Summary of Finance Committee Meeting of 18 July 2006
Present:
Finance Committee: John Frisch, Sanya Ham, Don Horan, Paul Rankin, Jean Strub
Board of Directors (BoD): Mal Malo, Bill Nosal, Toni Brown, Jackie Richards
Monitor FRCA (Koger) Account: At the Board of Directors’ meeting on 21 June, Jeff Koger, CFO of Koger Management, met with Finance Committee members Paul Rankin and Jean Strub to discuss the many questions and apparent inaccuracies noted in their review of invoices received in late May and monthly financial reports. Jeff had been provided with their list several days before their meeting. Jeff agreed that Paul and Jean’s observations were correct in every case, and said that the errors would be corrected and requested additional information provided within a few days. To date, the requested additional information has not been provided and, without the requested information, the status of the expected corrections cannot be verified. In addition, the 30 June financial reports were received from Koger Management, but without the copies of supporting invoices and general ledger entries. Until the invoices and ledger information are received, only a superficial analysis of the 30 June reports can be made. Mal Malo will again request the required information from Koger Management. However, without that information, the review and analysis of the FRCA account at Koger Management is effectively stopped. The superficial review of the 30 June financial reports does reveal several significant questions and apparent inaccuracies.
The status of the 2005 audit of the FRCA account by Goldklang, et al., was briefly discussed. Goldklang, et al. has reported some difficulty in getting the necessary information for the audit from Koger Management. Information was provided to Goldklang, et al. last week, but there has not been enough time to verify that everything required was delivered. The extended due date for filing of tax forms for 2005 is 15 September. The information needed for filing taxes has to come from the audit, so some urgency exists.
The use of the Visa debit card by the Activities Director provides some accounting challenges which are being addressed. The lists of items covered by each debit card transaction are kept in the Activities Director’s computer. Koger Management only sees the total amount for each transaction in the monthly Visa statement, and therefore cannot allocate the charges against the proper accounts. John Frisch is working on connecting those two pieces of information so that proper accounting of debit card transactions can be made by Koger Management. Copies of the monthly Visa statements have been requested from Koger Management and statements for April, May, and June 2006 have been provided. However, the request was for all statements dating back to November 2005, when use of the debit card began. Mal Malo will again request copies of these earlier Visa statements.
Monitor Community Center Account: Phyllis Benaman is working on consolidating and simplifying the accounting of individual events and trips kept in the Activities Director’s computer. Monthly reconciliation of the Community Center Account with the bank statements continues to go smoothly.
Investment Strategy: As of 30 June 2006, the FRCA has $563,306.96 in reserve funds comprising $442,710.17 of Replacement Reserves and $120,596.79 of Operating Reserve. The amounts listed for Replacement Reserves and Operating Reserve on the 30 June Balance Sheet are incorrect, although the total listed there for reserves is correct. As of 30 June, $543,479.56 is invested in a Super NOW Account at Community Association Banc (CAB). The rate of interest for this account was listed as 0.3% on 10 July 2006.
Recommendation to the Falls Run Community Association Board of Directors concerning investment of reserve funds: That Koger Management be directed to use $400,000 from the Super NOW Account and obtain 4 CDs of $100,000 each at CAB; 1 CD with a 6-month maturity (recently earning 5.12%); 1 CD with a 12-month maturity (recently earning 5.21%); 1 CD with an 18-month maturity (recently earning 5.21%); and 1 CD with a 24-month maturity (recently earning 5.21%). Each of these four CDs is to be identified as Replacement Reserves funds. The remaining $42,710.17 of Replacement Reserves in the Super NOW Account, plus any additional allocations of funds for Replacement Reserves, are to be put into a HOA Market Account at CAB (recently earning approximately 2%), and identified as Replacement Reserves. The remaining money in the Super NOW Account is to be put into a second HOA Market Account at CAB and identified as Operating Reserve. The Super NOW Account is to be closed. Money put into CDs and HOA Market Accounts at CAB are to be distributed to obtain FDIC insurance on $300,000 or more.
The members of the Finance Committee realize that significant funds will not be covered by FDIC insurance, which is also the present situation. However, CAB and its two associated banks are members of FDIC and subject to the oversight and auditing such membership requires. The recommended movement of funds will provide a good interest rate on our funds, and allow us six months before the first CD matures to prepare for investing in CDs at local Fredericksburg banks to the $100,000 FDIC limit, to prepare for investing in U. S. Treasury bills, or a combination of the two.
Budget: Preparation of the 2007 budget is underway. Several members of the Finance Committee have recently provided inputs for a new chart of accounts to be used as the basis for the 2007 budget, and for accounting by the management company starting on 1 January 2007. This chart of accounts is specifically tailored to the typical income and expense categories of Falls Run, in contrast to the present generic chart of accounts which doesn’t quite match our categories and thus presents an opportunity for confusion. Information is needed by 31 August from the Board of Directors and from each BoD committee listing additions to, with prioritization, and deletions from the 2006 budget to be considered for the 2007 budget. Mal Malo will have the BoD issue such a budget call. A key part of preparation of the 2007 budget is a review of every contract to determine expected cost of each in 2007. Sanya Ham, Paul Rankin, and Don Horan will do this review independently and then meet to compare information and resolve differences. A second key part of preparation of the 2007 budget is a review of all income and expenses for the first six months of 2006. This task will be done by Jean Strub as soon as the June invoices and general ledger information are received from Koger Management.
Committee Membership: The Finance Committee has lost three members over the past several months: Tom Cindric, Jim Hanscomb, and Jim Pierce. There was a brief discussion of the capability of the remaining seven members to do the required tasks. The consensus opinion was that there is no need to recruit additional members at this time.