Connect the dots . . .

For those of you who have not viewed the February 23^rd board meeting, the Chairman of the Finance Committee informed the board and the community that the capital fund accounts would be renamed and the cash balances in these accounts would be “restated” as of December 31^st (1) based on a recommendation from management. An unusual if not also shocking announcement indeed.

Meanwhile, given the nexus to the Chairman’s announcement, it should also be newsworthy to mention that after all these years of requesting association documents only to be denied by leadership, this writer’s formal requests beginning December 29^th for copies of certain accounting records pursuant to Georgia Code 14- 3-1602 have now at least been partially honored.

Herein lies the nexus . . .

That said, bound by “confidentiality” of the contents found in the accounting records coupled with a pledge regarding the original intent of the requests, this writer is not allowed to give any specifics of the findings in this particular format. Suffice it to say, however, that things are not as they appear.

Given the findings, an eleven page letter/report was personally and individually forwarded to each member of the board on February 7^th outlining various specific issues. Minutes of the February 13^th closed door meeting of the board seem to reference the letter fairly by stating, “Property Owner Letter – reviewed allegations of financial reporting irregularities”. (2)

And again at a February 20^th closed door meeting, the board “Further discussed response to Property Owner’s letter alleging financial reporting irregularities”. (3)

Note: At this same meeting the POA Treasurer obtained board concurrence for balance sheet capital fund definitions.

Fast forward again to the February 23rd board meeting where we learn that the capital fund accounts will be renamed and December 31st balances will be restated . . .

The Finance Committee Chair announced that the cash balance in the newly named Board Designated Capital Fund would be restated as $1.75 million at December 31^st as outlined on a slide titled Proposed Modifications. (4)  Note: This balance was previously reported by management and the Chair at $299k. (5) December Comparative Balance Sheet

In addition, it was announced that the newly named Board Designated – (CCF) Master Plan Fund would be restated as $1.30 million at December 31^st. Note: This cash balance was previously reported by management and the Chair at $2.75 million.

Who is running the show anymore? . . .

It is particularly noteworthy that the members of the board sat silently by throughout the Chairman’s entire presentation without raising any questions or even taking the matter to a vote.

And obviously, in order to accomplish these “restated” balances, the transfer of large sums of money (millions) between various accounts will be required. And again, no board vote was taken to approve those transfers.

And further, exactly what is an accounting restatement? . . .

For whatever reason, no real explanation other than “streamlining” and “simplification” was provided to define the significance or explain the intended purpose of any accounting “restatements”. However, a quick google search finds these definitions of the term:

• • “A restatement is an act of revising one or more of a company’s previous financial statements to correct an error. Restatements are necessary when it is determined that a previous statement contained a “material” inaccuracy. This can result from accounting mistakes, noncompliance with generally accepted accounting principles (GAAP), fraud, misrepresentation, or a simple clerical error.” (6) https://www.investopedia.com/terms/r/restatement.asp
  • And another citation, “A restatement is required whenever it is found that prior financial statements contain one or more material misstatements. There are a number of reasons why misstatements occur. For example, there might have been an accounting error, or fraudulent financial reporting, or noncompliance with the applicable accounting framework”. (7) https://www.accountingtools.com/articles/restatement    This same source further notes that ”Businesses try to avoid restatements, since they are a public admission that an entity cannot create reliable financial statements.” (7)

Other references are also available to demonstrate that an accounting restatement is an uncommon and potentially serious occurrence. (8)

But then, perhaps the Chairman misspoke or is unaware of the significance of restating the cash balances found in those capital fund accounts.

Note: To be fair, it was stated that the Finance Committee had instructed “management” to review their proposed changes with the Association’s independent accounting firm and obtain their concurrence which they appear to have quite remarkably provided. It is unknown what background or support for these changes was provided by management to the accountants in order to obtain that concurrence and what explanations for the restatement will be provided in their audited report.

Circling the wagons . . .

And unfortunately, these changes appear to be a repeat performance of the shell game making it virtually impossible for most property owners to follow the money. And further, given the timing of these changes, it is difficult to imagine that they have not been propelled in an attempt to conceal any “financial reporting irregularities” as discussed in the February 13^th and 20^th closed door meetings of the board.

Other examples of unreliable financial information . . .

Meanwhile, modifications seem to extend even further than those described regarding the capital fund accounts. As an example, the comparative balance sheet presented at the January board meeting displays a November operating cash ratio at 1.54% (5) versus the less than favorable ratio of .81% as indicated in the Association’s actual November financial package. (9) (This change is accomplished by excluding the current portion of notes and lease payables from the latest computation.)

So where is the real truth in our Association’s financial reporting? . . .

It is difficult to say, but one thing is for certain, future financial analysis by this writer has been rendered completely useless based on all of the above.

In closing, neighbors . . .

Please do not allow leadership to convince you that any of this is “normal in the corporate world”. It is not.

And for those who do not know, this writer loves Big Canoe. And cherishing the magic, the wildlife, the trees, the views and the peace once found has driven this writer to advocate for the preservation of the financial integrity and stability of this breathtaking place so many of us call home. Because it matters.

. . . . .

If you believe the information in this blog is important, please 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. Likewise, please feel free to post comments below or contact me at the pcrosses@gmail.com for questions or further discussion. Meanwhile, take care, stay safe and thank you for your readership.

Patricia Cross (10438 Big Canoe)

References:

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

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

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

4)  Proposed Modifications

5)   December Comparative Balance Sheet

6)   https://www.investopedia.com/terms/r/restatement.asp

7)   https://www.accountingtools.com/articles/restatement

8)   https://www.bakertilly.com/insights/restatements-costly-result-error

9) November 2022 Financial Package, Comparative Balance Sheet, pg. 2

(POAwebsite>login>POA>financials>2022July)