paid. L. RON HUBBARD LRH:ml.rd Copyright (c) 1965 by L. Ron Hubbard ALL RIGHTS RESERVED [Note: A complete copy of this Policy Letter can be found in Volume 1, page 328.] 3 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 30 SEPTEMBER 1970 Issue II Remimeo Treas Secs Dir income SO & Scn CREDIT COLLECTIONS DEFINED CREDIT COLLECTION includes 1. Monies collected for services given on credit. 2. Monies collected on bounced checks. 3. Freeloader collections. 4. Collection on any amount OWED to the org for service or items sold. (Not advance payments.) Industrious collection action by Div III is all it represents. Any Treas Sec reporting a CREDIT COLLECTION stat differently than as above must take this definition and advise CS-3 at once of the date and any graph change resulting, with carbons to Cont and WW OIC. LRH:VP:sb.ka.rd Copyright (c) 1970 by L. Ron Hubbard ALL RIGHTS RESERVED 1. Credit Collected 2. Bills Paid. Lt. Vicki Polimeni CS-3 for L. RON HUBBARD Founder HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 5 FEBRUARY 1971 Issue V ORG GROSS DIVISIONAL STATISTICS REVISED /Excerpt/ TREASURY DIVISION 3 Credit Collected is defined in HCO Policy Letter 30 September 1970, issue II - Credit Collections Defined. Bills Paid includes all org bills, including materiel. Monies paid into Reserves do not count as Bills Paid. LRH:HE:mes.rd Copyright (c) 1971 by L. Ron Hubbard ALL RIGHTS RESERVED [Note: A complete copy of this Policy Letter can be found in the 1971 Year Book.] 4 HCO Aide for L. RON HUBBARD Founder HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 12 MARCH 1971 Issue II Remimeo SO & Scn Orgs Treas Secs Starrate on all Div 3 Staffs OIC TREASURY DIVISIONS GDSes ALL ORGS (AMENDS: HCO PL 30 Sept ,65, "Statistics for Divisions", HCO PL 5 February 1971 - Issue I, "All Orgs, OIC Cable Change", HCO PL 5 February 1971 Issue V, "Org Gross Divisional Statistics Revised", and HCO PL 8 February 1971, "Handling of Bounced Checks and Refunds", page 2, para 2. CANCELS: HCO PL 30 Sept'70, "Credit Collections Defined".) Effective for ALL ORGS, SO and Scn, FEBC orgs and others, the Division 3 Gross Divisional Statistics are revised as follows: 1. TOTAL ADVANCE PAYMENTS AND TOTAL CREDIT COLLECTED FOR THE WEEK. 2. TOTAL BILLS PAID FOR THE WEEK. 3. TOTAL ORG MATERIAL AND LIQUID ASSETS. ADVANCE PAYMENTS is defined as a payment well in advance of readiness or arrival for service CREDIT COLLECTED includes collection for Qual Services and any other services given on credit, Freeloader collections, and any monies OWED to the org for services or sales. Credit collections and Advance payments are plotted separately on the same graph. BILLS PAID include all field creditor bills, and staff salaries paid, but does NOT include FSM Commissions paid, as these are reported separately as a Public Div stat. ORG MATERIAL AND LIQUID ASSETS include all org reconciled balances, any cash on hand, value of properly inventoried assets, properties and material, and value of bookstocks and inventoried supplies. The asset value of any item is evaluated against its purchase price, its present state and condition, and annual depreciation. FOUNDATION ORGS A Foundation org, where one is operating alongside a Day org, will only report its TOTAL ADVANCE PAYMENT AND CREDIT COLLECTED stat on its OIC cable, as the two other GDSes are shared with the day org and need not be reported. OIC CABLE REPORTS Effective for the week beginning 8 April 1400 and ending 15 April 1400 1971 for the first report, and effective thereafter, the new Div 3 GDSes are to be reported in the OIC cable as follows: (Per the HCO PL 5 Feb 71 "All Orgs-OIC Cable Change"). After the Gross Income figure: Gross Income / NEW Advance Payments / Credit Collected / Bills Paid / NEW Org Assets / (Following order of the cable unchanged.) On the fourth week following date of change and thereafter, the OIC Cable is reported as above, without the prefixes "NEW". LRH:LQ:HE:nt.rd Copyright (c) 1971 by L. Ron Hubbard ALL RIGHTS RESERVED 5 HCO Aide and Treasury Aide for L. RON HUBBARD Founder HASI SOUTH AFRICA HCO BULLETIN OF 9 NOVEMBER 1956 ACCOUNTING & FINANCIAL Accounting Department. To take care of: NOT HCO POLICY LETTER ORIGINAL COLOUR FLASH NOT GREEN ON WHITE Maintenance of adequate ledgers for the corporations. 2. Filing of tax returns 3. Preparation of Profit and Loss and Credit statements 4. Supervision and preparation of bills, of collections on notes owed to the organizations, and submission of a monthly statement 5. Preparation of weekly pay checks for signature by Treasurer 6. Custody of notes and paid bills for the organizations. L. RON HUBBARD HUBBARD COMMUNICATIONS OFFICE 37 Fitzroy Street, London W. 1 To All HCO Secretaries: 1. All funds received from whatever source shall be scrupulously and correctly invoiced on a triple-copy invoice machine. 2. All monies paid out shall be scrupulously and correctly invoiced on a triple-copy invoice machine. 3. All funds received shall be banked at the main bank HCO account. No funds may be withheld for expenses and no funds may be withdrawn from cash for any charge or any emergency of any kind. 4. All cheques are to be signed only by signatories authorized by LRH. No new accounts may be started except by mandate from L. Ron Hubbard. All bills are to be paid by HASI - except Petty Cash items for HCO. 5. All financial policies to be valid must bear the signature and seal of L. Ron Hubbard. 6. Tax Accounting is to be done entirely by a well-reputed accounting firm. All data in the form of copy in and out invoices is to be forwarded to them and all books are to be submitted to them quarterly for auditing. Any action they wish to take must be reviewed by L. Ron Hubbard before being put into effect. 7. The account system as outlined by LRH above must be installed and followed meticulously. This is the HCO account system. Please follow it exactly. 8. The two invoice machines used by HCO shall contain complete records of all funds which have entered and exited from the office. These should be transferred quarterly to a ledger, in a single IN and OUT column system. They are to be entered under various categories for which a code system is to be evolved. For example: (a) 10% received from HASI (b) Rent received from HASI etc. 9. The policing of the HCO Accounts system is done by HCO Secretary, who is to ensure the above is executed at all times and to report to L. Ron Hubbard accordingly. 10. HCO Secretary is to ensure each Monday morning that the correct cheque for the 10% of HASI gross income for the previous week is paid to HCO, and recorded properly as above. Also ensure HASI rent is regularly paid and that the cheque is promptly deposited to the HCO bank account. 11. HCO may not loan money to any HASI or spend sums for HASI bills. The above provisions have the status of law under US and British corporation commissions and failure to adhere to them can bring about legal or criminal action against an offender or confederates. All persons connected with the finances of the HCO are required to be alert to adherence of these policies to be accused of collusion in case of loss of funds. BASIC FINANCIAL POLICY HCO 27 November 1958 6 L. RON HUBBARD copies to: Acct Dept Dist Center Maxine - invoice Academy HGC Steves HCO File Ron The income (white) disbursement sheets of the Academy, the Hubbard Guidance Center, and the Founding Church for the past week (3 sheets in all), must be on my desk by 2.00 p.m., Monday. NOT HCO POLiCY LETTER ORIGINAL COLOUR FLASH NOT GREEN ON WHITE FOUNDING CHURCH OF SCIENTOLOGY 1812 19th Street N.W., Washington, D.C. FINANCIAL PROCEDURE LETTER OF 11 MARCH 1957 INCOME REPORTS Director of Training is responsible for the Academy Sheet, the Director of Processing the Hubbard Guidance Center Sheet, and Invoice Academy the Founding Church Sheet. The Distribution Center Income Sheet would also be appreciated at the same time. The Disbursement Sheets of the Academy and Distribution Center are made up by Accounting and should be presented by Monday afternoon to me. LRH:rd Copyright (c) 1957 by L. Ron Hubbard ALL RIGHTS RESERVED L. RON HUBBARD HUBBARD COMMUNICATIONS OFFICE 37 Fitzroy Street, London W.l HCO POLICY LETTER OF 6 FEBRUARY 1959 HCO ACCOUNTS WORLDWIDE The following will be done to handle Accounting World: 1. A post will be created in the HCO Office, London, called HCO Accounts. 2. This post will have as its function the receipt from all HASI Offices the weekly income report sheets, the bank statements for all accounts and a duplicate set of invoices from each office. 3. This post will check these reports, add all invoices, check the proportioning of funds and check the bank statements. 4. This post will report to the Director of Accounts, World, the accuracy or inaccuracy of all reports. 5. This post will have as its duty the presentation to the Executive Director of all requests for sums from the Building Fund of the various organizations. 6. This post will also receive reports from the various organizations of HCOs concerning the receipt and expenditure of funds from all HCO accounts. This post will check same. 7. This post will have as its Director the Director of Accounts, World, Mary Sue Hubbard. LRH:mp.gh.cden 7 L. RON HUBBARD HUBBARD COMMUNICATIONS OFFICE 37 Fitzroy Street, London W.1 HCO POLICY LETTER OF 5 JUNE 1959 Modifies previous directions Convert to Sec ED INCOME REPORT REQUIRED The Association (Organization) Secretary is entitled to weekly income reports from the following departments: DEPARTMENT OF ACCOUNTS Payments on notes Payments on loans Payments on memberships TRAINING DEPARTMENT All student enrolment fees All Extension Course fees PROCESSING DEPARTMENT All preclear processing fees All testing receipts PE FOUNDATION All HAS student fees All Co-audit student fees BOOK SECTION (HCO) All mail order sales RECEPTION All across counter sales These reports are made on a large sheet labelled "Income Sheet" available from the Department of Accounts or HCO WW. These reports are compiled by department heads after Thursday at 2.00 p.m. on the week's income ending then. They are due on the Association (Organization) Secretary's desk by Monday, 2.00 p.m. The sheets are compiled from yellow invoice copies by the Dept head or his deputy. Penalty for missing, inaccurate or incomplete sheets, week's pay of department head held until sheet is submitted or corrected. The Accounts department collects the sheets and places them on Association Secretary's desk. The Accounts department clips to these an official record of the Bank deposits made into all accounts the preceding Friday. The Association (Organization) Secretary initials each sheet and gives them to the Advisory Committee on Tuesday, the next day. Advisory Committee minutes are compiled from these sheets. Immediately after the Tuesday Advisory Committee meeting these sheets are returned to the Accounts department by the Director of Accounts or his deputy and are there bound into a permanent record. The yellow invoice slips from which these are compiled, are retained in their respective departments and do not accompany the sheets at any time. L. RON HUBBARD LRH:gh.cden 8 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 27 JANUARY 1960 HCO Secs Assn Secs Div of Accts of Central Orgs ACCOUNTS POLICIES (Cancels Earlier Directives) Rules Governing Accounting All income from whatever source is banked intact. never drawn on before being All funds are disbursed by cheque even when disbursed again by cash. All transactions are recorded in full, and all invoices and disbursements are given any history known about them on the invoice or the voucher. There is no reason for making accounts history a matter of memory. All financial receipts and disbursements are reported weekly (by Monday 2 p.m.) by Accounts to the Org Sec or Assn Sec. These are also reported by Dept heads on their income and disbursement sheets. All purchases require purchase orders before made. If a purchase is made with no order or no okay on an order, the staff member making it must pay for it. The accounts project is responsible for enforcing financial policy on staff. Current Bills File Every firm or person - even staff members, has a place in our accounts files in a separate file folder. One firm or person = one folder. All records, bills, letters, etc relating to such are placed in this person or company's file. Any bank or other loan has its own file. Cancelled cheques and bank statements are kept in their own files by account. But, where possible, a photostat of each cheque back and front is made and filed with the firm folder to which it was issued. So are invoice and disbursement copies also filed as they apply in these files. A summary sheet of billing and payments to one firm is kept in the folder of that firm. These folders are retired to dead file each year when actually dead. Statements Files Each debtor of any company we are handling has his own file and all papers related are in it. All invoices and papers relating to such debtors are kept in this file folder. A statement sheet is also kept in this folder. A copy of the contract (photostat) is kept in this file. The original is kept in a valuable document file in the safe. This applies to any company, firm or person who sends us money or owes us money. Invoicing (Note colours may be different in different areas of the world.) All monies received are invoiced with full data. paper. The white goes to the payer as a receipt. The yellow goes to the Project Supervisor or person most interested. The red goes to accounts for filing in folders. The blue stays in the machine and is never detached from its consecutive pad of Invoices are used to sort out banking, reports, statements, etc. 9 voucher. Disbursement Vouchers All disbursements, whether by cash or cheque, are written on a disbursement Payroll vouchers are signed while still on the machine by the recipient. Cheque numbers, a firm's bill number, any data applying, is written on a voucher. The white goes as a complementary statement to the firm, obviating letters or other papers. It is all that goes with the cheque. (We keep al] bills). A copy of the voucher goes to the Project Supervisor most interested. A copy goes to Accounts for filing in the folder of the firm or person. A copy remains in the machine and is not disconnected from its pad. Banking All monies are placed in the safe at once they are invoiced and are only removed to be banked. The Accountant is responsible for them from the moment the mail is delivered to him until they are banked. The Accountant should be bonded. All money banked is recorded on deposit slips stamped by the bank. These are filed then with bank records along with statements and cheques. Collections done by the bank are recorded with new invoices and must be sent to us by the bank. Adjustments and transfers in Accounts are subject to Disbursement Voucher recording and should be so recorded. These are done by cheque, not letter. Department Files When a department head receives his invoices and vouchers, he records these on appropriate sheets and presents them by 2 p.m. Monday, for the week passed, to the Assoc Sec or Org Sec who then passes them to Accounts. They are filed by Accounts in appropriate folders. Dept heads may have access to these folders. Accounts also presents its own report. Paying Bills A cheque is made out on an account and is presented with the full folder on the firm or person to receive it. The total of cheques is added up on separate slip. Current bank statements are also presented. These items are necessary to the payment of any bill. All bills being paid by bankers order are recorded routinely in the folders. Bills being paid by cash require the initials of the Assn Sec or Org Sec. Income Breakdown Income breakdown is done weekly on appropriate sheets after separating invoice copies into appropriate piles. A tape is run on each pile. A total of all tape totals should equal cash in hand. Cash is then banked in appropriate accounts as above. The papers and all worksheets related to income breakdown are filed in an envelope for that week. General All tapes of addition and other accounting records and all rough computations are kept by Accounts and appropriately filed. L. RON HUBBARD LRH:js.rf.cden Copyright (c) 1960 by L. Ron Hubbard ALL RIGHTS RESERVED 10 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 14 FEBRUARY 1961 /Excerpt/ Cen Orgs Copy for each Staff Hat Not for Franchise THE PATTERN OF A CENTRAL ORGANIZATION Dept of Material Headed by the Director of Material (Dir Mat) the Dept of Material owns every Mest object including pieces of paper in the entire organization and is responsible for its inventory, existence and good repair and usage. Material sets up and clears away rooms, keeps the place clean, maintains everything, orders and supervises construction and even procures new office or auditing space. If it's Mest, take it up with Material. If it's service or significance or personnel, take it up elsewhere Material does all purchasing for the organization. Purchasing can be done only after a Dept Head and Assn Sec approval on a purchase order, no matter how small the item. The greatest single threat to organization survival has been Purchasing by Material without proper judgement and authorization by purchase order. Both Washington and London have been all but crushed by this function done wrongly. Johannesburg, purchasing with bad judgement, wound up with very little material despite huge bills. Purchasing is a fine art and in Central Orgs a primary threat if done too abundantly or wrong. Purchasing can be so bad that the Organization can go broke while acquiring nothing. Further, enough money to pay its bills and have things is a better index for necessary income than the unit. If the disbursement fund is kept more than adequate, the unit will also be high. Financial management includes what is to be bought. When it's okayed by the Assn Sec. Material can buy it. But if Material, in liaison with Accounts, sees danger in buying Material must take it up with the Assn Sec with more figures even if the Assn Sec has already okayed it. The biggest potential upset next to purchasing is "job completion". An Organization can be torn apart if each job, started, is not finished before new jobs are begun. Unfinished jobs can upset everything. They must be avoided. Material should be given proper schedules of activities so that rooms can be set up or auditoriums procured well ahead of schedule. Cleanliness of quarters is a public point of acceptance of Scientology. Dir Mat is a highly responsible job. It can make or break an Organization. Dept of Accounts Headed by the Director of Accounts, the Dept of Accounts receives, safeguards and expends funds in the Organization. No other person can expend money, though others can receive it if it is promptly handed to Accounts. Scientology Orgs had trouble with accounts until a special accounting system for Central Orgs was developed. That system is of a vital nature to the Accounts Dept and must be followed without additives, ponderous ledgers, peculiar sub-systems or deletions. A Scientology Accounts system is simple. It works It consists of writing an 11 invoice on a four-copy machine for everything received and a disbursement voucher on a four copy disbursement machine for everything expended, even petty cash, with a completed statement of what Accounts knows of the expenditure. The system consists of four files - one with a file for every creditor, one with a file for every debtor, one with a complete file for every bank account and one with a file for every weekly breakdown envelope. A board with nails on it for pinning up invoices for every category on the breakdown sheet and a book to put income sheets in plus an adding machine and cabinets completes the entire system. Then if accounts will file every piece of paper, letter, invoice, voucher and receipt that comes in in these files properly, anybody can summarize them and financial management becomes possible. Monthly, on a mimeo sheet that bears the name of every creditor, all bills are listed from the Creditor file (not from bills mailed in by firms) added up and presented to the Assn Sec with bank statements for his directions as to payment. owe us. A similar mimeo sheet is made up of debtors each month and the amounts they Pay is paid not by cheque but in cash by the signature of the staff member on a disbursement voucher that tells the whole tangled story. Staff members each have a folder in the creditor file at the back in which copies of the voucher are filed. A chartered or certified accountant can always do a quarterly balance sheet for the Central Org rapidly from these files if they are kept up and are as designated. We don't copy figures from figures into vast piles of day books, ledgers, statements and other mysteries unknown. The files are these books. The law demands records everywhere. These are the records we want. When people pay on their bills, invoice it, (send them the white with their next statement) and file it in their file folder. Our weekly breakdown sheet, showing gross and units, amounts deposited to salary sum, disbursement account, building fund must be displayed to the staff each week on a staff bulletin board. We are interested in complete, orderly files and their individual summation. That's accounting in Scientology. If the Accounts Department is doing something else, they're still in the 19th century when accounting was a vast mystery and managers went broke. We have had good accounts and an easy life for Dir Accounts everywhere the moment this whole system went in. Even governments were satisfied. Admin Report Forms Only one report (and its income sheet) is permitted per department per week - except in PrR where each of its two sections report. We don't allow random report forms to develop in a Central Organization. Everything anybody wants to know is on a dept's single report sheet for the week. HCO WW ultimately receives all except income sheets. L. RON HUBBARD LRH:aecJs.rd Copyright (c) 1961 by L. Ron Hubbard ALL RIGHTS RESERVED [Note: Excerpted from HCO Policy Letter 14 February 1961, 7.-he Pattern of a Central Organization. A complete copy is in Volume 7, page 147.] 12 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 23 NOVEMBER 1961 Central Orgs Accts Depts ACCOUNTS (Modifies HCO Pol Ltr of July 6, 1961, Accounts so as to make it suitable for use in Central Orgs or City Offices) NOTE: IT IS NOT INTENDED THAT THIS POLICY LETTER SHOULD BE PUT IN FORCE AT ONCE IN ALL CENTRAL ORGS. BUT IF ANY CENTRAL ORG WISHES TO TRY THE SYSTEM OUT, THE ASSOC SEC SHOULD REQUEST PERMISSION TO DO SO FROM L. RON HUBBARD. THIS POLICY LETTER OUTLINES A SIMPLIFIED SYSTEM OF ACCOUNTS WHICH COULD BE USED IN CENTRAL ORGS OR CITY OFFICES. IF THIS SYSTEM IS OPERATED, A QUALIFIED OUTSIDE FIRM OF ACCOUNTANTS SHOULD BE EMPLOYED TO MAKE A REGULAR QUARTERLY AND ANNUAL BALANCE. Two Accounts Divisions are instituted. These are: The Income Division and the Disbursement Division. They are in separate areas and are run by different persons. They must be kept separate. INCOME DIVISION The Income Division performs the following actions: A folder is made for every organization or person who pays the Org money. This includes HCO WW and other Scientology Orgs (if applicable), and all these income accounts are kept in no other place nor by any other person. The Income Division sees that Statements, pre-addressed by Addresso on proper envelopes, go out to each foldered person or organization once each month. This statement is a Thermofax copy of the summary sheet in each folder, stuffed in these pre- addressed envelopes. New addresses for this list are routinely forwarded to Addresso Dept to be added to the monthly list. Old addresses withdrawn are also routinely passed to Addresso to be deleted from the plates or stencils. No ledgers are kept by the Income Division. No notebooks or journals are kept. All data is retained in folders. Each folder has a summary sheet for Thermofaxing. All accounts are written on this sheet. All invoicing is done by the Income Division. Division. Notice of all bank payments paid in, and all bank statements, go to the Income 13 When invoicing, mark each invoice for what it is - Processing, Training, Books, etc. White Copy (top copy) goes as receipt in the next statement mailing. Next copy goes to department concerned, and thence to C/F. Next copy goes to basket for Income Summary, and when summaried is filed in folders. Final machine copy is retained as income summary, not torn but kept consecutive. On Monday following a week, the basket copies are sorted into boxes: Processing, Training etc. Each box is totalled and given an adding machine tape which is marked Processing, Training, etc. The tapes are then totalled and marked; the cash deposited or received in the bank must equal the final total. These tapes are stapled together and passed to the Registrar, Assoc Sec (Org Sec) and HCO Sec. as income information. When returned to Income Division they are stapled to the machine Copies. These are put in an envelope, dated for the week and filed. This is total accounting record. The basket copies are now filed in the folders and each figure is entered on the statements sheet in the folder. The filing is done all at once. Once a month the Statements Sheets are brought to date from these invoice slips. When a slip is put on the Statements Sheet an X is put on the invoice slip to show it is entered. It does not matter if all statements are up to date when Thermofaxed for mailing. Bring them routinely to date as a continuing activity, not in a monthly rush. Folder Statements Sheets not up to date one month as to debit and credit will be up to date the next. The folder Statements Sheets are mimeoed in general and lettered in particular - i.e. they can be mimeoed in quantity in a generalized form, but they must be filled in in detail. Make sure that the mimeo ink and the ink or type used is capable of being copied on the Thermofax machine, as this machine will not copy water based inks. On invoicing books (if this is done by Income Division), this is the first operation of the day. The invoices go at once by hand to Shipping so books may be mailed same day. This is a rush invoice item. Folders are filed alphabetically by class, which is to say other Orgs form a group, individuals form a group, bookstores form a group, etc. It is the responsibility of the Income Division to know what the Org is owed and to see that it is collected. If Disbursement Vouchers, bank slips, etc are sent by debtors, they are never entered on the Statements Sheets. They are kept in the folders, for information only. Only money received in the bank is entered. The income report from the Income section also includes the amount shown on the last statement for each bank account. There is no further attempt to balance cash deposited but not shown on statement, or cheques issued but not cashed in by the person or firm who received them. This weekly report is the Money on Hand report. It goes to the Assoc Sec and the HCO Sec. It is then filed with the week's income report. It is compiled and despatched when all statements for the week are in. It is not attached to the Income report but is separate. In practice, if convenient, it could be so attached. The Income Division retains and has all invoicing machines but no Disbursement machine. The Income Division makes all deposits of cash and cheques into the bank. 14 DISBURSEMENT DIVISION The Disbursement Division has the responsibility of correctly disbursing the money of the Org, such as bills, wages, mortgage payments, etc. Each creditor, including staff members, has a red folder. Each folder has a statements sheet in it. Whenever a cheque is disbursed or a wage or cash is paid out, a Disbursement Voucher must be written giving all particulars. The white Voucher (top copy) is sent or given to the creditor, the next copy is filed in the statements folders. The next copy goes to Central Files (if applicable). The machine copy is retained unseparated and filed in an envelope dated as of the week disbursed, in a block. The copy of the Disbursement Voucher for filing is placed in a basket for filing and then is filed without entering it at that time on the Statements Sheet in the folder of the firm or person disbursed to. All incoming bills are placed in a basket along with the Disbursement Vouchers. They are all filed at once at the same time as the Disbursement Vouchers. They are not entered on the Statements Sheet at that time. Once each month minimum, or every two months maximum, the folders' Statements Sheets are brought up to date. This is a routine and continuing action. All debits and credits are entered on the Statements Sheet. These sheets are kept in the folder. When a Disbursement Voucher or a company's bill is entered on the Statements Sheet a large X is drawn on it. It is returned to the folder. These folders when brought up to date are brought up on the not-X'ed bills and vouchers. The Purchase Orders are filed in these folders and bills are checked against them. Disbursement is from 30 to 60 days on bills. Wages are preferably paid by cheque. Each cheque issued for wages or bills must be written on a Disbursement Voucher. Persons receiving wages do not have to initial or sign the voucher. They receive the white copy (top copy). The Folder copy is filed in their folder. Their pay books, etc are kept in their folders, not in any separate file. The Government has a folder of its own, one for each department of the Government to which we pay out. Other pay papers than in the folder are kept in the Government folder for pay. This folder is filed adjacent to the pay folders of staff. There must be no loose tables, folders or booklets kept anywhere but in folders. BANK STATEMENTS are filed in folders provided for the banks. There is one folder for each bank account. The cheque books are in the same file drawer but not in the folder. Cancelled cheques are filed loose in the bank's folder for each account until a cheque book is empty. Then each cheque is scotch taped, not stapled, to its counterfoil. Counterfoils are kept only in date, and no other data (not even amount), as Disbursement Vouchers are used for record, not Counterfoils. Cheques may not be taped into cheque books in use, neither voided nor cancelled cheques. 15 There is only one report, and that is monthly. Mimeographed sheets carrying the name of each company to whom we disburse are marked with the last debit figure on the statements sheet and how long the amount is owing. It is expected that all such statements will be brought up to date before the monthly report is made. This report totals all bills owing. When executive directions are given on them, cheques are issued as directed against this monthly report. There are no other reports except when requested for some firm. SUMMARY The Disbursement Division makes no income reports on reconciliation of bank statements. The Income Division makes no reports on Disbursement. Every quarter an Accountant audits the books and submits a quarterly report in summation form. He does not make books. The law requires records to be kept. We keep records. Actually we keep books as above, but their pages are folders. HISTORY: The bugbear of accounting is the failure to record all one knows about each transaction. An executive is later expected to remember it all and spend two or three weeks going over tangled accounts with each audit. This is circumvented by writing all you know about the transaction on the Disbursement Voucher or on the Invoice. We are at this writing being a lot too brief on our History. If you know something about the transaction related to what it's for and why, or what's odd about it, put it on the Invoice or Disbursement machine, not in a dispatch or in memory. Example: Joyce Bibbin orders œ2 worth of books but sends œ3.10.0. She wants us to retain œ1.10.0 for a future purchase. Make out one invoice for œ2.0.0 and one for œ1.10.0 but say on each what and why and that it came out of œ3.10.0. Also, if you know a purchase was for some particular purpose or department of the Organization, put it on the Disbursement Voucher when the bill is paid. This way we'll not be racking our brains, and can have an audit without the place being torn down. The person doing the audit should do it on the spot, on our premises. Do not part with folders and records. All correspondence relating to a firm or person and all data on that person is kept in the same folder. There are no 'Business Files'. L. RON HUBBARD LRH:esc.cden Copyright (c) 1961 by L. Ron Hubbard ALL RIGHTS RESERVED 16 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 6 MAY 1964 Sthil Cen 4 copies to each Org ACCOUNTS POLICIES There are two sections to the Accounts Department. One is the income Section. The other is the Disbursement Section. THE INCOME SECTION The income Section invoices all monies received on the appropriate machines and designates what each amount is for. Sums received in one cheque for two or more services are made into two or more invoices. A copy goes to the appropriate service unit in the Organization delivering the service being paid for. Another copy goes to the customer's folder in Central Files. Another is retained by accounts for the weekly summary. The original goes to the customer as a receipt. Invoices must be very legible and complete. The money goes to the bank each week. The bank receipts, a copy of every invoice for the week and appropriate addition tapes for each type of purchase, are all packaged together and submitted weekly to the Treasurer, Mrs Hubbard, for review, or in other Orgs to the financial manager. The accounts week closes at 2.00 p.m. Thursday, at which time a new accounts week begins. The Income Section also posts all receipts in ledgers starting January 1, 1964, one for each company concerned. The income Section also furnishes breakdowns of income of various types when required. The Income Section keeps a firm record of every debtor and a file on each debtor. These files are kept up to date and contain the full picture of what we are owed by everyone in detail. All related correspondence is filed in the income Files. The Income Section sends out monthly formal statements to each debtor. On those who are consistently delinquent the Income Section originates collection letters and also reports the full details to the Treasurer, Mrs Hubbard, or in other Organizations to the financial manager, for review and additional action. It is the purpose of the income Section to permit no past due accounts. Any sums owing in any other department such as the Book Department is the business of the Income Section and comes under its recording and collection function. Any legal action for collection is undertaken by the Income Section. ALL receipts are banked. No cash may be used before being banked. Prompt invoicing to facilitate shipment within the working day, accurate receipt and recording of all sums owing, safe banking and safeguarding sums until banked, rapid and urgent collection and accurate and prompt reporting to the Treasurer, or in other orgs to the financial manager, summate the main functions of the Income Section. THE DISBURSEMENT SECTION The Disbursement Section is responsible for the payment and recording of all sums owed. Every creditor whether paid in cash or cheque, whether submitting a bill or not is given a folder in the Disbursement Files and all correspondence of a business nature 17 with that creditor, whether Concerned with money or not comes to the Disbursement Files. There must be no separate "Business files", only the Disbursement Files. The only exception is debtor correspondence about money owed us in the income Files. It is mandatory that no other "business file" exists in the Organization. Disbursement never pays from a received bill alone. All bills received are first filed in the Disbursement Files. Then the file is reviewed as a whole when the time comes to pay bills. It is forbidden to short circuit this line and pay bills just as they drop into the In basket. They are filed. Then all files are reviewed once a month, summated and the result entered in a statement sheet in the file folder and on a Bills Summary Sheet. This Bills Summary Sheet is prepared on the 10th of each month and submitted with or without folders (as requested) to the Executive Director or Treasurer along with a Summary of the amounts in each bank account. When thereafter requested to do so, the Disbursement Section makes out the cheques as indicated or readies the cash. These cheques are then given to the Treasurer or in other Orgs to the financial manager, to sign and when signed are mailed or given to the creditors. The weekly payroll cheque is drawn for signature and given to the Treasurer, or the financial manager, on Wednesday of each week and the cash received from the bank on Thursday. The payroll is made up and paid on Friday noon, not before. Any bonuses are given at this time. The only exception is a Friday holiday. All disbursements whether by cash or cheque or petty cash are vouchered on the Disbursement machine of the debtor company. No payment of any kind may be made without voucher. The voucher must clearly state what the payment was for. Purchase Orders must accompany every order to Purchasing before the fact and must come to Disbursement before a bill can be paid. Purchases made for a company without prior purchase order render the employee ordering to payment of the account from his own salary. All contracts drawn must priorly be validated by a Purchase Order signed by the Treasurer, or in other Orgs to the financial manager. This applies to Service Contracts, contractors and all such. Utilities escape Purchase Orders by necessity but fuel oil, etc. do not. Domestic expenses (minor charge accounts such as gas) are by quota, not purchase order and are exempt so long as they remain in quota. Such quotas are set by the Executive Director or the Treasurer, or in other Orgs by the financial manager. The Disbursement Section posts all vouchers in ledgers for the companies concerned with an appropriate breakdown of the amounts for each activity to assist in financial management. Posting is done in separate ledgers for different companies. Posting is done in periods of one week ending 2.00 p.m. Thursday to agree with the Income period. To facilitate this Disbursement voucher copies are filed as made in trays of the separate divisions of posting. Disbursement vouchers are handled as follows: The original to the person or firm being paid, a copy to that person or company's folder, a copy to the posting trays and copy to the weekly Income Report Envelope, the last copies being carefully kept in numerical sequence. The gross amount of money in each bank account, without any adjustments for cheques outstanding, is made up from the bank statements weekly and enclosed in the Income Envelope roughly for the week in question. All bank statements are kept by and all statement-cheque reconciliations done by the Disbursement Section. The Disbursement Section in England and Commonwealth countries may not overdraw a bank account without specific permission. Where the permission is given, let us say to œ700 overdraft, the Disbursement Section may then not exceed that figure without new permission. In the United States no overdrafts are permitted. The good credit of the companies involved or the person for whom disbursement is being made is the full responsibility of the Disbursement Section. Bills should not be carelessly left outstanding. Such bills must be called to the Treasurer's, or in other Orgs 18 to the financial manager's attention and note made on the Bills Summary Sheet of how long it is overdue when it is not in the same month that the Bills Summary Sheet is for. Bank Accounts may not be overdrafted antagonizing bank managers and causing endless correspondence. The moment things appear critical and margins small, the matter must promptly be brought to the attention of the Treasurer, or in other Orgs to the attention of the financial manager. Under the heading of good credit comes remarks or comments on company affairs that threaten its credit reputation. All such observations should be made to the Treasurer in good time. When money is advanced to anyone above their wage the matter of its collection out of wage remains the concern of the Disbursement Section. If money is advanced to anyone or any firm, Disbursement passes the matter to the Income Division for its collection activities when the matter falls due. SUMMARY Procuring money is the main function of the Income Section, not merely recording it. Safeguarding credit and solvency is the main function of the Disbursement Section, not merely spending it. Both the Income and Disbursement Sections must keep the Treasurer and the Executive Director fully informed of the facts of procurement of money and the credit and solvency of the Companies. Financial emergencies occur only when both sections have failed to do their jobs in keeping management advised, for management can always promote income or adjust expenditures easily if given enough warning. It takes about half a year for competent management to recover from a bad imbalance of income and outgo. It takes as long as a year and a half for competent management to recover from a real financial emergency. Solvency is only that condition where Income exceeds Outgo. Insolvency is only that condition where Outgo exceeds income. With the Income Section making sure the income is coming in and the Disbursement Section making sure that it isn't going out faster than it is coming in, and with both sections keeping management advised of fluctuations, solvency becomes possible. And jobs for people exist only where solvency is maintained. (Note: The Treasurer or the Executive Director may, as in London which is near to hand, direct that all an organization's cheques be signed only by the Treasurer at Saint Hill. Especially in cases where insolvency seems chronic and not mending, regardless of distance or inconvenience envisioned, the Treasurer may direct that no cheques may be signed except by the Treasurer and all other cheque signatories dropped from the account. In such cases all the above actions are still undertaken and the nominated financial manager in the organization receives all the reports and forwards only those portions required to the Treasurer with the cheques ready for signature in ample time to be airmailed in return. This action has uniformly resulted in returned solvency for the organization. Such an action changes none of the above except as noted here. LRH) (Note: in small organizations both Income and Disbursement sections are handled by one person, but if so each section has its complete files and functions just as above. LRH) L. RON HUBBARD LRH:dr.cden Copyright (c) 1964 by L. Ron Hubbard ALL RIGHTS RESERVED 19 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 15 MAY 1964 Sthil CenO 4 copies to each Org ACCOUNTS POLICIES (Addenda to HCO Policy Letter of May 6, 1964) At end of first paragraph in the INCOME SECTION, add: TOTALS ON ALL Invoices are to be shown in STERLING. At line 5 (under INCOME SECTION) add: OR TO Business Files if the Invoice shows a debit or credit. Between second and third paragraphs (under INCOME SECTION) add: If a student has a debit or credit at St Hill, his or her file must be in the Business Files, NOT in CF, and CF must be informed of the fact. In such cases, where a file would normally be expected to be in CF, the fact that the folder is in Business Files must be signalled in CF by a dummy folder (i e., a BLANK PINK CARD, the same size as a file-folder, bearing only the person's name and address) being placed in the correct position in Central Files. On page 2, third paragraph, delete "noon, not before". At end of twelfth paragraph page 2, add: But bank statements are to be available to INCOME SECTION as necessary. LRH:jw.oden Copyright (c) 1964 by L. Ron Hubbard ALL RIGHTS RESERVED Issued by: HCO WW Area Secretary for L. RON HUBBARD 20 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 23 JANUARY 1966 Remimeo Exec Sec Hats Org Division Hats URGENT ACCOUNTING POLICES OF SCIENTOLOGY COMPANIES (Scientology organizations long have had exact firm rules regarding accounting procedure. They are repeated here. These MUST be in use from 1 Jan 1966 forward in all organizations. If they are not, put them right back to 1I Jan 1966 so we can get a proper and swift audit in 1967.) The Accounting policies of a Scientology Company are: 1. ALL AUDITS MUST BE DONE FROM ORIGINAL RECORDS. (No secondary books, journals or ledgers may be consulted in doing an audit and are illegal in a Scientology Company anyway.) 2. ALL SUMS RECEIVED FROM ANY SOURCE MUST BE LEGIBLY INVOICED AND BANKED. (They may not be spent before banking, not even a penny no matter the emergency.) 3. ALL SUMS DISBURSED MUST BE DISBURSED BY CHEQUE. (Even petty cash and salary sums must be drawn by cheque before being disbursed.) 4. ALL SUMS DISBURSED MUST ALSO BE DISBURSED BY LEGIBLE VOUCHER GIVING FULL DETAILS AS WELL AS CHEQUE GIVING FULL DATA. (Wages for each person must have a disbursement voucher for that person and signed by that person. Every cheque also has a voucher. A voucher is like an invoice, same machine.) 5. WEEKLY INCOME INVOICE MACHINE COPIES WITH A CARBON COPY OF THE BANK DEPOSIT SLIP FOR THAT WEEK AND A TAPE OF THE INVOICES ADDING THEM MUST BE PLACED IN AN ENVELOPE AND DATED AND CAREFULLY FILED. (This gives a complete record of bankings for the year by week. ) 6. ALL BILLS MUST BE FILED WHEN RECEIVED IN A FOLDER FOR EACH COMPANY AND THE FOLDER SUMMARIZED BEFORE THE BILL IS PAID. (Bills may not be paid merely by reason of receipt in mail or before filing.) 7, EVERY MONTH ALL BILLS OWING ARE LISTED ON A MIMEO FORM AND PRESENTED TO THE SIGNING EXECUTIVES WITH A LIST OF MONIES IN THE BANK AND PLANNED FOR PAYMENT BEFORE ANY CHEQUES MAY BE WRITTEN OR SIGNED. 8. EVERY PERSON OWING ORG MONEY HAS A COLLECTION FOLDER INTO WHICH COPIES OF INVOICES OF ALL PAYMENTS MADE ARE FILED, THE FOLDER TO INCLUDE COPIES OF ALL CONTRACTS AND NOTES. 9. COLLECTION FOLDERS ARE SUMMARIZED MONTHLY AND STATEMENTS ARE SENT OUT MONTHLY TO DEBTORS. (Any bill written off for tax is still billed to the debtor monthly.) 10. ALL PERSONS OWNING MEMBERSHIPS FREE OR PAID ARE RECORDED IN ACCOUNTS AND BILLED 30 DAYS BEFORE MEMBERSHIP, FREE OR PAID, EXPIRES. 21 11. ACCOUNTS ORIGINAL RECORDS AS ABOVE MUST BE SENT TO WORLDWIDE EVERY QUARTER FOR AUDIT AND PREPARATION OF BALANCE SHEETS AND TAX RETURNS. 12. BANK STATEMENTS MUST BE RECONCILED (COMPARED TO DEPOSITS AND VOUCHERS) WHEN RECEIVED. (TO KEEP THE BANK FROM MAKING ERRORS.) 13. CHEQUES WHEN CLEARED AND BACK FROM BANK MUST BE TAPED IN TO ORIGINAL CHEQUE BOOK ONTO THEIR STUBS (COUNTERFOILS). 14. EVERY PERSON TO WHOM A SALARY IS PAID HAS A FILE FOLDER INTO WHICH ALL HIS PAPERS, CONTRACT, DEBTS TO ORG AND VOUCHER SHOWING EACH AMOUNT RECEIVED ARE FILED WEEKLY. There is a peg board system of separating the weekly invoices and vouchers into categories of income and expense. This refinement is described in earlier policy. If you have any other accounting system in operation, it is contrary to company policy which is based on the above only. As Executive Director will not sign any balance sheet or return not taken from the original records. Balance sheets or statements of affairs based on secondary ledgers and journals or double entry systems or punched card computer systems or any "books". The law requires that accurate records be kept. This does not mean ledgers and double entry and such are not required by law anywhere in the world. Accounting is no mystery. When it becomes so by complex systems executives cannot manage their companies and they go broke. The introduction of complex accounting contrary to policy is a suppressive act on laymen. Scientologists with little or no accounting experience can run the above system and interpret it easily. The decline of more than one Scientology organization can be traced to violations of the above accounting policies. Executives could not manage the company when intimidated by mysterious complex accounting. Accounting cost more than the company could afford. The field ARC Broke on being billed erroneously. Accounts collections were neglected and staggering sums went uncollected because they weren't billed or poorly billed due to violations of the above. This system is a very simple one and a good one, designed for Scientology orgs and successful. L. RON HUBBARD LRH:ml.cden Copyright (c) 1966 by L. Ron Hubbard ALL RIGHTS RESERVED 22 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 30 JANUARY 1966 Issue III Remimeo Exec Sec Hat Org Sec Hat All Org Div Hats Org Div ACCOUNTS PROCEDURES Minus invoices and Vouchers In invoicing income and in writing disbursement vouchers, all corrections are done on additional invoices or vouchers. This makes it unnecessary to search wildly for the machine copies to correct them. The original invoices or vouchers are often already distributed when a need of correction arises. Invoices Instead of correcting the original write a MINUS INVOICE giving what transaction was being corrected as fully as possible. In case of a REFUND from cash just received or a CORRECTION of amounts just received or in case of a BAD CHEQUE informed from the bank, write a MINUS INVOICE and clearly mark it so and for how much and to whom and why. In adding the week's income these show up easily. When separating out invoices into classes of Income for an audit these MINUS INVOICES show up clearly and are subtracted from the type of income. Mark the invoice MINUS in big capital letters so nobody can miss it. Disbursement Vouchers Minus disbursement vouchers are made every time a cheque is VOIDED or when a payment comes back unaccepted or when for any reason something already Disbursed is found not to be disbursed after all and must be added back. Mark the voucher MINUS in Capital letters so nobody can miss it and give FULL DETAILS. When sorting out classes of disbursement for an audit these Minus vouchers are dealt into the class of expenditure but when it is totalled, they are subtracted. Cheque Book Assembly Always tape your cheques coming back from the bank into the original cheque book, onto their counterfoils. 23 Never let these cheques drift loose. When a cheque book is refilled with cancelled cheques mark on its cover: 19.... Date to Date Corp name and place Packet invoices Be sure to packet the week's machine copies of the invoices unseparated in an envelope clearly marked for what week and year and what org. Put the addition tape of the invoices with it. Put a copy of the bank deposit slip with it. Put another complete set of invoice copies in with it so they can be dealt into boxes for classes of income received. That is a complete weekly packet. File carefully. From this a quarterly audit or a yearly audit can easily be done. Packet Disbursement Vouchers Packet the monthly machine copies of disbursement vouchers unseparated and a set of loose copies in an envelope. Mark the envelope with the year, the month and the corporation and place. File carefully Tallied with the taped cheque book and bank statements, this gives the material for quarterly and annual audits. It is not hard to do if done on schedule and not all at the end of a year - heaven forbid! Summary If you ever had to audit original records it would make you very careful to label everything with full details at the time you know them. And if you ever try to audit a careless accounts personnel's work, with bits missing, hell hath no fury. Keep your records safe, complete and accurate or somebody will inevitably get into trouble which could easily have been avoided. It's very important. L. RON HUBBARD LRH:ml.cden Copyright (c) 1966 by L. Ron Hubbard ALL RIGHTS RESERVED 24 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 2 AUGUST 1966 Remimeo Applies to Exec Secs, Secs Treasury Div and OIC GRAPH CHANGE AD COUNCIL STATISTIC OIC will graph bills owing as a total accumulation of statements and purchases. This makes a true picture of what is currently owed. Cash in Hand will be from reconciled bank statements. AD COUNCIL STATISTIC A new graph will be added to the Ad Council's statistics that shows total debt of the org including all HP, mortgages, any bonds, notes or other indebtedness whether due or not, plus the bills owing. This graph will have a second line showing a current estimation of the org's assets and property. [See also HCO P/L 1 July 1972 "Cash/Bills and Org Reserves", for expanded definitions of "Cash/Bills" and data on Org Reserves.] L. RON HUBBARD LRH:lb-r.rd Copyright (c) 1966 by L. Ron Hubbard ALL RIGHTS RESERVED HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 16 OCTOBER 1969 Remimeo HCO ES Hat OES Hat E/O Hat FINANCE COURSE VITAL ACTION As of 1 Dec 1969 it shall thereafter be a Comm Ev offense for an OES or a Treasury Sec or a Deputy Guardian for Finance or any Div 3 member to be on post or take post without having done the Finance Course Pack starrate. The financial survival of orgs and for all of Scientology has been threatened too many times for staff to be on Finance lines without having had this short course. It costs orgs a fortune to have this one factor out. SO Missionaires are alert to this. LRH:rs.ei.kd Copyright (c) 1969 by L. Ron Hubbard ALL RIGHTS RESERVED L. RON HUBBARD Founder 25 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 15 MAY 1970 Issue II Remimeo (Reissue of HASI Policy Letter of 1 May 1958 Financial Management) FINANCIAL MANAGEMENT Purpose: Makes certain the org makes money and continues in good credit. Hat Worn By: The Assoc Sec and by his deputization, the Dir Admin. Policy comes from Assoc Sec. Execution comes from Dir Admin. Financial Management guarantees solvency. It does not concern itself with accuracy of bills, payments or collection. This is the job of the Treasurer and by deputization, the Disbursement Clerk. For example: The order to pay "it" comes from Assoc Sec. The correctness of "it" is the task of the Treasurer and Accounting. Accounting receives the order from Assoc Sec to pay, passes the bill to Treasurer for correctness, and then Accounting pays. Assoc Sec passes an order to collect "it" to Accounting. Accounting checks with Treas as to correctness and then collects it. The cost of an item must be less than selling price. All pertinent items to cost no matter how remote are part of the cost. Using this rule, financial management prices items. He adds to cost all profit that can be made and still make the item sell. He publishes, then, an item's "price". That the price of an item is collected is the business of the Treasurer who issues proper orders concerning it. Financial Management must now establish cost and price of all items sold. And must adjust, for organization credit, what bills must be paid in concert with how much money there is to pay them. LRH:sb.aap Copyright (c) 1958, 1970 by L. Ron Hubbard ALL RIGHTS RESERVED L. RON HUBBARD Founder SOLVE IT WITH SCIENTOLOGY [Excerpt from HCO Policy Letter of 24 February 1964 Urgent - Org Programming] If the Org slumps: Don't engage in "fund raising" or "selling postcards" or borrowing money. Just make more income with Scientology. It's a sign of very poor management to seek extraordinary solutions for finance outside Scientology. It has always failed. For Orgs as for pcs "Solve it With Scientology". Every time I myself have sought to solve finance or personnel in other ways than Scientology I have lost out. So I can tell you from experience that Org solvency lies in More Scientology, not patented combs or fund raising Barbecues. LRH:dr.rd Copyright (c) 1964 by L. Ron Hubbard ALL RIGHTS RESERVED L. RON HUBBARD [A complete copy of this Policy Letter appears in Volume 4, page 367.] 26 HUBBARD COMMUNICATIONS OFFICE 37 Fitzroy Street, London W. 1 HCO POLICY LETTER OF 2 JUNE 1959 Sec ED one. A COMMENT ON FINANCE The history of finance in Dianetics and Scientology Organizations is an interesting But a recent repetition of early financial history in Washington and London must bear comment. In 1950 and 1951 I did not have financial control of Dianetics and Scientology organizations. I was, administratively, a figurehead. In less than one year from start the early HDRFs were crowded into financial difficulties and went broke. In early 1952 I started the first organizations I controlled, the "Office of L. Ron Hubbard" and the HAS. Impeded badly by the HDRF credit history, I nevertheless was able to build the HAS and its successor the HASI into a 6 1/2 million dollar organization, fully solvent. Now in the past few months I gave check signing and financial concerns over to others in Washington for the FCDC and for the past two years to London for the HASI London. In these few months FCDC went $19,000 into the red from a total pay up as of January 1, 1959 when I gave over. To go $19,000 into the red and to show every sign of going deeper (while business volume remained fairly usual) took some hard work on somebody's part. In HASI London the organization in two years of non-control went œ18,000 into the red! I am now busy making FCDC solvent and am sending Nibs over to see to it. I have already cut the HASI London bills payable from œ18,000 to œ7,000 in the past 90 days. And this without even having an accounts department to help. I've also made HASI London pay me back œ2,000 of the money it has owed me personally for SIX years. In other words, we don't have many people who can handle finance smartly. That this sag was not accompanied by other slackening or increasing activities, is quite a comment. Beside myself, only Jack Parkhouse and Julia Lewis Salmen amongst all of us have a proven record of good financing. It might interest you how I do this trick: I disseminate like mad to lots of people and get in lots of money. I don't run up bills if I don't have money. I spend money freely only when it has been made and is in the bank. I don't worry about wasting money if I have made the money first. I never "plan for emergencies". I just make lots of money for the organization. To any financial problem I answer by making money. To any crucial organizational problem, I answer by disseminating like mad, improving service and getting in lots of money. I answer money problems with lots of money, not with worry or sadness or impractical hope. I never count on any one source. I always plan to get the total sum of all the money I need from each one of 3 or 4 ways or sources. 27 But most important, I don't run up bills if I don't have the cash in sight to pay I am not parasitic on the organization. I always make many times the amount I may spend on hybrid horned toads with pink ribbons for the front hall. I do now and then throw money away when it's been made and isn't needed. Now I've taught you many things. Let me also teach you to make tons of money for the organization. It's the one thing staffs do poorly-the making and spending of money. They can evidently spend it, they don't well make it. So let me teach you this: Disseminate like mad and make tons of money. Please? | By the way, both DC and London went completely sour in only two functions - the buying of printing and the failure to send their magazine once a month to everybody in CF. In other words, HCO printing hat and the Department of Materiel hats were to blame for the sag. No ruin faces us. I'm still here, still working hard, still communicating. But by golly you better learn to do this one for yourselves: disseminate like mad and make money: don't incur a single bill until you have the cash to pay it already in the bank. I've put DC and London on tight budgets for current expenses and have other ways to float their barks. If need be I'll pay the bills out of my own pocket, which would be unjust, since I didn't incur in any way the more serious debts and repayments to me in both cases summed only a fraction of their total. So get smart about money. It's only money. It's made and if you make it, you can have some. If you don't you can't: it won't be there to be had. L. RON HUBBARD LRH:gh.oden 28 HUBBARD COMMUNICATIONS OFFICE 37 Fitzroy Street, London W. 1 HCO POLICY LETTER OF 3 JUNE 1959 CenOCon FINANCIAL MANAGEMENT The financial management hat of Scientology Organizations has assumed a great importance now. Financial management is ordinarily done by the Assoc Sec. the Org Sec or the Treasurer and possibly, in some cases, the Director of Accounts, but is always under the direct responsibility of the Assoc Sec no matter who wears the hat. It is the purpose of the hat to ensure solvency of the organization and its divisions. This hat would be worn both in the service organization and HCO and/or in some cases for both the service organization and the HCO. The basic principle of financial management is a simple one. income must be greater than outgo. Amongst the principles of financial management are these: One cannot spend money unless he has it. Never contract bills or debts unless the money is immediately in sight to pay for them. Calculate all predictions necessary to security. Disseminate like mad and make money rapidly. Every organization should be on a contract and purchase budget. A certain amount of money is laid aside every week to pay salaries and current operating expenses and no debts are incurred until the money is there to pay for them or can be predicted to be there to pay for them. Any money left over is used to pay past bills and handle special projects. The calculation of the budget is very simple. It is done as follows: 1. Take a dozen of the lowest weeks in the past year (ignore the high weeks), add up these 12 weekly incomes and then divide by 12. This gives you an average low week of income. This is then obviously a fairly safe figure on which to base a budget. 2. From this average low income week deduct 10% to HCO. From this 90% subtract 45% of it, not of the gross. From this 45% deduct 8% of the 90% figure. This gives you the amount of money now available for operating expenses of the organization, rents, utilities, supplies, equipment and other expenditures including advertising. Example: Average low week Less HCO 10% 90% balance 45% (Exp and Bldg F.) 180 _.08 Spec. Fund 14.40 We can see from this that our total available budget must now cover rents, purchases, time payments, hire-purchase, utilities, supplies, equipment, paper, printing, the whole works. Total available for budget: œ66.12 per week. In calculating the 10% for HCO and Exp and Bldg F. Special Fund.. .œ200 .20 ... 180 .45 . 900 720 .. 81.00 .. 14.4 œ66 .6 29 the 8% for the Special Fund, one takes these, of course, from the actual gross. The figures above show the portion which comes from the budget figure in order to establish the budget. After the budget is once calculated it is adhered to. The œ66 above is the actual figure. It is not recalculated. It is spent for all expenses. HCO 10%, Salary Sum, 8% for special Fund ail come out of the actual weekly income entire and are transferred at once to proper accounts. The way HASI London got into trouble was to have an authorized buying and contracting at every hand without regard to income and the way it tried to stay out of trouble, rather laughably but serious enough in the long run, was to only pay as many bills as they had money in the expense sum. This, of course, was an idiotic procedure. The control point must be on purchasing and contracting not on paying bills. As a result of this policy when I returned to financial management overall at a board level and put a financial management hat into the organization we had œ18,000 of unpaid bills, which were so secret that no record was even kept of them by the Accounts department. They were evidently waste-basketed. One of the methods used to 'follow the comm lines' was after a purchase was made, the goods delivered, a purchase order would be hastily made out so as to "make the records complete". Accounts not being able to pay the bill would then file it carefully in some mouse-hole and not advise anybody about it. The point of entrance of financial management then is the regulation of purchase and contract and the severe calculation of and precise ordering of all supplies and the careful calculation of future rents. Here we are not fooling. We must run within our income or we won't have any organization at all. What happens to the money which is left after we have spent our budget? We can do several things with it, but the best thing is to take this money periodically and bring the organization up to snuff with equipment and supplies to the degree that we have actual cash with which to pay for them, and not to buy one more paper-clip than we can buy with cash. Furthermore this money can be utilized for wide advertising programs and other things which we so desperately need. But unless we budget ourselves within an income and only spend money that we have and not contract for expenditures of money that we do not have and cannot expect to have we won't survive very long. Therefore, the fundamental of financial management is guaranteeing the survival of the organization within the economic framework of the society. However, financial management must also be real. If it has a œ66.0.0 a week budget for the expenditure of the organization on current bills, rents, etc. it must spend it and not try to chip down on its actual budget. It counts on high weeks to simply provide extra funds which will be needed probably semi-annually to buy the things the organization has been out of for a long time or to engage in special projects desperately needed for dissemination. Running 8-c on money is very difficult to do, I am told. I personally have never found it so but many people have. If the organization is only permitted to spend a certain amount of money it has a prediction and there is no question about it. Salary sum varies. All other sums for transfers, of course, come out of the main account but the budget sum must cover all the expenses, rents, equipment and other things of the organization. It is up to a financial manager to be very, very, very tough and to learn how to say no, no, no, no. In fact, it would be a very good thing if he stood in front of a mirror for ten or fifteen minutes a day saying "no". This would be an excellent drill. It is very important to this hat to be handled at once and it would be enforced ruthlessly, otherwise we are going to continue to run into financial jams and never have enough money to do any broad advertising in the London "Times" and "Saturday Evening Post" or anything else. Besides which, we won't even be there to do it. The budget of Washington and London have already been set by Sec ED and is not to be changed. Other organizations should set up their own budget as above. LRH:mp.rd 4th Jun 59 L. RON HUBBARD 30 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 19 JULY 1959 CenO HCO Sec for seeing it gets back to HCO WW ACCOUNTS INSPECTION All Assn Secs and Org Secs should inspect their Accts Dept and answer the Dir of Accounts - Do you have one? Are you confident of his or her responsibility with money?_ records? Do you have the following: 1. Current Bills book where all bills due and all sums paid on them are recorded? is it up to date? 2. Statements Book where all accounts receivable are entered? 3. Business Files where all business papers, statements, and bills are entered? 4. Mimeographed sheets which assist breakdown into prop income? _ Are you doing the following? (a) Sending out statements to all debtors monthly? accurate? (b) Suing all delinquents? (c) Reassuring all past due creditors by letter avowing their account routinely? Do you receive: I (a) A report on Monday showing income of past week?_ I (b) A report on Tuesday so you can OK payroll person by person in org?_ I (c) A weekly summary of bills to be paid? I (d) A weekly summary of notes to be collected? NOTE: You realize of course that all monies received by an organization must be invoiced and banked without being touched and that all disbursements must be by cheque. Is this being done? The most trouble the old HASI had was financial. Nearly all of it stemmed from carelessness in the Accounts section (extravagant purchase, bad collections, poor records). Insolvency was not the fault of PRr but of accounts. As we enter into a new status let us be sure we leave the old turmoil behind us. Please make your inspection and report. Then report again when you have remedied any omissions or negative answers. LRH:brb.cden Copyright (c) 1959 by L. Ron Hubbard ALL RIGHTS RESERVED L. RON HUBBARD 31 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 18 JANUARY 1965 International Board Members Sthil Executives FINANCIAL MANAGEMENT BUILDING FUND ACCOUNT Effective June 1, 1965, no rents, cleaning bills or any other actual expense sum bills may be expended from the Building Fund Account. Such sums must be paid from the Expense Sum. The weekly proportion of income owing to the Building Fund Account must be paid into it weekly and may not be withheld. SIGNATORIES Account. The Chairman Secretary and Treasurer are the signatories for the Building Fund Only international Board Members may sign on the Building Fund Account. There may be no local or national signatories. PRIMARY PURPOSE OF BUILDING FUND The purpose of this account is to provide a cushion by which an organization which is becoming insolvent may be salvaged. The following steps should be taken by the International Board in event of the threatened insolvency of a local org: (a) Remove its Organization or Association Secretary by transfer to lower post or, in flagrant cases, dismissal; and (b) Use the Building Fund Account to prevent the organization's collapse until a new Association/Organization Secretary can be found and the newly appointed Organization/Association Secretary can get things going; or (c) Pay the expense involved in sending a Board representative to the area to investigate its activities but only when these show no signs of being mended locally. SECONDARY PURPOSE The secondary purpose of the Building Fund is to purchase property, but when this is done, the purchase must be for cash or, if any mortgage is involved, all further payments than the initial payment must be made from the Expense Sum. THIRD PURPOSE Building Fund monies, being under the control of only the International Board, may also be used for other Board purposes without local consultation. These include research projects or experimental dissemination projects in the local area, or research on an international basis. FOURTH PURPOSE The repayment of loans made by the International Board to an area may be repaid to the International Board from the Building Fund, but only on arrangements originated by the International Board. 32 FIFTH PURPOSE Finance of International Board projects may be obtained by the international Board by simple withdrawal of funds from the local Building Fund Accounts without permission or consultation with area or national officers or their accounts units; these, however, must be informed of the withdrawals. CURRENCY REGULATIONS Where the 10% of the gross income may not be paid to the International Area weekly by reason of local currency regulations, an additional bank account must be set up locally to receive them and the 10% must be paid weekly into that account. This account is to be called the HASI INTERNATIONAL ADMINISTRATIVE ACCOUNT. Only International Board Members may be signatories on the HASI INTERNATIONAL ADMINISTRATIVE ACCOUNT. Funds so deposited may be handled in any way the International Board chooses and are in no way the property of the local area organization. THIS POLICY ALSO APPLIES TO FRANCHISE HOLDERS. Any "inability to transfer funds to the International Organization by reason of Currency Restrictions" are handled in the above fashion always. DEMANDS FOR FUNDS As in my experience an organization always spends all it makes, financial management on an International level consists not of carefully balancing income above outgo in an effort to save a surplus in am organization, but of (a) preventing an org from spending more than it makes and (b) setting aside enough money from its income to care for salvage operations and salvage expenses. Part (a) is done by good financial supervision. Part (b) is done on an International Level without any regard whatever for the protests and "financial necessities" of the org in question. An organization, whether Standard Oil or any other will always spend all it makes and try to spend more. The task is on the one hand to keep it from spending more than it makes and on the other to make some of its expenditures recoverable in cash. Never, on an International basis, be so fatuous as to believe an organization will continue to have the difference between its income and its outgo. It will never have that. It will spend it in some way. An avalanche of reasons it must not save money, or (same thing) why it must spend it, is routine and is to be expected. "The government will tax it", "We can't get auditing rooms" and a thousand other reasons may be advanced as to why the org must spend all its money. Truth told, I could run any org we have on only 25 percent of the income I would promote for it and pay high wages. I have done so repeatedly. But I do it by making the org apparently spend all it makes while actually spending the surplus in a recoverable fashion. This is the only way I have ever achieved a surplus for an org in actual practice. Accountants deal in figures. I deal in people. Some championship chess players liken life to chess and yet can't make a go of it in life. In life the pieces think. They have impulses. So chess rules, like accountants' rules, don't apply. Collective-think is always closer to bank-think than individual reasoning. That's because the bank is the one constant people have in common. And it's crazy. So almost any individual alive can plan better than a group will execute and certainly better than a group cam plan. Scientology groups are far superior to human groups. But the rule still applies that collective-think is always less sane than the thinking of an individual. 33 In finance, which is pretty weird to begin with, collective-think is always less wise than individual reason. So a group is quite certain to behave contrary to good sense in financial matters. This factor, far more than accounts balance sheets, must be given attention. A group, poorly supervised as in a government, will usually try to spend more than it makes. Heavy supervision and economy can prevent this. Only the physical removal of money can achieve a surplus. INCOME POTENTIAL The income potential of any usual group is established by the demand for income, not by any other important factor. In financial supervision on an International basis, this is the only factor one works with. While it is reasonable to suppose that income will occur for other reasons and can be achieved in other ways, the actual fact is that only demand by the group produces any income at all. You can, for use in financial supervision, make the requirement almost anything you like and so long as a group believes it is spending all it makes and needs more, you will have adequate income. For practical purposes, no other rules apply. Scientology orgs have always spent all I would make for them. They have adjusted their "need" to how much could be made. In supervision of their finance it is only necessary to reverse this and they adjust their income to their "needs". When a surplus is made part of the "need" by disguised outgo, a surplus occurs. Only then will it occur. It will not happen otherwise. You can waste 15% of an organization's income to obtain a 5% surplus and it will be a wise action. If you seek a surplus by trying to save the 15% instead in a visible way, you will not only lose the 15% but the 5% also. You can only attain a financial cushion in an org by removing it out of reach so that it appears to be spent, then producing it when the org overspends or gets in trouble. Orgs, like children, are fantastically improvident. And a group, to work, must believe it is spending all it makes. Money, to begin with, is only an abstract idea. Therefore it is the victim of all manner of thoughts and opinions. All we want out of an org is for it to stay there and continue. To do that we have to have financial ideas that work. Incredible as it may seem, the above are the only practical financial ideas which have worked and which have produced surpluses and guaranteed org continuation. Add to these good promotion and excellent technical and you have the reasons we are becoming strong all over the world. Financial management is not accountancy. It's people. As head of an org, if you can think your way around collective-think you can become solvent and even have a surplus. Maybe it shouldn't be that way but it is. LOCAL FINANCE When local finance is poor, don't ever look at anything or any one but the Association or Organization Secretary. This being can either think his way around collective-think or he can't. If he can, he's got a solvent org. If he can't, he'll go broke. An org that runs only on collective-think will go broke. The only symptoms of approaching insolvency in an org one needs to look for are (a) demands by it for money belonging to the International Org or myself or (b) consistent low income. 34 In either case, the remedy is to get somebody in charge who doesn't demand monies belonging to the International Org or myself and who gets a higher income coming in for the org. An Assn/Org Sec who can't do this is the effect of the collective-think in his org and is not the org leader or the dominant planner of the org. At Continental or International level one must never seek for the "reason" why International or LRH monies must be used by the org or why income is consistently low. You can get reasoned to death. If these two facts exist, then there's so much else wrong, one would go mad tabulating it. The steps to take are: Remove the Assn/Org Sec. 2. Put somebody in who can handle collective-think. 3. Use any local surplus to carry the org during the upsets of transition. Experience has taught me that distant efforts to right local extreme wrongs are usually disastrous. You can right small wrongs, show the way and so on. That's only normal leadership. But when an org begins to skid financially or get upset over "its" money being used Internationally, you don't fool about. You just act. The longer you put off acting, the more local people get hurt. Because behind those facts of poor finance are some very ugly other abuses always. I don't want any orgs in a games condition with the International Org. For this is only a symptom of the imminent collapse of the local org anyway. It goes into a games condition only after its overts stretch from A to Zed. You don't see the overts from a distance. You do see financial conditions and demands. It would be impossible today for a cleanly run, on-policy, up-tech org not to own its area totally in 10 years. Financial insolvency? What nonsense! So financial policy is based on good individual ability heading up each org and is not based on either accounting or collective-think. Neither one will build any future for Mankind. The reasons behind the Building Fund Account have been set forth above in full. Good local leadership always results in good local financial credit and strength. Weak local leadership has always resulted in financial insolvency and trouble. Broad general supervision of orgs uses financial protests and upsets and trouble to detect weak leadership. Without adequate and sensible leaders, orgs would slump into collective-think in their planning, spend more than was made and cease to exist. We want orgs to be successful, to stay there and continue. That requires sensible financial provisions and management. STABLE DATA 1. An org will try to spend more than it makes. 2. Economy is aimed at preventing it from spending more than it makes. 3. A surplus is achieved only by making it part of what an org spends. 4. An org's expenditures are not regulated by what the org needs in order to do business but by what an org thinks it has available for expenditure. 5. Financial management can not achieve a financial surplus by economy alone. 35 6. A surplus to be achieved must be made part of what an org thinks it spends. Income is regulated by what an org thinks it has to have to operate. 8. Income is never regulated in a usual org by desires for a surplus. 9. To achieve a surplus it must be masked as a "necessary expenditure". 10. Economy, to achieve a surplus, does not include saving on expenses. It includes only adding an "expense" that becomes a surplus. 11. To achieve a surplus one must add an expense that can then thereafter convert to a surplus. One can waste up to 50% of an org's income to achieve a 10% surplus. In some cases this is the only way a surplus can be achieved. Why? See 1 and 2 above. 12. An individual is always more sensible than a group. 13. When am org is losing ground financially it is being "run?' by someone who is only the effect of the group, and cannot act as an individual in planning or control the group. 14. The only possible Board action when an org is not making its way financially is to remove the Association or Organization Secretary. The incumbent is only the effect of the group and is not planning or controlling. 15. The earlier one detects a bad Assn/Org Sec and replaces him, the better it is for the people in that area. 16. The ways to detect a bad Assn/Org Sec are: (a) Their games condition by any part of the org with the board; (b) Their desires to be financed by the board or use the board's or my income to run on; (c) Generally low income; (d) Protests against the board using "their money". Under these or any of them will be found an org out of control and messing people up. Therefore the quicker the board acts to replace the Assn/Org Sec. the easier the situation will be to handle and the faster the org will recover. 17. Board efforts to "straighten up am area" without replacing the local head have never been successful in 14 years. If let go too long under incompetent management an org's recovery requires heroic efforts and vast financial expenditure by the International Org. 18. Bad local publicity and trouble always follows after #16 to the degree that the Board d d not act. 19. Financial management as contained in this policy letter, closely followed, will prevent almost all trouble and org upsets, not just in finance but in all other areas. L. RON HUBBARD LRH:jw.rd Copyright (c) 1965 by L. Ron Hubbard ALL RIGHTS RESERVED 36 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 19 JANUARY 1965 Gen Non-Remimeo Saint Hill Executives Board Members FINANCE - ORG ACCOUNTS BUILDING FUND ACCOUNT Effective June 1, 1965, no rents, cleaning bills or any other actual expense sum bill may be expended from the Building Fund Account. Such sums must henceforth be paid from the Expense Sum. The weekly proportion of income owing to the Building Fund Account must be paid into that account weekly and may not be withheld from it for any reason. SIGNATORIES International Board Members only may be signatories on any Building Fund Account - to wit: the Chairman, the Secretary and the Treasurer at international Headquarters. No other signatures may be designated for this account. One signature only as above suffices to withdraw monies. TAX POSITION The Building Fund monies, once deposited, cease to be the property or concern of the local organizations and are not part of their assets. Any tax on Building Fund sums are to be paid from the Building Fund but only by the international Board. These sums are to be regarded as part of the cost of international Management. The regular paid 10% of gross income is not affected by this arrangement and continues to be paid. USE OF BUILDING FUND follows: Entirely at the discretion of the International Board, the sums may be used as 1. When an organization's income is low or the organization is in danger of insolvency, the International Board may bridge the financial gap between the inevitable removal of the old Association or Organization Secretary and the appointment of his or her replacement. 2. When serious trouble develops which local officers seem unable to handle, the International Board may use the Building Fund monies of that or a nearby org to send a representative to handle the situation. 3. Wholly at the discretion of the International Board, Building Fund monies may be expended by the International Board to purchase property. If such property is bought for cash the whole of the purchase price, if available, may be paid from the Building Fund. But in case of a down payment and mortgage, the mortgage of a building used by a Central Organization or City Office, must be paid off from the Expense Sum, as it replaces rent payments which would otherwise be made. 4. Building Fund monies may be expended by the international Board or transferred without any consultation with the local organization. Such purposes include local dissemination or local experimental projects, local collection of data, International Research, and any other purpose. 5. The repayment of loans made before January 1, 1965, by the International organization or its board members, may be done by the International Board from the Building Fund. Bills owing to the international Organization before January 1, 1965, may be collected from the Building Fund Account by international Board action. 37 SUMMARY Greatly increased local income makes it possible to return to the original plan and use of the Building Fund Account. It should be realized that this account was made available to the local organizations some years ago to bridge the research gap now traversed. The actual action here is simply restoring some of the status quo extant a few years ago, signalizing the end of an emergency assistance period. As early as 1957, orgs commonly had surpluses while paying 25% of their income into a separate account and this money was never touched for local activities. I permitted after this rents to be paid from the Building Fund and some other expenses to expedite org growth and to ease the research gap until processes stabilized. It should also be noted that the above arrangements permit an org to catch up on past debts for 10%s, books, tapes (but not Saint Hill student enrollment or expenses) owing to the International Org. STARTING THE ACCOUNT Most such accounts are already started. For a new org to start one it is only necessary to obtain the usual papers and cards from a nearby bank and send them to Saint Hill. The Treasurer at Saint Hill completes them and returns them direct to the bank and also informs the org of the fact. A cheque book must be requested of and received from the bank by Saint Hill. All relevant papers and the cheque book are made part of the Treasurer's Files. Such accounts do not become the concern of either the International Org Sec or the Saint Hill Accounts Unit. ACCOUNTING Deposit slips noting deposits into the Building Fund Account of a local org are sent to the Board Treasurer at Saint Hill directly along with weekly reports. These slips are not invoiced by Saint Hill Accounts as the monies are not actually received at Saint Hill. They are invoiced by the Treasurer on a separate machine and the white is returned to the org by usual channels. All bank statements on such local accounts are directed to be sent only to the Treasurer. The Treasurer's Files contain, then, a file book for each org with its sections chronologically marked into which the basic papers, the bank statements, the copies of the invoices, the cheque book and all correspondence and activities relating to that account are carefully kept in order and up to date. At the org, a routine file for the white slips and deposit slip copies is kept. into this file the local accounts unit also places its disbursement voucher for each deposit into the Building Fund Account. Note that the local org makes out a disbursement. voucher for all deposits into the Building Fund Account, treating the money as expended. A copy of this voucher accompanies the deposit slip to Saint Hill. All correspondence with an org relating to the Building Fund Account goes only to the Treasurer and is not handled by the international Org Supervisor or Saint Hill Accounts. L. RON HUBBARD LRH:jw.rd Copyright (c) 1965 by L. Ron Hubbard ALL RIGHTS RESERVED 38 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 28 JANUARY 1965 Remimeo Int Bd Members Cont Dirs HCO Cont Secs Org/Assn Secs HCO Secs Accts Units ACCOUNTS HATS FINANCE HOW TO MAINTAIN CREDIT STANDING & SOLVENCY (Hat check on Org/Assn Secs and Accts Assistants) Credit does not entirely deal with money. It has everything to do with confidence and reliability. When the world saw a recently elected government act foolishly with customs dues, etc. it had no confidence in that government and the currency of that government went to pieces on the world market. Money is basically a matter of confidence. So is credit. An accounts unit that handles money poorly wrecks the org's credit rating. Insolvency is much less often the source of poor credit than just poor money handling. Almost all our orgs have good credit. But where they don't it is money handling, not the amount of money available, that wrecks credit. An Assn/Org Sec who handles bills in a certain way has good org credit. One who doesn't has bad credit. To try to assign credit to the amount of money available is completely false. You can have lots of money and horrible credit. You can have little money and excellent credit. So saying "our income has been poor so our credit is bad" is a lie. The business world judges Scientology not on its scientific validity but on its financial credit rating. If the org's credit is good, then "Scientology is okay". If your credit is bad, "Scientology is a racket", in business general opinion. Melbourne's financial credit went bad before its general repute earned it an Enquiry. Good credit is a primary dissemination line. It breeds confidence. You can't have bad credit and still be thought of as a valid science. So financial management must help general dissemination by maintaining good credit. A bad credit rating comes from negligence in Accounts, not from the lack of industry of the Registrar. To begin with, an org has no business spending more than it makes. To do so shows stupidity in management and accounts, lack of a purchase order system and a general beatnik state of organization. Make all the money you can. Spend less than that. That's the simple ABC of financial control. Make sure all the income is accounted for and banked. Make sure no unauthorized purchases can be made by executives or staff by requiring an authority to purchase or contract from the head of the org before any purchase can be made or contract signed. Sure that's slow. Who wants it fast? The slower it is, the less you spend. You want speed on the income line. The disbursement line is something else. So never listen to somebody saying "But it takes so long to get a purchase order that I just bought it ---". Yawn and say, "You bought it without authorization. You can pay for it personally." Never let your Purchase Order system break down. If you do you will soon be spending more than you make. Fact. No exceptions. 39 A company to most people is something to bleed. They never realize that a company can only spend what it makes and that what it has is made by individuals. So if you have somebody around who is always saying "the org will pay or should pay", point out that the org is its staff's collective pocket book and that that pocket book has a bottom. SOLVENCY You sometimes hear around an org a wave of "we're broke" when spending is restrained. This hurts credit. For it's not true. Economy is not a sign of being broke. It's a sign of increasing prosperity. Without curtailed and watched spending you never have prosperity. So don't tell everybody "We can't buy it because we're broke". That's a lazy, dull reason. A better one is, "We can't buy it because we don't need it", and is usually the truth. "We have a P.O. system because we want to prosper" is the real reason you have one. Make lots of money. Spend it frugally. So it gives a tax problem. So what? Your accountants should be capable of avoiding tax problems. Whether you do or don't have money you will always have a tax problem because governments are crazy. The way to solve tax problems is to have money, not to be broke. Taxes exist only to destroy businesses. Be impudent. Get rich and to hell with them. Governments are just a reactive bank we have to live with for a while. Learn to handle them. But not by refusing to make money or have it. But solvency depends on how you handle things, not on how much you have. Micawber, in "David Copperfield", said that if you had twenty-one shillings and spent a pound, you had happiness. But that if you had nineteen shillings and spent a pound, you had misery! A pound being twenty shillings, that's all there is to solvency. If you have to spend a million dollars, then you better make one million one hundred thousand first. And then make sure you don't spend one million two hundred thousand. The secret of solvency is: Make a lot of money. The way to do that in Scientology is covered in HCO Policy Letter of January 21, 1965 - "Promotion and Organization" 2. Spend less than you make. That's covered by having a good P.O. system and alert financial management. 3. Make it before you have to spend it. 4. Gather bit by bit a cushion of cash to fall back on and don't ever fall back on it. 5. Keep your credit excellent as a second cushion. 6. Refuse to spend reserves. Make more money to meet the emergency instead. (It's usually quicker to make it than to dig it out of old hiding places. Never borrow to pay bills It's less trouble just to make the money ) 7. Realize that collective-thought regarding finance is just bank and that bank is dead against the creation of anything good and all for eating up everything that exists. Thus financial planning and control is an individual job, is often contrary to group demands and succeeds only when the individual handling it can rise superior to the group. A tame dog financial manager, trailing along behind the group, yessing everything, will always make the group insolvent. The person you put in charge of financial management should be able to say "No!" no matter how popular a silly "Yes" would be. The financial manager is not there to buy his own popularity with org funds. In the early years of Scientology, my whole answer to org solvency was just to make a lot more money than people could waste. It's a good answer, lacking all others. When I finally attained control of orgs, I was able also to curtail the waste while making lots of money and we've been pretty solvent ever since. The principles I used to achieve and continue this state of solvency are accurately and completely listed in 1 to 7 above. CREDIT When you realize FINANCIAL CREDIT is vital in dissemination, you become very interested in what it is. As I said above, this is confidence. Given some degree of solvency, you still do not have a good credit rating. That is achieved by HOW YOU PAY BILLS. 40 This is the one big point that is vital to know thoroughly in this policy letter. If an Association or Organization Secretary and the Accounts Assistant does not know exactly this data, the org will have bad credit and financial trouble, no matter how much they make. There is an exact way to pay bills. This is to pay the bills up to a certain date always. It is called "Paying by dateline". Never "pay a little bit on each bill" to save money or help cover a lean period. That will never help. On the contrary, it advertises your lean period and hurts your credit. Instead, always, lean or fat, pay all the bills behind a certain date and none closer to PT than that date. That's why we have the type of disbursement system we have. So you can do this trick. If your disbursement system and its files are not up to the mark and are sloppy, you will always have bad credit because they can't then do this trick of Dateline Paying. Look to the inefficient accounts unit and the lack of this bill-paying system if your local credit is poor. Don't go off into income-outgo. Just demand that our general accounts system be followed and that Disbursement Files are up to date. If you find an accounts personnel giving financial management the razz-ma-tazz about why it can't have good disbursement files and if this bills-paying schedule is always being violated, assume at once that that personnel is overtly wrecking the org's credit and get him or her away from that post and get somebody in who will follow our system accurately and help pay bills only by dateline. You can have six months worth of unpaid bills in some areas of the world and still have a good credit rating providing you do not have one bill that is ten months unpaid. Never "pay bills" any old way. A financial manager should always refuse to pay bills one at a time on different days, or when accounts submits a check. Tell Accounts "Give me every bill we owe prior to August (three months ago)." Add these up. Let's say the amount exceeds our cash. Cut it back one month. Order "Write cheques for every bill up to July 1." (That's four months back.) That we can cover fully with cash. We pay all bills up to July 1. We demand of Accounts "Are you very very very very sure that no bills dated prior to July 1 now exist?" If the answer is "None exist", okay. But if we find out next week that one existed for April 1 that wasn't included, we overhaul the unit as destructive of credit. Business men handle their books by bills owed month by month, not by total sums owed. When a Check comes in paying his July 1 bill, then it's plain you're paying your bills. If you send a small sum hopefully to "stave them off" they can't dismiss any one statement with it and so get panicky. It looks like you aren't paying your bills. After you've paid all bills older than 4 months, get busy and make money. In 30 days, request of accounts "all bills up to 15 August". Let's say we find that we have cash to cover. We say "Pay all bills up to August 15". Now we're only 3 1/2 months behind. A month hence we pay "All bills up to Oct l." Now we're only 3 months behind. If you get some eager beaver into finance who doesn't use or understand how to do this, you can suddenly look up and find that you thought you were doing all right but you're broke. The eager beaver paid randomly anything in the files he or she came across "in order to pay our bills". We aren't interested in bills as bills. We're interested in "all bills earlier than a given date". You can go pretty smash on an eager-beaver bills-paying spree with no regard to the age of each bill. Only pay by this system: PAY EVERYTHING UP TO A DATE ALWAYS and no further. And get a new Accounts Unit if Disbursement Files aren't accurately kept so financial management can do this. EXCEPTIONS Government tax bills, water bills, occasionally rent or 'phone are sometimes accompanied by threats of vast action unless the whole bill is paid instantly. Still try to 41 use the above system. But if you can't, pay it and retard other bills accordingly. And thereafter, don't pay that outfit's bill on any other terms than threatened trouble. If a tradesman, despite the use of the above system, demands further payment or threatens suit, caution him that if he carries on this way you'll deal elsewhere. And carry out the threat. Never continue to use a private business firm after they become obnoxious about bills. Trade elsewhere. And say why. If you're using the above dateline system and a tradesman gets upset, then he is gypping you or he has too little finance to handle your account, so stop trading with him. Always make that an iron-bound policy. Be very proud and haughty about bills. Never propitiate. So the points here that are important are: 1. Pay by dateline only and pay all up to that dateline. Put the dateline far enough back so you can pay all up to that date. 2. Have an Accounts Unit that can do this and change one that flunks it. And that handles the whole of credit rating. Simple? OUR SYSTEM The other day two high-geared chartered accountants were giving me a lot of stuff about how I needed a double entry system and that the existing system was wrong. They said, "We can tell you 21 days after the 30th of the month where you stood in that past month using our double entry system." I said, "The system we have to have must tell us four days after the past week exactly where I stand. We operate in the 20th Century, not the 19th." They said, "But your system is wrong." I said, "In a double entry system, you need each bit we have, don't you? Invoice all the money, bank it, reconcile the deposits with the slips and statements, file all the bills, verify them, pay them by cheque and voucher and keep all records." They looked at each other and were very quiet. "Yes, that's correct," they said. I said, "All right, that's our system. Now you can do anything you like with that system from there on, so long as you don't prevent us from knowing where we stand four days after the past week and don't bar out a non-accountant from discovering what's what in the Accounts Unit. Now go ahead and on our system erect any system you like. No government requires anyone to have books. They only require records. But books, if they help, should also be kept made up from our records." They agreed. So if you are getting propaganda about how our system is inadequate as a reason not to operate and have accounts, get somebody in who can make it work. For our system is the basis of every other system and if it's in order and done, you can have books. If it isn't in order, no books can be kept by any system. So we don't care what accountants do with our basic system so long as we still at least have that. On that, any type of books can be erected or any balance sheet made. If you have the basic data you can add it up. If your accounts unit can't add up whatever you need then our system is not kept up and no system would work in that unit. Where there is Accounts trouble there is: 1. Non-comprehension of our basic system as the basic of any accounts system, 2. Nothing being done. Get our system in so you know where you are with cash and bills. Manage by paying all bills up to a specific dateline only. Advance the dateline as you can cover all with your cash and make lots of money so you can advance it further toward PT. Practise economy so you can advance it even closer. Continue to do that and you'll always have a good credit rating. We have a lot of fine accounts units. They do a good job. They can handle this if they understand it. It's your job now to get it understood and done. LRH:jw.rd Copyright (c) 1965 by L. Ron Hubbard ALL RIGHTS RESERVED L. RON HUBBARD 42 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 2 MARCH 1965 Remimeo Int Bd Members Cont Dirs HCO Cont Secs All Accts Executives FINANCIAL MANAGEMENT (ACCOUNTS HATS) (Ref: HCO Pol Ltr Jan 28, 1965) PURCHASE ORDER FILING All Purchase Orders must be filed in the folders of companies from whom material is ordered regularly or in the Unpaid bills file immediately the purchase is made. There may be no additional "Purchase Order File" which retains original POs. When making up the monthly bills statement the Accounts Unit must examine folders for POs outstanding not covered by statements and report these on the monthly bills statement to the financial manager. Failure to so check lays us open to error in dateline paying of bills. An account from a company that is sloppy in sending statements can suddenly emerge from a period earlier than the dateline set and mess up our paying of other bills. For instance, you confidently pay all bills up to, say, September, only three months earlier than current. Two weeks later Accounts tells you that you owe another œ5,000 back from summer. You have to back up the dateline to handle them. There is nothing wrong with backing up the dateline. But there is everything wrong with having œ5,000 more bills than you bargained for. it's a nasty shock and oversets all financial planning and estimates of the state of the org. The way this can happen is that two or three companies have never submitted statements for work done and accounts didn't see the bills were missing. Then said companies submit bills and bang, there goes financial management. We care nothing for the interest the money would draw if we didn't pay until a statement was sent. We do owe the money and it is better to pay it. That they sent a statement five months late is no advantage to us. Actually it's a mess up. So keep all POs in the proper files so you can also check them for appearance and in lack of appearance on the statements we get. Don't be hopeful such firms will forget. They never do. They just jump up suddenly and scream for money right when you think you're going great. Their failure to send statements will get them into a financial mess which they then solve by frantic demands for money. Try not to deal with such firms as they have pretty lousy managers and will mess us up by slow delivery and all. But even so, look for big POs particularly that don't appear on statements yet before you feel secure that your monthly bills summary for financial management is "all there is up to September". Otherwise you put our credit at risk and wreck all efforts to estimate the condition the org is in. LRH:jw.rd Copyright (c) 1965 by L. Ron Hubbard ALL RIGHTS RESERVED L. RON HUBBARD 43 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 4 MARCH 1965 Gen Non- Remimeo Assist Treasurers Accts units Sthil ACCOUNTS HATS RESERVED PAYMENT ACCOUNT All organizations must start,. as an additional bank account, a Reserved Payment Account with signatories the same as other routine org accounts. The Reserved Payment Account, as its name indicates, is money set aside for a certain destination but not yet sent. PURPOSE OF THE RESERVED PAYMENT ACCOUNT: To prevent a false idea of the financial position of the org from occurring by providing a place where money awaiting disbursement can be placed before it is actually paid out, thus removing it from the general accounts and estimates of financial position of an org. QUESTIONED BILLS: Anytime a bill is in question, it is not paid to the creditor until fully settled. However, dateline paying becomes very disrupted by such sums and the actual financial position of the org becomes difficult to estimate while such sums remain in its regular accounts. When a past bill prior to the dateline is being challenged and corrected, the full amount is deposited in the Reserved Payment Account. To pacify the creditor who may get the idea you are just stalling, also always send him a copy of the Reserved Payment Account Transfer Voucher, writing: "Dear Blitz & Co: Your bill is being audited for verification or correction. Meanwhile its payment is being held in our Reserved Payment Account. If verified or corrected the amount owing to you will be paid to you from this account." The transfer voucher is clearly marked "Blitz & Co, Reserved Payment Account Transfer for March bill, being checked." Such vouchers accompany other cheques being presented to the signatories of accounts. When the actual sum is verified, that amount is then paid the creditor by a cheque from the Reserved Payment Account. For any money not paid, it is eventually returned to the regular accounts. At times when the books are being closed for the period just past, any excess money in the Reserved Payment Account is returned to the regular accounts as a transfer or left as a saving for future purchases as directed by financial management. TAXATION: All taxation monies which are owed governments but are not yet paid are deposited in the Reserved Payment Account and eventually paid to the government as owed. This means that where an org must pay withholding tax, PAYE and other such sums, TWO salary cheques are drawn each week, one for the staff, one for the government. The government cheque is deposited to the Reserved Payment Account. Once a month or as wise, the government is paid off to date with a Reserved Payment Account cheque or cheques amounting to the sum owed. In cases of org income tax payments, any sum estimated can be placed in the Reserved Payment Account as seems prudent, fitting the conditions of the area. OUTSTANDING PURCHASE ORDERS: Where, on preparing a Monthly Bills Summary for dateline paying, large POs for which statements are not yet received, incurred prior to the dateline must have their amounts deposited in the Reserved Payment Account or a liberal estimate of the amount. Such large POs must not remain undetected and must be part of the dateline payment system. If a large PO exists for August but the creditor has sent no statement and the dateline being paid to is September 1, then the amount of the large PO is deposited in the Reserved Payment 44 Account when the other bills are paid. There it remains until a statement is submitted by the creditor. SAVINGS: When the org desires to buy something big or expensive, it should not use time payments, hire purchase or mortgages. It should start putting money into its Reserved Payment Account and when the full sum is there, buy the item for cash, using the fact to obtain a good big discount. While the Building Fund on Building Purchases is also intended to help buy buildings outright, there is nothing wrong with also depositing available amounts of the Disbursement Sum in the Reserved Payment Account to help out. All monies transferred to the Reserved Payment Account are made the subject of a Disbursement Voucher which clearly states why and for what the payment is being reserved for. Of course, when any amount is paid from the Reserved Payment Account another voucher is written, referring to the first one regarding the original transfer. So it is necessary that when one makes a Disbursement Voucher for transfer into the Reserved Payment Account, a copy of that voucher is spindled or put into a handy single file. Otherwise one won't be able to recall why the Reserved Payment Account has money in it and so may let it be used for something else as an apparent overflow-much to everyone's eventual embarrassment when the X bill gets straightened out and wants money to pay it. The Reserved Payment Account is an easy system. People often handle their own personal money this way - $20 aside for a new jacket, 515 for this week's share of the rent when it falls due. Add to this $12.50 "for the money Bill says I borrowed and he has to find the note for" and put it all in the broken tea-pot on the top shelf and you've got the purpose and action of the account. You can object to it on the grounds that "it ties up capital on which we pay interest in another account" etc. but frankly such small interest bits are little to pay for the security of knowing you can meet your obligations. To juggle with already committed funds is financial Brinkmanship. You see, by just an orderly scheduling of payments (as per dateline paying) and being prudent in setting big amounts owing but not paid aside, an org can move up to present time. I know no other way of getting an org's finance (or a pc) to present time except by pulling off the things which hold him in the past. An org is far more aware, and far saner if it's in Present Time. Just like preclears. Hence dateline paying and the Reserved Payment Account. L. RON HUBBARD LRH:jw.rd Copyright (c) 1965 by L. Ron Hubbard ALL RIGHTS RESERVED 45 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 28 MARCH 1965 Gen Non Remimeo Accts & Financial Management Hats HCO Sec Hats Assn/Org Sec Hat EMERGENCIES AND ACCOUNTS PERSONNEL Any tendency of Accounts to use "we're poor" or "we're in an emergency" to turn down POs or explain to tradesmen why bills are not paid reverses the emergency formula (1) Promote (2) Change (3) Economize and (4) Deliver. Crying poverty is a violation of the formula, to say nothing of being a sour postulate. All you have to do to really fail in an emergency is to use the wrong sequence in the formula. If you use economy in the name of "promotion", the whole org is threatened and may collapse. When the org is doing all right and accounts personnel falsely uses an emergency formula to turn down POs the org can be thrown into an urgency condition, since poverty, wrongly announced, brings poverty and frantic promotion becomes necessary to save credit. In the Emergency Formula the first action is Promote. This applies to the money section of the org as well. While they don't have to write letters to new applicants they do have to promote the org's credit standing both to staff and tradesmen. Accounts and finance promotion in a time of emergency is to bolster confidence in the org's credit by putting a good face on things and encourage the staff to make more money. For example, a politician recently destroyed his country's credit abroad by howling "economic money crisis" instead of promoting England. Saying to somebody, "You cannot have this Purchase Order because we're broke" is sometimes a social falsehood, told to escape having to tell the applicant that the Purchase Order is silly. One doesn't downgrade the org's credit to make an extravagant staff member stop blowing our money. One says, "Maybe if your department made more money, you could have this. Until your department does, you can't." It's really a matter of they are broke, not the org. If the department is doing well and still submits a wasteful Purchase Order, just say so. Say, "We aren't making money to be silly with it. We need what we make to expand, not to buy " whatever the PO calls for. The criterion of all POs is, "Is this PO for something that will increase our ability to expand or is it just somebody's got-to-have?" That's the judgement in signing a Purchase Order as OK. Some items actually retard expansion, consuming more time to us than they save. In the case of a tradesman demanding for a bill only slightly overdue you will usually find they have done poor work or slow work if you're at all solvent and paying your bills. Don't say, "We're too poor and we can only send you a little but we will try." If you do and anybody hears of it in the org, it may become the subject of discipline if not Committee of Evidence. Say properly, "I don't see that your bill is much overdue. It takes a bit of time to pay a bill you know. I will check over your account and see if it is all right. And by the way, people who dun us either have insufficient finance to handle our business or something is wrong with their bill. I am setting your bill aside for audit and if you call again about it, we will sever the account." Be tough. They're probably a gyp outfit anyway. I've never found otherwise. For a bill in actual question say, "The amount of your bill is deposited to our Reserve Payment Account and will be freed when we have finished an audit on your statement." And tell them how they can help. 46 If the org has foolishly let itself get deep in debt and there is little money, the surest way to make tradesmen demand full payment is to tell them how "poor" you are. They will instantly rush to serve you with suits. Just say, to tradesmen who dun, "Oh really? We'll send you a cheque." Never say how much. And stay steady with dateline paying and you'll make it. Your casual air is itself promotion. If a personnel has money trouble of his own he thinks everybody else must have. That is not true. Very few people have real money problems. So don't sell money problems. That's not promotion, that's sabotage. Sell good sense and sound finance and good credit. Downgrading Scientology credit rating by careless or false statements concerning its financial condition is very, very, serious. And should be regarded as such. We control an awful lot of money in Scientology. We are as rich as we promote and deliver and handle our money sensibly. To say "Scientology is broke" is very, very much a suppressive act. Bolster credit in emergencies, that's the promotion action for Accounts. I never write a letter that concerns money without promoting our credit standing. Never. I always promote our credit. "Dear Bank Manager: Our expansion is going so rapidly that" or "Dear Blitz and Co: Demands for Scientology are such that our org wishes to buy a new Blitzet, providing we don't have to wait on delivery. We can't. Etc." Promote the org's credit. Public confidence in Scientology depends on our promoting and maintaining excellent credit everywhere, and even when you're on the ropes in emergencies, still promote our good credit. After all, we'll be around for the next trillion or more. Why not have good credit standing while we work. Credit is just an idea. Help plant it. And then make it come true. LRH:wmc.rd Copyright (c) 1965 by L. Ron Hubbard ALL RIGHTS RESERVED L. RON HUBBARD HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 26 APRIL 1965 Issue II Gen Non-Remimeo Saint Hill Execs Board Members HCO Policy Letter of January 19, 1965 "Finance - Org Accounts" is herewith cancelled. LRH:wmc.eh.rd Copyright (c) 1965 by L. Ron Hubbard ALL RIGHTS RESERVED L. RON HUBBARD 47 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 26 NOVEMBER 1965 Gen Non- Remimeo Ad Council Hats Org Div Hats Executive Division Org Division FINANCIAL PLANNING The Financial Planning Hat is worn by the Advisory Council. Financial Planning means-How to handle the money and assets of an org so as to maintain outgo below income. The actions of Financial Planning are as follows: 1. Directing the payment of bills (as designated by the Ad Council); 2. Directing any necessary delay in the payment of certain bills; 3. Handling finances in accordance with "dateline paying" as covered in an early policy letter; 4. Setting limits on the Purchase Orders that may be signed; 5. Preventing divisions or departments in Emergency from buying any but essential promotional supplies or postage; 6. Adjusting payrolls; 7. Setting limits on pay, overtime or bonuses and all authorizations for pay overtime or bonuses; 8. Fixing prices; 9. Directing any transfers of funds; 10. Deciding upon any large purchases; 11. Authorizing the sale of any equipment or property; 12. Passing upon prices offered for any equipment or property. Any matter affecting the financial health of the organization has to be passed upon or planned by the Advisory Council. LRH (Office of LRH, Financial Planning Authority) can set aside Advisory Council decisions in any Financial Planning matter whether referred to him or not. Only large transactions or important long range decisions should be referred to the Office of LRH and then only when the Advisory Council is divided. DISBURSEMENT SECTION The Disbursement Section furnishes the data without which financial planning is impossible. A short summary of the data required for financial planning is as follows: The Disbursement Section files every bill received in the Disbursement Files. Those bills that are repetitive are filed in folders under the company name. The one- time bills are filed in a loose folder for a single month. The Disbursement Section has made up a Mimeographed form. This is the Monthly Bills Summary. This form has the name of each company with which the org does business plus adequate blanks after each alphabet letter for new companies to be added. This form has four columns. The first column is the company owed. The second column is the grand total of money owed that company. The third column is the amount that is past due. The fourth column is the month since when the bill has been past due. All bills are filed on arrival. They are not kept out and entered. They are filed in the folders. This is important. No one must pay bills just taken from the post and save up. They are promptly filed. Then one takes the folders one by one and makes up the Monthly Bills Summary. As each folder is taken up the bills are examined for correctness, straightened up and entered in the Monthly Bills Summary. 48 The way the system breaks down is to make up too many folders. Only a repeating creditor rates a folder. One the org does business with routinely like the light company, the landlord, the paper company, etc. The occasional bills go into the folder for the month. Each time a Monthly Bills Summary is made up, the occasional folders for past months containing unpaid bills are gone through again and added to the statement. The Statement for one month complete, then tells one the total monies owed by the org for that month. Thus there is a statement for each month. The Monthly Bills Summary is due in the hands of the Ad Council on the second Tuesday of each month. BANK RECONCILIATION SECTION The Bank Reconciliation Section of the Dept of Records, Assets and Material makes up the latest bank records of monies on deposit concurrent with the Monthly Bills Summary. This section once each month (concurrent with the Monthly Bills Summary) reconciles all bank statements, tapes all cancelled cheques on their counterfoils and in short makes certain there are no bank errors or omissions. A Monthly Accounts Summary is then prepared showing the amount in each bank account. This too is a mimeographed form showing the names of the bank used, cheques outstanding, etc. It also carries a total sum of monies in the bank. This form also carries a section devoted to loans outstanding that the org must pay. This form, made out, is submitted to the Ad Council on the 2nd Tuesday of each month. INCOME NOTE COLLECTIONS SUMMARY THE COLLECTIONS SECTION The Collections Section of the Department of Income submits to the Ad Council a form called the income Note Collections Summary. This form carries an amount for cash collectible from notes (possible to collect) and a cash collectible from notes past due and the amount of notes that are, apparently uncollectible. The total is added into grand total of Credit Advanced. It gives the total of payments received during the month past (the 1st to the last day of the month). It gives the number of statements mailed in the month just past. It gives the number of persons with overdue notes who have been handed over to the Director of Clearing and passed on to Field Staff Members. It gives the number of notes to date given to lawyers for collection that remain uncollected. This income Note Collections Summary is placed in the hands of the Advisory Council on the 2nd Tuesday of each month. ADVISORY COUNCIL ACTION The first action of the Advisory Council is to prepare and get mimeographed the three forms described herein. The second action of the Advisory Council is to make sure the Org Division is so organized as to be able to make out the forms provided easily, that their files are so arranged as to do so and that personnel exists to do them. The third action of the Advisory Council is to make sure the persons making up the forms know this and other pertinent policy letters. The fourth action of the Advisory Council is to make sure that it receives the proper forms on the second Tuesday of each month, ready for use in Financial Planning. The fifth and continuing action of the Advisory Council is to make sure routinely the forms are accurate and actual and not generalized or "roughly estimated". The sixth and most important action each month is to plan financially on the basis of the three reports and set limits or restraints on POs or personnel numbers or whatever is necessary to achieve "Outgo less than Income" and get or keep the org solvent. 49 INCOME The Advisory Council's Actions of assigning conditions to divisions on the basis of the gross divisional statistic and actions in straightening up Divisions in Emergency and pushing standard Promotion as per HCO Policy Letter 22nd November 1965, will keep income up. It is more vital to pressure income up than to save money by Financial Planning restrictions. The emergency formula places, rightly, economy after promotion Promotion comes first. But economy is also vital. It is handled in relation to income. When income is far down the Advisory Council simply shuts off all but promotionally vital POs. Where a Division is in Emergency the Ad Council shuts off all POs except those vital to promotion in that division. (The tendency of a Division in emergency is sometimes to demand extravagant or unwise purchases.) CHEQUE SIGNING The Cheque signing line contains all three of the above reports as of the last time they were prepared and a tape of all cheques paid since. Cheque signing policy as already released thus requires the other two monthly reports as well as the other items specified. To that policy, also add, that a cheque signer must, to sign a cheque, also have before him the last issued orders of Financial Planning. It is very easy to confuse a cheque signing line with a Financial Planning line. They are, however, completely different. One signs any Cheque only after Financial Planning has been done and with the total reports of Financial Planning and decisions taken, before one. Cheque signing is a secondary action and is the result of Financial Planning decisions. One pays only what Financial Planning has okayed to be paid and how. DISBURSEMENT ACTION When Financial Planning indicates what to pay or not to pay, Disbursement makes up the cheques and sends the lot to cheque signers. Cheques signed during the period are signed as authorized by Financial Planning each week, such as, "Franking Machine, FSM Commissions and Petty Cash up to may be paid in the coming month." This, part of the Financial Planning Minutes of each meeting, is the guide by which weekly cheques are made up, submitted to signers, signed and sent. SUMMARY Unless all these actions are done, an org cannot in fact prosper, has poor credit and is generally upset. One has to get in the Income. That is done by making divisions do their proper promotions and keep their statistics up. The mechanism is Gross Divisional Statistics, assignment of conditions and investigating and putting right Divisions in Emergency by Ad Council personal inspection. Sometimes, where a divisional emergency is continued too long, the Ad Council has to order an E-Meter and case survey of its personnel as an SP is surely about. In Financial Planning one safeguards what one gets in as described above. Cheque signers and PO Signers are not necessarily Ad Council members but whether they are or not, are governed entirely by the last Ad Council Financial Planning directive. The Financial Planning Directive of the Month is issued promptly after the second Tuesday meeting of the month as an Exec Division Admin Letter with the Month and Financial Planning of it in caps such as FINANCIAL PLANNING FOR MARCH. This is the second part of the Ad Council Assignment of conditions to divisions. Long range planning also appears on this directive, this long range financial planning is not binding and is often changed in view of current happenings. It is a guide by which other executives can tentatively plan. LRH:ep.ca.rd L. RON HUBBARD Copyright (c) 1965 by L. Ron Hubbard ALL RIGHTS RESERVED 50 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 21 DECEMBER 1965 6 copies to Each Org Master Files Org Exec Sec Hat HCO Exec Sec Hat Org Sec Hat Dir Dept S LRH Communicator LRH FINANCIAL RELATIONSHIPS TO ORGS After a careful review of various tax situations in orgs I have come to the following conclusion: 1. That no understanding is given by tax officials when the relationships of LRH, an individual, to organizations has been handled on a very charitable basis by LRH an individual; 2. That when LRH an individual does not precisely bill and demand payment of debts by orgs to LRH an individual, the tax authorities twist the matter to our discredit; 3. That leniency where financial relationships between LRH, an individual, and any org rebounds to our discredit tax wise; 4. That when sums owing by an org to LRH, an individual, are not fully accounted for in the books and balance sheets of an org as due and owing to LRH, an individual, tax problems arise for the org and for LRH, an individual; 5. That tax problems stem from the leniency in this relationship. For fifteen years I have personally paid for research, have loaned and advanced orgs money, have guaranteed their overdrafts, have given them the benefit of my personal credit rating which is high. I have not sought for reimbursement; I have not collected adequate pay or given orgs bills for what they owe me. The 10% sent by orgs is fully consumed by administrative service (and much more than 10%) and is routinely invoiced to the managing organization and spent by it, or is sometimes held by LRH as a trustee. It is not given to LRH, an individual as records prove without exception. All this for 15 years has been an effort on my part to help our organizations. But it is interpreted in other ways by tax officials, winds orgs up with what it owes LRH an individual showing as a "profit" and upsets LRH, an individual's personal tax picture. Thus I have had to conclude that the majority of tax troubles stems from (a) Orgs not keeping a proper record of monies owed to LRH an individual. (b) LRH an individual not regularly billing orgs for monies owed. (c) LRH, an individual not exacting proper salary, payment and reimbursement! In 1966 we will begin to set this right. A recapitulation will have to be made and records corrected. Although it is not easy to imagine that a benign attitude on the part of LRH an individual is incomprehensible to tax officials, it is easy to realize that tax persons are unused to dealing with unselfish acts and suspect anyone so engaging. Therefore the following policies are laid down: A. Every org must carefully record and keep in record all sums owing to LRH, an individual; B. All sums owing to LRH, an individual, must be reflected on yearly balance sheets; C. Adequate salary and compensation must be allowed for LRH, an individual by all orgs; D. The Office of LRH must also keep a record; E. The Office of LRH must bill the orgs routinely; F. Sums so owing must be paid; G. Every effort must be made to set the earlier records in order; H. The current indebtedness must be carefully accounted for; 1. The LRH Communicator is responsible for the LRH an individual financial sums 51 appearing in the balance sheets of the org and that routine bills are rendered. Note: These policies stem from US internal Revenue actions by which the Founding Church of Washington DC is under threat of large tax bills it does not owe and the tiny amount reimbursed to LRH, an individual, for actual outlays on behalf of that org are under challenge and actual sums owing to LRH, an individual, are not properly recorded or taken into account. All the trouble stems from the lack of A to I policies immediately above. DEFINITIONS LRH, AN INDIVIDUAL, means L. Ron Hubbard, a private person as distinct from a trustee, a director or a staff member. LRH, an individual often advances goods or sums without reimbursement, has borne the whole cost of research of Scientology and used his own money to found organizations. LRH, TRUSTEE. This is L. Ron Hubbard in the capacity of a trustee as distinct from a director or individual or staff member. LRH, Trustee, holds money for corporations or persons or holds property for them. LRH, TRUSTEE FOR TRANSFER. For some years the Commonwealth (overseas, not US) interests belonging to the Hubbard Association of Scientologists, International, incorporated, in Arizona, have been held by LRH, Trustee for Transfer. As the overseas interests were worthless to the US Corporation in the US (HASI, Arizona) due to currency exchange laws, and was costing it money, the board of HASI, Arizona, appointed LRH a Trustee for Transfer for all Commonwealth Corporation property or interests with orders to hand it over to a UK corporation. As Arizona law forbids giving the assets to any but a non- profit corporation, non-profit UK and Commonwealth Corporations had to be formed. The UK tax authorities make a company operate for a year before declaring it non-profit. So far no Commonwealth company has been granted tax exemption for companies LRH attempted to form. HASI Ltd was such an effort. Non Profit status was refused it. But progress is now being made in another direction so these assets can be delivered eventually to UK and Commonwealth companies. LRH, A DIRECTOR, is a director on the board of directors of several companies. No salary may be paid for this post. LRH, A STAFF MEMBER, works on staffs as a case consultant, training officer, lecturer, design and planning consultant, promotions adviser and a department head of the Office of LRH and as such should receive compensation. As a staff member his expenses are paid by orgs. The pre-Dianetic salary level of LRH an employee was several times that given by orgs subsequently. 10% ROYALTY, LRH an individual owns, since he paid for the original research as well as later research and never received a salary for doing it, all Copyrights, registered marks and trade marks and rights of Dianetics and Scientology. Orgs send 10% to Saint Hill and this is used by HASI to administer orgs, paying for communication costs, administration, bulletins, etc. etc. It is invoiced to the Saint Hill Org and has never been given to LRH, an individual, a matter of record. Some US 10%s have been held by LRH, a trustee, and returned in legal in loans and other official matters to orgs in the US. Therefore the 10% royalty owed for use of name, materials and research by orgs has never in fact been paid. The Franchise 10% is similarly used up by Saint Hill in giving service. No org or field auditor or Franchise Holder has ever paid for its use of name, copyrights, material, writing and research. SALARY, LRH, an individual has received a salary from time to time always less than that given to comparable positions in other orgs. It is currently œ25 a week, advance. I have tried to put as little financial strain as possible on Scientology orgs. This is not understood and we are penalized for it. Therefore we must bring earlier arrangements up to date and keep current. This does not mean I want money. I spend my money on behalf of Scientology one way or another anyway. It does mean that to stay away from tax trouble in the future we must understand and put my relationships to orgs on a sound current footing financially and keep scrupulous records of it. LRH:ml.rd L. RON HUBBARD Copyright (c) 1965 by L. Ron Hubbard ALL RIGHTS RESERVED 52 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 4 JANUARY 1966 Issue VI Gen Non-Remimeo LRH Communicator Hat HCO Area Sec Hat Exec Sec Hats Org Secs Hats LRH RELATIONSHIPS TO ORGS I have several posts and relationships to orgs which make up several identities. Unless these are understood many errors can occur, not the least of which are tax errors, and not the least dangerous, power pushes and upsets. For instance, there are two Offices of LRH at Saint Hill. And one more for every other org. This is a familiar situation. It has happened in LA, Phoenix, DC and London-l always specially work with the org where I am situated as well as continue to handle all other orgs on an International basis and remain the chief executive of each org elsewhere. An org where I am, making more than other orgs, always bears the expense of international activities. In this case, here at Saint Hill, the org also shares international income and so its cost is light. Thus I have several hats and resultant Comm lines here at Saint Hill and at least one more in each org. These can be described as identities and posts as follows: LRH, AN INDIVIDUAL This is LRH a private person. This identity is the one who is entitled to any royalties and leases copyrights and trademarks and technology for use by Scientology organizations. This identity paid for and did the research, organized the organizations. This is the identity that loans orgs money or guarantees their bank accounts, etc. and on death is a private trust for my family. LRH, TRUSTEE This identity is a trustee who holds in trust properties and money for Scientology and since 1957 has held UK and Commonwealth corporations in trust for the original US company until these assets can be transferred to a UK non-profit corporation. As UK tax people will not okay such a non-profit status until after a year of operation we have formed other corporations in the UK and Commonwealth time and again only to have them refused non-profit status. The laws of Arizona prevent transfer of HASI assets abroad to any but a corporation with non-profit status. This leaves me as a Trustee of all assets outside the US until they can be transferred. But even after transfer I will still be a trustee for Scientology corporations. All money sent to LRH an individual is received by LRH a trustee or a corporation and is seldom paid to LRH an individual but turned over to companies without being given to LRH, an individual. This is a vital point, often missed even by accountants who then get us involved. If the money were 1. received by LRH, an individual and then 2. turned over to LRH a trustee and/or 3. received and used by a company, it would hang LRH an individual for huge tax sums for money he has never really received or used and indeed won't ever get. Example: Mr. X sends a $20 franchise pay to "L. Ron Hubbard". This is always invoiced by an org as "Franchise payment". Therefore one concludes that "LRH" in that case is LRH, a trustee. If one erred and said it was the income of LRH, an individual, that identity, never seeing the money, would yet owe tax on it, which is unfair. All 53 incoming 10%s to "LRH" mean LRH, a trustee, and are used in company expenses or are put away to be in general defense. The point of confusion is that LRH, an individual, is actually owed those 1 10%s as royalties to support research, etc. But the companies receive and use the money and it doesn't even go through the hands of LRH an individual. LRH, an individual, has not cancelled monies owed to him. He has not received them. LRH, a trustee, seldom gives LRH an individual any Scientology money. Tax authorities are astounded at this (believing the worst of everyone) but those on our accounts lines know it is so. This is LRH, a trustee. "Trustee" is an identity and activity almost all movements, churches, and benevolent associations have and in each case the "Trustee" does just what LRH a trustee is doing - safeguarding property and assets of an association. It's a very usual role. LRH, BOARD MEMBER This is an unpaid identity on several boards. It is entitled only to out-of-pocket expenses and almost never puts in for any. This is a member of a board of directors. These must be paid no salary in a non-profit corporation, only expenses. "Chairman" comes under this. Also "President". LRH, EXECUTIVE DIRECTOR This is better understood as "General Manager" as it isn't as a member of the board that it is held but as a manager. This is a paid post in any corporation or association. There are numerous LRH Exec Dir titles and identities; for this title repeats in each area and org and in the international Division. It means "highest executive of the organization", "third member of the Advisory Council", "head of the department called the Office of LRH". Therefore there is one of these titles for each org we have and for the international Exec Division as well. Perth for instance has an LRH Executive Director, Perth, LA has LRH Executive Director LA, etc. Then there is LRH Executive Director WW. The identity of the LRH Communicator in the org or activity gives clue to this. Each LRH Executive Director title has an LRH Communicator. There are two LRH Communicators at Saint Hill, LRH Communicator WW, who attends to each org for LRH Executive Director WW via each org's LRH Communicator and LRH Communicator SH who handles the traffic both of LRH Executive Director WW as sent to it from the LRH Communicator WW and for LRH Executive Director SH. This is only possible as the orgs are all similarly engaged. HCO Area Secs filled this role for years and still do where there is no LRH Communicator. HCO Area Secs still have duties for the Executive Director regardless of the LRH Communicator as old policy letters show. "Sec Ed issue" is one of these. Proper routing from an org is through the LRH Comm of that org to LRH Executive Director of that org and forwarded on to LRH Comm WW who sees that LRH Exec Dir that org receives it in absence. LRH Exec Dir WW may issue a blanket order concerning it but it is usually answered by LRH Exec Dir that org. The Advisory Council of any org operates without its third member, LRH Exec Dir of that org but in case of disputes or errors finds LRH Exec Dir that org taking it up. LRH, STAFF MEMBER In addition to all these other identities and titles there is that of LRH, Staff Member. As such I give staff lectures in the org where I am, assist where I can, crack cases and train students as "Co-ordinator of Research" (meaning application of 54 research), write magazines, take pictures, act as a routing expert, listen to problems, and do a lot of other things. I am chiefly a staff member of the org where I am located but am also a staff member of each org. COMPLEXITY Necessarily, no one person can hold all these posts and identites. But at the same time, over the years, I have found they are the minimum number I must give attention to. To handle this complexity I have many persons assisting me. I expect them to act with initiative. I expect them to carry out the purposes I have regarding orgs and Scientology so as to keep things expanding and the lines clean and flowing and keep me from getting so involved on just one point I can't do the rest of my jobs. For quite in addition to these posts, I have my research hat (our most important hat) and an organizing hat and a promotion hat and a public relations hat. My writing-books hat should absorb most of my time with research complete but not wholly published. Thus I expect people to do their jobs so I can then do my job and don't like people to flub theirs and require special attention on it. Only this holds us back because I then can't do my jobs which eventually breaks down our expansion and dissemination. OTHER ARRANGEMENTS Many other arrangements have been tried, fewer "identities" less traffic for me. But each time some catastrophe has occurred. This then required more work than wearing that hat in the first place. The early Dianetic corporative catastrophes occurred because I did not have or wear all my Exec Director hats and had no legal control of the orgs. Since I began to wear these and took responsibility things have been much better indeed, so I can't shed them. So these identities are a minimum by trial and error and by success. SUMMARY Anyone on high executive and Accounts lines should understand these things thoroughly and LRH Communicators should point them out. Only when these relationships are misunderstood do we get in trouble. Our growth depends on our staying out of trouble, getting our lines in and keeping corporate structure straight. And understanding these separate identities or titles and functions and using them. It is doubtful if this situation will change. As orgs grow, my assistants grow also and become more competent and refer less to me and work on delegated authority. My work is lighter the bigger we get so eventually I will hold only titles with no actions or duties. This can be continued easily and so there is no need to reduce identities to simplify lines. And there wouldn't even be a need to reorganize if I wasn't there in the flesh at all. All I need to do is work out a succession of assistants to make the activities continue. There is no succession of myself to be worked out in any identity regardless of what happens to me simply because I did the original work and as it is done there is no reason to have a succession for it as it is itself. 55 My identities are therefore woven in to the pattern so they don't have to be altered to keep things going. LRH an individual becomes an estate. The rest is by appointment from "LRH Executive Director" with that title activated by the Int AdCouncil or board but still used as a title but not of a person. The "Office of LRH" is part of org structure. And before long even LRH "a board member" will be needless to be filled in the flesh by delegated signature of LRH. This is not only today then, but tomorrow as well and the above identities are firm as identities whether I am here or not. Even today 99% of my functions are done by delegated authority. The 1% left is heavy enough for 20 men but it is getting lighter each year and so can be seen to be only a post in a few years and so it can continue. Trying to fill up the post is all that would cause "a war", so leave it activated as itself, none assigned to it, assistance to it by established formula. We won't vanish if I as a person vanish. And these identities never were me anyway so they can survive. It is a part of basic org structure. My post title is used ten thousand times a day on matters I never will hear of, so why should I hear of any in the long run as only the delegation of authority is in action anyway. So whatever happens to me as a person leave these LRH identities on the org board unfilled and all will be well. If you try to fill them catastrophe will result. Only how authority is delegated by "LRH Executive Director" in my absence needs to be worked out and that will be published. Somebody some day will say "this is illegal". By then be sure the orgs say what is legal or not. L. RON HUBBARD LRH:ml.rd Copyright (c) 1966 by L. Ron Hubbard ALL RIGHTS RESERVED 56 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 22 MAY 1968 Issue I (Amendment of HCO Pol Letter of 14 Jan 1966 Issue II) Gen Non-Remimeo HCO Exec Sec Hat Org Exec Sec Hat Dept 1 Hats Financial Planning Hats Org Sec Hat Qual Sec Hat HIRING PERSONNEL LINE FOR This is the exact line to be followed for the hiring of personnel. A person who comes in or calls in response to an ad is put on lines to the Personnel Procurement Officer in Dept 1, Div 1. The Personnel Procurement Officer finds out all the pertinent data about the person, i.e. past experience, training, what position or type of position they are interested in taking and only if the person mentions it, their expected wages. The Personnel Procurement Officer takes him to Personnel Control Officer to be put on post immediately. ALLOCATION BOARD In Dept 1, an Allocation Board is to be kept which shows vacancies. This Board is a piece of cardboard which shows all Divs and Depts of the Org Board aligned much as the Org Board. It is kept by Personnel Control and when a request for a staff member comes in, the Personnel Control Officer writes on a small strip of paper the post that is vacant and who requested the personnel on the reverse side of the paper. A pin is then stuck through the end of the paper and it is stuck in the Dept where the vacancy is. The same action is taken when an ED comes out in which new personnel is authorized, and these are taken up at once, with all priority. The Personnel Procurement Officer is never told what kind of personnel to procure, unless a professional photographer or some such is required and he has to put ads in the paper. Mostly his whole attention is just to be on procuring staff, all kinds, not categories. The Personnel Control Officer, when he receives a new Staff member from PPO, looks over the person's qualifications, checks his allocation board and places him in a suitable position. Or, he can be allocated to replace a staff member who is wanting to be transferred. At the top of each Div and Dept is the maximum Quota of personnel authorized for that Dept or Div by the Exec Council and the current number of persons in the Dept concerned and the Division. FINANCIAL PLANNING Since Wages comes under Financial Planning and the Quota is set by Exec Council, all this data must be presented to them, however it is sent to them after the person is put on post, with all details about his qualifications and where he has been placed. 57 Council: The. Personnel Procurement Officer then. when hiring a new person. sends to Exec (a) A P.O. giving all details of the interview with the new person. (b) The person's preference as to where to work. (c) Personnel Procurement's recommendation as to placement. (d) The Allocation Board up to date. Financial Planning gives a maximum figure for the person taking into consideration his/her training, and the type of position to be filled. The final say in the Placement of the Personnel remains with the HCO Exec Sec as one of the functions of her office. DISMISSALS The Org Exec Sec through the Org Sec and Qual Sec has the power to dismiss personnel in accordance with Ethics and status policies. SUMMARY Since the hiring of Personnel and Wages play a big role in the overall well-being of the org, planning and care has to be taken on each person or else we will find ourselves way overboard on the admin side or paying huge wages to clerical help and a consequent disintegrating organization turned bureaucracy. The way to keep this under control then is not to cut down your procurement. This should go ahead at a tremendous rate, and meanwhile you should be pushing your people out the top of the organization to the next highest org or sending those eligible for training. Allow your staff to expand and move on. Do this by procuring enough replacements as want to leave. L. RON HUBBARD Founder LRH:js.cden Copyright (c) 1968 by L. Ron Hubbard ALL RIGHTS RESERVED [Note: This issue of 14 January 1966 policy of same title puts in the line from Personnel Procurement Officer to Personnel Control Officer for immediate placement on post (paragraph 4), instead of Personnel Procurement Officer "...tells them the data will be forwarded to the proper person and they will be notified in the next day or two"; changes keeping of Allocations Board from PPO to PCO; adds paragraphs 6 and 7; gives CSW to Exec Council for Financial Planning purposes after placing new person on post (paragraph 9); and adds final paragraph. "Ad Council" is amended to "Exec Council" throughout.] [This 22 May 1968 issue was later amended by HCO P/L 21 July 1972, issue IV, Staff Qualification Requirements for Hiring Cancelled, where the procedure of putting new persons on post immediately was changed to assigning new personnel to the HCO Expeditor Pool and instant hatting them on what they are to do and putting them to work immediately under supervision.] 58 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 15 JANUARY 1966 Issue II Remimeo Exec Secs Hats Org Secs Hats All personnel Org Division Hats OFFICE OF THE TREASURER The Office of the Treasurer is formed herewith at Saint Hill. On the Org Board it belongs under the corporate name at the upper right of the Board. Its personnel come directly under the Treasurer but for staff posting belong in the Org Advisory Section of the Office of the Org Exec Sec Int Executive Division. There may be other personnel in that section and also an Org Division Advisor but the section is junior to the Treasurer. The Office of the Treasurer has the following purpose: TO HELP RON SAFEGUARD THE FUNDS AND ASSETS OF THE ORGANIZATION AND THROUGHOUT THE WORLD AND TO BE RESPONSIBLE FOR THOSE FUNDS, THEIR PROPER RECEIPT, ACCOUNTING AND DISBURSEMENT BY ALL STAFF PERSONS AND TO PREPARE PUNCTUALLY ALL QUARTERLY AND ANNUAL ACCOUNTS FOR ANY AND ALL PURPOSES. All Organization Secretaries and Organization Division staffs must concur and act at once upon any orders issued by the Treasurer. Such orders issued and signed by the Treasurer take precedence over any local orders which may conflict or seem to conflict with them. The duties and policies of the Treasurer are issued as HCO Policy Letters, SEC EDs and Treasurer's Directives, the latter serving to amplify or explain HCO Policy Letters or SEC EDs. The "B" Routing channel of Communication is from the Treasurer to the Org Exec Sec WW to the Office of LRH WW to the LRH Communicator WW to the LRH Communicator Area to the Org Exec Sec of the Area to the Org Sec of the Area. The "A" Routing is from the Treasurer WW to the Org Sec Area. Any orders passed on "A" Routing must be available to the Org Exec Sec WW and the Org Exec Sec Area and may not be denied them. Within ten days after the end of every quarter the standard accounts items required for summary, as specified by the Treasurer, must be airmailed or HCO Couriered from the area org to the Treasurer at Saint Hill. These dates are: April 10 July 10 October 10 January 10 The Treasurer will prepare and summarize accounts from these records and return them by air or HCO Courier to the Org. 59 At the end of the Org's year a full accounting will be furnished suitable for filing with Company Registrars and Tax authorities. All orgs should shift their reporting year to the actual year Jan 1 to Dec 31 as feasible. The employment of outside accounting firms is no longer required. Advices for tax reporting may be obtained from the Office of the Treasurer WW. This policy letter does not interrupt or cancel any obligation of the org to account to governments for the year 1965. The earliest reports to be done by the Treasurer will be 1966. All orgs must adhere severely to the 20th Century accounting systems of Scientology without variation and may not revert in any way to older accounting methods as these obscure from executives of the org their true financial position and delay knowledge of affairs. The Office of the Treasurer is formed to make the burden of accounting easier and to regularize the accounting activities of all organizations and improve their position and reputation. L. RON HUBBARD LRH:ml.cden Copyright (c) 1966 by L. Ron Hubbard ALL RIGHTS RESERVED HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex Remimeo Ad Council Members HCO POLICY LETTER OF 15 DECEMBER 1966 FINANCIAL PLANNING A set of proportionate figures recently compiled on Financial Planning at Saint Hill are of general interest to Ad Council members. The period chosen was a fairly average one for income, covering the three months (12 weeks) late August, Sept, October, 1966. Four sums of monies actually disbursed were obtained. These were: 1. Total Salaries Paid. 2. Total gross of Building POs (would constitute maintenance expenses and rent). 3. Total gross org expenses. 4. Total FSM Commissions. The total gross income of the period was added up. 10% was deducted from it for Research (adding up to Admin 10% of most orgs). 10% of the gross was taken to operate as a Reserve or to catch up errors and overages in planning and in case income went down in the next quarter. The remaining 80% was then proportioned amongst 1 to 4 above. The percentage results were as follows: 1. Total salaries pd Government payroll deductions 2. Total Building 3. Total Org Expenses 4. FSM Commissions 10% Admin or Research 10% Leeway or Reserve This gives some sort of a guide. 31% 4% 17% 21% 7% 80% 10% 10% 100% = During this period the org was being pulled up from a high bills - low cash ratio so the expense sum is perhaps a trifle high. And it had a building programme going so Building POs may be a trifle high. Its Leeway or Reserve simply paid off back bills. However, the fact remains that this was a period of gain of org financial affairs and, being at the end of summer and into autumn, not a period of extraordinary income which occurs just before summer at Saint Hill. So it is felt that these percentages are safe. The way one could use this table would be to calculate the past quarter of the year's gross income when the new quarter begins and then allocate these percentages each month for the next quarter. 61 The percentages took a 12 weeks quarter but expenses were also for 12 weeks so they are just percentages and so are valid for a 13 week quarter. Let us say income Jan-Feb-Mar (13 weeks) was Q dollars. One could then divide Q by 13 and get an estimated future weekly gross figure. We will call this W (meaning gross income for a week). One could then divide Q by 3.12 and get an estimated future monthly gross income average. We could call this M. Therefore to set a ceiling on all expenses for the coming 13 weeks for each week we would have: .31 x W = Weekly salaries .04 x W = Weekly Tax pd by company or personnel .17 x W = Building and Rent ceiling .21 x W = Weekly org expense ceiling .07 x W = FSM Commission estimate .10 x W = Admin or Research 10% .10 x W = Leeway or Reserve 10%. Then we would also have our figures as an estimate of-monthly expenses where Financial Planning is done monthly: .31 x M = Salaries/Month .04 x M = Company pd salary tax .17 x M = Bldg and Rent Ceiling .21 x M = Org Exp Ceiling .07 x M = FSM Commission Estimate .10 x M = Monthly Admin or Research 10% .10 x M = Leeway or Reserve 10%. Org Exp includes all utilities, bills, services, the lot. By keeping to or under these figures one could then be considered to be planning safely. By getting departments and divisions to turn in their estimated POs before the beginning of the month for the next month one could plan successfully (remembering their POs don't include utilities and many routine bills which must be deducted from the org expense amount before one signs any POs). It is realized that where one is on a 55% of 90% proportionate pay plan, the above indicated safe salary sum is greatly exceeded which is on (in all) 35% of 80%. This may be why orgs tend to develop a high bills-low cash ratio. Lack of stability (poor financial picture) and expense money may reflect back on the gross income tending to depress it and thus really reduce wages despite the 55% of 90% proportionate wage allocation. The staff might make more and have more future if their pay was only 31% of 80% with 4% of 80% for tax. Certainly staff at Saint Hill makes more than staff in other orgs and has consistently even in low income years. Anyway there are some figures on which financial planning can be based. L. RON HUBBARD Founder LRH:jp.rd Copyright (c) 1966 by L. Ron Hubbard ALL RIGHTS RESERVED 62 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 25 JUNE 1967 All Executives of all orgs All Accountants LRH Finance Comm OT Central Committee Guardian WW Treasurer WW SCIENTOLOGY ORGS TAX AND BALANCE SHEETS There is a confusion on the subject of tax and balance sheets as they involve or concern monies owed on balance sheets. Extraordinary solutions are being advanced and the matter should be reviewed. There are certain principles involved here which vitally affect Scientology companies as companies and indeed are basic in any business. 1. If you acquire the profit of an asset without paying for it, all monies received become a false profit and taxable. 2. If you invoice money as your own that is in fact owed to someone else you wind up with a false profit and get taxed for it. 3. There are certain principles of business having to do with income and debts which cannot be thrown aside even by a tax department. 4. The moment you vary from the exact truth of any transaction you involve yourself in potential confusion that requires extraordinary solutions. 5. When you find yourself being asked for extraordinary solutions you have departed from the truth of the transaction. As tax departments have never to my knowledge accepted without question the year's return or balance sheet of any corporation, efforts to get such departments to accept a return or balance sheet by putting in wild solutions avail nothing. The tax people aren't going to accept anything at all anyway ever without challenge. If you are challenged, you better have the REAL facts right there. This doesn't mean one should tell them all the truth in a geyser and gush. The real stable datum in handling tax people is NEVER VOLUNTEER ANY INFORMATION. It does mean one must not tell them or give them false data. It only means that when you give them data you can't back up or report profit you didn't make you will get into severe trouble. The basic errors of Scientology corporations in accounting and tax matters lie in (1) to (5) above. Under (1), all existing companies have acquired assets from me without paying for them and therefore show a false profit. They sell books they do not own the copyrights for, acquire technology they never paid for and, in the case of Saint Hill, acquired a business worth upwards of two million pounds and an estate worth œ80,000 without ever showing any debt. So the profits then look very large in any Scientology company. And this involves them with tax. Because the government accuses them of paying me (which they don't), they think it must be a crime to pay me anything and so are pushed into a profit situation because they have never paid for their main assets. Of course, a tax department wants to see them with a big profit which can be taxed and so blocks the truthful fact that the companies owe me money. 63 Recently a law in England, passed by the boilermakers playing politician, threatened to call any company a Close Company which owed any money to an individual and put Close Company tax at 67%. Well, the loophole is that if they don't owe it to an individual they'd pay tax anyway at high percent. And if they did owe it they'd have no profit. And 67% of nothing is exactly nothing. So using the Close Company law to say I can't be owed anything is just bad thinking. And it leaves SH with œ2m of "profit" that CAN be taxed which it doesn't really own as profit at all. Under (2) above, whenever you invoice money as your own income that is owed to somebody else you wind up with a false profit on which you will then have to pay tax you don't owe. Let us take an Advanced Clinical Course I have given. I paid my fare, often the bulk of expenses and took no fee. The ACC was invoiced in as org income. Yet it wasn't. It was my income. Yet the org not only invoiced it in, it didn't even note on its balance sheets it owed it to me and so wound up with a taxable profit. Take the book "Dianetics, Modern Science of Mental Health" as a property. I bought it back from the publishers in New York for $15,000 of my cash. I turned it over to the Distribution Center Inc in DC which then sold tons of copies of it, invoiced each one as its own income and never paid me any royalty at all. Further, it never noted on its balance sheets it owed me for it and soon had US Tax bills against it for its "profit". In addition to all that, DC, London and notably Saint Hill have taken over bank accounts of mine, have invoiced royalties owed to me only for movies and books, even my veteran's cheques and yet never noted in any balance sheet or return that it owed it. So it wound up with a taxable sum. Of course the government tax offices will say not to put down your debts as then they have a profit to tax! Under (3) governments can pass all the legislation they want, but certain business actions remain themselves. One buys, one sells, one collects, one owes. The government would like to upset all this but truth is no government really can, not even in Russia, as they are flying in the teeth of the fundamentals of commercial interchange. If one acquires a $10 dress for nothing one now has $10 worth more than one had before. If one paid $10 out and took a $10 dress in the books balance. A thief must be in continual trouble in economics and with tax agencies as he acquires without spending which leaves him heavily asseted without debt and so taxable to the hilt. Under (4) above, the moment you depart from the truth of records with explanations or gimmicks, you cannot substantiate your statements. The records no longer line up. So you have to destroy the accounts system or muck it up so it can't be read and promptly you are in real trouble. You can assign new values to some data, you can honestly reassess the meaning of your figures (such as advanced payments are not income) but note you are going in the direction of more truth. The truth of Scientology orgs is that I built them with my own money (which they didn't record) and made them affluent where they are without pay. I gave them technology they did not Nuance, books on which they pay no royalty and cash they forgot to mark down. The result is that they show a profit which does not exist in fact as the wherewithal by which the money was made was not ever reimbursed. Not only were assets acquired which had not been paid for, but additional monies were invoiced they did not have coming. The result is an apparent profit and, of course, trouble with the tax people. 64 Under (5) when you depart from facts and basic planning you then have to have very extraordinary solutions. And when you seem to have to have extraordinary solutions you have departed from basics and fact. Right now there is a lot of tax yap. And it is being set up to clobber Scientology with huge tax bills in England and the U.S. This isn't because people are mad at Scientology, It's because Scientology orgs have given themselves a huge swollen profit by not keeping good records and by not letting the real debts be debts. Every SP on the lines is of course frantic at the thought of Ron getting hold of any money. What will Ron do with it? More research, more orgs, more Scn more freedom. The record clearly states this is the case. When I draw $10,000 as a repayment of debt which it was, I promptly expand Scn to make it another $100,000. So it goes. Sometimes, in development, some money gets "wasted". But it always comes back 10 for 1 in the long run. So of course an SP tries anything or says anything to prevent my getting hold of any more money than I have. And all sorts of weird "laws" and opinions are dug up to show that I can't be paid. The last phoney was that if money owed me was shown on current balance sheets then All Past Years of All Orgs would have to be redone. Not so: It's up to the government to demand that and in that case it would all be corrected anyway so it's no argument and wouldn't even happen. In past orgs, I had control. I no longer have it. So it's natural that the investment had to be added up and paid back. A debt is a debt. Newly discovered debts are common in any accounting system. So what does one do? Report it all as profit arid get taxed out of existence? And help it happen by telling a lie-that it owes me no money? As for the sale of SH to C of S of Calif, the tax on any sum paid is on me not the org. So it is not the org's business. It IS the org's business to be sitting there with the full income of several million all invoiced as profit. That is the road to ruin taxwise. There are a lot of people around who "know best". This "best" usually winds us up in the soup. MY orders on this stand and are not open to opinion. And these orders are: 1. Record in balance sheets as owed proper payment for any property or business acquired from me. 2. Record all sums invoiced into an org that were really mine as still owed to me. 3. Carry on with standard income-outgo recordings and business procedures regardless of "law". 4. Tell and record the exact truth of all transactions past and present. 5. Put into effect the basic solutions I have written out in full for the handling of monies and debts. Don't be dismayed because somebody in a "panic" says one must do something odd to "stay within the law". They probably don't realize how lawful our conduct of business really is. And Scientology orgs if they record their debts owed for assets and their incorrect invoicing of my money as their own and report what is really owed on their balance sheets, will come out straight on tax. The governments are in the business of falsifying other people's records so as to collect more tax. If you report a bad debt they say it's a good debt. If you report a debt you owe, they say it isn't a debt. They can be counted on absolutely to assign a significances to figures to increase tax. But even the craziest pervert in the tax office 65 CAN'T argue down actual records so your only defense is actual records. When YOU fall for the gag that YOU must falsify your records to "satisfy" some "law" or some cookey official stick you are just playing into their hands. Further, some accountants paint black pictures of the government to cow their clients and ask them to falsify records by omitting actual facts or demanding weird solutions. The thing to do is stick with the truth and the real invoices doggedly. Now as to TAX, why this is mainly anybody's game of what is a PROFIT. The thing to do is to assign a significance to the figures before the government can. The whole thing is a mess only because arithmetic figures are symbols open to ANY significance. So I normally think of a better significance than the government can. I always put enough errors on a return to satisfy their bloodsucking appetite and STILL come out zero. The game of accounting is just a game of assigning significances to figures. The man with the most imagination wins. BUT there must be correct figures and there must not be gross misassignment of debts as profits or the whole thing won't hang together. Income tax is a suppressive effort to crush individuals and businesses and deprive the state of national gross product (since none can expand). The thing which baffles any suppressive is truth. It's the only thing that works. Significances one assigns figures are neither true nor false but always must be reasonable and defendable. And the figures themselves must always check out. Income does not mean profit One can and should make all the INCOME one possibly can. Always. The only crime really is to be broke. But when one makes INCOME be sure it is accounted for as to its source and that one covers it with expenses and debts. Handling taxation is as simple as that. Scientology income is high in most orgs. But it IS high due to the investment of time and money in earlier years. So if the balance sheets omit all the money that was invested and show only the money that was made, they are false balance sheets. And that is what the government wants us to turn in - a false balance sheet that shows all income as profit, with no repayment OT retirement of debt. Yesterday's unreported debts became invested money for expansion. The debts of 1950 have not been lost at all where they remain unpaid, but show up as DEVELOPED business. When the debt was not paid, that sum was used to expand. So the debt is still there and today's "profit" in no small way can be traced to the orgs not having to pay. Instead the money was used to develop the org and area. The income from that development is still there. Thus the debt must be there, must be shown on the balance sheets and books, or it will involve the org eventually in tax trouble. L. RON HUBBARD Founder LRH:jp.cden Copyright (c) 1967 by L. Ron Hubbard ALL RIGHTS RESERVED 66 HUBBARD COMMUNICATIONS OFFICE, Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 20 APRIL 1969 Remimeo AO-SH FINANCIAL CONTROL With the current advent of Sea Org expansion and the recent establishment of an AO- SH, firm policy is established, as below, outlining who controls AOs and AO-SHs financially around the world. FLAG BANKING OFFICER INTERNATIONAL 1. The post of Flag Banking Officer International is established herewith alongside and under the EC AOs, but subject to the orders of the EC AOs for administrative purposes only. The purpose of this post is: TO SAFEGUARD SEA ORG MONIES BY ENSURING MORE IS NEVER SPENT THAN ALLOCATED AND SUBSTANTIAL RESERVES ARE BUILT UP. 2. The FBO INT receives and evaluates financial data from FBOs attached to AOs, AO-SHs, OTLs and the Pursers of any ships and Missions in his area. Essential data from the financial reports as required by current Flag Orders, is then forwarded to the Staff Banking Officer as one report, so organized that costing analysis is possible at Flag and that any non-optimum use of funds from any area under his control can be quickly spotted and handled by the FBO INT as a matter of course. 3. Proposals relating to tax, leases, purchase or rental of buildings, long term financial commitments, major changes in the Sea Org financial set-up must be approved by the FBO INT and forwarded to the 2nd Deputy Guardian for Finance WW for final okay before such can be activated. 4. The FBO INT in addition to his normal duties has the added responsibility of seeing Ships, Bases and Missions adhere to Sea Org finance policy and handles their financial needs through the FBOs. 5. Responsibility for handling any urgent matters relating to finance needs of Sea Org Missions must be delegated to the local FBO in the area. 6. An FBO must first see a copy of the Mission Orders and ensure that any proposed disbursements requested by the Mission are essential to the Mission, not excessive and in line with their orders. He may disapprove any proposed expenses on this basis. Ships in the area will normally conduct their Missions on their usual allocation amount, no further expense is usually required. 7. Allocation sums for AO, AO-SH, OTLs, and Sea Org Ships in the area, etc are set by and may not be changed without first obtaining approval from the FBO INT Any disbursements over and above allocation requires the FBO INT's approval also before the disbursement can be activated. 8. The FBO INT may issue of his own determinism, and when required, Finance Base Orders applicable to one or all FBOs. 9. In the event of an FBO's failure to do his duty thereby bringing Sea Org monies to risk, the FBO INT has the authority to remove him/her from post. His approval is required before an FBO may be appointed to an area. FLAG BANKING OFFICERS 1. Attached to each AO or AO-SH is an FBO who has the duty of ensuring that 67 the AO, or AO-SH and their adjacent OTL complies with Sea Org Finance Policy and is directly responsible in these duties to the FBO INT, receiving orders only from the FBO INT on financial matters. The Commanding Officer of an AO or AO-SH may issue orders to the FBO, but only on an administrative basis-NEVER ON MATTERS PERTAINING TO FINANCE. 2. In the case of an AO, AO-SH or OTL's gross non-compliance and failure to adhere to Sea Org Finance Policy, the FBO has the authority to temporarily reduce the org's allocation or allowances of the crew. 3. Financial Planning for an AO, AO-SH or OTL may not be activated without the final approval of the FBO. The major duty of the FBO in this regard is ensuring that promotion is adequately provided for within the allocation and is not reduced by wasteful expenditure on non-essentials. 4. In the event of any operational failure of a Division 3 AO or AO-SH, such as FSM Commission Payments backlogging, the FBO steps in, issues the orders necessary to handle the situation and obtains compliance. 5. The banking of an AO or AO-SH daily takings is handled by the FBO as laid down in Flag Orders. Care must be taken to ensure separate Income records are maintained for an AO-SH, as 10% of the SH's Corrected Gross income is forwarded to WW weekly for their defense purposes. STAFF BANKING OFFICER 1. The Staff Banking Officer (Commodore's Staff) located at Flag, is responsible for receiving from AOs, and AO-SHs, that portion of their income which is paid by them to Flag. 2. All reports formerly forwarded to the SBO, will now be received by the FBO INT. The additional duty of the Staff Banking Officer with regard to AOs and AO-SHs finance will be to receive monthly figures from the FBO INT and prepare from these a monthly costing analysis and income Summary. 2ND DEPUTY GUARDIAN FOR FINANCE WW 1. The 2nd Deputy Guardian for Finance WW, in addition to his other duties, is appointed as the Finance Guardian over all AOs and AO-SHs. His primary duty in this new role is overseeing these orgs are given any help and advice they may require in handling matters relating to finance and tax. 2. He may not issue orders with regard to the disposal of Sea Org funds, aside from seeing the routine financial arrangements and policies governing the above-mentioned orgs are adhered to. His terminal on these matters is the FBO INT. However, in the event of Sea Org monies being subjected to grave risk, he may assume the role of a heavy hussar and take actions and steps necessary to resolve the situation. 3. A Saint Hill which was under WW control transferred temporarily out from WW and placed under the Sea Org, would still remain under the direct control financially of the 2nd Deputy Guardian for Finance WW. Under this arrangement no changes would be made regarding their financial set-up. Administratively, the org would take their orders from the Sea Org. Lt. Robin Roos CS - 3, Material Aide for L. RON HUBBARD Founder LRH:ei.rd Copyright (c) 1969 by L. Ron Hubbard ALL RIGHTS RESERVED 68 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 16 JUNE 1969 (Amends HCO P/L of 20th April 1969) Remimeo AO-SH FINANCE CONTROL With the current advent of Sea Org expansion and the recent establishment of an AO- SH, firm policy is established, as below, outlining who controls AOs and AO-SHs financially around the world. FLAG BANKING OFFICER INTERNATIONAL 1. The post of Flag Banking Officer International is established herewith under the Staff Banking Officer, but subject to the orders of the 2nd Deputy Commodore for administrative purposes only. The purpose of this post is: TO SAFEGUARD SEA ORG MONIES BY ENSURING MORE IS NEVER SPENT THAN ALLOCATED AND SUBSTANTIAL RESERVES ARE BUILT UP. 2. The FBO INT receives and evaluates financial data from FBOs attached to AOs, AO- SHs, OTLs and the Pursers of any ships and Missions in his area. Essential data from the financial reports as required by current Flag Orders, is then forwarded to the Staff Banking Officer as one report, organized as a costing analysis and so that any non-optimum use of funds from any area under his control can be quickly spotted and handled by the FBO INT as a matter of course. 3. Proposals relating to tax, leases, purchase or rental of buildings, long term financial commitments, major changes in the Sea Org financial set-up must be approved by CS-3 Material Aide for final okay before such can be activated. 4. The FBO INT in addition to his normal duties has the added responsibility of seeing Ships, Bases and Missions adhere to Sea Org finance policy and handles their financial needs through the FBOs. 5. Responsibility for handling any urgent matters relating to the finance needs of Sea Org Missions must be delegated to the local FBO in the area. 6. An FBO must first see a copy of the Mission Orders and ensure that any proposed disbursements requested by the Mission are essential to the Mission, not excessive and in line with their orders. He may disapprove any proposed expenses on this basis. Ships in the area will normally conduct their Missions on their usual allocation amount, no further expense is usually required. 7. Allocation sums for AO, AO-SH, OTLs and Sea Org Ships in the area, etc. are set by and may not be changed without first obtaining approval from CS-3. Any disbursements cover and above allocation requires CS-3's approval also before the disbursement can be activated. 8. In the event of an FBO's failure to do his duty thereby bringing Sea Org monies to risk, the FBO INT has the authority to remove him/her from post. Anyone appointed to the post of FBO, must be first cleared for such by the local Ethics Officer and the Ethics Officer International before they can be placed on post. 69 FLAG BANKING OFFICERS 1. Attached to each AO or AO-SH is an FBO who has the duty of ensuring the AO, or AO- SH and their adjacent OTL complies with Sea Org Finance Policy and is directly responsible in those duties to the FBO INT, receiving orders only from the FBO INT on financial matters. The Commanding Officer of an AO or AO-SH may issue orders to the FBO, but only on an administrative basis - NEVER ON MATTERS PERTAINING TO FINANCE. 2. In the case of an AO, AO-SH or OTL's gross non-compliance and failure to adhere to Sea Org Finance Policy, the FBO has the authority to temporarily reduce the Org's allocation or allowances of the crew. 3. Financial Planning for an AO, AO-SH or OTL may not be activated without the final approval of the FBO. The major duty of the FBO in this regard is ensuring that promotion is adequately provided for within the allocation and is not reduced by wasteful expenditure on non-essentials. 4. In the event of any operational failure of a Division 3 AO or AO-SH, such as FSM Commission Payments backlogging, the FBO steps in, issues the orders necessary to handle the situation and obtains compliance. 5. The banking of an AO or AO-SH's daily takings is handled by the FBO as laid down in Flag Orders. Care must be taken to ensure separate Income Records are maintained for an AO-SH, as 10% of the SH's Gross Income is forwarded to WW weekly for their defense purposes. STAFF BANKING OFFICER 1. The Staff Banking Officer (Commodore's Staff under CS 3, located at Flag) receives from the FBO INT a monthly costing breakdown and income summary, made up from the combined reports of FBO's and subject to current orders from SBO as to content and format. 2. The SBO acts as senior to the FBO INT to originate programmes related to banking and reserves, and gets Finance policy and FOs complied with and to control the AO Banking and finance lines in co-ordination with CS-3. The SBO is responsible that the FBO INT performs his duties. 3. The FBO INT holds all administrative duties formerly done by SBO and he acts as senior to AO and AO-SH FBOs to accomplish the purpose of his post, reporting fully his actions and a summary of info received from each FBO in his daily reports to the SBO. 2ND DEPUTY GUARDIAN FOR FINANCE WW 1. The 2nd Deputy Guardian for Finance WW in addition to his other duties, is appointed as the Finance Guardian over all AOs and AO-SHs. The purpose of this hat is to assume the role of a heavy hussar if Sea Org Monies should be subjected to grave risk and to take actions and steps necessary to resolve the situation. His terminal is CS-3. LRH:ei.rd Copyright (c) 1969 by L. Ron Hubbard ALL RIGHTS RESERVED Lt. Robin Roos CS-3 Material Aide for L. RON HUBBARD Founder 70 It's a PRO world today. HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 11 NOVEMBER 1969 Remimeo PES Hat OES Hat Accounts Hats Finance Course Chksht PRO Course Checksheet ACCOUNTS AND PRO Public Relations Office or Officer is meant by "PRO". it is also slang for "Controlled Good Relations in the Community or Area". When you "PRO" something you visit, write, handle it so as to enhance and improve your Public Image. A terrific amount of PRO effect occurs on ACCOUNTS lines. Bad or inaccurate statements of debt can ruin your PRO with a customer, pc or student. Unfair accounts decisions can mess up the PRO of a whole area. Unpaid bills can ruin your PRO in a whole town. So there is a lot of PRO connected with accounts actions. Repairing the damages done by not submitting correct accounts to customers or failing to pay commercial bills or rents or utilities is a PRO action and requires sane thought and careful handling so as to restore the org's PRO. The biggest crime one can commit in this modern society is to be without money. Even in a Supersocialism this is a crime. For an org not to have and make lots of money is stupid. Given a potentially remunerative activity, only thoroughly lousy service and horribly bad handling of promotion or criminal carelessness in accounts can leave an org without money. Doing standard org actions, giving excellent service and adequate promotion brings m plenty of money. The outnesses which prevent income or waste outgo have to be truly glaring and goofy to leave an org without money. The way to have NO PRO is to have no money at all. Lack of money or wild outnesses in handling money can practically destroy an org's PRO. "Credit" as a quality is a sort of god in Western society. If your "credit is bad" that finishes you to one and all. It is a statement far worse than mere "murderer". it must be since psychiatry murders daily but is well thought of in governments. So you get the extreme value of "good credit". Dateline paying and other accounts policies prevent bad credit. But when it has gone bad, it takes making money and brilliant PRO actions to restore a good credit image. AND IT MUST BE RESTORED. Money as a total motivation for an action is not high grade motivation. In espionage services the man who works for money only is expected to turn his coat and allegiance and is regarded with contempt. But money is a basic point of judgement on which higher levels of motivation can be built in a wog world. It is PRO to the commercial world which has no real dedications. So billing debtors and paying creditors have high PRO value to an org. All this can become a Strange cycle. The org mucks up its area, let us say, by bad 71 or indifferent service, promotion then is unreal so the org PRO with customers collapses. These don't buy service. The org runs out of money. Its bills mount up and its commercial community PRO collapses so it has no public credit. There goes the org. Accounts is the area hit and will go on being hit until it begins to insist on GOOD SERVICE, the repair of all bad service, good real promotion and finds money to spend on PROMOTION. Then money will come in. Accounts actions must now PRO the commercial field, get that handled with good PRO accompanied by money on dateline payments and sound arrangements. Further money is spent on more PROMOTION. Former bad service is handled. Credit is re-established in the area. Any accounts trouble with customers is cleared up. The org is fully there again. i There is no substitute in Accounts PRO for knowing one's finance policy and following it. Sloppy accounts files, no Financial Planning, no Purchase Order system, ignorance of finance policy as in the Finance Checksheet can lead an org directly into losing its community PRO regardless of service quality or promotion. So just as accounts can be mucked up by lack of money coming from bad service or bad promotion, it also happens that Accounts all by itself can wreck an org's Community PRO. Therefore it is VITAL to PRO that an org: 1. Has its Accounts personnel have their Accounts Hats on and finance policy being closely followed. That Financial Planning is real and income remains greater than outgo. 3. That adequate funds are available for promotion and that org funds do not get all soaked up by the HCO ES and OES divisions on film cabinets and new roofing paper. 4. That the pcs and students (customers) of the org are handled to generate high PRO on their accounts contacts. 5. That the commercial connections of the org in the community, the org's creditors, are smoothly handled to generate high PRO. 6. That any adverse reactions along accounts lines are instantly handled to restore good PRO. These can include a covert operation to one's creditors by some enemy - which is handled by proving the falsity of the accusation. They can include wrong change, failure to refund, reluctant or inaccurate or failed payment to Field Staff Members. These and any other adverse Accounts action MUST be pushed back to good PRO fast. Lack of money comes from slow or bad service, and a failure to go flat out to remedy it or from no or poor or unreal promotion. Or no money can stem directly from off-policy or messy handling of accounts and org finances. In the final analysis it's a PRO world and high PRO cannot be effected for an org if there is anything wrong in its accounts lines. Thus PRO is affected strongly by accounts and finance actions. Our orgs do not go into debt, do not finance themselves by borrowings. Our orgs make their own way. That is why they are still our orgs. And Accounts PRO has a lot to do with it. L. RON HUBBARD Founder LRH:rs.cden Copyright (c) 1969 by L. Ron Hubbard ALL RIGHTS RESERVED 72 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 4 NOVEMBER 1970 Issue IV Remimeo SO & Scn Orgs and ships COs & Exec Dirs FBOs & A/GFs & ECs to activate All Div Secs Treas Sec Hat Dir Disbs Hat Purchasing Hat Accts & Materiel Bureau ESTIMATED PURCHASE ORDERS NECESSITIES The divisions and staff of an org or ship require certain necessities to operate and promote and deliver service. Stats enter this where stat rise and vital function require certain quantities of supplies directly related to a particular stat or function. To get more letters out would require more letterhead paper. NECESSITY = Materiel needs directly related and necessary to the vital functions, promotion, delivery, stats and acceptable image of a division or org or ship. Financial Planning operates to create and maintain viability by causing the org to make money and continue in good credit. It directs payment of existing bills (dateline) and authorizes PT expense. In handling PT expense, Finance is planned and used to back and provide the necessities with which Div Secs and staff can cause GDS and income rise. Not every stat or function requires materiel. Some do. Some don't. Some do more than others. The judgment required is the line drawn between actual need and "got to have". Finer judgments are "how much" and "what quality". Aligned to stats and vital function the judgment becomes easier. A Financial Manager who would permit vast quantities of letterhead ordered far in excess of need and at the expense of other necessities actual in present time or would approve an expensive paper when a less expensive one would do as well would be as unwise as one who would ignore the need and reduce or halt the letter stat by denying paper altogether. The object and orientation and action of FP is to enhance viability by providing promotional and operational necessities which assist or cause stat rise. The operative term is NECESSITY. Not because an org should ignore facilities that better image and conditions. But because finance channeled into NECESSITIES first brings back the return and increase which permits facility improvement. ESTIMATED PURCHASE ORDERS HISTORY An FP system which seeks to provide necessities but admits only exactly priced 73 purchase orders sometimes collides with the fact that the exact cost of a vitally needed Item is sometimes not known or obtainable when FP convenes. Extensive and time consuming price searches for items then not accepted by FP is time lost. Ships, being mobile, are subject to price variations from port to port. Bills files have prices but many items are infrequently purchased and have no price on file or easily accessible. Or a vital dissem mailing may lack the 3 required quotes when FP is held. This leaves FP members with 3 choices: 1. Delay the whole FP to obtain the missing prices. 2. Delete the unpriced items ignoring need. 3. Accept POs which, although apparently valid, are actually a guess and which get the originator into trouble with accounts or which deny him the item anyway when the real cost is discovered, or even worse, results in a bill far exceeding the planned amount. SOLUTION To solve all this and provide a workable FP system which prevents exclusion of vital org necessities, ESTIMATED PURCHASE ORDERS were developed aboard Flag and are established by this policy letter for use in all ships and orgs. EPO EPO = ESTIMATED PURCHASE ORDER. AN EPO IS NOT A PURCHASE ORDER AND GIVES NO AUTHORITY TO PURCHASE. An EPO is submitted to FP in place of an actual and valid purchase order when the exact cost of a needed item is not yet known: it serves to hold aside the ESTIMATED amount needed until an ACTUAL purchase order with exact cost can be raised against it. That's all it does. No purchase or order may occur by reason of an EPO. EPO format and color are distinct and different from that of an actual and valid Purchase Order. An EPO is mimeoed in black ink on white low grade low cost paper. CSW required of an EPO is the full and exact reason for need. EPOs are made in duplicate-one for FP use, carbon for Div Sec to retain and use when making actual POs against them. RED PO An actual and valid PURCHASE ORDER is on deep pink paper and because of this is called a RED PO. ONLY AN ACTUAL (RED) PURCHASE ORDER EXACTLY PRICED AND 74 SIGNED BEFORE PURCHASE AUTHORIZES PURCHASE AND NO PURCHASE OR COMMITMENT TO EXPENSE MAY OCCUR WITHOUT ONE. A Red PO has the exact cost of an item and any specifications (size, color, quantity) required by Dept 8 to purchase. It is not another estimate or an EPO re-copied on a Red PO form. It is EXACTLY COSTED. Red POs may go direct to FP before meeting. Red POs raised between FP meetings are only against already approved EPOs. This gives two possible sequences: A. I. Red PO made and complete prior-to FP meeting. 2 FP meets. 3. Red PO approved (or not). 4. Purchase occurs if Red PO approved. -OR B. 1. Exact cost unknown, an EPO is made instead. 2 FP meets. 3. EPO approved (or not). 4. If approved, exact price obtained as and when available. 5. Red PO made up. 6. EPO and Red PO matched up by Dept 8. 7. Red PO signed (or not) by PO signer. 8. Purchase occurs if Red PO approved. In either case PURCHASE OCCURS ONLY BY REASON OF RED PO APPROVAL, AND ONLY AT THE PO AUTHORIZED COST OR LESS. NEVER MORE. FP ACTION Date and time of FP meeting published in Orders of the Day or by staff notice board sets the deadline for submission of newly prepared EPOs and Red POs for the coming week or month. The primary requirement is coverage of all NECESSITIES. FP members take up EPOs and Red POs in meeting against the gross amount established as available for PT expenditure. At the moment when POs and Estimated POs thus presented reach the established sum the EPO and PO signing is stopped. No further POs are acceptable except those subsequently raised against the approved EPOs. As POs and EPOs presented often exceed the allocated sum prior to FP meeting the first action of the meeting is adjustment or elimination to meet the allowed total before any EPOs or POs may be signed. FP approval authority should require rejected POs and EPOs submitted by separate folder with completed FP for a check of items rejected. Any real essential found rejected in favor of items less vital to function and promotion causes FP to be reconvened or is adjusted by the FP authority himself. DEPARTMENT OF DISBURSEMENTS Dept 8 receives from FP: A) Approved Red POs for immediate purchase. 75 B) Approved EPOs to be held awaiting Red POs. C) The FP directive listing these by division. D) Dateline established for bills already owing. A basket set up in Div 3 Comm Center and labelled "RED POs" collects the Red POs submitted by Div Secs and staff against approved EPOs. Purchasing section empties the basket once daily, staples to each Red PO its corresponding EPO and prepares the day's collection in a folder for PO signer. The action is only once daily. No RUSH POs and no body traffic. On return of the signed Red POs Purchasing Section activates and routes to Bills File of the appropriate company. (Ships being mobile and having many creditors normally file POs and bills by month instead.) Bills arriving then match up with the Red POs already in the bills file and are subject to payment by dateline. PO SIGNERS PO signing and FP approval is by FBO or A/GF, D/GF (or A/G if held from above), where there is one. SO units and ships having no FBO send FPs and Red POs to the area FBO (Continental Finance Office). A remote OTL operates against an established basic FP and reports expense in summary form to the nearest SO Finance Office. FP approval and PO signing in Scn Orgs where there is neither FBO nor A/GF or A/G occurs at Exec Sec level. Any Exec Dir may add himself as mandatory signer if he considers org financial position warrants it. Signature of a Red PO exceeding the EPO amount would be occasional and would be only on receipt of factual advice by Dept 8 that there exists sufficient overage on other EPOs to compensate. There is no obligation to sign. He may require the EPO held for next FP and the shortage made up by a second EPO at that time. EPO AND RED PO MATCHING EPOs and Red POs usually match up one-for-one but not always. 1. An item too costly for allocation by one FP meeting may hold aside EPOs of partial cost until accumulated EPOs reach the total cost. This would give several EPOs against one final Red PO for actual purchase. Thus, purchase of a large item can be covered by several months' EPOs for it accumulated from FPs granting it. 2. Sometimes a single EPO may also accumulate Red POs against it. "Routine org supply items for February" could be a Div 3 EPO against which there could be a Red PO for dispatch paper, one for carbon, one for pens, etc. Maybe more is needed a few weeks later and there's a second Red PO for dispatch paper. Ships never know exact agent fees until arrival in a port and sometimes not even then. Thus there is an EPO for "Agent's fees for January" against which Red POs for actual agent bills accumulate. Such an EPO is good until its total value has been used up by Red POs. It is then removed from EPO file as expired. Red POs raised against this type are in duplicate so that the original can go to bills file leaving a copy attached to the still valid EPO to indicate partial use of the total amount. The most usual type of EPO is one-for-one and expires on use of a single Red PO 76 to match it-even when there is money left over due- to actual cost being less than estimate. HOW TO ACTIVATE THIS POLICY LETTER 1. Have adequate copies of the attached EPO form mimeoed off and distributed to Div Secs 2. Have this policy checked out on all Div Secs and staff and particularly on Execs. 3. Require that the necessities of each division are represented by Red POs or EPOs at the time of regular FP meeting. 4. See that EPOs do represent divisional needs and allow no change or swap of EPOs after FP meeting. EPOs do not represent a divisional allocation subject to change of amount or use. An EPO for light bulbs cannot become something else. it's light bulbs or nothing. EPOs do not substitute for planning. They only make it smoother and more real. 5. Enforce it if necessary by assignment of pay loss to any division or staff member neglecting vital needs or requesting other items at the expense of real necessities. 6. Groove your Div 3 in thoroughly on EPO and PO handling as in this PL. 7. Refine it by preparation and use of divisional checklists of materiel needs required to effectively promote and deliver. 8. Refine it further by organizing a 5th disbursement voucher copy for routing of vouchers to the Div Sec concerned so that a divisional cost reference file builds up. 9. Apply the use of EPOs to improvement of FP ease and effectiveness. An EPO system properly applied and supplementary to the existing Purchase Order system (which is unchanged) gives the margin that allows a simple and effective FP action without which the untended materiel needs of a division or org can suddenly leap up as a real emergency. 10. Recognize any other use of this system as a misapplication to be reported to ethics and to result in starrate checkout of the offender on this policy letter and personal payment for any unauthorized or illegal purchase or expense to the org in excess of authorized amount. Lt. Vicki Polimeni CS-3 for L. RON HUBBARD Founder LRH:VP:rr.rd Copyright (c) 1970 by L. Ron Hubbard ALL RIGHTS RESERVED 77 E . PR O H DIVISION: ESTIMATED COST:(in US $)_ ITEM: REASON: (attach CSW) DATE: NUMBER:_ FP ESTIMATED P.O. HAS NO VALUE OR EXCHANGE VALUE AND HAS NO AUTHORITY TO PURCHASE (in local currency)- It is understood that this is an estimated cost and the item cannot be bight until a fully and exactly priced PO has been submitted and signed by PO Signing Authority. ORIGINATOR DIV HEAD FP MEMBER FBO, A/GF, A/G_ 78 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 13 FEBRUARY 1971 Remimeo Add Finance Checksheet All FP members FINANCIAL PLANNING TIPS FP need not be a burden at all. If these five conditions exist then FP is very easy 1. PRODUCE AS AN ACTIVITY. Look over what your products should be, particularly your Valuable Final Products, and then begin to get those products somehow anyhow. This and only this is the shining reason why you can have a decent allocation. If it is then denied you you can howl and be sure of redress. A cap in hand with no product is a sure route to chopped FP. (Example: An org with half a million collectable on its books but which didn't even send out statements had an awful time with FP. Asking for "allocations" that were really handouts, neither its FP body nor its FBO fully understood WHY, but it just seemed unreal to give it money. It was asking for money. It wasn't requesting the return to it of money it had made and was entitled to. It did not make other value so could not justify value. Therefore it "sort of looked odd" to Finance. Even Finance did not know why. The wildest example of this was the 1950 LA Foundation which, under a US Navy Ex-rear Admiral, wanted $47,000 a week to subsidize a foundation potentially making $80,000 a week. But he closed its doors and wouldn't run it until he could get "legal" and subsidized. Another one is OK 1969 wanting Flag to pay it $3,000 a week to keep it going when it wasn't even sending out letters and did not even own a typewriter yet was accidentally making $5,500 a week average. There are tons of such examples. Activities go on to government appropriation think instead of promote - sell - collect and deliver and wind up with no pay, no food, no uniforms and FP troubles and conflicts you wouldn't believe possible.) 2. KNOW YOUR FINANCE PACK. When members of FP bodies have not done their Finance Pack they get into total confusion Further any Finance authority gets disgusted with their admin irregularities and won't regard their propositions or troubles with any seriousness. Failure to do, refusal to do a Finance Pack (which only takes a couple part time study days) can give an FP body a bad name with Finance people simply because their ignorance is mistaken for foolish proposals. 3. SEPARATE OUT DIFFERENT TYPES OF EXPENDITURE. An early FO on "Title" of various items helps clarify. Find out and get it agreed to what is covered under Title A (permanent) Title B (valuable non-expendable) and Title C (issuable or usable) and get Finance to agree to what is which and exactly what one is doing FP on and the tangle becomes easier to undo. What is Permanent Fixture? Does one FP for new ships, new buildings, vital repairs, vital spares? (Actually no, but it has to be covered in general Finance.) Is one FPing for gimmicks and oddities and possibly useful things (Title B). Or is one FPing for expendables, wages, food, fuel, papers? (Title C.) Maybe one FPs for all three BUT in the category of necessities to operate and would be nice and future hopes. Necessary spare parts for Title A that would break everything down are of course necessities. So probably should pass without question. Whereas Finance people often don't see them that way. Wages, food, uniforms, fuel are subject to cutbacks where an activity is not able to demonstrate production. Good idea Title B usually comes in for purchase when the activity is really making the money and otherwise are a yawn. Future hopes depend totally upon one's profitable use of what one has. Once you get all this agreed to with Finance people they can't change the rules on you every FP. And a lot of the strain goes out of it. No FO or P/L could easily set up exact rules for every type of activity there is. Essentially it would be what is agreed upon between the Finance people and the FP body. The Finance people want to get cash to reserves and they resent justly a freeloader activity that has subsidize or unwise think. They want to give an activity X beans (money) and get back X beans plus. When they give out X beans and get back no beans they are hard to live with. Even a ship that produces no money directly still sells org help events and trained experienced SO members for beans from orgs. Any org would give it good hard beans for real help and trained experienced SO members. If AOLA could "buy" all the 79 excellent SO members it wanted and needed from the station ship it would be delirious with joy. But if the SS has not been making them, it has a hat-in-hand aspect to Finance people. Finance people then shift the rules around to try to get out of giving any money at all, naturally. While this is covered in No. 1 above, it also affects No. 3, this one. Everything is considered Title C, even the ship, and subject to total reduction as it does not increase Finance people's viability. So "the rules" get shifted on the FP body. If it isn't making a valuable final product that can be changed for cash with something that has cash (No. I above) and if it doesn't know general Finance rules (as in No. 2 above) and if it has no solid agreement with the Finance Authority on Title A, B and C, then of course FP is a nightmare for everyone concerned. 4. NEGLECTING NECESSITIES. When an FP body is not aware of the necessities of its operation and neglects to FP for them Finance people (Bureau Three Treasury and FBOs) have to do it for them. This causes a lot of bad feeling from Finance people. A new drinking fountain or trampoline mat for staff and no postage FPed for is sure to cause a lasting engram! An FP body should have a list of vital necessities by division and FP for those first before it begins to wonder. Strangely, pay, food, uniforms are not considered necessities. They do not directly influence an activity's income. A "necessity" is what it takes to make products and valuable final products. In a cap-in-hand activity food is qualified as "some food, oatmeal maybe". Pay becomes "maybe but no bonuses ever". Uniforms become "none". Recruiting posters YES. Fuel becomes "economical amounts carefully used". Training materials becomes YES. So what's a necessity? A necessity is what it takes to make the valuable final product, not individual survival but group survival. So an FP body doing individuated think can get in severe FP trouble just by the nature of economics. 5. USING FP TO NEGLECT DUTY. It is a shame but true that people will excuse lack of vital action by blaming FP. "The building burned up because we couldn't get fire hoses through FP." "The main engine broke down because FP rejected...." Actual tracing of such statements usually discloses the item was never FPed for at all even to the FP body or that "FP" was used as a means of escaping the work. If you buy all this blame of FP you will think FP and Finance people villainous. Actually FP is often a whipping boy to excuse not doing the job or to delay it. Failure to handle and saying it was FP when it wasn't is Comm Ev stuff. So don't let FP get a bad name unjustly. It's grim enough even when done right. The future of any activity depends upon these five factors above. It is an economic world in which we live, regardless of "isms" like Capitalism or Communism or Socialism. If you have these five things cared for you can do FP quite merrily. The essence of getting money is making money in the first place. FP is the second step of what do we do with the money we make. It will never solve neglecting to make it. You always have trouble with money if you don't make any. (c) hope this helps lead sane Finance bodies out of the jungle into the sun. L. RON HUBBARD Founder LRH:sb.rd Copyright (c) 1971 by L. Ron Hubbard ALL RIGHTS RESERVED 80 HUBBARD COMMUNICATIONS OFFICE Saint Hill Manor, East Grinstead, Sussex HCO POLICY LETTER OF 27 FEBRUARY 1971 Issue II All Finance Hats To be displayed on the desk of every Finance Personnel FIRST FINANCIAL POLICY INCOME IS MORE IMPORTANT THAN DISBURSEMENT. Board of Investigation FCO 1121 Lt. David Murphy, Chairman Lt. Peter Warren, Secretary Ens. Bill Lawrance, Member for L. RON HUBBARD Founder LRH:BL:PW:DM:sb.rd Copyright (c) 1971 by L. Ron Hubbard ALL RIGHTS RESERVED 81