Is Transition to Self-management In Trouble? Part 1 of 3

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Is Transition to Self-management In Trouble? Part 1 of 3

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    Rana Goodman

    The following three part series was written by board member James Mayfield. Jim is not running for re-election to our board and we thank him for his service to this community. He could always be counted on for a frank answer whenever a question was asked of him. These thoughts are un-editied and are his feelings as written.

    The purposes of my three articles on transition to self-management are to summarize frequently expressed perceptions by homeowners about the transition to self-management (Part 1), to express my assessment of the root cause driving these perceptions (Part 2), and to examine the role of homeowners in insuring better governance and management at SCA (Part 3).

    Part 1—Frequently Expressed Community Perceptions

    SCA homeowners are expressing their perception that the implementation of the Board’s decision to transition to self-management from third-party management (by a management company) was a mistake and is in trouble.  Their perception is based on six commonly held observations.

    1. Communication from the Board is insufficient and poorly executed.
    2. Board and management actions have decreased transparency of the decision making process.
    3. Board members and management don’t listen to homeowners and substitute their personal goals for those of a majority of the homeowners.
    4. Operating costs are increasing and driving assessment increases instead of achieving promised cost savings.
    5. The appropriate and inappropriate roles of volunteers is changing and without sufficient input from the volunteers.
    6. The capability to amicably resolve the inevitable conflicts that arise involving clubs, service groups, individuals, and long-standing partners has deteriorated.

    Specifics About Common Perceptions

    Communication.  The sufficiency of communication between the Board and management and the SCA homeowners will never be resolved to everyone’s satisfaction.  Furthermore, communications is a two-way street in which homeowners must play an active role.  Homeowners have a responsibility to insure that their contact information (e.g. preferred mail address, telephone numbers, and email address) is up to date and accurate.  Homeowners also have a responsibility to participate in responding to age surveys, Board elections, and other assessment tools used to determine homeowner preferences.  Homeowners also have a responsibility to stay informed on significant issues that affect the quality of life at SCA and financial issues that affect their cost of ownership and property values. Despite of these admonitions, my assessment is that communication from the Board and management to homeowners is deficient.

    Communications on policy and strategic issues are strictly controlled by the Board president and GM and frequently do not represent the position of the whole Board or divergent views by members of the Board.  Communications frequently cherry pick information and are skewed to “sell” a position instead of presenting all facts and viewpoints so that homeowners have all of the information or viewpoints necessary to understand important issues and related Board and management actions.

    Transparency.  Board candidates frequently state they will improve transparency of SCA governance, if elected.  But the two last years, the actions of the Board Presidents and many Board members haven’t matched their campaign rhetoric.

    The Presidents have used their self-serving, misinterpretation of Section 4.4 of SCA By-laws and Section 4.5 of the Board Policy Manual to

    • Give direction to the GM, CAM and SCA legal counsel on behalf of the Board, without a majority vote of the Board at a properly noticed Board meeting,
    • Use Emergency Board meetings that do not require normal notice requirements to avoid timely awareness of such meetings and to avoid disclosures,
    • Suppress allowing items on the regular agenda proposed by other Board Members that they did not want publicly discussed,
    • Issue reprimands, including letters issued by SCA legal counsel, not approved at a meeting of the Board or without inclusion of the Board Member being reprimanded, and
    • Assign the development of Board policy and oversight to individual Board members supportive of their positions to insure that recommendations do not contain minority input.

    The majority of Board Members supported these violations of SCA governing documents and, in certain matters, State law.

    Similar tactics have been used by the Treasurer to circumnavigate the collective governance of the Board as well as the intended roles of the Finance and Audit Committees

     Preferentialism. With few exceptions set out in NRS 116 and SCA CC&Rs and By-laws, the approval or ratification of Board decisions by homeowners is not required. However as fiduciaries, Board members are expected to stay objective, unselfish, responsible, honest, and trustworthy as stewards of public trust and must always act for the good of the organization, rather than for the benefit of themselves.

    Homeowners have expressed concerns that the Board and individual Board members have exercised preferential treatment in

    • Appointment of members to SCA committees,
    • Authorizing use of SCA facilities,
    • Decisions regarding the restaurant, and
    • Equipment purchases.

    Homeowners also believe that prudence dictates that the Board and GM must increase involvement of homeowners in major decisions when the support of the Homeowners will be critical to the success (or failure) a decision.  Two examples of such decisions are ones taken regarding a restaurant at SCA and authorization of litigation.

     Cost Control.   Over the last three years, revenues from SCA operations, including assessments, exceeded operating costs plus contributions to reserves by over $1.25 million.  Furthermore, once SCA elected to no longer use a management company, the $700,000 once paid to the management company became available for other uses.  Yet, the Board authorized a 10% increase in the annual homeowner assessment for 2017.

    Homeowners are asking why the anticipated costs savings from self-management plus accumulated excess funds resulted in an assessment increase instead of a roll back of assessments.  Four answers partially respond to this question.  The explanations include (1) the costs of transition to self-management, (2) the costs of correcting construction defects at Liberty Center, (3) retention of approximately $600,000 of excess funds (a violation of NRS 116), and (4) unsupported, unnecessary contributions to SCA reserves  (See Attachment 1 by the former chair of the SCA Finance Committee on this subject.)

    Volunteerism.   The effects on volunteers resulting from the change to self-management have not been assessed on a comprehensive, strategic basis.  Instead, changes have been developed on an ad hoc basis by a small number of directors appointed by the President without the participation of the whole Board or representation of dissenting viewpoints.  Many active volunteers have expressed their views that the process resulted in confusion, dissatisfaction and a loss of independence and influence of standing committees and community service groups.

    Conflict.  Disagreements inevitable arise within the SCA community involving individuals, clubs, and service groups.  Clearly, one of the primary obligations of the Board is to be the ultimate arbiter of disputes.

    But, since beginning implementation of transition to self-management, the appearance of an increase in the number of disagreements is of concern. More importantly, the ability of management to impartially and efficiently aid in amicable resolution of disputes is now frequently questioned. The result is an increased need for the standing committees and the Board to become involved in the resolution of disputes.

    View on the Perceptions

    Perceptions expressed to me by many homeowners align with my views. I accept that the path to changing from using a management company for management services has encountered rough spots.  The performances of the GM and CFO have not been perfect; management has made mistakes.  These problems shouldn’t be either glossed over or blown out of proportion.  While the Board owes the GM its support, it also owes the homeowners a candid assessment of progress—both successes and disappointments—as fiduciaries charged with the oversight of management.

    In my next article, I will explore whether past and present perceived problems at SCA are a result of management failures or inadequate governance.


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