Connect the dots – part two . . .

Still stunned by the February 23^rd announcement that the capital fund account balances would be restated as of the 2022 year end, (1) additional issues continue to surface regarding those accounts as well as other questionable financial information currently being peddled to the community. 

That said, with the Director of Finance out of town and the Finance Committee Chairman apparently absent from the March 30^th board meeting, the General Manager was provided the spotlighted platform and opportunity to once again apply his spin to the “wonderful” financial performance of the Big Canoe Property Owners Association. (2a)

Unfortunately, as stated in the previous post on this site, all is not as it appears. (1) https://bcmatters.org/connect-the-dots/

In fact, the December and January financial packages (only recently posted to the POA website) along with the GM’s March 30^th slide presentations clearly demonstrate that “financial reporting irregularities” have continued even after management’s restatement of the capital fund balances.

A failure to reconcile . . .

So first, perhaps in a zeal to seemingly exhibit transparency and/or full disclosure, a “reconcilement” of the restated balance in the newly named Board Designated Capital Fund (“BDCF”) was included in the December 2022 financial package posted to the POA website in mid-March. (3)

However, based on information found in the accounting records that have been provided to this writer, (4) some of the information (or lack thereof) included in that reconcilement is clearly inaccurate.

The money was never really there . . .

In addition, it is also crucial to recognize that although the balance in the account (“BDCF”) was restated as of December 31^st, the $1,450,419 transfer (deposit) to the account (as shown on the December reconcilement report) was not really there until at least sometime after the February 23^rd board meeting when the idea was first pitched by the Finance Committee Chairman. (5)

Likewise, the $143,482 deposit to the account representing the capital assessments as shown on the January reconcilement (6) also did not take place until some time after the February 23^rd board meeting. And while management may choose to pretend that the cash was there all along, it was not.

Because of that, the “BDCF” account would have clearly been overdrawn at the end of January 2023 if all of the transactions on the reconciliation report are in fact accurate.

An overdrawn bank account . . .

Specifically, the January reconcilement (6) states that capital expenditures totaling $804,518 were paid out of the “BDCF” account during the month of January. Again, if that and all the other information  included in the report is accurate, the account would have been overdrawn ($235,404) at the end of January after excluding the $1.450 million and $143k transfers/deposits both of which did not take place until late February.

And this unfortunate scenario can be dually documented via a quick look at the  GM’s own slide presentation  (7) displaying a January 2023 restated balance in the “BDCF” account of only $1,358,496. A simple math exercise to deduct the transfers that took place after February 23^rd ($1,450,419 and $143,482) reveals the same overdraft balance of ($235,404).

One might seriously ask, how can that possibly be? And how could those responsible for preparing and approving the financial reports have failed to recognize the occurrence of an overdraft when preparing the reconciliation reports?

So seriously – which is it? . . .

Obviously, the Board Designated Capital Fund account was either significantly overdrawn or inaccurate information was intentionally provided in the reconciliations in order to manipulate the resulting cash balances as shown on the comparative balance sheets and other financial reports provided to the community. But why?

And could it be that other account balances are inaccurate as well? Most probably.

And yet, despite this and all of the above, the community has somehow been assured that the Association’s independent accountants have concurred with management’s decision to “restate” those December 31^st balances. Perplexing indeed.

Something less than wonderful . . .

Further, as if the uncertain status of the “BDCF” account isn’t disturbing enough, the GM dug himself another hole by pontificating on the significance of the Asssociation’s cash ratio by stating, “Our cash ratio is wonderful. You always want that to be over one. That says you have enough cash on hand, if we all stopped paying our assessments tomorrow, would we have enough cash to handle all of our liabilities for a year, and the answer is, yes we would.” (2b)

Well yes, the General Manager was correct. You do always want that ratio to be over one. Unfortunately, the 1.12 cash ratio disclosed on the  GM’s own slide presentation  (7) was inaccurate and wrong. Not only is it wrong – at only .79, it is significantly below ONE without even including the current portion of the long term debt and lease obligations.

And would that mean that the Association does not have enough cash on hand to handle all of our current liabilities for a year? Perhaps.

All that said, cash ratio computations are pretty simple calculations, (8) and it really should not be that difficult to get it right unless one is using some auxiliary set of numbers.

The perpetuation . . .

In closing, the purpose of the “restatement” remains elusive as there is no indication that the “restatement” has corrected any error. It instead perpetuates and continues to affirm many of the “financial reporting irregularities” (9) (10) found in this writer’s original February 7^th letter/report to the board of directors.

Something is definitely amiss.    And the shell game continues to flourish in POA land.

. . . . .

Should you wish to see additional articles posted in the future, please subscribe for an email notification or check back frequently. Likewise, please feel free to post comments below or contact me at thepcrosses@gmail.com for questions or further discussion. Meanwhile, take care, stay safe and thank you for your readership.

Patricia Cross (10438 Big Canoe)

Note:   As a reminder, our elected leadership has failed to cast a formal vote of approval for management’s “restatement” of these account balances. (1) Instead, they have tacitly allowed employees of the Association in concert with representatives from the Finance Committee to not only transfer almost $1.6 million between funds previously established for very specific purposes but also redefine the purpose and use of the capital assessments as initiated and approved by the 2019 Board of Directors. (11)

 

References:

1) https://bcmatters.org/connect-the-dots/

2) Big Canoe POA Board meeting, March 30^th, 2023, video on Youtube at a) 29:40; b) 32:40

3) December 2022 Financial Package, Consolidated Statement of Operations and Restricted Funds, pg. 5 (POAwebsite>login>POA>financials>2022December)

4) January 2023 request for accounting records

5) Big Canoe POA Board meeting, February 23^rd,, 2023, video on Youtube at 42:15.

6) January 2023 Financial Package, Consolidated Statement of Operations and Restricted Funds, pg. 5 (POAwebsite>login>POA>financials>2023January)

7) GM’s own slide presentation  (March 30^th, 2023 Board of Directors Meeting)

8) https://www.omnicalculator.com/finance/cash-ratio

https://corporatefinanceinstitute.com/resources/accounting/cash-ratio-formula/

https://www.investopedia.com/terms/c/cash-ratio.asp

https://www.thebalancemoney.com/what-is-the-cash-ratio-393227

9) Special Board Meeting Minutes, February 13^th, 2023 (POAwebsite>login>meetings>Minutes>2023>February13^th)

10) Special Board Meeting Minutes, February 20^th, 2023 (POAwebsite>login>meetings>Minutes>2023>February20^th )

11) 2019 – Facilities & Amenities Master Plan; (POAwebsite>login>POA>meetings>videos>2019>Facilities & Amenities Master Plan)