Remember the Finance Committee Chair that surmised to the community in his “Renew Big Canoe” financial presentations that food and beverage losses are a “good thing” because that means we don’t have to pay taxes? (1) Now installed for a second term as Chairman, he’s back and presenting a rambling and disconnected tutorial on GAAP (generally accepted accounting principals) and accountability. (2a)
Pointing to the Finance Committee, management staff and Board of Directors, (2b) the Chair declares “we have strong accountability” and yet all have turned a blind eye to $100k in food and beverage inventory that can not be accounted for. (3)
This is hardly accountability. Further, a “clean audit” by Mauldin & Jenkins could be questionable if the accountants are in fact aware of the details regarding this discrepancy.
Even more nonsense . . .
And while noting that the Association’s financial statements are prepared according to GAAP, the Chair seemed to imply that the financial reporting of those non-profit associations that utilize “fund accounting” are not. (2c)
However, this statement or implication is untrue, as can be shown in the 2023 audited financial statement of The Landings Association, Inc., (“The Landings”) a similar community association often noted by the Board as comparable to Big Canoe. The accounting method described in the “Notes to Financial Statements” clearly states that the statements were “prepared in accordance with generally accepted accounting principles in the United States (“U. S. GAAP”). Accordingly, revenues are recognized when earned, rather than when received, and expenses are recognized when incurred, rather than when paid.” (4a)
The note goes on to say, “To ensure observance of limitations and restrictions on the use of financial resources, the Association maintains its accounts using fund accounting.” [emphasis added]
Note: This same “fund accounting” method and wording has been found in the financial statements of other communities as well.
In fact, several resources state that the “guidelines issued by the American Institute of Certified Public Accountants (AICPA) state that this method is preferred for the homeowners’ association industry”. (5) https://echo-ca.org/fund-accounting-vs-equity-method-reporting-which-one-right-you/
It might be noteworthy to mention that if fund accounting were used by the Big Canoe POA utilizing separate columns for each fund across all financial reports, it would have been readily apparent from the P&L that the Association did not generate sufficient operational revenue in 2023 to cover the principal payments on the Association’s debt as has been repeatedly noted by this writer. (6)
Note: While the Finance Committee Chair emphasizes that Big Canoe does not use fund accounting, the Director of Finance began utilizing a modified version of the Statement of Cash Flows (closely resembling “fund accounting”) in her board presentations beginning in April 2023.
Additional Note: None of this is necessarily a rally call to suggest that the Association should convert to fund accounting. This is merely a discussion on some of the differences.
Enough of that . . .
And now as promised, let’s take a look at some interesting comparisons between Big Canoe and The Landings (located on Skidaway Island in Savannah, GA). Given our leadership’s constant emphasis on the outstandingly strong and enviable financial position of the Association despite it’s perceived need to borrow an additional $15 million, this writer was immediately intrigued by some of the contrasting financial information found in the Landings audited statements.
First, as originally noted in part one of this series, the 2023 Annual Report along with the audited Financial Statements dated February 1st, 2024 have already been published and presented to the Landings community. (7) Needless to say, the 53 page report is impressive.
Compare this to Big Canoe management’s inability or reluctance to provide our community with even internally prepared year end financial statements until approximately March 25th, 2024. Subject to further change by the Association’s accountants, the audited financial statements will not be prepared and available until late June.
It remains incomprehensible that current, internally prepared financial information would be withheld from the community for almost ninety days!
The organizational structure . . .
To keep things within context, the Landings which owns all common property including an expansive Marina does not own, maintain and renovate the golf, swim, tennis and restaurant amenities. These amenities are owned by a separate entity (The Landings Golf & Athletic Club).
Note: Property owners interested in partaking of those amenities, would be subject to additional monthly charges and, with respect to golf at least, significant initiation fees. Conversely, those disinterested property owners would not be subsidizing the renovation of those amenities or any losses that might be sustained.
In addition, the real estate company is a subsidiary of The Landings Association. However, due to the community’s use of “fund accounting” separating those financial results, that information is irrelevant to the comparisons that follow.
The cash position . . .
It is interesting to learn that the Landings’ 2023 year end cash (including the Reserve Funds) is a substantial $12 million against $24 million in total assets and with absolutely no debt! Compare that to Big Canoe with only $8.2 million in cash against $54 million in assets and $3.2 million in debt at year end. (4b)
And despite POA leadership’s past proclamations of “robust cash flow”, it seems in recent years that Big Canoe borrows for any and everything possible. The Association borrowed against the new fire truck. The Association leased golf equipment and new golf carts. And should the Association fully draw out the $15 million line for Renew Big Canoe projects as anticipated, the debt will skyrocket.
Note: It is also important to recognize that Reserve Funds (set aside for future major repair and replacement of common properties) comprise $10.2 million of the Landings’ cash total.
Somehow given these comparisons, Big Canoe’s cash position no longer appears quite so flush.
The assessments . . .
After increasing a nominal $100 ($8.33/mo/4.6%) in 2023, annual assessments at The Landings totaled $2,270 (without including maintenance, upkeep, depreciation of golf, swim, tennis, etc.,) versus 2023 assessments at Big Canoe totaling $4,272 after an annual increase of $240 ($20/mo/6%).
But most strikingly, at the Landings, assessment increases require a vote of the members which appear to be approved in three year increments.
Note: Imagine as a property owner, actually being able to accurately budget one’s assessments three years out while also having some level of control over the destiny and future of the community one lives in.
And there’s more . . .
And while there are many other nuances and comparisons that might be made, the timely and detailed presentation of financial results, cash position, debt levels, assessment increases and property owner approval requirements stand out in a really big way.
But before moving on to other subjects by revisiting the “revote” discussion of the clubhouse renovation, this writer would like to close with one last astounding piece of information, the 293 page 2024 Budget Transmittal of the Landings Association.
https://www.landings.org/sites/default/files/resources/Governing%20Documents/Budget%20Book-2024.pdf
No discussion needed here as it is self explanatory. Compare that to the single page budget posted to the Big Canoe POA website.
Meanwhile . . .
Remember, as property owners, we have wagons too.
More to come . . .
. . . . .
If you believe the information contained on this site is important, please continue to share and pass it on. And should you wish to see additional articles posted in the future, please subscribe for an email notification or check back frequently. Meanwhile, take care, stay safe and thank you for your readership.
Patricia Cross
10438 Big Canoe
References:
1) “Renew Big Canoe: The financials”, bcmatters.org, July 22nd, 2023 https://bcmatters.org/renew-big-canoe-the-financials/
2) Big Canoe POA Board meeting, March 28th, 2024, video on Youtube at a) beginning at 45:30; b) 47:10; 54:15 ;c) 49:25 https://www.youtube.com/watch?v=9-2mBzllukQ
3) “Circling the wagons: Part one”, bcmatters.org, April 2nd, 2024
https://bcmatters.org/circling-the-wagons-part-one/
4) The Landings Association Annual Report 2023, February 1st, 2023, a) pg. 43 – Note 2, Significant Accounting Policies; b) pg. 40, Consolidating Balance Sheets https://landings.org/2023-annual-report-posted
5) https://echo-ca.org/fund-accounting-vs-equity-method-reporting-which-one-right-you/
6) “In search of full disclosure”, bcmatters.org, August 10th, 2023
https://bcmatters.org/in-search-of-full-disclosure/
7) https://skidawaytimes.com/2024/02/26/tla-annual-meeting-set-for-march-6-and-annual-report-posted-2/
Thank you for using The Landings as a comparative – I recall that The Landings was also a comparative basis for the decision to initiate a “ entry” fee for new and selected property owners. I am hopeful you will be spared the old and reliable. “ If it is better there why are you here? , move there “
Patricia , Thank you for giving us a visible financial record example. The Landing published report is the type of report that Big Canoe residence should expect going forward. [.]
NOW ! This month !
The POA must give the Property Owners reporting we can have confidence in ! Why does it seem like they report in fashion of a shell game ?
As a resident , I am not confident in the voting and tally of surveys and/or elections.
I feel our voting and survey system is where we should start to restore confidence and renew Big Canoe.
I propose the HOA organization return. I feel the HOA would and should handle all future surveys, elections, and any documentation that involves recorded opinions. This would eliminate the
COST of mailing to an outside source.
The HOA should have an [election committee ] where anyone can witness the counting and the recording of the votes and or survey questions.
The HOA election committee after an HOA approval of results, would GIVE/ present the results to the POA board. This would insure the residence of Big Canoe that the voting tabulation is tallied properly and represent the residence wishes.
Total transparency from the beginning of each project.
***A newly formed HOA could initiate their own homeowners surveys. Maybe the HOA should survey questions like, “ Do you have confidence in our election system ?“
“ Do you have confidence in our financial reporting?”
“ Do you have confidence in our projects and the financials and the architectural plans? “
“Do you have confidence in giving the REMODEL bidding out to ONLY two contractors?”
*****
“ Would you like to see an annual financial report like that of ‘The Landing’ example?”
Gulp! Looks like our POA board has egg on their face after seeing the detailed and highly professional year end accounting presented by The Landings.
I understand there may be many ways for financial budgets and year end accountings to be presented, but when there are apparent discrepancies and missing inventory running at $100,000 in Big Canoe, we obviously need more diligence in investigating and reporting. Too much is falling between the cracks.
Over the years I’ve served on many boards and the year end financial reports were always made in a timely manner. Organizations may have loose ends hanging in the initial report, but boards I’ve served on gave a full accounting, including what was outstanding and expected to materialize. This included what was owed and what was still needed to clear the books. Every 30 days, the initial financial report was amended to show changes. If an amount outstanding had to be written off, the amended financial report included details. No shaming, just facts.
It seems many are forgetting that Big Canoe property owners are the actual employers here and as such deserve, and should know, financial details. Things are pretty loosey goosey now. Why is so much hidden from property owners? Excuses for omissions and changes are plentiful and get quite fanciful and creative.
I too am in favor of reintroducing the HOA here. For many years that worked very well and sometimes acted as a watchdog over POA decisions. Property owners had much more input and influence over decisions made than we have now being governed by a secretive board and GM.
How can a wave to re-establish an HOA be started? I would be happy to be part of organizing an HOA but I don’t know what all is involved.
Final thought…let’s learn from The Landings’ example and step up to create more open, effective and responsible governance of Big Canoe.
There is much in this overall line of question pointed toward the BC POA… which probably deserves attention. However, some comments pointed to one specific statement made in this post…this paragraph (one of the various comparisons made of The Landings and Big Canoe):
“Note: (Landings) Property owners interested in partaking of those amenities, would be subject to additional monthly charges and, with respect to golf at least, significant initiation fees. Conversely, those disinterested property owners would not be subsidizing the renovation of those amenities or any losses that might be sustained.”…
Just some points of reference here:
The HOA fee for Landings homeowners is ~ $155/month. Lot and dwelling assessments in BC are $381 total per month.
Golf members in BC pay additional $256 per month plus $23 per round. Point is, there are costs associated with all amenities here and everyone has their interests/preferences….clubhouse, boating, racket, fitness, beach club etc. Some of us use a variety of amenities, some a few, and some…one or none. But all enjoy the cumulative value of all of the amenities as relates property value.
Family members also have varied interests. Guaranteed tho, if there is a golfer in the family, the option in BC to pay full price for a round of golf once in a while, even if they choose not to invest in a full-time golf membership, makes the BC approach to amenities very attractive.
Conversely, a homeowner at The Landings can only play golf if they are a golf member. There is no a la carte option. Same is true of the clubhouses, fitness, racket, pools. They ALL have initiation and monthly fees and you must be a member… social, tennis or golf… to access any of it.
In some circles here in BC, golf is called out as objectionable for reasons noted. And yet, clubhouse, swim, fish, fitness, racket, boating are all just fine to have under the same cost structure. Yep, golf has more inherent cost to it. That is, in part, why membership cost is substantially higher compared to all of the other amenities.
Other than access to the marinas, Landings homeowners get none of that without hefty initiation and monthly fees. So, you want to have lunch or dinner as a Landings homeowner, (or for swim, or fitness, or racket… yada yada)? Get in your car and leave the community… and the island… and expect a 15 to 30 minute drive. And much of the public access versions of amenities available in Savannah leave a lot to be desired.
Comparisons are useful. But this particular comparison needs more balance. Rebuttals expected I guess, but these points are just facts to be aware of in making the comparisons.
I appreciate the work done here though to shed light on an apparent overall area of murky.