OCTOBER BOARD MEETING 10/26

Each month management of SCA produces a Board Book for the Directors meeting. Please understand that during my career I was at times a Chief Financial Officer and I also have been a Director on an HOA board. I have a bias. I believe that whomever is preparing financial information especially to a HOA Board of Directors must lay out the information in a way that answers basic financial questions for the reader. FOR EVERY LINE ITEM I’d want to know:

1. What has happened this period? ( in terms of spending)
2. How does it compare to Budget?
3. If we are over or under budget significantly Year to Date ( YTD) provide an explanation. Why?
4. How does it measure up to where we might end up at year end? Always have a projection beginning with 6 months actuals and 6 months projected to equal the 12 months. Then in month 7 have 7 month actuals plus 5 months projected.
5. How does this period ( or month)compare to the previous year’s same period( or month)?
6. Any corrective actions you recommend based on analysis?

I will suggest to you that SCA’s financial operation is not up to speed and the BOD is complicit. And management in the form of the COO contributes to the chaos because of a lack of her operational and financial skills. They seem to play defense because they really aren’t doing a good job. Change is needed.

Here is just a sampling of a few items that caught my eye in reviewing the October Board Book:

1. It looks like unpaid assessments are growing. At 9/30/23 the amount doubled from last year same month to $50,404. What’s going on?
2. Income taxes were budgeted at $56k and came in at $132k. Why?
3. The Restaurant expenses were over budget by $177,741 through 9 months. How big of a loss are we expecting for 2023? The 2023 Budget was $316,800 but CFO has reclassified certain expenses that are no longer included so we don’t have apples to apples. How big of a loss is being projected as of this meeting including all costs.
4. Also relating to the Restaurant are Utilities and Insurance and Trash. The Utilities show a budget of $661,711 to date and over budget by $76,904. Small allocations were assigned to Restaurant for September. What is the formula going forward and is it enough? How do you know? How much of utilities are due to construction of restaurant build-out and August operations? Did the restaurant accounting ignore utilities prior to opening? If so, please correct it.
5. It appears at the October Town Hall a homeowner and CPA raised the issue of the budget and financials for 2024 with a need to show restaurant revenues( as all revenues must be included). That’s Nevada law as well as accepted accounting. Apparently Treasurer Greg Swenson said not going to show Restaurant Revenue. He intends to net revenues and expenses on one line item. Wrong answer. I would urge a change of attitude as Mr. Swenson is wrong and the board ought to get its 2024 budget properly prepared in accordance with Nevada law.
6. Federal Income Taxes were budgeted at $56k and came in at $132k. Why?
7. There is an item for cumulative unbudgeted 2023 reserve expenditures $ 1,213,982. Who approved and were any provisions of our governing documents violated? What is budgeted for 2024 Reserve Expenditures?
8. Are there any NEW capital expenditure for 2024 outside of the Main reserves? If so what are they and where are the monies approved to pay for them? Don’t they need to be part of ratification meeting assessment approval?

There is another item on the board agenda that I will write about in a future post. Board members Rick Ernest and Pam Williams have been sent this at this time to help them prepare and support good governance.

Until next time…Robert