Proposal for $100 Dues Increase Plus COLA

2009 November 24
Last update: 2009 Dec 01. Click on History for changes and updates.

__The continuation of this post is my email to MOA members concerning the Board's Proposed Vote on a $100 Dues Increase Plus COLA. Members are obviously polarized on this issue. Accordingly, this email attempts to provide information and discussion to help in the decision.

__I have received comments from some members. Those are added with permission at the end of this post. Please send me comments you would like to share or add your comments in the Comment section at the end of this post.

__(added 2009 Dec 01) In 2006, I recorded a post, Should MOA Annual Dues be Indexed for Inflation?. This post makes the same pro and con arguments now being made. The post also includes a graph showing the cost of living and MOA dues through 2006, which shows that the MOA dues trend is well in excess of the Consumer Price Index.

Memo: Some of the links including the one above in this post are to my password-protected weblog. If you are a MOA member, please refer to the Welcome & Home page for information on access.

Don Nordeen
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Please be advised that the writer is not an attorney, and this is not legal
advice. The information is based on research on information available
in the public domain.
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• Key Words: Accounting Practices - MOA, Business Reviews - 2009, Financial Information - 2009 General, MOA Board of Directors, MOA Members & Members' Rights, MOA Members' Letters, abuse, access to records, accounting standard, accounting, balanced budget, budget, civility, closed meeting, closed session, Covenants Conditions and Restrictions, dues, duty of obedience, executive session, GAAP for community associations, GAAP for homeowners associations, GAAP for property owners associations, governance, governing documents, members' rights, replacement fund, reserve fund, special meeting, user fees, vote

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Accounting Discrepancies — MOA vs. CPA

2009 April 27
Click History for a list of changes and updates.
__The continuation is my email to the board on this subject. There are a number of discrepancies between MOA's account (that provided in Business Reviews and usually available at the MOA website) and the CPA's accounting in the audit reports. Except for year-end adjustments, these should be the same.

__The email describes and discusses five major discrepancies between MOA's accounting and the CPA's. The accounting should be based on Generally Accepted Accounting Principles. MOA's accounting does not appear to conform to GAAP.

Don Nordeen
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• Key Words:_ Accounting, Business Reviews, Financial Information (2008 General), MOA Operations (General/Total), Preservation Fund

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Why is the Preservation [Reserve] Fund Important?

2009 March 27
Click History for a list of changes and updates.

__This subject was included in the post, 2008 MOA&PCC Financial Results. Because of its importance concerning keeping MOA a viable organization, a separate post is created for further discussion and comments on Reserve Fund — more descriptively the Preservation Fund. The continuation of this post provides that additional discussion and will be updated with any new information concerning this important concept.

Don Nordeen
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• Key Words:_ Accounting Principles and Issues; Financial Information, General; MOA Operations, General/Total; Reserves for Capital Repair [Preservation Fund]

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2008 MOA and PCC Financial Results

2009 March 24
Last update: 2009 Mar 30. Click History for a list of changes and updates.

__The continuation of this post discusses three aspects of financial reports: importance of high-quality financial information, explanation of the Preservation (reserve of replacement) Fund, and explanation of the Preservation (reserve for replacement) Fund, and Estimated financial parameters for the end of 2008.

Don Nordeen
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• Key Words:_ Business Reviews, 2008; Financial Information, 2008 General; MOA Operations, General/Total; Reserves for Capital Repair; Working Capital

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Comments Concerning MOA's 2008Q4 Business Review

2009 March 21
Last edit: 2009 Mar 22. Click History for a list of changes and updates.

__The 2008Q4 Business Review is significantly better than prior ones. It includes serious letters from the board and the general manager. We should also thank the board for these improvements.

__A saying attributed to former Senator Moynihan is that everyone is entitled to his/her own opinion but not to his/her own facts. Where members question or have concerns about what is represented as "facts" in the Business Review, we should speak out and ask for clarification, further investigation, and correction where appropriate.

__The continuation of this post speaks out and asks for clarification, further investigation, and correction where appropriate for selected items. If any of my "speaking out" is not correct, please advise.

Don Nordeen
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• Key Words:_ Accounting Practices, MOA, Business Reviews, 2008, Financial Information, 2008 General, MOA Board of Directors, MOA Members & Members' Rights, MOA Operations, General/Total, Reserves for Capital Repair

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2008 Year-End Financial Statements

2009 March 20
Click on History for changes and updates.

__ The continuation of this post is my email to Todd Chwatun, general manager of MOA, concerning the 2008 year-end financial statements published by MOA to the members. The following areas for improvements are discussed:

• Need to conform to GAAP and the AICPA Audit and Accounting Guide for Common Interest Realty Associations. The MOA Board adopted a policy to conform to GAAP and specifically to the AICPA Audit and Accounting Guide for Common Interest Realty Associations.
• Need to compare MOA accounting financial statements with those from the CPA to identify accounting practice changes for MOA to implement.
• Need for MOA's accounting to always include comparisons to prior year and to budget.
• Need to correct the shortfall in unrestricted cash of $80,000+ as indicated by the CPA's 2007 audit report.
• Need to reduce the dues revenue in the income statement by the amount placed in the Preservation Fund (approximately $48,000) as required by GAAP. The effect is to increase the operating loss from about $250,000 reported in MOA's accounting to about $300,000 which is expected to be reported by the CPA.

These are all serious accounting errors. Use of accounting information with such error misleads everyone. Recommendations are included in the email. Please advise if you find any errors in the analysis.

Don Nordeen
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• Key Words: • Accounting Practices, MOA; • Accounting Principles and Issues; • Financial Information, 2008 General; • General Manager; • MOA Operations, General/Total; • Reserves for Capital Repair; accounting principles; audit; CIRA; Common Interest Realty Association; CPA; financial statement; preservation fund; preservation; reserve fund; reserve

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Accounting for the Reserve [Preservation] Fund

2009 March 11
Click History for a list of changes and updates.__

__This post including graphics is available as a PDF file at Accounting Preservation Fund.pdf.

__The continuation of this post is my 2008 Dec 13 email to Vice President Kirk Yodzevicis concerning an incorrect accounting of $80,000 from the preservation fund (reserve for repair, replacement and renovation) which occurred in 2007. This shortfall of deposits into the preservation fund is reported in the 2007 audit report as described in the email. After three months, there is still no reply.

__ The effect of the incorrect accounting affects all financial results reported in 2008. The restricted cash (cash plus certificates of deposit) for the preservation fund has a shortfall of $80,000. The unrestricted cash is therefore reported with the $80,000 excess which gives a misleading statement of MOA's cash position. I have added graphics of the pages from the 2007 audit report that show this shortfall.

__This is more that just an accounting issue. The $80,000 cash does not exist. It has been spent on operations and not replaced.

__ I raised this question on several Open Forums at board meetings. The response was that neither the board more the general manager had time to look into the possible discrepancy. After the 2008 Dec 13 board meeting, I discussed the matter with Vice President Kirk Yodzevicis, who agreed to investigate the matter if I would send him the necessary information. The email provides that information.

__ Pardon me, but $80,000 of someone else's money for which the board and general manager have stewardship responsibility should seek to be a high priority. One must conclude that mishandling of $80,000 is unimportant to this board, whose members are Vicky Rigney (President), Kirk Yodzevicis (Vice President), Tad Latuszek (treasurer), Carolyn Study (secretary), Richard Gaubatz, Jay Welter, and Brenda Durant. $80,000 is not important to this board, particularly if it results in less favorable financial results.

__ Yet this same board is about to ask MOA members to approve an increase in dues which would provide more money for their stewardship.

__ I will gladly remove this post with an answer to the question with appropriate action.

Don Nordeen
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• Key Words:__Financial Information, 2007 General; Financial Information, 2008 General; MOA Operations, General/Total; accounting; financial statements; preservation fund; reserve fund

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Estimate of Operating Loss for 2008

2008 December 28
Last Edit: 2009 Feb 14. Click on History for changes and updates.

__Making an ongoing estimate of the projected year-end financial results is one of the primary obligations of the board of directors. The budget is annual; so the primary checking point on financial status should be the projected results against that budget.

__One of my ongoing questions at Open Forums is asking for financial results — particularly compared to prior year results. In general, the board is not prepared to answer the question even though the board has just approved filing of the financial report for the prior month.

__The continuation of this post contains further discussion and my estimate of the operating loss for 2008 which is in the range of $200,000 loss (most optimistic) to $280,000 loss. Mr. Todd Chwatun, general manager, was unequivocal during the Dec 13 meeting that the operating loss would be the optimistic number — $200,000 loss. For 2008, the board approved a balanced budget, meaning that the performance to budget is an unfavorable $200,000 at best.

__The Line of Credit and Accounts Payable are also unfavorable to 2007. In 2007, the board used $80,000 from the reserve fund for operations. These three accounts are a short-term debt of $566,000 which is about 65% of the annual dues billing.

__But maybe members aren't interested in receiving correct and competent financial information since they voted to not have an independent audit committee that could provide trustworthy financial reports.

Don Nordeen
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• Key Words: MOA Financial, Working Capital, budget

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Accounting for the Reserve [Preservation] Fund

2008 December 13
Posted: 2009 Mar 11. 
Click History for a list of changes and updates.

__This post including graphics is available as a PDF file at Accounting Preservation Fund.pdf.

__This post is my 2008 Dec 13 email to Vice President Kirk Yodzevicis concerning an incorrect accounting of $80,000 from the preservation fund (reserve for repair, replacement and renovation) which occurred in 2007. This was posted on 2009 Mar 11 as Accounting for the Reserve [Preservation] Fund.  This post is included to place the email in correct time perspective in this weblog. 

Don Nordeen
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• Key Words:xxFinancial Information, 2007 General; Financial Information, 2008 General; MOA Operations, General/Total; accounting; financial statements; preservation fund; reserve fund

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2007 Audit Financial Statements

2008 August 29
Last update: 2008 Sep 13. Click History for a list of changes and updates.

___The audit reports for 2007 are finally available. They should have been available and summarized in the notice of the annual meeting.

___The continuation of this post is a summary of the results reported. Roughly, the results for 2007 are about $100,000 worse than for 2006, which were unfavorable as have been prior years. The cash flow for 2007 was negative (meaning unsustainable).

___If my review of the the 2007 audit report is incorrect, or if you have concerns about the findings from the review, please post a comment.

Don Nordeen
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• Key Words: Financial Information, 2007 General; MOA Operations, General/Total; accounting; financial statements; preservation fund; reserve fund

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Preservation of MOA's Assets

2008 July 24
Posted: 2008 Sep 05. Click History for a list of changes and updates.

___One of the major obligations of MOA through its board of directors is the preservation of MOA's assets. The quality and appearance of the assets provides an important indication of the well being of the Association. Wear and tear are inevitable. Assets in need of restoration are an obvious indicator of the financial health of the Association and poor management by the board of directors.

___The continuation of this post provides the parts of the 2005 preservation study for the items identified for RRR in the 2006-2010 time frame. It seems clear that the current board has decided not to take any action on preserving the assets, even though the board made a report in 2006 stating that the estimates were on the low side, items were omitted from the study, and the preservation fund had a major shortfall.

Don Nordeen
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Continue reading "Preservation of MOA's Assets".

• Key Words:_ access to records; accounting; annual meeting; arbitrary; arbitrary and capricious; Balanced Budget; Business Reviews, 2007; consolidated financial statement; depreciation; Fiduciary Duty; Financial Information, 2007 General; Financial Information, Capital Projects; Financial Information, General; preservation; preservation fund; reserve; reserve fund; Reserves for Capital Repair; transparency;

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Audit Considerations for 2006

2007 May 07
Last edit: 2010 Feb 16. Click History for a list of changes and updates.

__ The continuation of this post is an email to the board summarizing the accounting and audit concerns regarding MOA's financial accounting and reports. Fourteen subject areas are covered, which is an indication of the magnitude of the opportunities for improvement. My goal is to help make the accounting and accounting practices so well founded that even over a beer after a round of golf the members comment that they have no quarrels with the accounting. With solid credibility in the accounting, the members can better spend their efforts on helping to make the necessary improvements.

__ Please post your comments.

Don Nordeen
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Continue reading Audit Considerations for 2006.

• Key Words:_ Financial Information, 2006 General; Financial Information, 2005 General; Financial Information, General; MOA Accounting Practices; MOA Board of Directors; MOA Operations, General/Total

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Recommended Bylaws Provision re Operating Plan and Budget

2007 April 03 Last edit: 2009 Mar 23. Click History for a list of changes and updates. __The continuation of this post is an email to the MOA board of directors recommending an amendment to the bylaws concerning the balanced budget requirements. This amendment merely makes more specific what is to be included in the balanced budget calculation, and would require a monthly projection for balance (unbalance). The M-W online dictionary definition of budget is

4 a : a statement of the financial position of an administration for a definite period of time based on estimates of expenditures during the period and proposals for financing them b : a plan for the coordination of resources and expenditures c : the amount of money that is available for, required for, or assigned to a particular purpose

This definition includes all sources of financing and all expenditures. Unfortunately, the boards over the past six years have only considered revenues and expenses (income & expense items) only, which has underestimated the finances required, and helps to explain MOA's deteriorating financial condition. __This is also a policy issue for building trust with members. An interpretation that avoids disclosing the true budget conditions to members does not build trust with members. __(added 2009 Mar 23) A prior email to the board discusses the concept of Annual Approval of Operating Plan and Budget at [http://swagman.typepad.com/michaywe_poa/2006/10/annual_approval.html] Don Nordeen ========== Click Continue for Post Continuation plus Comments.

• History:xx
• 2009 Mar 23 — Added link to prior discussion of the concept.
• 2007 Jan 10 — Initial Post, but indexed to the date of the email, 2007 Apr 03.
• Links:xxRecommended Bylaws Provision re Operating Plan and Budget at [http://swagmanmwpoa.blogspot.com/2007/04/recommended-bylaws-provision-re.html]
• Key Words:x Financial Information, General; Governing Documents, 2005-7 Amendment Initiative; Governing Documents, General; MOA Board of Directors; MOA Governance; MOA Members & Members' Rights; MOA Operations, General/Total; planning; plan; budget; balanced budget

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Recommended Bylaws Provision re Operating Plan and Budget (continued) __ _From: Don Nordeen ____Date: 2007 April 3 18:59:47 EST ____ _To: Floyd Burchard, Bill Martella, Tad Latuszek, Bob Olszewski, _________Vicky Rigney, Carolyn Study, Kirk Yodzevicis ____ _Cc: Bill Nowacki, Robert Felt, Don Nordeen, Bob Allaben, Bob&Jackie _________Kish, Jack Barry, Mike Buckley, Phil Curtiss, Bill Fish, Gary Hyatt, _________Dick Nelson, Kate Nordeen, Diane Shockey, Pam Tavernier, _________Jim PagelsO, Dick&Joyce Thams, Christine Zarichney __Subject: Recommended Bylaws Provision re Operating Plan and Budget Date: 2007 April 03 ___ _From: Don Nordeen_____ _To: Floyd Burchard, Tad Latuszek, Bill Martella, Bob Olszewski, __________Vicky Rigney, Carolyn Study, Kirk Yodzevicis _____ _cc: Bob Allaben, Jack Barry, Mike Buckley, Phil Curtiss, Bill Fish, __________Gary Hyatt, Bob Kish, Don Nordeen, Dick Nelson, __________Bill & Penny Nowacki. Kate Nordeen, Jim Pagels, Vicki Rigney, __________Diane Shockey, Pam Tavernier, Dick Thams ______cc: Christine Zarichney (for MOA file) __Subject: Recommended Bylaws Provision re Operating Plan and Budget Re: Recommended Bylaws Provision re Operating Plan and Budget __This responds to the discussion concerning Operating Plan and Budget at the Special Board Meeting on Mar 29. I had the writing assignment on this provision. At the Mar 14 bylaws cmte meeting, there were a number of decisions on content, but not full agreement on the language. My email (Appendix) on the revised language was sent to the bylaws cmte on Mar 15. A lot was done at the last moment in putting the bylaws package together, so a few glitches are not unexpected. __The discussion at the Mar 29 board meeting was a very good one. Since the members control the money by having to approve both the dues cap and any special assessment, and since the members are unlikely to ever assign any part of that to the board, a way must be found to connect the members with the operating plan and budget. The operating plan, budget, dues cap and special assessment all go together. Even though the decisions are made by the members, the board has a major role in the process. Trust is essential. ************************************************************************ __With regard to trust, consider a few aspects of how the board views the members as evidenced by the actions taken on Mar 29. The qualitative scoreboard is:

Favorable to the Board — Many Favorable to the Staff — Many Favorable to Members — Zero (so far) Unfavorable to Members — Many

__And this only counts the direct actions. Many, perhaps all, of the actions that are favorable to the board and staff are unfavorable to the members. Why?

• Aren't the directors elected to represent the members?
• Why are the board and staff more important than the members?
• Did any current director state in the election biography and reasons for seeking election that they intended to vote against the members?
• Does the board have the obligation to protect the rights of the members?

__Consider the action on the $25.00 late fee as an example. I heard comments that the members have a fiduciary duty for timely payment of dues. No, members have an obligation to pay. Fiduciary is a duty to others. The fees and penalties for non–payment are defined in the DMCCR, which the board has the obligation to enforce. Does the DMCCR give the board the authority to assign a blanked $25.00 late fee? Does any board member know the extent of the investigation by a prior board in developing the policy? The language in the DMCCR is clear that a $25.00 late fee assigned as a fine requires the four steps (hearing, etc.) with each individual member prior to assessment. If the board is trying to build trust with the members and protect the members rights, shouldn't the benefit of the doubt go to the members? That is also the standard used by the courts — ambiguities construed against the party seeking enforcement. How the board treats the "least of our brethren" sends a powerful message. On the other hand, protecting the rights of the "least of our brethren" would send an even more powerful message that the board is there to help and to serve the members. __The issue of information is also critical. The board and the staff have the information. The members don't. Isn't providing full and accurate information to members so they can make informed votes part of the board's obligation? I heard discussion about phone books and about members having the obligation to dig out the information. Just where would the members get the information? Could they write to MOA and get questions answered within the 30 days between notice and voting? Who would answer the questions? Would a board meeting be required to approved the answers? Is there any other source of information? Full and accurate information is the requirement, done once and done right. And there is the ridiculous hold harmless clause regarding full and accurate information. The board has the resources to get it right. Incidentally, the "full and accurate" phrase has been in the job description for the treasurer since 1971, as in "full and accurate" books and records. __Providing full and accurate information is only one aspect of the voting process. A careful review will show that the voting process in the bylaws committee report is stacked against the members and does not treat members uniformly. These and other provisions must protect the members' rights if they are to be meaningfully involved in the process if trust is to be established between the members and the board. My views. ************************************************************************ __Enough philosophy. But in reviewing the recommended amendment below which is for the members' benefit, consider the members and also the workability. Below is the recommended bylaw provision on operating plan and budget with explanations line by line. The text from the Appendix (email to Bylaws Cmte re Balanced Budget amendment) is shown in blue. #PrpsdAmndmnt

Section 7.xx. Operating Plan and Budget — The board shall develop an operating plan and budget for the following fiscal year and include both with the mailing of the annual dues billing on or before 60 days prior to the beginning of the fiscal year. Members may provide comments and recommendations to the board prior to the beginning of the fiscal year. The board shall consider members’ comments and provide a final operating plan and budget to the members by first-class mail no later than 30 days into the fiscal year.

__Explanation — Since the operating plan and budget interact with each other, they need to go together. Mailing with the dues billing further ties the operating plan, budget and dues together. Note that the word preliminary is not used. Most of the year's revenues and expenses are known by the end of September so the estimates can be reliable. A special board meeting would be required in early January to consider the members' comments and to refine the operating plan and budget as final. It should be then published to the members with the fourth quarter business review mailed in January.

__The Board shall not approve an annual budget in which the total unrestricted operating revenues are less than the total operating expenditures.

__Explanation — This is the balanced budget requirement expressed in simple terms. All members should be able to understand the principle involved. The complexity is in the definitions of what is included. "Unrestricted" excludes the restricted funds (reserves, etc.) from the statement, but the transfers to the restricted funds may be part of the expenditures. "Operating" is a key word as well which excludes extraordinary items, such as a profit or cash from the sale of an asset. The next paragraph provides the definitions.

Budgets shall be based on operating trends adjusted for changes reflected in the operating plan, usual and customary business analyses and methods used to develop operating plans and budgets, and shall be conservative (may need a better word). Any budgets with projected increased revenues require a business analysis based on no increase in revenues, which shall also be provided to the members with the dues billing.

__Explanation — This is a definition for "be realistic". Part of being realistic is not using optimistic projections of revenue for balancing the budget. Hence the requirement in the last sentence. I hope the meaning is clear: no budgets that are only an exercise in arithmetic.

__For the purposes of this provision, total operating expenditures means the sum of (a) total unrestricted operating expenses, (b) required principal payments on long-term notes and obligations, (c) capital investments in new and/or expanded facilities, (d) the net of required reserve funding minus depreciation, and (e) required transfers to any other restricted accounts or funds.

__Explanation — I have inserted letters in the text above to aid the explanation. Since members may not understand these details, they are in a separate paragraph. Perhaps the bylaws should be written with a "lettered" list. Probably better, the CPA should specifically review these definitions.

1. (a) "Unrestricted" means not including revenues earmarked for restricted funds.
2. (b) I have added the word "required" in the text. The budget has to be balanced based on the required payments. Discretionary payments such as might occur from the sale of an asset would be excluded from both the revenue and expense sides.
3. (c) These are the discretionary investments (example is the $100,000 in most of the prior year budgets).
4. (d) This should be better worded as "the greater of depreciation and the reserve requirement from a professionally-conducted reserve study". Since both depreciation and reserve calculations are based on useful lives of the assets and since project-by-project repair etc is more expensive than if done as part of a larger project, the professional study should yield a higher number than depreciation. The use of depreciation establishes a minimum allocation to the reserve fund which would be reflected in more meaningful financial statements.
5. (e) Restricted accounts can also be established by the board or could be established by members' resolution. For example, a fund should be established by the board for the repair of the pool so that the operating expenses related to the repair and the payments from the insurance companies would not distort the operating expenses. The language has been crafted to avoid any implied resolution of the questions about the CI/DR Dues.

As a way of validating the language, the above could be applied to the results for 2002 through 2005. __Monthly projections of year-end results are required with the above requirements applied. A budget or monthly year-end projection not meeting the stated requirements requires approval by a majority vote of the members voting in person or by proxy at a special members’ meeting called within 5 days for this purpose. The notice of the meeting shall provide full and accurate information on the annual operating plan and budget and applicable year-end projections.

____Explanation — The basis for determining status should always be the projected year-end results. When conditions change that affect projected revenues and/or expenses for remaining months, those adjustments should be immediately made in projecting year-end results. The year-end results made each month should be approved by motion of the board. As part of the determination of unfavorable projected year-end results, the board should have debated alternatives for keeping the budget balanced. That is the information needed for the notice. If the result by approved motion is unbalance, the only time required to the mailing the notice is the time to prepare and reproduce the notice for mailing. It is a short time. Delays are costly. No deferring or waiting until next month.

__Click Return to go to the beginning of this post. Don Nordeen (989) 939-8240 =====Appendix — Bylaws Provision as Submitted to Bylaws Cmte===== #BylawsBalBdgt Date: 2007 March 15 __To: Bob Allaben, Mike Buckley, Bill Fish Gary Hyatt, Dick Nelson, _____Don Nordeen,Kate Nordeen, Jim Pagels, Pam Tavernier __cc: Christine Zarichney (for MOA file) Re: Balanced Budget Provision Article VII. Board of Directors __Balanced Budget Provision ____Current Provision — The Board shall not approve an annual budget in which the projected expenses are in excess of the projected income (revenue) unless approved by a majority vote of the members voting in person or by proxy at a Members’ Meeting. The notice of the meeting shall provide complete and balanced information on the annual budget. ____Proposed Provision as a New Section — ____Section 7.xx. Operating Plan and Budget — The board shall develop an operating plan and budget for the following fiscal year and include both with the mailing of the annual dues billing on or before 60 days prior to the beginning of the fiscal year. Members may provide comments and recommendations to the board prior to the beginning of the fiscal year. The board shall consider members’ comments and provide a final operating plan and budget to the members by first-class mail no later than 30 days into the fiscal year. ____The Board shall not approve an annual budget in which the total unrestricted operating revenues are less than the total operating expenditures. Budgets shall be based on operating trends adjusted for changes reflected in the operating plan, usual and customary business analyses and methods used to develop operating plans and budgets, and shall be conservative (may need a better word). Any budgets with projected increased revenues require a business analysis based on no increase in revenues, which shall also be provided to the members with the dues billing. ____For the purposes of this provision, total operating expenditures means the sum of total unrestricted operating expenses, principal payments on long-term notes and obligations, capital investments in new and/or expanded facilities, the net of required reserve funding minus depreciation, and required transfers to any other restricted accounts or funds. ____Monthly projections of year-end results are required with the above requirements applied. A budget or monthly year-end projection not meeting the stated requirements requires approval by a majority vote of the members voting in person or by proxy at a special members’ meeting called within 5 days for this purpose. The notice of the meeting shall provide full and accurate information on the annual operating plan and budget and applicable year-end projections. ______Rationale — The proposed provision corrects the deficiencies in the current provision by reflecting all of the operating revenues and expenses. By including the operating plan and budget with the dues billing, members can relate what they are paying to what will be provided. The dates reflect timely action by the board. The 30-day requirement reflects approval of the year-end results for inclusion in the fourth quarter business review. The second paragraph defines requirements to avoid unrealistic budgets, which requires Plan B (no revenue increase) if Plan A is based on a revenue increase. The third paragraph provides the accounting detail to ensure that expenditures do not exceed revenues. The last paragraph requires monthly evaluations by the board for which unbalanced budgets or projections require prompt approval by the members. The CPA should review the third paragraph to ensure that the accounting details are properly stated. ______Further Explanation — The operating plan and budget are logically bound together as hand in glove. The parts members may have difficulty understanding are the accounting details in the third paragraph. A qualitative understanding is provided by the first, second and fourth paragraphs. Barron's accounting dictionary defines expenditure as "Payment of cash or property, or the incurrence of a liability to obtain an asset or service." That is what is intended to be described. The CPA should also verify the default for reserve funding equal to the depreciation. Don Nordeen Tel: (989) 939-8240

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