The basics . . .

Only in Big Canoe could monthly financial results reflecting a $46k net operating loss be considered acceptable without explanation or discussion. (1a) Further, and with all due respect, it appears that our monthly board meetings have become little more than scripted dog and pony shows designed to impress and mislead while full of conflicting details and an abundance of  incorrect and/or missing financial information. Given that, along with the constant trickle of other emerging news, it is difficult to know where to even begin.

The money grab . . .

But perhaps the best place to start is with a quick revisit of management’s recent money grab of the property owner’s past and future capital assessments (currently set at $45 per month). Although the resulting “restatement of the capital fund balances” was discussed in detail in the two previous posts on this site, (2) it may not have been sufficiently emphasized that the members of the board did not vote to approve this redirection of the capital assessments away from the Board Designated Master Plan Fund and into the Board Designated Capital Fund. Likewise, the board did not vote to allow management’s transfer of $1.450 million (previous capital assessments) out of the Board Designated Master Plan Fund and into the Board Designated Capital Fund.

Further, the most recent audited financial statement by the Association’s independent accountants clearly recognizes and designates those capital assessments as “Master Plan Fees” while stating that the “The board has designated the increased monthly assessments for the master plan fund”. (3) That said, it continues to be frankly implausible that the accountants would concur with management’s redirection of those funds without majority approval of the board much less condone the backdating of the transfers on the financial statements.

Obviously, employees of the Association (management) do not and should not have the authority to take such actions as these and to overturn previous board directives without a specific board vote of approval . . . and yet for whatever reason, the board has remained silent. How can that be? This is our money, and it demands appropriate board oversight.

Note: Needless to say, without this “money grab” it would be impossible to fund the carryover items from the 2022 Capital Budget totaling $1.6 million as well as the $6.3 million 2023 Capital Budget as that money was never really there. (4) https://bcmatters.org/just-keeping-up-with-the-facts/

As for that dog and pony show . . .

Based on information found in the March 2023 financial package, not only did the Association record a net operating loss for the month of March but the dismal first quarter results noted a year to date net income from operations of only $64k which is $284k LESS than the previous year even after including this year’s increase in assessments. (1a)  Significantly less than “outstanding results”. (5)

(Instead, it appears the only performance metric that is being used to assess the Association’s financial performance is positive variances to an obviously padded budget.)

Note: Although ordinarily included in the GM’s previous financial presentations, (6) the column containing the dismal year to date net income was omitted from his April 27^th slide presentation. (7)

Inadequate funds generated for debt service . . .

And what does all of this mean? For starters, sufficient revenue has not been generated thus far to even cover the year to date principal payments ($336k) on the Association’s outstanding debt. (1b) This eventuality was clearly detailed in previous posts on this site. (8)

Instead, that shortfall has been sourced from residual operating fund balances.

LOSS on the trade-in of the Pontoon Boats . . .

And to be fair, it must be noted that part of the dismal financial performance can be attributed to the pontoon boat fleet transaction. Specifically, it has now been confirmed that the trade in allowance on the old Pontoon boat fleet was not sufficient to offset the book value of the old fleet on the Association’s records resulting in a $73k loss. (9) AskthePOA Ticket#9784  

And rather than being reported as such, the General Manager manipulated the narrative during his April 27^th board presentation complete with a slide describing the transaction as an “acceleration on capital projects”. (7) It is unknown if the GM intentionally misspoke or if he failed to understand the significance of the transaction.

It also can not be forgotten that management previously refused to provide this information when asked via this writer’s AskthePOA Ticket#8790 . (10) Just as disturbingly, the board has refused to produce the depreciation schedules  (accounting records) requested by this writer as required by Georgia Code Section 14-3-1602 and 1603 which would have confirmed the status of this and all other capital assets. (11)

Important Note: Property owners still do not know the true cost of the new pontoon boat fleet as the $319k reported represents the cash outlay only. (4) https://bcmatters.org/just-keeping-up-with-the-facts/

And inflated cash ratios . . .

Management has further continued last month’s deception by inaccurately reporting and inflating the Association’s cash ratio  (12) Instead, it actually stands significantly below one at .78. And after appropriately including the current portion of the Association’s debt (as shown on the Comparative Balance Sheet), (1c) it drops even further to .52.

Note: It might be noted that this writer found no issue with the cash ratio calculations presented by the 2022 Finance Committee Chair. Instead, with management now presenting the balance sheet, it can not be determined how the cash ratio is being calculated.   It appears that management has utilized some unconventional method of calculation thereby inflating the Association’s cash position.

Meanwhile . . .

Effective March 23^rd, the Fed once again increased interest rates .25% followed by an additional increase on May 3^rd of another .25% resulting in a SOFR of 5.06%. (13) With $15 million of the ill-advised Wells Fargo credit facility tied to the SOFR plus 1.70%, the new rate at adjustment will be approximately 6.76%. Annual interest expense will now equate to approximately $68k per each one million dollars outstanding.

Note: And as a reminder, leadership has also refused to provide this writer with copies of the loan documents. 

Another environmental mess . . .

In other news, much like only two years ago when silt, mud and dead fish (14) were dumped into Disharoon Creek (below the water slide) after the catastrophic collapse of the lower level outlet pipe, more mud and silt has once again been poured into what was once a pristine, clear, mountain stream after yet another lowering of Disharoon for capital projects. Fortunately, it appears that additional pollution to Lake Sconti may have been somewhat mitigated by the installation of a silt fence across the creek.

However, one must seriously ask how do these calamities continue to occur in our community, and who is at the wheel?

With the silt removed from that 2021 disaster only months ago (December 2022) at a cost of $444,938, (15) it is unknown what the price tag will be to once again clean up the Disharoon Creek area. Unfortunately, just another example of how our POA assessment dollars are often wasted.

The Lake Petit Dam Spillway . . .

With so much discussion about the dam centered recently on the lower level outlet test and the new design for the bench drain system, any discussion of the pending required replacement of the spillway has fallen under the radar. However, that subject was revisited in the recent board meeting with the GM insisting that an estimated $3 million required to replace the structure (in 2024) had been saved and “earmarked” in the cash flow.

That statement is actually untrue as neither the BD Capital Fund or the BD Master Plan Fund has a balance remotely close to $3 million. Further, those balances will be more than consumed by the Association’s capital expenditures budgeted for 2023.

While clarifying that reserve funds would not be used, the POA vice-president was quick to jump into the conversation and also emphasize that the funds were actually in the Association’s “Cash Flow”.  Really? No – not really. Unless leadership has undisclosed plans to increase revenue (via additional assessment increases) or draw against the Wells Fargo credit lines, the money is not there for the replacement of the Lake Petit spillway.

Save the Date? . . . Seriously? . . .

And finally, it is being announced that the presentation and “reveal” of the Master Plan has been scheduled for a June 3^rd Big Canoe Town Hall meeting. The presentation will presumably include the specific projects, costs and schedules that the Long-Range Planning Committee recommends for the first phase of the Long Range Plan. (16)

Obviously, given the Association’s current cash position, any activation of the Master Plan projects will necessitate the utilization of the Association’s $20 million credit facility.

Still with nothing as it appears . . .

And now given the board’s refusal to produce certain accounting records; refusal to produce loan documentation; undisclosed losses on the sale of capital assets; inaccurate balances and “financial reporting irregularities”; (2) inaccurate cash ratios; inadequate revenue to service the Association’s current outstanding debt ($4.319 million); rising interest rates; large unknowns about Lake Petit Dam; and the board’s reluctance to safeguard the community’s assets by even casting a vote for or against management’s “money grab” . . .

Is it really the time for leadership to pitch their Master Plan ideas to the community?

Instead, perhaps it’s actually time for leadership to “Cancel that Date” and get back to the basics of honesty, transparency and full disclosure of the records and affairs of Big Canoe.

. . . . .

If you believe the information contained in this post 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, 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)

References:

1)  March 2023 Financial Package, Summary of Operations, (a) pg. 1; (b) pg. 3, Statement of Cash Flows; (c) pg. 2, Comparative Balance Sheet

(POAwebsite>login>POA>financials>2023March)

2) “Connect the dots”, bcmatters.org, March 13^th, 2023; https://bcmatters.org/connect-the-dots/

“Connect the dots – part two”, bcmatters.org, April 4^th, 2023;

https://bcmatters.org/connect-the-dots-part-two/

3) 2021 Audited Financial Statement, dated June 23rd, 2022, by Mauldin and Jenkins, Pg. 4 and Pg. 13 (POAwebsite>login>POA>financials>AuditedFinancials>2021)

4) “Just keeping up with the facts”, bcmatters.org, February 20^th, 2023; https://bcmatters.org/just-keeping-up-with-the-facts/

5)  Big Canoe POA Board Meeting, April 27^th, 2023, video on Youtube at (a) 36:15

6) February Financial Summary Slide

7) March Financial Summary Slide

8)“Self-inflicted chaos updated”, bcmatters.org, December 30^th, 2022;

https://bcmatters.org/self-inflicted-chaos-updated/

9) AskthePOA Ticket#9784  

10) AskthePOA Ticket#8790

11)  Request for depreciation schedules

12)  Balance Sheet with Association’s cash ratio 

13)  https://www.newyorkfed.org/markets/reference-rates/sofr

14) “Simply not possible”; bcmatters.org; April 17^th, 2021;

https://bcmatters.org/simply-not-possible/

15) March 2023 Capital Report (POAwebsite>login>POA>financials>2023>Budgets>MarchCapital)

16)Long Range Master Plan Committee Meeting Notes, March 20^th, 2023

(POAwebsite>login>POA>committees>LongRangePlanningCommittee>2023>March20>minutes)