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Minutes for La Casa Finance Committee Meeting – October 21, 2019
Call To Order: Jack Pasquale, Chairman called the meeting to order at 9:00a.m.
Roll Call: Members Present: Jack Pasquale, Jan Danner, Denis Meikle. Call In Members: Dan Mahoney, Ron Long, Dianne Richardson.
Staff Representatives: Present:Randy Browning, Absent: Linda Krout—However she responded to questions that were asked during the meeting in an email to the Finance Committee and her responses are included in these minutes.
HOA Board Liaison: : Hank Madura, Treasurer (Call In)
Guests: Jill Palmer, Bucky Rogers, Rich Dickson, Terry Holovachuk, Ruth Meikle
Agenda: The current agenda was approved.
Approval of Minutes: The September 23, 2019 minutes were approved.
Monthly Financial Statements: The Committee reviewed the following financial statements for the period ended September 30, 2019: Bank Balances, Cash Flow, Balance Sheet, July P&L, Year to Date P&L, Reserves, C.A.A. Transaction Detail, Asset Expenditures, General Ledger Entries, Notes on Financials, and Budget Variances. Dan Mahoney asked about the $59,949 of reduction in the Centennial Money Market bank account. He asked what the expenditure was for and why did it come from the Money Market account and not from the lower paying checking or savings accounts. Linda Krout responded that the funds were applied to the excess over Reserves for the office roof replacement. She stated that this CAA expenditure was approved by the Board. Linda stated that the funds were transferred from the Centennial Money Market to Centenial Checking since the Fidelity Money Market pays higher interest. This transfer was authorized by Hank Madura. Dianne Richardson asked why the budget on the Profit and Loss statements did not match with the approved budget. She pointed out that the Reserve Interest Income on the approved budget is backed out but not backed out on the current statements. Linda answered that we must report the La Casa financial statements as a whole and Reserves are a part of that whole. Dianne also pointed out that the approved budget includes $20,000 for Contingency Expense but is not on the current statements. Dianne stated that it appears that the Contingency Expense is now called “Park Improvements” on the current statements. Linda wants to defer this issue until she can discuss with our auditor. Hank Madura stated that he is planning on pulling out the Reserve Fee Income and Reserve Interest Income in his financial report to allow reporting of only Operations. Dan Mahoney stated that this would exclude a significant portion of La Casa income and therefore no longer represent the full reporting of income for the La Casa entity which has been the long term policy. He also stated that the Reserves and CAA funds are only reserves under the La Casa entity and not entities in and of themselves. He stated that it was his understanding that the reason the approved Operations budget excludes Reserves Income is because we must include a separate annual budget for Reserves. Dan Mahoney asked why office roof expenditures were being charged to CAA fund and not the Reserve fund. Jack Pasquale and Hank Madura explained that Reserves liquid cash was low therefore paid from CAA and CAA will be refunded by year end from Reserves. Hank Madura stated that we have $300,000 in C.D.’s maturing over the next 3 weeks. He is suggesting a $200,000 4 year C.D. for Operations and a 5 year $150,000 C.D. for Capital Asset Acquisition be purchased. He will call for an Investment Team meeting next week to discuss this.
Free Conferencing: Remains a “Work In Progress”. We can now display documents and the problems with sound and the mike have been resolved. Jack will be preparing a summary on the Free Conferencing system.
Project Update: Randy Browning gave an update on existing projects. His update is attached to these minutes.
Brokerage Firm Issues: Hank Madura and Linda Krout prepared a list of issues they are experiencing with our Fidelity Broker. The Committee members briefly discussed their concerns and some options. A more thorough discussion on this topic was tabled until Linda Krout could be a participant. Dan Mahoney pointed out that the procedure in purchasing a rolling C.D. at the Brokerage firm was the same for both commercial and personal accounts and was a very simple procedure and gave Hank Madura the Fidelity Fixed Income phone number to review it.
Reserve Study RFP: Jack Pasquale gave the Committee an overview on our Reservist history. Our current Reservist, Staebler Appraisal and Consulting Services, is currently not under a contract. Denis Meikle and Dan Mahoney asked about any issues we are having with our current Reservist to warrant a Request For Proposal. Rich Dickson responded that the Board has requested a Reservist RFP. Rich stated that he was concerned about our past expenditure peaks and valleys which creates budget problems. He felt our Reservist should foresee these issues and assist us in avoiding them. Randy Browning gave the Committee an overview on the Reserve Study procedure. After completing the discussion, Jack Pasquale stated he will draft an RFP next week for review. Jack Pasquale pointed out that this statement made in our prior meeting “The basic Reserve Study is a physical inventory of our assets to be maintained and repaired but not does not include replacement of those assets” is incorrect. He stated that it does include replacement of those assets.
Five Year Projections: Linda Krout has updated the Five Year Projection and copies were distributed to the Committee prior to the meeting for review. The Projections consist of three parts: Operations, Capital Asset Acquisition, and Reserves. Dan Mahoney pointed out that these Projections will most likely become a point of reference when shareholder fees are discussed and therefore should be as accurate and realistic as possible. The applied assumptions were included with the Projections. The assumption for the inflation rate is 3% for all five years. Dan Mahoney suggested that we use an official U.S. inflation forecast for example the IMF U.S.Forcast as follows: 2020-2.7%, 2021-2.3%, 2022-2.2%, 2023-2.2%, 2024-2.2%. Dan also suggested that the same inflation factor applied to expenses should also be applied to miscellaneous income items and the LCRE Bonus should be included in the Operations Income Projections. Rich Dickson stated that the LCRE Bonus was moved from Operations to CAA. Dan Mahoney pointed out that the Board motion moved only the cash side since the income is recorded as Operations income and that is where it must remain because the CAA fund is not an entity where income is recorded but is a fund within Operations. Jack Pasquale pointed out the Reserve Projection basically comes directly from the current Reserve Study and the funding for it applies the Current Assessment Funding Model. Dan Mahoney questioned the need to have the percentage funded going up to 71% by the year 2024. Jack Pasquale responded that the Board needs to establish the target funding level within a Reserve policy which we do not have at this time. Ruth Meikle pointed out that the CAA interest income is listed both in Operations and CAA Projections and this will be further reviewed with Linda Krout. The CAA Projection included both Board approved projects and anticipated projects. Since the total amounts on this Projection were quite substantial, Rich Dickson suggested including caveats on this Projection to make sure it was understood that this is not a formal Plan. It is a snapshot in time. These suggestions and others will be further reviewed at a joint meeting on November 5, 2019 with the Finance Committee, the HOA Board, and the Futures Committee. The changes will be incorporated for final review by the Finance Committee for Board recommendation in our meeting on November 18, 2019.
Reference Manual: Jill Palmer has compiled a reference manual for Finance which includes all the motions issued by the Committee back to 1994. Thank you Jill!!!
Annual Budget Change: It was suggested by various shareholders that we consider changing our budget cycle so it would more coincide with the time frame when more shareholders and Committee and Board members are physically present for input into this important process. This was discussed and we will further research it with our auditor.
Meeting Adjourned: At 11:17 a.m.
Next Meetings: November 5, 2019– Joint Meeting with HOA Board & Futures Committee at 2:00pm; November 11, 2019—Joint Meeting with HOA Board to meet with our Auditor at 1:00pm; November 18, 2019—Regular Monthly meeting at 9:00am in the Office Board Room.
Attachment: Project Update
Attest: Dan Mahoney, Secretary
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