2020 and an increasing lack of transparency

Here we are faced with a new year, a new kitchen, new menus and the first financial package of 2020 indicating good news with net income exceeding budget.  In fact, remarkably, despite all the constant hype about increasing F&B revenue, one quickly realizes that food and beverage losses were actually less while being closed for most of the month.  Analyze that.

Capital expenditure report eliminated from monthly reporting . . .

What isn’t such good news is all the information that property owners are accustomed to seeing in these financial packages that is no longer included.  For example, the capital expenditure report which has been available monthly in some format for at least the last five years is no longer available.  Instead we are told that this information will be provided in a detailed quarterly report.  In other words, although capital and master plan items total $248,648 (1a) for just the first month of the year, we as property owners must now wait until April to see the itemization of those expenditures. (1b)  This does not seem like a good practice to initiate and certainly not in the year when a $25 capital contribution assessment has been levied along with leadership’s quest for a $5,000 capital contribution fee.

Unable to track the $25 capital contribution assessments . . .

Of additional concern is the failure of management to separate and report the balance and any transactions in the newly created “capital contribution account”.  Property owners were assured by leadership that these funds would be maintained in a separate account earmarked for capital components of the Master Plan only.  (2)  However, no documentation of the existence of this separate account can be found in the financial reports.  Further, expenditures for those components at $104k (1a) already exceed the capital assessments collected for the month totaling $79k.  (1c)  Therefore, contrary to leadership’s assurances that these funds would be separated, it would appear that those funds have been commingled.   This is unacceptable, and an immediate accounting of those funds should be provided without delay.  Obviously, any consideration of a $5,000 capital contribution fee should be out of the question until this lack of separation and controls is addressed.

Itemization of F&B revenue eliminated from financial package . . .

Additionally, despite numerous requests for a breakdown of food and beverage expenses by category (banquets, member events, weddings, etc.), we now find that the F&B revenue by category is no longer included in the financial package.  Seems leadership keeps asking for more of the property owner’s money while simultaneously providing less information.

And while we are on the subject of food and beverage . . .

It is truly amazing how quickly leadership can rationalize and redirect the conversation away from the fact that food and beverage lost $775,220 in 2019.  In fact, although described as disappointing, the actual amount of the F&B loss was never once verbalized in the January board meeting.  Instead, it was characterized by the finance committee chair as a $26 per month property owner subsidy.  (3)

Before getting too caught up justifying the F&B loss by using that monthly analogy, consider how those dollars might have instead provided funding for the capital contribution account.   One might also consider just how far that $26 could go toward minimizing the impact to each property owner of the pending water increases.  Meanwhile, despite the massive and unexplained losses, a $75k covered terrace on the lower level of the clubhouse is now being given consideration.  (4)  Seriously?

Looking back at previous years . . .

Admittedly, most of us recognize that it is unlikely that F&B  will ever be profitable, but losses such as these in recent years should never be acceptable.   Likewise, it is perfectly reasonable to expect those losses to be significantly lower given the statistics found in prior years.  In fact, a quick comparison to previous years that many of us actually also remember will show that 2019 F&B losses doubled the 2015 losses and almost quadrupled the 2016 losses even though revenue stayed basically flat.  Specifically,

• • • • 2019 F&B Loss – $775k (5)
      • 2018 F&B Loss – $648k (5)
      • 2017 F&B Loss – $487k (6)
      • 2016 F&B Loss – $195k (6)
      • 2015 F&B Loss – $377k (6)

This is a comparison that can not be ignored.  It seems that line item detail and speedy explanations should be forthcoming.  Yet, we get nothing.

And why does it matter?

One might wonder why is line item detail of revenue and expense by category even important?  This information could serve to define the source of the problems.  As an example, Big Canoe hosts and continues to market various banquets, weddings and corporate events for non-property owners.  If this detail were to demonstrate that these non-property events are generating a loss, would it be fiscally responsible to continue the additional capital outlays and promotion of those events?  I would think not.

And lastly, an impressive presentation was provided by a representative of Bobby Jones Links at the February board work session where it was indicated that a F&B business plan had been developed.  When one property owner inquired whether that plan might be made available, the “BJL” associate deferred the question to the POA president whose response was “the simple answer is not right now”. (7)  The president noted  problems with the pricing of banquets along with leadership’s  desire to work out  those issues before presenting the information to the community.

Once again, yet another demonstration of complete lack of transparency and full disclosure by our leadership.  Quite honestly, at this point, nothing short of a full and complete independent audit of the entire food and beverage function addressed and reported to the property owners will ever serve to restore the credibility of this current board.

*****

If you would like to see additional articles posted in the future, please subscribe for an email notification.  In addition, if you believe the issues examined on this site merit property owner awareness and discussion, please share and/or forward to your friends and neighbors in Big Canoe.

Likewise, if you have questions or would like further discussion, I can be contacted at thepcrosses@gmail.com.

Patricia Cross (10438 Big Canoe)

References:

1    January 2020 Financial Package (a) Statement of Cash Flows, pg. 14; (b) Balance Sheet detail, pg. 11; (c) Consolidated Statement of Operations and Restricted Funds, pg. 16  (POAwebsite>login>POA>financials>SummaryOfOperations>December 2019)

2    Memorandum to Property Owners, from Director of Finance, January 2nd, 2020 (included in 12/31/2019 property owner emailed statements)

3    POA Board of Directors Meeting, January 2020  (POAwebsite>login>POA>Meetings>Videos>January2020BoardMeeting> 20:47)

4    Finance Committee Meeting Minutes, January 21, 2010  (POAwebsite>login>POA>Committees>FinanceCommittee>Minutes>January2020)

5    December 2019 Financial Package, YTD Amenity Results, pg. 10 (POAwebsite>login>POA>financial>SummaryOfOperations>December2019

6    Big Canoe POA 2019 Budget (POAwebsite>login>POA>financials>Budgets>OperatingBudget2019)

7  POA Board of Directors Work Session, February 13, 2020 (POAwebsite>login>POA>Meetings>Videos>February2020BoardWorkSession>43:50)

____________________________________________