Fact Checking and Financial Hanky Panky

The following was originally written and distributed by Ron Johnson and is republished here with his permission for you to see what others are saying about the current HOA Board and happenings.

Wednesday, October 4, 2017

Fact Checking Some of OSCAR’s Claims

In a letter to residents, OSCAR’s leadership team of former board members and others have attempted to support their opposition to the Board Directors removal petition by making a number of claims about SCA’s self-management, financial condition and other issues. Unfortunately for the intended readers, the OSCAR letter makes a number of gratuitous and false claims, which I have commented on below.

Opinion and commentary by Ron Johnson

Self-management is working.
OSCAR’s Claims What are the Facts
Our facilities are in better condition than they ever were with the management company. False. It’s blatantly misleading to attribute the poor condition of Liberty (and now Anthem) Centers to FSR when successive Boards deliberately ignored and refused to timely address needed repairs.
We no longer have to pay $36,000 per month to a management company. True. However, SCA is compensating key management staff a similar amount per month.
Current payroll expenses are less than we formerly paid the management company to manage our Association. Inconclusive. There’s an array of issues that affect payroll expenses, including startup vs. FSR wage scales and employee turnover, which happens to plague custodial jobs here.
Communication with and understanding of members’ issues has improved. False. The Board eliminated members’ primary venue to voice their individual and collective input when it transferred the project management mission from the Property & Grounds Committee to the General Manager. With the loss of that venue, there is no longer any effective means
Sun City Anthem is in excellent financial condition.
OSCAR’s Claims What are the Facts
Expenses are under control. False. With management deferring over half a million dollars in originally scheduled repairs for 2017 to 2018, that’s a picture of expenses out of control, not of expenses under control.
Revenues exceed expenses by nearly $450,000 through August. False. Indeed, management simply manipulated the books to reflect that revenues exceeded expenses. How did they do that? They did so by moving $550,000 in reserve expenses that was originally scheduled for 2017 to 2018. In doing so, SCA’s revenues for 2017 could only then reflect an excess over expenses. Some might refer to that as hocus-pocus accounting.

 

If all of that originally scheduled work had been performed in 2017, expenses would have exceeded revenues by $100,000, just the opposite of the surplus that was claimed. It’s reasonable to assume that the Board and management, possibly for political reasons, wanted the financials to report a “surplus” rather than a “deficit.”

No dues increase is expected for 2018. True, but. Only on the basis of questionable financial statements does the “no dues” decision make any sense.  In reality, though, the Board is keenly aware of the extent of SCA’s financial problems. It’s evident that SCA did not have the funds needed to do all of the work that had been scheduled for 2017. And faced with the recall effort and despite incurring excessive costs for unbudgeted work at AC, the Board was unwilling to confront the downside of requesting members to authorize a supplemental assessment, let alone an increase in our annual dues. Further, the Board was privy to a legal opinion that will require homeowners to significantly increase their contribution to SCA’s reserve fund, further aggravating SCA’s financial picture going forward.
The 2017 dues increase was to replenish the Reserve Fund after costly repairs to Liberty Center. Assuming that to be true, that increase should have been returned to the homeowners in the 2018 budget. That return is not scheduled to happen, especially given SCA’s current funding problem.
The number of NRS complaints filed is an invalid metric.
OSCAR’s Claims What are the Facts
The Ombudsman and the Nevada Real Estate Division (NRED) have agreed that our Board has handled each situation correctly in all cases for as long as these directors have been on the Board. False. Regrettably, OSCAR’s former directors are either grossly misinformed or are intent on misrepresenting SCA’s history with the Ombudsman. First, I am personally aware that over the years, the Ombudsman has issued letters of correction notifying the association of the need to take specific corrective action to comply with this or that section of the statutes. Second, I am personally aware of at least one case in which the Division found that SCA had violated the law and recommended its prosecution before the Commission on Common Interest Communities. And third, I am aware of a number of Ombudsman cases where the Division has concluded that the case was not suitable for prosecution before the Commission, meaning that contrary to OSCAR’s claim, NRED had not agreed with SCA “that our Board has handled . . . [the] situation correctly.”
There are ZERO open complaints in the Ombudsman’s office. False. I am aware of roughly a dozen mostly recent complaints that have been submitted to the Ombudsman’s office, which includes a recent case that I had filed and was assigned to an investigator of their Enforcement Section.

 

 


Saturday, September 30, 2017

Financial hanky-panky or something else?

Contrary to what others may have led you to believe, the 2018 Budget portrayed a not so rosy picture for our association’s condition. While SCA’s financial condition has the appearance of being good, even “excellent” according to those OSCAR advocates, appearances can be deceiving. There is no doubt that homeowners will be reassured in learning that our assessments will not increase in 2018, but in view of what’s going on behind the scene, such reassurances appear to be merely hype and misplaced.

So, what’s going on behind the scene? The association has a number of financial problems, problems the board and management have been reluctant to adequately explain, address or even disclose. I suspect that more than a few ears were raised when Treasurer Forrest Quinn recently alluded to SCA’s “funding problem.” As I see it, those problems include the following:

  • Funding repairs for damage to “hidden assets.” “Hidden assets” are typically underground or in the walls and in addition to the equipment needing repair may involve water damage, mold remediation and related construction work. When such damage occurs, it can be very costly, as at Liberty Center and the Locker Room project at Anthem Center, which together may exceed one million dollars.

Traditionally, hidden or invisible assets are not included in reserve studies, perhaps because they are not visible or due to the mistaken belief that such assets have a life expectancy of more than 30 years and, therefore, are not required to be reserved. As a result, there are no reserve funds set aside when such assets fail, thereby creating a funding problem.

That funding problem can be resolved in one of three ways: 1) a one-time only special assessment to fund the needed repair; 2) an increase in annual assessments, which was done in SCA for 2017 and subsequent years; or 3) utilizing existing reserve funds, which has the practical effect of robbing funds intended for Peter to pay for the work that Paul needs.

Note that the second option is effectively permanent unless the funds are subsequently returned to the homeowners after the initial need was satisfied. And note that the third option might create a shortfall in needed reserves.

  • Rob Peter to pay Paul? SCA’s management team has been very busy last year and this year in moving large sums of reserve funding around for reasons that I do not understand. I happen to get a little curious when association reserve projects do not get done as planned. How can that happen? Yes, a repair project here that there might be deferred a year for one reason or another.

Let’s take a look at the 2014 Reserve Study. That study, as all HOA studies do, sets forth a yearly plan of which equipment or projects will be repaired or replaced, presumably in advance of their estimated life expectancy. For example, the 2014 RS called for an estimated $225,000 in fence painting for 17 Villages in 2017. That didn’t happen, although some disappointed homeowners may have expected to have their fences painted in 2017. Such is life.

What did happen was that in 2016 in connection with the “mathematical” 2016 update performed by Criterium, management decided to eliminate that requirement for 2017 and changed the RS schedule for fence painting to read “2018” for each of those 17 Villages. Why did they do that? I do not know. I suspect that they might have done that because that money was needed for a different project for which there was no funding authority in the budget. Were similar deferrals made in 2016? I don’t know but I do know that the reported total dollar value of all changes made in reserve spending for 2017 and deferred to 2018 (based on the 2014 RS) was at least $550,000.

Now, this year our management team has been busy making similar changes to the 2018 RS plan, reportedly deferring in reserve spending in 2018 “as much as $800,000.” What’s going on? Management has claimed and would have us believe that they are merely saving the homeowners money that did not have to be spent on the projects that they decided to defer to the next year.

If management is going to make such changes to the estimated life expectancy of association assets, I would hope that they are adequately documenting the basis for those changes since they are deviating from nationally recognized standards that are employed by all HOAs.

  • Reserve for invisible assets. A decision to reserve for invisible assets would likely have a significant impact on future assessments.
  • Association’s liability for walls and fences. Rumor has it that a legal opinion has been received advising that the association is legally responsible for 100% of the walls and fences, i.e., both sides. Furthermore, based on Criterium’s recent study, the amount of lineal feet of coverage of walls and fences is far greater than originally plotted.

If true, that would mean that the amount of reserves needed to fund walls and fences is far greater than initially projected and will have a significant impact on needed reserves. 

Other news

More on the Ham Radio Club under attack.

 I had intended to report that the Management of the Amateur Radio Club was out to destroy the club.  Follow-up investigations shines more light on this matter.  On the top of Independence Center, one can obverse multiple antennas on the roof.  This construction has occurred over the last few years.  The SCA Board has procured amateur radios and supporting equipment expending tens of thousands of dollars of SCA funds.  This equipment was intended for outfitting the Sun City Anthem Emergency Prep Service Group (EPSG).  The EPSG has a room in back of Channel 99 in the Independent Center.  This room is where the amateur radios are located.

It is left for another article to answer the question what is the SCA BOD doing buying amateur radio equipment.  The question for today is who are the FCC licensees using this SCA funded amateur radio equipment. To operate Amateur Radio equipment an FCC test must be passed and FCC license granted.

Amateur Radio Licenses are public records.  Are SCA’s volunteers properly licensed?


The SCA View-Journal, Inc. is an educational and news service designed to support the information interests of Sun City Anthem homeowners and is not affiliated with the Sun City Anthem Community Association, Inc., Del Webb Corp., or Pulte Homes, Inc.

E-mail: rljohnson32@lvcoxmail.com

Publisher/webmaster, Ron Johnson      Telephone:  702-617-8172

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