SCSH News

By Robert Jester
Chair, Finance Advisory Committee

As published in The View, April 2024:

Question of the Month: What has the Finance Advisory Committee been doing over the past months for this community?

Since we are in the midst of the Board election season and a new Board configuration will be put in place in April, this seemed like a good time to look back over what the committee has been doing the past months.

One of the committee’s biggest tasks in 2023 was to assist in the budget process. We started on this in July 2023 and worked through the months until the final budget was approved in October 2023. Frankly, the committee had some input that did not make it into the 2024 budget, but the Board speaks for the community, and a budget was approved. We will carefully monitor the budget over the next months, and we will tackle the process again this summer. The committee is also drafting a budget process for the Board to follow for the 2025 budget, and we hope that the new Board will find it helpful and consider following it in the creation of the 2025 budget.

The committee is also close to approving an “operating cash available” formula for Board consideration and approval very soon. This is an extremely important formula to have so that the Board does not have to guess or assume how much “operating cash available” is present. Without this formula, the Board could be spending Association cash that would jeopardize the Association’s ability to pay its bills as they come due in both normal and crisis times. The guideline is to have enough available cash to meet two to three times the Association’s average monthly expenses. This is really just like all of us. We need that cash cushion for unexpected expenses.

We have also been doing an extensive analysis of our Reserve Fund and the items funded on the replacement list of components. They number approximately 834 components that have a useful life of less than 30 years. Most of these useful life and replacement cost figures have not been intensively studied for some time. Now that we have a vice-chair devoted to this purpose, we are plowing ahead. You just learned that as of December 31, 2023, we had 16.7 million dollars in our Reserve Fund.

But that is not the whole story, as there are more serious Reserve Fund concerns that are being considered by this committee. Today, if it was necessary to replace everything on the 30-year replacement list, it would cost 43 million dollars and that does not consider inflation and other economic factors. But thankfully, we yearly retain a licensed reserve specialist to calculate what the monthly resident reserve assessment should be to cover those costs spread over 30 years.

In addition, in the next five years we expect to spend 12 million dollars, so we will be focusing on adequate cash flows and the timing of the invoices that need to be paid. It is a laborious job, but it must be done. The Vice-Chair has spotlighted 80 components that comprise the highest dollar demands on the fund over the next 5 years. This requires the committee to carefully reexamine useful life and replacement cost on these 80 components, or we will not have the needed funds. We acknowledge that we are the “volunteers” who must spend the time to be sure the community is financially secure. We will accomplish our obligations, but we will need a Board that accepts our carefully researched recommendations for a healthy Reserve Fund.  Remember  that  golf  course  maintenance equipment alone over the period of 2019 to 2024 has experienced cost increases of 62%.

A final thought on the future of the Association’s financial health, is the absolute need for a capital improvement fund and funding mechanism. We all hear the “we need a new or larger amenity” or “we need expanded clubhouse space.” But to date, we do not have a funding mechanism other than a special assessment, which everyone wants to avoid.

So, the committee’s request of you is to think outside the box and consider options and then be willing to accept new and inventive funding sources for your Association.

Contact the author at finance@scshca.com.

By Robert Jester
Chair, Finance Advisory Committee

As published in The View, March 2024:

Question of the Month: Why do we have a Finance Advisory Committee?

The reality is that a five-person board cannot do everything that is necessary to carry on the day-to-day business of this Association. The board needs attorneys, management services from Desert Resort Management, auditors, reserve study experts, and advisory committees to assist it in doing what is necessary for this Association to function properly. One of those advisory committees is the Finance Advisory Committee (FAC), and it has specific duties assigned under its charter by the Board. This article is to highlight those duties so you will better understand what the Finance Advisory Committee does for you, the resident.

The current FAC Charter was approved on September 27, 2021, and contains the following advisory committee obligations:

1. Meet regularly to analyze and review ALL the Association’s financial statements.
2. Review the monthly Bank Reconciliations and the investment accounts of all accounts held by the
3. Review the annual financial forecasts prepared by the Comptroller.
4. Prepare or review, if prepared by the Comptroller, the Management Discussion and Analysis of the monthly Forecast update.
5. Advise the Board on Best Industry Practices for the accounting reporting systems and systems of needed internal financial controls.
6. Advise the Board on the use of Best Industry Practices for the Association’s Annual Report.
7. Review the Investment Performance on a regular basis and advise the Board.
8. Assist the Board in the review of all major vendor and provider contracts.
9. Monitor contract compliance and report discrepancies to the Board in writing.
10. Assist the Board in the preparation, review, and evaluation of the Association’s Annual Operating Fund and Replacement Fund Budgets.
11. Review the Association’s annual insurance needs and policies with the broker and suggest changes to coverages, limits, deductibles, and costs.
12. Meet with the independent accounting firm in preparation for the annual audit and review the engagement letter of the auditor.
13. Review the Management Letter issued by the independent auditor, which identifies their recommendations for strengthened internal controls and procedures.
14. Review the Association’s draft tax returns, filings, and supporting schedules provided by the independent accounting firm.
15. Review the engagement letter for the annual Reserve Study.
16. Conduct special financial research or analyses at the request of the President or Treasurer for the purpose of improving aspects of the Association’s operations.
17. Assist the Board in educating SCSH residents regarding the Association’s financial condition.
18. The committee is to make written recommendations to the Board on the selection of professional service firms for the Association, i.e. accountants, auditors, attorneys, etc., including management companies for golf operations, F&B operations, and the Association’s management firm.
19. The FAC has a Financial Advisory Sub-Committee that assists the FAC in the review and analysis of all monetary requests for purchases or projects that exceed $5,000, per the Association’s approved Procurement Policy.

• • All reviews and analyses of matters are reported to the Board as a recommendation by the FAC. The Board makes all final decisions.
  • The Board Liaison for the FAC is the Treasurer of the Association.
  • All direction by the committee to Association staff is required to be made through the Association General Manager.

I hope this provides you with a clear understanding of the duties of the FAC and why we are the “Financial Watchdog” for the residents of this Association.

Contact the author at finance@scshca.com.