Finance Advisory Committee Report

Beginning in July 2016, the newly constituted Finance Advisory Committee (FAC) has been reviewing a number of items including but not limited to the:

  • 2016 unaudited financial statements prepared by the three management companies providing services to the HOA including PCM, Western Golf and Troon Golf
  • 2015 audited financial statements and the adjusting journal entries proposed by the auditor
  • 2015 and 2016 final replacement fund (reserve) study
  • 2016 operating fund budget and replacement fund budget
  • 2017 reserve replacement fund (reserve) study
  • 2017 operating fund budget and replacement fund budget
  • Management contract with Troon Golf effective July 1, 2016
  • Management contract with PCM effective October 1, 2016

FAC noted the following for the HOA:

  • Total revenues for the operating fund and the replacement fund were more than $13M annually for the years 2014 and 2015 and were more than $12M annually for the years 2011 through 2013
  • Total revenues for the operating fund and the replacement fund are estimated to be more than $13M in 2016 and more than $14M in 2017
  • Estimated cost to replace the common area improvements owned in common is estimated to be approximately $36M
  • Total expenses for the operating fund and the replacement fund were more than $12M in 2015 and are expected to be more than $13M in 2016
  • Total expenses for the operating fund and the replacement fund are expected to be more than $15M in 2017

The FAC concluded:

  • The financial operations of the HOA were:
    • A very large business with multiple revenue sources and types of expenses including significant expenditures for:
      • New common area improvements
      • Major repairs
      • Replacement of common area improvements
    • Significant and complex with the size and scale of the community, the multiple management companies, and the number of amenities and facilities operated
    • Among the top 1% of all HOA’s in the country

The FAC recommended to the Board in August 2016 that a Financial Controller be hired by PCM. The recommendation was approved by the Board at a meeting on September 29, 2016.

Since October 2016, FAC assisted PCM and the Board by:

  • Reviewing and recommending changes in the development of the position description for the Controller
  • Reviewing and recommending qualities, experience and expertise that would be helpful in candidate review, evaluation and selection
  • Interviewing of candidates for the position
  • Providing independent follow up on references provided by the candidates for the positon
  • Recommending a candidate to be hired by PCM

The FAC has seven members at this time and their professional experience includes two individuals that are CPA’s (one active and one newly retired), an active CFO, a retired CFO, a retired Investment Banker, a retired Financial Analyst and a contract/IRS tax attorney.

PCM has now hired Tyler Ingle as the Controller for the HOA. Tyler has over 20 years of accounting experience including 12 years as a Controller. Tyler commenced employment with PCM on January 16, 2017. After a couple of weeks of orientation to and training on the Associa accounting systems, FAC and Tyler began working together. FAC has developed a comprehensive onboarding and training plan for review with Tyler.

  • The duties of the position of the Controller are significant. The principal responsibilities of the Controller include but are not necessarily limited to:
  • Responsibility for the preparation of the accounting records in accordance with Generally Accepted Accounting Principles (GAAP) and free from material misstatements
  • Review and approval of the combining and combined financial statements for the Association in accordance with GAAP
  • Coordinate all activity with the independent auditor for the annual audit and annual tax returns
  • Implementation and maintenance of internal controls and safeguards for the receipt of all revenues and payment of all approved expenditures and expenses
  • Review and approval of general ledger account coding of approved invoices for expenditures to ensure meaningful comparison of actual vs. budget results
  • Leadership in the annual budget process including implementation of a rolling forecast throughout the year with comparison to budget to keep the FAC and the Board updated on actual results of operations as compared to budget and anticipated results of operations as compared to budget
  • Verify transactions between PCM and Troon Golf are recorded consistently so that there are no reconciling items
  • Examine and review expenditures for contract compliance
  • Review and approval of all cash and investment account balance reconciliations to the general ledgers maintained by the management companies on a monthly basis
  • Leadership in the review of monthly and year to date variance analysis to ascertain causes of variance, categorize the variances as to timing or permanent, and assess the impact of the variances on the rolling forecast for the current year and the budget for the following year
  • Prepare management discussion and analysis of the variances and other significant items affecting the financial positon or results of operations of the HOA
  • Leadership in the annual replacement fund (reserve) study
  • Prepare management discussion and analysis of the changes in the annual replacement fund study

BY BILL WETHE
CHAIRMAN, FINANCE ADVISORY COMMITTEE