Rotonda West Association, Inc
Budget And Finance Committee
Minutes
Wednesday, February 13, 2008

Present: Bruce Miller, Chair., Hank Artz, Lois Burger, John Carroll, Bud Nill, Claudette Romano and Fred Warner

Absent: Gerry Townsend

Management: Dianne Brophy, Deed Restriction Secretary

Other Member/Visitors Present: Joseph Romano, Ken Guillerm and Jay Lyons

Chairman called the meeting to order at 9:00 am Roll call was taken.

Bruce Miller passed out to the committee The Reserve analysis prepared by Lois Burger and asked that she explain the contents. Lois Burger explained that she took the audited figures from last year and the audited shortfall was $95,825.00. We started with a budget shortfall of $95,825.00 at the end of 2006. We had an actual cash balance of $250,323.00. I posted the interest that the CD’s earned this year and I did it as a percentage of the total. The Building and Repairs amount of $20,191.00 is 5.83 % of the total. So that is the percentage of interest I gave each one of these accounts. I added the interest in and added in the Family Fun Day. So at the end of 2007 our cash balance is $254,227. 96, after the shortfall of $95,825.00.  We met with Geoff Lorah yesterday and at his suggestion we take whatever he ends up with after the audit, take our legitimate reserve expenses and debit them from the Reserve Account and then credit the shortfall. The money is there. If we put it back in the Operating Account and leave it there it will increase the shortfall. Consequently in order to keep from doing that and actually keeping it down, as we are supposed to, whatever we spent that is charged to Reserve this year will reduce the shortfall. The end number will be the same, because if we subtract the $10,000.00 from Aquatics and we subtract $10,000.00 from the shortfall the number is the same. So once we do these transactions after Geoff is through with the audit our cash balance should be $254,227.96. I will do the same with the CD’s that are maturing this month and the CD maturing in March. I will do the same calculations on these CD’s and they have to go back into the Reserves. At some point we need to figure out how we get $200,000.00 from what we have now to the $254,000.00 as that has to be our starting figure for this year. Otherwise we will have borrowed from Reserves again and not replace it. Under the new law we cannot do that. We spoke to Geoff about having a separate Money Market Account for reserves. If we anticipate spending Reserve money and it’s in a CD maturing four months from now, how we are going to have Reserve money available? If we put it in a money market account it will be there and we can use it. If it were in a CD, we would have to do our CD’s in different amounts.

Claudette Romano said we have already put in extra money for interest. Lois Burger said she thought that was to make up for the interest that is accruing right now. It doesn’t matter where the money comes from. We have to get the balance up to $254,277.96.  Lois Burger said we are going to do a Reserve Study. Once we do the Reserve Study, they are going to tell us how to proceed with various things and that way we will be able to eliminate the shortfall. We can reallocate if we do a Reserve Study. At that point and time we will be starting with the $254,277.96. John Carroll asked if Geoff said how fast we have to make up the shortfall. He said if we just put back the money that was spent in the Operating Account that will increase our carry over. If the $44,000.00 that we were looking at seems to be reserves expenditures, it means at the end 2007 we will have in our Operating Account about $13,000.00 plus the $44,000.00. We will end up with a $57,000.00 carryover. If we put it against our shortfall, it will be reduced. If we have that money, we should be putting it against this. We should not end the year with over $55,000.00. By putting it against the proper account, we reduce the debt to ourselves. John Carroll asked where are we going to get this money. Lois said we need to come up with it out of the budget. How we got here, is at the beginning of the year we had $250,000.00 in Reserves. We earmarked $225,000.00 into CDs. So we were short $30,000.00 to begin with. We should have put away $250,000.00. That is why we are so far behind now. Discussion ensued. We have $80,000.00 in Unanticipated Expense. It can be used to replace monies. We have to do this. Lois Burger said if the expenditures needed are legitimate reserve expenditures we can take it out of Reserves. There is discussion on the expenditures. Lois Burger said you can borrow from Reserves and pay it back. There was discussion on the CDs. The first $190,000.00 is for Operating Expenses. Lois Burger said the interest goes into Reserves. We have to account for all the interest on our Reserve Funds. Claudette Romano said on this report you do not have any of the expenditure. Lois Burger said no, because Geoff Lorah said they are taking a hard look at that. We are making sure what is listed here is really all Reserve. Once they are done with the audit, the expenditures will come up. Then the amount of the expenditures will come off. Lois Burger said she will redo the report for the Board of Directors meeting.

Bruce Miller said he didn’t know if he wanted to go to the Board with this. Lois Burger said I don’t think that we have any choice. John Carroll said you have to put the Board of Directors on notice that there is no money in the Reserves for them to take out unless it is for an items that already has been accounted for. They have no money to spend. They thought that there would be some at the end of the second quarter. They can forget about that. Bruce Miller said we don’t know that. John Carroll asked how is the Association doing with the money coming in. Jay Lyons said in the month of January we brought in $282,869.81. The month of February $140,243.00 for a total of $423,113.00 as of today. We are not through until the 15th. Jay Lyons said the property owners have until the 15th of March based upon their billing. I will say we will be close to half way by the end of this month. We will have some delinquency we will be dealing with. That is about a 50% shortfall on our collections at the end of February. Lois Burger asked do we find a lot of people wait until the end to pay the assessment. Yes. Hank Artz gave averages of payments. It is usually 80% for the first three (3) months. Hank said this is an average over four (4) years. John Carroll asked for dollar amounts. For January $11,023.00. For February $382,000.00. For March $380,000.00. Jay Lyons said we are ahead for January and behind for February.

Claudette Romano asked if the Draft Audit could be put on report. Yes. Claudette Romano said more money will be going into Beautification. George Krabbe just put money in from the Dinner Dance. He wants that to go into Reserves.

Lois Burger said this needs to get into Century 21. Jay Lyons said if we can. If we can’t, we will run it in Excel separately and then update it with information that is provided.

Hank Artz asked Claudette Romano the four (4) items that we listed for expenditures $7,400.00, $13,500.00, totaling $44,227.00 that you are going to get together with Geoff Lorah on and identify. We will need a paper trail on this, so that we can look back and see where it came from. Claudette said there should be a paper trail in the office. Hank said these were not charged to any Reserve Accounts. Claudette said they were charged to the Operating Account. Hank said they need to be identified.

John Carroll said when the committees asked for money out of the Reserves, and they were spending it on legitimate items that were covered in the Reserves. We should look to see if the amounts needed were decreased in Reserves. If those items were supposed to be in the Reserves and they spent it out of there, then we used money from the Operating Account to cover it. That money should come out of the Reserves. Claudette said that will bring us down to only $10,000.00 and that is needed because we have expenditures of $44,000.00. Lois Burger stated Geoff Lorah said we should take that $44,000.00 and apply it against the shortfall, to lower the $95,825.00. Lois Burger said this committee and the Board of Directors need to know what the Reserves are for. Discussion followed on Homeowners’ Associations and Reserves.

There was discussion on what was going to be presented at the Board of Directors meeting. Hank Artz said those are accounting numbers and that’s what true. Bruce said the Board may ask what is the plan for the shortfall. Can we talk about what options we have. Hank said one option is last years budget of $40,000.00. The things we did not count were income from fines and interest. These were monies we couldn’t count on therefore it was not added to the budget. Discussion continued. Hank continued saying that 20% of our owners do not pay within the first three (3) months. This means that they get a bill plus 15% administrative fee and postage. This could amount to $40,000.00 or $50,000.00. This is not accounted for or in the budget. Plus we have the Unanticipated Funds. There are a couple of places we can get money. We cannot tell how much that amount will be. Bruce said we do know we have $80,433.00 in Unanticipated Funds. We did not include in the budget anticipated monies from seven (7) or eight (8) items such as fines. We anticipate that may be around $40,000.00. We don’t know. Bruce Miller asked the committee what do you want to do? Knock out the deficit - shortfall. Hank said we don’t know what we can do until we know what numbers we have. We were going to put everything on hold until June or July. Claudette said we need to wait for the audit. Bruce said we will wait for audit figures and stick to our plan that we are not making any expenditures in the first quarter. John Carroll said we can wait for the Reserve Study to see what we have and where we should have it. We can take this whole reserve thing and redo the figures ourselves.  We should prioritize what we are going to spend. Discussion follows. There was discussion regarding money from fining. Jay Lyons said we are working off historical data not actual receivables from all other sources of income other than dues. Lois said money from administrative fees and postage goes into dues. Bruce said it isn’t broken out. Jay Lyons said we can’t. That’s what we are trying to get 21st Century to do. We are asking them if we can split up income and put it into the different areas that we want, so we can report income as dues, fees, administrative and postage. Hank said the reason we appear to be at 100% of our collections on our assessments with 180 people left to collect from, is because of monies coming in from other sources. You cannot balance the books that way. If 21st Century is an accounting system it should be able to show income from other sources rather than putting it all together. Hank Artz said perhaps we can add some fields to break it down. There was discussion regarding 21st Century. We hope there will be a training session for 21st Century here sometime in the second or third quarter.

There was discussion on monies that have to be expended. There was discussion about the grant for $2,800.00. Jay Lyons said they were going to go to the program to see what the $2,800.00 covered.

It was stated that the program should still be attended.

Lois Burger said one thing to ask Geoff Lorah is the possibility of putting money back into Reserves rather than paying down the deficit. That would take us to $244,000.00 towards our $254,000.00. If we have money left at the end of the year, we will pay down the deficit.

Jay Lyons said if Geoff says we have to get our Reserve Account to where it should be, we will have to go back and decrease each of the organization’s budget by a percentage. That would be the best thing to do at this time. You lower the operating budget that was planned for 2008 by whatever percentage it is to increase the Reserves. John Carroll said that is a good objective; however, there are some fixed expenditures. Claudette Romano said the money can come out of the Unanticipated Expenses and then we don’t have to reduce any of the budgets. Discussion followed on the Unanticipated Expenses and paid dues.

Bruce Miller said we are not ready to make any recommendation today to the Board of Directors at this point.

Hank Artz said we spent $44,000.00 last year that we thought was going to be in Reserves but was paid out of Operating Expense. Could any of that come out of Community Maintenance, Community Center or equipment. Claudette said money was just taken. It was not taken out of any specific account. Hank said it had to be charged to something. Claudette explained she showed everything to Jay Lyons. Depending on where these things are charged there may be other money available. Our 2008 Budget maybe high because of what we did paying them out of Operating Expense. Discussion followed. Claudette listed all the office equipment that should have come out of Reserves. The amount came out to $13,591.00. It was not taken out of Reserves at is should have been.

The committee discussed the Budget Review and Planning Subcommittee recommendations presented by Hank Artz. Bullet item three (3) addresses a new money market account with limited check writing to be designated as “Reserves” to store reserve earned interest and reserve fund required to pay for capital improvements and non-recurring maintenance. There was discussion regarding this item. We have not co-mingled money last year or this year for Operating and Reserves.

Hank Artz stated there is not $190,000.00 coming due February and March for Reserves. John Carroll said no that is Operating Funds. Discussion followed regarding the CDs and the interest on them. There was discussion on the proposed new money market account designated for Reserves.

There was discussion on interest on CDs.

There being no further business the meeting was adjourned at 10:15 am

The next meeting will be February 28, 2008.

Respectfully submitted,

Dianne M. Brophy
Secretary