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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• Key Words: Accounting Practices - MOA, Financial Information - 2007 General, Financial Information - 2008 General, Financial Information - 2009 General, MOA Board of Directors, MOA Operations - General/Total, Reserves for Capital Repair [Preservation Fund], accounting, AICPA Audit & Accounting Guide for Common Interest Reality Associations, AICPA Audit & Accounting Guide, AICPA, audit, board of directors, CIRA, preservation fund, preservation, replacement fund, replacement, reserve fund, reserve

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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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2008 Audit Report for Michaywe Owners Association

2009 June 23
Last edit: 2010 Feb 17. Click History for a list of changes and updates.

__The continuation of this post is my email to Mr. David Myler of the CPA firm conducting the 2008 audit concerning the report made by a staff member of this firm at the 2008 MOA Annual Meeting. The email supports and explains my comments and questions at the Annual Meeting.

__I did recommend this firm because it focuses on reviews and audits for owners associations and has the knowledge of the accounting standards applicable to owners associations.

__The results have been disappointing. The content and format for the audit reports have changed each year. Many of the requirements in the applicable audit and accounting guide for owners associations do not appear to have been applied.

__ The lack of consolidated financial statements, however, is the responsibility of the MOA Board which did not authorize their preparation even though required as part of GAAP.

Don Nordeen
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• Key Words:_ • Accounting Practices, MOA; • Financial Information, 2008 General; • MOA Operations, General/Total; • Reserves for Capital Repair; accounting principles; AICPA Audit & Accounting Guide for Common Interest Reality Associations; AICPA Audit & Accounting Guide; audit; CIRA; Common Interest Realty Association; consolidated financial statement; preservation fund; transparency

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Comments on the 2007 Audit Reports

2009 May 18

Last edit: 2010 Feb 17. Click on History for changes and updates.

__MOA has had two different auditors (CPAs) in the years since 2000. Significant changes were made in the format and content in the review/audit reports by the CPA from 2000 to 2005. A major restatement of MOA's 2000-2004 income statement and other accounts was made in 2005 to correct the handling of the losses in the Pines Club Corporation. Beginning in 2006, a new CPA firm was engaged, who made further changes in both format and content. The new CPA used a different method for entering PCC's losses into MOA's accounting.

__MOA members are rightfully confused. No one on the board has explained what has happened and why. Without intervention by someone, the same errors and discrepancies are likely to be carried over into the audit reports for 2008.

__The continuation of this post is my email to MOA's CPA commenting on the 2007 audit reports which contain the possible errors and discrepancies.

Don Nordeen
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• Key Words:_ Accounting Practices (MOA), Financial Information (2007), Financial Information (2008), MOA Operations (General/Total), Preservation Fund, accounting principles; AICPA Audit & Accounting Guide for Common Interest Reality Associations; AICPA Audit & Accounting Guide; audit; CIRA; Common Interest Realty Association; consolidated financial statement; preservation fund; transparency

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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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MOA Financial Information Re Dues Increase Vote

2009 March 25
Last update: 2009 Apr 30. Click History for a list of changes and updates.

__(added 2009 Apr 30) According the my notes taken at the meeting, the voting results on the proposal to increase the dues cap (annual fees) from $400 to $475 beginning in 2010 are as follows:

total votes cast: 1238
not in good standing: 33
invalid: 45
yes: 497 (43% of valid votes)
no: 663 (57% of valid votes)

__The most critical information concerning a proposed dues increase is the financial information, operating plan, and budget. The financial information provided by the board in the 2008Q4 Business Review has significant discrepancies and omission relative to the financial information in CPA's audit reports which include the financial statements. Further, the board states in the Business Review that the CPA's audit report for 2008 will not be available before the vote.

__The board has not provided an operating plan, but described some broad generalities which are not quantified.

__The published budget for 2009 is balanced likely for two reasons: (1) the numbers are not realistic; and (2) not all expenditures and obligations are included in the budget.

__The continuation of this post is my 2005 Mar 25 email to MOA members with a copy to the board of directors on this subject. Financial parameters based on the CPA's methodology are developed. Alternatives for comprehensive structural reform are described. The two recommendations are to vote NO on the proposed dues increase and to write to the board requesting a comprehensive plan for a New Bargain — structural reform of MOA's model, management, and operation with the dues increase required with the New Bargain — in time for a vote to implement the reform if approved or to cut operating to live within MOA's means.

Don Nordeen
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• Key Words:_ Business Reviews; Financial Information (2008 General); Members' Rights, MOA Operations (General/Total); 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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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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