December 30, 2009

Updated Replacement Fund and Restricted Assets Tabulation

2009 December 30
Last update: 2009 Dec 31. Click on History for changes and updates.

__During and following the 2009 Dec 29 Town Hall Meeting, several of the members had an extensive discussion of the shortfall in the Replacement Fund / Restricted Assets accounts. This was covered in my 2009 Oct 13 letter to the Board re Preservation (Replacement) Fund & Restricted Assets. No action was taken by the Board concerning the 2009 Oct 13 letter.

__The continuation of this post is my 2009 Dec 30 email to the Board re the subject title of this post.

Don Nordeen
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Updated Replacement Fund and Restricted Assets Tabulation (continued)

From: Don Nordeen
Date: 2009 December 30 18:24:35 EST
To: Carolyn Study, Jay Welter, Mike Buckley, Rich Gaubatz, Steve Renton, Tad Latuszek, Vicky Rigney
Cc: Todd Chwatun
Subject: Updated Replacement Fund & Restricted Assets Tabulation
Date: 2009 December 30
To: MOA Board
cc: MOA General Manager
bcc: MOA Members
From: Don Nordeen
Re: Updated Replacement Fund & Restricted Assets Tabulation

__The attachment to this email is my 2009 Dec 30 update of my 2009 Oct 13 letter to the Board re Preservation (Replacement) Fund & Restricted Assets. Use your PDF Reader to rotate the attachment pages to read in landscape format. 

__ To my knowledge, the Board has taken no action concerning my 2009 Oct 13 letter. The significant changes in the 2009 Dec 30 tabulation are:
  • updated for two additional months for 2009 (now through 2009 Oct 31)
  • verification of the tabulations for 2009 (small changes)
__The significant information from the tabulations in chronological order are:
  • The taking of cash from the Restricted Assets and use for operations began in 2007 by an amount of $81,853. See my 2008 Dec 13 email to Vice President Kirk Yodzevicis cc: Todd Chwatun, Accounting for the Reserve [Preservation] Fund. These numbers are directly from the 2007 audit report. To my knowledge, the Board took no action on my 2008 Dec 13 email.
  • In 2008, there was an addition taking of cash from the Restricted Assets and use for operations in the amount of approximately $15,500 resulting in a total taking of $97,368 at the end of 2008. These numbers are directly from the 2008 audit report. The $97,000 was flagged by the writer at the 2009 annual meeting. To my knowledge, the Board took no action.
  • In 2008, only $36,000 of the policy $48,000 was allocated from dues income, via Prepaid Dues, to the Replacement Fund account. That, in effect, increases the accumulated taking to $109,368 at the end of 2008. The $12,000 shortfall was flagged by the writer at the 2009 annual meeting. To my knowledge, the Board took no action.
  • In 2009, there is no allocation from dues income, via Prepaid Dues, to the Replacement Fund account. By the end of the year, the total amount should be $48,000 plus the $12,000 shortfall for 2008. Consequently, dues income for operations is current overstated by $36,000 and will be $48,000 by the end of the year.
  • In 2009, $3,786 not counting the lack of allocation to the Replacement Fund has been taken from the Restricted Assets as cash and used for operations. Through 2009 Oct 31 counting the $36,000 that should have been allocated to the Replacement account, the total taking in 2009 is $39,786.
  • The shortfall of cash in the Restricted Assets on 2009 Oct 31 was $154,151.
  • With the additional $12,000 allocation from dues income, via Prepaid Dues, to the Replacement Fund account for the fourth quarter, the shortfall of cash in the Restricted Assets on 2009 Dec 31 would be $166,151. Hence, $166,151 is the cash to be deposited in the Restricted Assets (CDs or Money Market securities) on 2009 Dec 31 to reduce the shortfall of Restricted Assets to zero.
  • (added 2009 Dec 31 and not in the email to the Board) The cash shortfall in Restricted Assets based on the reserve study conducted by the Board in 2005 is $1,146,151 — a huge unfunded liability.
All of the above are based on numbers and tabulations in the 2007 and 2008 audit reports and in MOA's financial reports for 2009. The formats for the tabulations are the same as used in the audit reports except that the two accounts are laid out side by side.

Explanation of the Accounts__The Replacement Fund account may be a misnomer. It is not a fund. It is rather an account which is used to record the allocations from operations and the expenses. It is probably better just to call it the Replacement Account. The balance merely reflects the difference between the allocation and expenses, which should be cash that should have been set aside in a Restricted Asset instrument to cover the obligations. The Restricted Assets account records that actual cash that has been deposited into a restricted cash account or used to purchase financial instruments (cash equivalents).

Attached PDF File__ The PDF file is my 2009 Dec 30 letter to the Board which includes the tabulation of transactions for 2007, 2008 and 2009 as separate charts. Use your PDF Reader to rotate the attachment pages to read in landscape format.

Chart for Board Review__The chart for 2009 is an example of a schedule the Board could review monthly, or at least quarterly, to ensure proper management of the Replacement and Restricted Assets accounts.__I am available to answer any questions concerning the tabulation of numbers from audit reports and MOA financial reports.


Sincerely,
Don Nordeen
(989) 939-8240



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