Straight Talk from ABC

Last Monday a rumpus began when POA directors Don Crosby, Craig Harvey, Marshall Kyger, and Paul Montjoy showed up at the country club to stop a forensic audit that had been ordered by treasurer Mike Schaefer. 

The four, joined by directors Johnson, McCulley and Silcio, explained their objections to the audit in an email widely circulated over the last few days.  It’s all about board powers, duties, and policy.  Bylaws specify the treasurer’s power to designate agents to help him, but they also give the board as a whole control over business and duty to act always as a board.  Policy says that for services over $5000 the board must seek bids, with exceptions.   

According to the board members’ email, they put a stop to the audit since Schaefer didn’t have authority to order it, he was secretive and underhanded in not consulting them, and he violated policy by not seeking bids.  They also said it was intolerable because they didn’t understand the purpose of the auditor’s questions, and it was causing disruption and employee “angst.”

We haven’t heard Schaefer’s side of the story yet.  We do know that unlike the others he is a qualified auditor and that he has always conducted himself at open meetings in polite, mild mannered accord with board procedure.  If he has suddenly changed gears, we think the appropriate question is not how dare he but why did he? 

Financial reports from January through June this year show that country club losses are 31% higher than in the same 2014 period, averaging roughly $10,000 more per month. After late February when the board renewed HMS’s contract, they shot up to 44% higher than last year, averaging $15,000 more per month.  According to the financials, we are now seeing monthly country club losses of $46,000 to $54,000.  Unless there’s a reasonable explanation for this, it’s a major red flag needing immediate attention. 

Here’s the seven directors’ emailed response to the losses:

“The Club does operate at a deficit which is made up by member dues. It has always lost money and always will. It is an amenity and all of our amenities require support from member dues. This is the purpose of dues. It does remain our objective to improve operations at the Club to reduce the required subsidy and steps are underway to accomplish that objective.”

Translated, that means why worry when we can just dip into property owners’ wallets to make up the difference?  Here are the steps they think the treasurer should take if he’s concerned:

“. . . inform the responsible Board Committee (he was largely responsible for establishing these) and give the POA staff the opportunity to answer his questions. If not answered satisfactorily, . . .refer them to the outside auditor already under contract and selected by competitive bid.  If, finally, that review did not provide satisfactory answers, then, and only then, should we consider hiring an additional outside auditor/consultant and use a competitive selection process.*”

As board members they all responsible for asking questions about the financials.   Have they asked why the club has been hemorrhaging money for months now?  If so, why are they satisfied with the answers when the treasurer — a qualified auditor who surely began to ask knowledgeable questions some time ago — wants a forensic audit, a specialty function requiring skills significantly beyond what’s provided by the board’s usual financial auditor?

Following protocol is good –  it makes people and systems function better.  But while our money is flushing away at prodigious rates, we’d like to see a little less concern about board members’ prerogatives and a little more about their responsibilities.  They can follow procedure later.  For now, they should follow the money. 


*The “competitive selection process” has been bypassed whenever the board chose to, even though none of the exceptions applied as when they hired HMS and sometimes Fore Front Construction.

1 Comment on "Straight Talk from ABC"

  1. The seven are getting cheered on by the usual crowd that limits itself to its own thinking. Here’s part of an email sent to them by the former board president who promised that your tax rate would only be 8 mills if you incorporated:

    “If the Treasurer would bother to read, NONE of the 5 instruments that the POA operates under requires the POA to make a profit or otherwise not lose money. In fact, the POA Charter and Bylaws establish the POA as a non-profit (that means to NOT MAKE A PROFIT) land management firm whose sole two responsibilities are to operate and maintain the people’s amenities and to provide the architectural control for the Covenants. In fact, while it is always nice to hold down costs, there is NOTHING requiring the POA to make a PROFIT. In fact, if memory serves, if the POA does make a profit, it would probably lose its “non-Profit” status, meaning it would lose its tax reducing advantages and have to start paying taxes on its “profits” as well as very large property taxes from which it is currently exempt. Just Sayin’. Lloyd”

    Wrong again. On so many levels. Legally, directors are trustees of POA assets required to use due diligence to oversee financial soundness; nonprofit doesn’t mean the POA can’t make a profit, just that its main purpose can’t be making profits; and nonprofits don’t lose nonprofit status or tax reducing ability by simply making a profit, or else a lot of hospitals would be up a creek. Functionally, warning the board about making profits when we’re losing our shirts at the country club is inane. And morally, claiming that board responsibilities are limited to the contents of five legal documents is disgraceful.

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