Perspectives on 2019 Financial Performance

There doesn’t seem to be time anymore to seek peace and tranquility in the refuge of Big Canoe.  We are so overwhelmed with drama and the constant barrage of issues and crises under the watch of the current board.  And throughout all of this mayhem, not one single individual has been held accountable.

At a minimum, surely protocol would dictate that this leadership group address the disappointing and unacceptable year end financial performance while taking the necessary steps to properly complete the new election and revote in order to seat the duly elected new board members.  Perhaps, the other aforementioned issues would be better left in the hands of the new leadership.

As for the financial performance, the year-end “preliminary” financial  package has just been posted to the POA website.  (1)  For some background information, the word “preliminary” is indicated as some accounting adjustments may take place after year end.  Use of this description stems from confusion in 2018 regarding $192k in downward adjustments to income after year end and without any indication to property owners that this was being done or that it had also been done in previous years.   Corrections were eventually made and a reconciliation provided.  Appreciation is expressed to management for correcting that confusion by labeling this financial package as preliminary.

Food and beverage losses total $775k in 2019 . . .

Using the assumption that this package is intended to be accurate excepting any small adjustments that might be necessary, many concerns and questions are noted.  It is immediately recognized that food and beverage losses for the year total what may be a record breaking $775,220. (1a)  Truly, how is that even possible?  We must also keep in mind that this loss does not include depreciation expense or approximately $10k in consulting fees paid to Bobby Jones Links.

Further, it can not be forgotten that the food and beverage debacle has been front and center for the entire year.  It has been repeatedly noted in previous articles and by other property owners as well that F&B was on a trajectory to lose $700k+.  Although we were assured by leadership and management that appropriate measures were being taken to avoid that prediction, those measures were either never implemented or were ineffective.

Insult added to injury finds that after promises and repeated requests for a breakdown by F&B category (ex. banquets, member events, weddings, duffers, food trailer, etc.), that information still has not been provided.  As a result, without first ascertaining the real cause of these losses, this leadership group began throwing more money at F&B in an attempt to either reduce the losses or increase the revenue.  Some of these financial decisions included:

• • Renovation of the clubhouse kitchen(s) originally budgeted at $160k and later increased to $275k  (3)(4)
  • Cancellation of the Talk of the Town lease at the Chimneys that generated approximately $60k income each year in hopes of providing additional wedding and banquet revenue even though no business plan had been developed, and it can not be determined if this type of activity is even profitable.
  • $66k for kitchen at the Chimneys location, and
  • $60k contract with Bobby Jones Links to find ways to reduce food and beverage losses. (2)

Capital Expenditure Report gone AWOL . . .

Another report ordinarily included in the financial package is the capital expenditure report (CapexReport) which itemizes all capital expenditures for the month and year to date and compares to budget.  Unfortunately, this very important report has gone missing.   Assuming it was an oversight, a request was submitted when it was discovered that it had been excluded in the November financial package.  Unfortunately, no response to that request has been received, and it is now found to be excluded in the December year-end financial package as well.

The value of this report can not be overemphasized as it is the only means for a property owner to determine exactly what was spent where and when on any given capital project.  For example, questions have been asked by several regarding the unanticipated construction of a large retaining wall at the bocce courts.  The last available capital expenditure report in October 2019 indicated that $103k had been spent vs. a budgeted cost of $115k even without the planned pavilion and without the retaining wall. (5a)  At the November work session, management stated the cost of the wall would be approximately $15k.  Unfortunately, the video of this session is not presently available for confirmation.  Similarly, management was questioned regarding this same issue during the Q&A at the January work session where management provided an estimate of $24k.  Unfortunately again, this can not be referenced as the Q&A sections of board meetings are not included in the videos.

Obviously, this report is of supreme importance and should be provided without hesitation.

2020 Master Plan Projects funded in 2019 . . .

Moving on and looking at previous cash flow reports to compare changes, it can be determined that capital expenditures for the year have increased $351k since October 31st.  (1b)(5b)  Of that total, projects totaling $242k can not be determined without the missing capex report.  The remaining 109k was spent on 2020 Master Plan projects to include design and engineering for the yet to be approved Creek 9 golf course along with costs associated with the clubhouse kitchen renovations and parking lot expansions at the Wellness Center and Postal Facility.

• • One might ask why projects budgeted for 2020 are initiated and funded in 2019?

No additional debt? . . . Au contraire

This leadership group has also given reassurances throughout the year that the POA would not incur additional debt.  That reassurance and commitment was actually misleading as $726k  in lease obligations were recognized in December as indicated on the liability side of the balance sheet.  (1c)(1d)  The recently acquired golf cart fleet would account for $508k of that total.  The remaining $254k can not be determined without further information from leadership as there is no documentation or approval found in the board minutes of any additional acquired equipment or lease agreements.

• • Could it be golf course equipment included on Line #118 of the 2020 Capital Plan?  (6)

Net income also under budget . . .

While net income has trended below budget throughout most of the year,  management and leadership once again assured property owners that adjustments were being made to ensure that the POA would meet plan by year end.  First glance at the “Income from Operations” (1e) indicates a year end income only $56k less than budget.  Looking closer, however, it can be found that net income before extraordinary items was actually $208k under budget.  This income deficiency is then offset by a hefty $149k gain from the sale of an asset in December.

• • What were these assets that were sold or disposed?  The previous golf cart fleet for sure.  Other golf course equipment replaced and also leased in December?   Perhaps management can provide this information.

In reality, without the sale or disposal of these assets, there is no indication of the POA meeting budget, and it would be misleading, at best, should management or leadership present it to the property owners otherwise.  It should also not go without notice that although 2019 net income does  exceed 2018, that is the direct result of the $20 (7.66%) assessment increase effective last year rather than any overall reductions in expenses.

December is indeed a busy month at the Big Canoe POA  . . .

And just as in previous years, the POA continues to budget and post a loss each December when other months are generally profitable.  As an example, the loss for December prior to the sale of assets totals $158k, whereas, the previous month of November indicates a net profit of $158k? (7)  For the most part, these losses are attributable to increased payroll expenses (such as year-end vacation accruals) throughout various departments.  These similar questions have been asked previously without response.

• • What makes up that December loss?  And, if those expenses are anticipated enough to be budgeted, why are those expenses not accrued throughout the year?

In conclusion, this leadership group is requested to dial it back a bit.  Eliminate all the talk of bylaw changes, procedure changes, golf and initiation fee informational sessions and just get the election taken care of.  Leaving those other issues to future leadership, time might be better spent providing answers to some of the above questions while also providing line item detail by category explaining to property owners exactly where and how the POA managed to lose $775k in food and beverage in 2019.

. . . . .

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     December 2019 Financial Package (a) YTD Amenity Results, pg. 10; (b) Statement of Cash Flows, pg. 15; (c) Balance Sheet, pg. 12; (d) Comparative Balance Sheet, pg. 14; (e) Income from Operations,  pg. 16 (POAwebsite>login>POA>financials>SummaryOfOperations>January2020)

2     Big Canoe POA Annual Meeting, December 7, 2019 at 20:44 (POAwebsite>login>POA>meetings>videos>2019POA AnnualMeeting)

3     POA Board of Directors Meeting Minutes, August 22, 2019 (POAwebsite>login>POA>meetings>minutes>August2019)

4     POA Board of Directors Meeting Minutes, November 21, 2019 (POAwebsite>login>POA>meetings>minutes>November2019)

5     October 2019 Financial Package (a) 2019 Capital Plan, pg. 16 (b) Statement of Cash Flows, pg. 19  (POAwebsite>login>POA>financials>SummaryOfOperations>October2019>CapitalPlan, pg. 16)

6     Big Canoe POA 2020 Capital Plan (POAwebsite>login>POA>financials>budgets>2020CapitalPlan)

7     Summary of Operations, November 2019 (POAwebsite>login>POA>financials>SummaryOperations>November 2019)