2015 DEC 31 VLC Financial Statements
Above is the year end report as posted by Associa., The highlights made were on line items that appeared unusual, including the excessive legal fees. As of June 30, 2015, legal fees were posted as under $4,000 of the $8,000 total amount budgeted. At Dec 31st, they are reported as nearly $20,000. Why?
The Board mailed a Jan 2016 Newsletter “explaining” the legal fees, perhaps in response to the inquiry by an owner at the Nov 2015 Budget meeting. The owner asked for a breakdown of the legal fees, likely since the Board increased the legal expense budget to $20,000 for 2016. The Newsletter describes that $11,375 “went for defending Van Loon”. Defending from what or whom? Did anyone file litigation against Van Loon? Did anyone file an intent to sue?
The Board should show all expenditures, invoices and contracts to any owner who is interested and stop their baloney. Without asking for the actual breakdown, meaning the Detailed General Ledger with check numbers and dates, no one knows if the financial above is correct. Was $13,157 spent on Mulch in December? Was exactly $11,500 spent on Tree Removal in December? Did the total Water/Sewer expense actually come in JUST UNDER budget, when we all had unlimited use for $47 per month? WHERE IS THE MULCH?
The last line of the report indicates that in December, a huge amount of expenditures were made; $102,171 and also shows the Dec expenditures as $47,130 more than a 1/12, budgeted monthly amount. Of course expenses other than management fees or contracted maintenance will vary by season, breakdowns or for other reasons but accounting entries can also be made at year end to, classify expenses as other items, hiding the actual amounts.
The result of the report shows that Van Loon spent $19,073 less than they took in. That may be the “Taxable Income” the Proxy letter is referring to, or the “Taxable Income” may be the $374 of Reserve account interest (which could be offset to zero by costs).
If any of this report is correct, including 100% Collections of Dues – the end result would still not be $19,073 of Dues over Expenses. Why? Because the Budget built in as an expense (rightfully so) a “Bad Debt” Line. It is not a Cash out/Check written Expense. It is an entry that should be based on prior years and current market conditions of what an association may not collect. Florida has Safe Harbor laws for property in foreclosure and the amounts associations can recover have limitations. Therefore, if a property languished in a foreclosure status for a couple years, as they often do now – the back dues and assessments could grow to $10,000. The association would be limited to collecting a 1% of the original mortgage or 1 year’s dues (this is a very simplified explanation and not to be quoted as an exact example – the issues are easy to self search using Google)
So……the Bad Debt amount of $20,837 was not spent; it was simply not used, or realized.
This is one of the reasons the actual financial copies should be made available at the clubhouse, monthly. Owners with financial backgrounds such as mine, would be able to spot immediately when we are “having the wool pulled over the eyes” and keep the Board and the property managers accountable to us.
DISCLAIMER: The above post is not written or approved by the Board of Van Loon, obviously. When the Board of Van Loon includes persons who open the books and records to owners per Chapter 718, the Blog Author will be able to move on to other projects.