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REMAIN CALM … NOTHING TO SEE HERE … MOVE ALONG!
By Forrest Quinn (former SCA board member & treasurer)
Within 24 hours of the three incumbent Board candidate’s embarrassing debate performance, the Board sent an “all is well” email. Monday’s Community Chronicles Eblast attempted to rebut criticisms of the Association. Unfortunately, management denied me my right to respond in kind under NRS.116.31035. Below is the original Board message in black text; my comments are in red italics.
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Message from Sun City Anthem Board of Directors (Dated 3/02/23)
There has been some criticism of the Association that requires the Board of Directors, based on our fiduciary duty, to make some accurate statements of facts. What follows are the issues heard from a few of our many residents and the actual information that refutes these criticisms.
Despite their claim, the Board’s “statement of facts” and “actual information” don’t refute the criticisms. FIRST, NOTE THE GLARING OMISSION: The Board doesn’t defend the COO’s or CFO’s outrageously high salaries. Evidently, even SCA’s Board (silently) believes the COO’s and CFO’s salaries are indefensible.
QUESTION: Does the COO work an eight-hour day at SCA’s office?
Answer: Sandy Seddon has a salaried position at SCA. She does not punch a time clock but works as many hours as it takes to get her job successfully accomplished. Sandy averages 50-55 hours per week including many hours at her residence handling phone calls, handling emails and reading documents.
The Board posed a question but didn’t answer it. The answer is; the COO doesn’t work an eight-hour day at SCA’s office. The COO typically arrives late and leaves early. Why does SCA’s Board consider this acceptable conduct/leadership? Do all SCA employees enjoy this privilege? If the COO doesn’t show up for an eight-hour day, how can the Board compel other employees to do so? How productive/committed are SCA’s 80+ other employees when the COO is so frequently absent?
QUESTION: Is SCA’s accounting only involved in bookkeeping, not finance? Does the CFO have check signing authority? Why does the CFO not sign SCA’s tax return? Does the COO or CFO push the tax return liability off onto unpaid volunteers?
Answer: SCA’s accounting department handles a broad range of responsibilities which include receivables, payables, general ledger, club accounting, investment decisions, financial analyses on all major projects, vendor bid analyses, advising the COO on all financial decisions, advising the Finance Committee on all financial decisions, and advising the Board of Directors on all financial decisions. The CFO is also responsible for leading the annual budget process and the five year reserve study.
The description above is for a Controller; it is not a CFO’s job description. Nearly every accounting task at SCA is clerical/bookkeeping in nature. If there are any financial analyses, they are well hidden. For example, the restaurant’s financial analysis is a year late. Furthermore, typically reserve studies are prepared/managed by engineers, and engineers are never mistaken for Chief Financial Officers.
The CFO wears many hats and is frequently torn between competing tasks throughout her normal workday. One task that the CFO is not allowed to perform (per NRS law and SCA bylaws) is the signing of checks or the signing of the annual tax return. Two Board members must sign each SCA check. The Board Treasurer must sign the annual tax return.
If NRS regulations and SCA’s bylaws do not permit an HOA employee to sign checks nor allow them to sign the tax return, that is conclusive evidence that the Nevada legislature never intended HOA employees to be the Chief Financial Officer.
Conversely, as NRS and the bylaws grant the Treasurer the authority to sign association checks and tax returns, it indicates SCA’s Treasurer is the senior financial position (CFO). Furthermore, the Community Association Institute (CAI), which issues Community Association Manager (CAM) licenses, states that an HOA Treasurer is the association’s Chief Financial Officer.
QUESTION: Are SCA’s financials compliant with Nevada laws and regulations? Did SCA’s 2023 budget provide adequate reserve funding? Is the Villa’s “additional assessment” compliant? Are SCA’s internal financial statements prepared per Generally Accepted Accounting Principles (GAAP)?
Answer: SCA’s Audit Committee hires an outside CPA firm to perform an annual audit. The CPA firm selected is an expert in large HOA accounting practices. SCA is given a clean audit each year which means SCA is compliant with GAAP.
SCA’s staff does not prepare monthly/quarterly financial statements that comply with Generally Accepted Accounting Principles (GAAP). GAAP requires a balance sheet, an income statement, and a STATEMENT OF CASH FLOWS. Staff’s financial statements do not include a statement of cash flows. This report is prepared/compiled by SCA’s auditor and included in the auditor’s annual report.
Gary Porter, an expert in large HOA reserve funding, has advised SCA to not focus on what percentage your reserves are funded, but focus on your “cash flow situation”. SCA’s cash flow is outstanding to cover all future needs. An updated reserve study will be completed in 2023 to make sure SCA’s cash flow remains in excellent shape… The Villa’s “additional assessment” is very compliant.
The percentage funded is not the issue. NRS 116 defines adequately funded reserves as sufficient cash when required (the necessary funds are always on hand when repairs are needed). The problem is that in 2022, two Villa reserve assessments passed within 30 days of each other, and neither adequately funded the Villa reserves. Consequently, the Villa’s “cash flows are NOT outstanding to cover all future needs.” Gary Porter would be alarmed that SCA’s Board is using his name to justify passing budgets that do not adequately fund reserves.
The Board approved the “additional assessment” after receiving legal advice.
An “additional assessment” might be allowed, but it still needs to meet the adequate funding requirements which it did not.
Subsequently, a complaint was brought to the Nevada Real Estate Division which was dismissed without merit.
The NRED complaint didn’t address the adequate funding issue, so why is the Board trying to confuse residents by implying it does?
QUESTION: Does SCA prepare monthly financial statements?
Answer: The CFO presents monthly financial statements to the Finance Committee at their monthly open meeting. The CFO presents quarterly financial statements to the residents at the April, July, October, and January open Board meetings. In addition, both monthly and quarterly financial statements are posted on the SCA Website after they are accepted at the quarterly Board meeting.
The more Management spends and the more people on the payroll, the less budgeting, financial, and operating information residents can see to determine if their money is well spent. One of these restrictions is Management’s requirement that residents trek to the Anthem Center each month during a one-hour window to review SCA’s monthly financial statements. Management’s absurdity dial is at “11.”
Furthermore, per NRS 116.31175, owners can access SCA’s financial statements WITHOUT LIMITATION. The only exception is (4)(c) when the executive Board has not yet placed an item on the agenda for final APPROVAL by the Board.
SCA’s Board NEVER approves monthly financial statements. Look at SCA’s quarterly Board meeting minutes; the Board merely ACCEPTS financial statements; they don’t APPROVE them. When I was on the Board, it was made clear that “Accepting” and “Approving” were two different standards. Nevertheless, Management keeps withholding financial records on the false premise the Board needs to approve them.
QUESTION: Whether you are pro or anti-restaurant, where is the information to make a decision? Why did residents first pay $1.2 to $1.4 million before anyone starts a marketing/feasibility analysis to determine if the money was well spent?
Answer: SCA spent many months negotiating a multi-year contract with Western Hospitality Group before deciding on presenting this finalized contract to the residents. This restaurant agreement included financial projections for the preopening time frame and four years of operating results. The restaurant decision was fully debated at the March 2022 Board meeting. The restaurant agreement was accepted with a 4-3 vote.
SCA has three restaurant cost “buckets,” none of which were available in March 2022. Without this cost information, it wasn’t possible to “fully debate” the restaurant issue. Nevertheless, without knowing the scope of the costs, four Board members irresponsibly voted to approve reopening the restaurant. A year later, the Board has yet to determine or disclose the financial consequences of their vote.
FYI, the three restaurant cost buckets are:
1) SCA’s startup costs are remodeling, furniture, design, etc. A year after the Board blindly voted to reopen the restaurant, we now know this cost will be about $1.4 million. Imagine how different last year’s debate would have been if Management had practiced finance and provided an estimate of the restaurant’s reopening costs.
2) The WGH restaurant agreement where SCA is obligated to fund the restaurant’s annual losses. These costs were never disclosed to SCA’s residents. The March 2022 Board book includes a scrambled mess of restaurant spreadsheets with only one year of information, not four. In addition, because of inflation, these projections are no longer valid.
3) SCA’s annual restaurant overhead costs outside the WGH operating agreement, such as utilities, taxes, insurance, labor, etc. SCA’s annual restaurant overhead costs have never complied. Management obscured these costs in their 2023’s budget.
It will take at least two years of restaurant financial results before anyone can make a determination whether the restaurant investment was financially sound.
And what is the “financially sound” standard? Our transparent Board won’t say.
During March, SCA’s Board Treasurer will publish a “Yorktown Grill Financial Overview”. This financial summary will remind residents of our restaurant investment and WHG’s future financial projections for the Yorktown Grill.
As the restaurant’s financial information was never known to SCA’s residents, the Treasurer cannot “remind” residents of something they never knew.
Forrest
Never fear the cavalry is here! LOL! Today I delivered my written response under NRS116.31035 2 to be published this coming week. If they reject their duty then I will await the results of the election and then initiate actions against Sandy Seddon, Steve Anderson, Greg Swenson, David Meredith and Doris Logar in accordance with the provisions in NRS116.
And at that time I will call for their collective resignations as they are participating in direct disregard of NRS116 and homeowners’ rights.
NRS116.745 Defines Violations and NRS 116.760 contains the process and consequences. More importantly if not published as you and others have told me the board and management are using their weaponized legal counsel to silence critics.
Our only recourse long term is to create a new board majority that will get rid of Seddon and Clarkson. And that will take two election cycles. It is time to end the failed leadership.
This election hopefully will be the beginning.
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