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HELP YOUR COMMUNITY
READ THIS AND THEN FILE TO BE A BOARD CANDIDATE BEFORE FRIDAY THE 3RD @ 4 PM.
By Forrest Quinn
WE ARE NOT GETTING WHAT WE ARE PAYING FOR.
SCA’s COO’s annual compensation package is about $315,000. Yet, the COO has so little regard for residents she doesn’t even work an eight-hour day at SCA’s office (typically arriving after 8 AM and leaving before 4 PM with many Fridays off). But to make up for the lost time, she requests assessment increases to add more staff.
About 15 months ago, the COO hired an SCA resident as Chief Financial Officer (CFO). The CAM at the time (licensed HOA manager) told the Board that hiring a resident for a managerial position was a professional ethics/standards violation. That CAM left SCA shortly after that.
SCA is wasting money because the COO isn’t knowledgeable enough to know that SCA doesn’t need a CFO. SCA’s accounting is bookkeeping, not finance. SCA’s “CFO” doesn’t manage multiple locations in multiple states. The “CFO” does not supervise other professionals like CPAs, MBAs, degreed accountants, etc. The “CFO” has no check signing authority. Shockingly, the “CFO” doesn’t even sign SCA’s tax return. Instead, the COO pushes that liability off onto unpaid volunteers. SCA’s accounting manager is not a CFO.
The COO’s CFO pick had no HOA experience and no CFO experience (no fund accounting experience, no reserve study experience, no reserve funding experience, no assessment experience, no HOA income tax experience, and no construction or project management experience). Nevertheless, our COO was generous with our money and started the inexperienced “CFO” as the highest-paid HOA accountant in Nevada with a $190,000 to $200,000 compensation package.
You would think that top-of-the-line compensation would provide top-of-the-line results. You would be wrong.
SCA’S FINANCIALS ARE NOT COMPLIANT WITH NEVADA LAWS AND REGULATIONS:
SCA’s 2023 budget did not provide adequate reserve funding.
The Villa’s “additional assessment” is non-compliant.
SCA’s interim financial statements are not prepared per Generally Accepted Accounting Principles (GAAP).
SCA doesn’t prepare monthly financial statements.
THE COO’S NON-COMPLIANCE WITH CC&RS – CORRECTED BY VOLUNTEERS
The COO denied Villa owners the use of their property by denying their requests to install backyard patios. Volunteers found and corrected her error.
Due to the lack of funding, much-needed improvements were blocked for years. The COO never alerted the Board that SCA’s CC&Rs included a project funding mechanism called the Asset Enhancement Fee (AEF). Before a volunteer corrected this, about $1.7 million in improvement funding was lost since the COO’s arrival.
MILLION DOLLAR RESERVE STUDY ERRORS – CORRECTED BY VOLUNTEERS
The COO and her CFOs have missed millions of dollars in Reserve Study errors. This includes overvalued masonry walls, use of improper reserve techniques, and missing landscaping replacement costs. All of the above were detected and corrected by volunteers.
Nevertheless, due to these errors, the Villas are getting massive special assessments of about $10,000 per home.
There is a 2023 Reserve Study under contract, but there isn’t anyone on staff or on the Board with a proven understanding of Reserve studies.
DESPITE TOP COMPENSATION – NO PROACTIVE MANAGEMENT
Ironically, SCA’s Chief Operating Officer doesn’t provide operating information. Image the COO of General Motors not disclosing how many cars are made or sold. At SCA, how many residents use our facilities? How many fitness classes are held? How many residents are participating in bus trips or attending variety shows? These and other metrics should be compared over time to determine if SCA is improving or declining. Then corrective action can be taken as required. How can the Board or residents make informed decisions without knowing this information?
To reduce risk, financial forecasting is a fundamental CFO duty. But SCA’s COO/CFO refuse to prepare multi-year assessment forecasts.
No strategic planning. If the COO/CFO don’t know 55+ HOA market trends, they should work elsewhere. Instead, they should identify emerging HOA market issues and develop solutions for the evolving HOA environment.
Whether you are pro or anti-restaurant, where is the information to make a decision? It is astounding the residents must FIRST pay $1.2 to $1.4 million before anyone starts a marketing/feasibility analysis to determine if the money was well spent.
IF YOU WANT CHANGE, YOU MUST RUN FOR SCA’S BOARD OF DIRECTORS.
The COO works for the Board of Directors. If there is a performance problem, as you obviously believe, then that lack of performance is the fault of the BOD. It is their responsibility to fix the problem.
Since completing my terms of service on the SCA Board, I have refrained from attending board meetings. Yet, I attended the January meeting of the SCA Board to see and hear the presentation on the 2022 year-end financial statements. As I stated at the meeting, I found the financial statement presentations contained the right amount of detail and were in a format that a non-accountant could understand. I also found the CFO’s oral comments helpful and displayed a knowledge of “details behind the numbers”.
Once the independent audit for 2022 is complete, a comparison of the unaudited 2022 financial statements and the audited financial statements will validate the accuracy of the unaudited 2022 financial statements presented in January. Furthermore, the independent auditor’s report on internal controls will serve as a benchmark of the reliability of the SCA accounting process. Because of the work of the Audit Committee and the Finance Committee, I expect the auditor’s reports will validate both the financial statements and reliability of SCA internal controls. Until the 2022 audit is complete, I suggest keeping doubts about the unaudited financial statements or the capability of the CFO on hold. SCA has bigger fish to fry.
I agree with the criticism regarding “title inflation” at SCA. The responsibilities and work performed by SCA’s “CFO” are more consistent with those in a job description for a controller (aka chief accounting officer). But, it is unfair to blame the CFO or criticize her for the deficiency. Instead, the Board should be held accountable for the lack of a personnel policy that includes an independently developed staffing chart with appropriate job titles. It is nonsense that an inflated title is necessary to attract a qualified person to manage SCA accounting and reporting operations, particularly at SCA’s compensation levels.
Criticism needs to be more carefully aimed to hit the target. As in many case, the SCA Board of Directors should be the target.
One of the key principles of good governance is the structure of an audit committee and to have the INDEPENDENCE necessary without conflicts of interest or the appearance that an actual conflict is possible.
SCA AUDIT COMMITTEE’s mission is to assist the Board of Director’s oversight responsibilities with respect to:
1.Financial Reporting
2,External Audit Process
3.Internal Controls
4.Compliance with Laws and Regulations and the related risks thereto
The Audit Committee has 5 members:
1. SCA BOD Treasurer ( chair)
2. Another SCA BOD Director
3. Chair of the Finance Committee
4.Another Finance Committee member
5. At Large
A. The Audit Committee structure lacks the INDEPENDENCE both in appearance and practice to be self defeating and suspect. Some would correctly argue that the structure creates the FOX guarding the HEN HOUSE in appearance if not practice defeating the INDEPENDENCE universally accepted AUDIT STANDARDS. Board members Greg Swenson( chair) and David Meredith serving as committee members is just wrong because they are board members overseeing themselves.
B. And the 2021 external audit was performed by a California firm headed by Mr. Porter and is the same Mr. Porter through an offshoot company he owns in Nevada is doing the 2023 Reserve study. Not sure if his firm is doing the 2022 audit but if so there is an appearance of conflict of interest because there is a lack of Independence. Mr. Porter ought to do one or the other. Not both especially in the 2023 Audit as he would be reviewing his own work.
c. I claim that internal controls are weak. While the current CFO gave a good presentation she revealed and acknowledged the weak internal controls relating to the restaurant accountings and reporting. That’s pretty significant considering the amount of investment. And internal control oversight is not only limited to accounting.
d. The audit committee is charged to ensure compliance with the laws and regulations. That includes all rules regulations and governing documents of SCA. That requires internal controls. What oversight is the Audit Committee doing? What internal controls is it examining? There certainly wasn’t any INDEPENDENT oversight in the 2023 Main Assessment, the MAIN RESERVES, examining possible abuse of power claims by COO and the board and unequal enforcement claims. NO INDEPENDENCE.
And because of the above stated weaknesses one cannot and should not rely on the reporting. It lacks INDEPENDENCE and competence. The board of directors is responsible for the existing deficiencies and Mr. Quinn has laid out a very good case as to why.
The Audit Committee is, and has been for as long as I can remember, the most corrupt internal organization in SCA. The five members are either appointed or approved by the SCA Board of Directors. The Audit Committee meetings are held in secret, the agenda and the minutes for these meetings are not published, and no homeowners are permitted to attend. Greg Swenson has confirmed these facts to me, and said the status quo will remain in place.
The Audit Committee is the only committee that I am aware of that does not provide an update of their activities in the Spirit. Hence, any new homeowner has no idea that an Audit Committee even exists.
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