August 29, 2009 by bobfrank.

During August 27, 2009 Board Meeting Treasurer Cheri Announced Huge $4.7 Million Accumulated Surplus and ’09 Dues Cut from $960 to $720.

Here is data from the Board’s summary of our past 5 years of accumulated “surplus” funds showing SCA members have been willfully overcharged every year since 2002.

Year     Dues      Surplus* Funds
2002    $ 740          $    455,000
2003    $ 740          $ 1,050,000
2004    $ 940          $    909,000
2005     $ 940         $ 2,348,000
2006     $ 940         $ 3,179,000
2007     $ 940         $ 3,845,000
2008  $ 1,000**      $ 4,755,000
2009     $ 720***    $ 4,000,000+
2010     $ 840****      (??)

* Surplus = Left over after paying bills, reserves, and budgets for new projects.
** 2008 Assessments set to $1,100 but $100 was cut and/or credited during the 4th Quarter.
**** 2009 Assessments cut from $1,100 to $960, but was further cut to $720 after a 4th Qtr. dues holiday.
**** My suggested 2010 dues level

In case it is not remembered, in 2007 I strongly opposed the 2008 budget when it was clear that the board had been grossly overcharging on assessments and improperly/illegally handling the accumulated surpluses/slush funds. Here is a quote from the October 23, 2008 SCA Board Meeting Minutes:

“XV. a. Association Assessments Lowered To $960.

Bob Frank proposed an amended that the association assessment be lowered to $900 for the 2009 year–the motion FAILED for a lack of a second.

[R07-102308] UPON motion duly made by Shirley Cheri, seconded by Carl Weinstein, with (5) five in favor and Bob Frank voting no, the Board of Directors adopted the Finance Committee budget recommendations that the Sun City Anthem Association assessments be lowered to $960 in 2009 with the Association reserves allocation portion of the assessment to be $117.”

So, what have we learned from this week’s Board reports about the past results under the iron-fisted budgetary controls of Roz Berman, Jack Troia, Shirley Cheri, Mike Dixon and Don Manning?

1. The opinions I (and other competent SCA business people) stated in 2007 and 2008 were correct. Dues were exorbitant. Surplus/Slush Funds were being improperly/illegally accumulated. Income tax returns were incorrectly prepared and submitted.

2. Our financial managers are NOT the wizards they claim to be. They have flagrantly overcharged dues/assessments for over 5 years. They have willfully accumulated almost $5 million in surplus funds without properly adjusting the assessment rate and without allowing SCA members to vote on what to do with huge surpluses!

3. Claims that SCA dues are reasonable/below average are beside the point. Dues/assessments are required by law to be based on what is NEEDED to properly maintain the common property. If the needed amount is significantly less than comparable HOAs in Nevada, then good for us and good for our property values. Dues are not to be set based on a commercial pricing practice of “whatever the customer/members will tolerate”.

4. Instead of refunding or crediting all (or most) of the surpluses back to members (as required by the laws and IRS rules) these people have conspired to hoard the surplus money while desperately seeking ways to spend/waste it. This has established serious income tax liabilities for up to $2 Million, and exposed SCA to future IRS findings of major income tax evasion and violations. And, during that entire time, our professional management companies have failed to help our directors avoid these serious problems.

5. Members must get more engaged this year and require that the 2010 budget be scrubbed down. Dues should be set at around $840 with truly effective fiscal controls placed on unnecessary expenditures. We also need to require RMI to implement effective management of our facilities contracting policies.

Posted in SCA Board, Community Affairs, Operations, News! | Print | No Comments »

August 26, 2009 by bobfrank.

NOTICE: David Berman has posted a blog announcement claiming the board has approved cash collections for the Zu Chi Foundation to help provide relief to Taiwan victims of the recent storm. He also mistakenly claimed that all such donations to Zu Chi would be tax deductible.

However, no board agenda items, deliberations or announcements concerning approval of such fund-raising have been made. Unless there was yet another secret board meeting, David Berman is wrong.

In addition, David Bernstein (retired attorney living in SCA) researched the tax aspects and posted on the Berman blog as follows: VERBATIM from section 170 (c) (2) of the Internal Revenue Code: “A contribution or gift by a corporation to a trust, chest, fund, or foundation shall be deductible by reason of this paragraph only if it is to be used within the United States or any of its possessions exclusively for purposes specified in subparagraph (B).”

David Bernstein also stated: “As a 501 (c) corporation, it may have income that is non-taxable. But that does not automatically make any contributions to that corporation deductible if the funds so donated are to be used in Taiwan…”

I have sent an e-form asking the SCA Directors to immediately correct the record to avoid inconveniences to members when they discover no board authorization has been issued to allow such funds collections on community property.

While SCA members are involved in many good fund-raising causes every year, the association policy in the past has been that SCA community property can not be used for collections for outside organizations–except for the Minuteman Foundation.  Many previous charitable requests have been denied. If the policy is to be revised in the future, it will take some careful work on the revised policies by the Lifestyle Committee and the Board.

Posted in SCA Board, Community Affairs, Clubs & SIGs, Operations | Print | 1 Comment »

August 20, 2009 by bobfrank.

This year’s “tax planning workshop” will be on Friday afternoon @ 2 PM in the Arlington Room. I URGE SCA members, standing committee members, and board members to attend. Future decisions resulting from discussions during the tax planning workshop will drive our future assessments.

There have been many past allegations of serious mistakes made in SCA’s federal income tax returns for 2005, 2006 and 2007. Because nothing was done to resolve the dispute, one of our well-informed SCA members declared he filed a complaint with the IRS. If so, an IRS audit of SCA may be coming this year or next. The member making the complaint said he believes SCA owes over $1 million in back taxes, penalties and interest.

Past boards, finance committees and auditor have all claimed that absolutely no mistakes were made, and that they are not worried about the results of any IRS audit. Their position has been that they have 4 CPA volunteers, plus another CPA in the auditor/tax preparer, so they believe there is NO CHANCE they made any mistakes. However, no one person, CPA, attorney or other professional, can possess “perfect” knowledge of how the IRS interprets the rules. And, the consequences of being wrong are expensive.

So, if you are interested in this topic and have time to review the information at the below link, you should attend the tax planning workshop.
http://www.anthemvoice.org/taxes_issue.html

Afterwords, you may conclude that all is not as simple, or as squeaky clean as the board president, vice president, treasurer, finance committee members and auditor would like for us to believe. In fact, you might conclude that these folks sound like some of them are hiding some important facts and others are covering up for them. They are MUCH too defensive and emotional to be on the perfectly solid ground that they claim. The spinning and loud posturing of some of our SCA volunteers might remind you of the hundreds (or thousands?) of CPAs and attorneys who contributed to organizations like Enron and Fannie Mae going bankrupt.

Why should YOU care? If our volunteers are wrong, WE (you and I) will pay dearly for their mistakes. Experience shows that prudent people work WITH the IRS and AVOID audits. Otherwise, there could be IRS payments, auditor and attorney/litigation expenses, and other high expenses. When we find such potential liabilities to our members, we are obligated to thoroughly check out the allegations–BEFORE the IRS starts an audit.

On the other hand, if our volunteers are perfectly correct, they should stop blocking the requests to invite the IRS national HOA specialist to review the returns in question. We need to get a clean slate of approval from the IRS to make the controversy go away and to avoid an audit. Let’s do the smart thing–ask for IRS guidance and not wait for an adversarial audit to get scheduled.

Posted in Truth Squad, SCA Board, Community Affairs, Laws & Rules, Operations | Print | No Comments »

August 19, 2009 by Forrest Fetherolf.

I have decided to move my comments to other blogs. I originally honored David Berman by posting this information on David’s Journal, but he took offense reading the facts and my opinion and nuked the post. He indicated “defamatory” and “defamation” for his reason to nuke. I have received many emails in support of my comments and from more than one Board Member, another resident corrected Berman’s unreasonable reasoning and was nuked.

I will agree when he said I have an agenda to post on other blogs, he is exactly right-on. I do because all the blogs provide information to many residents. Many undesirable issues have surfaced and residents should be aware.  I wrote:

I will have to give Carl my approval for how he voted against the lease agreement; he isn’t against having a restaurant or gaming but how the lease agreement was handled in secret led by our current board president, a couple of supposedly resident restaurant experts, and with legal advice from attorney Ed Song.

I spoke with Mr. Song after the special Board Meeting regarding why he would allow a flawed lease agreement to be written with questionable wording “unreasonably withheld” and then make three speeches attempting to justify the wording that he felt was really meaningless, would not have any adverse effect on our community, and was in the lease only to entice Hernandez to sign the agreement. His long, confusing, babbling speeches were accompanied by a MOU (Memorandum of Understanding) to further attempt to justify his failure to provide proper legal advice and wording to protect SCA.

His classic response was “I just write down what the Board tells me.” Is our pricey law firm that appears to be questionable by many knowledgeable residents nothing more than a secretary?

Current and past Board members rely heavily on Mr. Song’s legal opinion to bolster their lack of knowledge in many areas; such as they did in the past with RMI. When RMI’s mismanagement practices were exposed, the BOD and Committees responded by implementing procedural changes to reduce wasteful spending and liability.

In my opinion, the BOD should consider alternatives as to who should be our legal council. The current law firm (John Leach) is a carry over from the Del Webb/Pulte era; a new legal firm could work solely for the benefit of SCA without conflict of interest.

Forrest Fetherolf

Posted in SCA Board, Community Affairs, Operations | Print | No Comments »

August 15, 2009 by bobfrank.

For the record, the NV Real Estate Division has stated that about 1,000,000 NV citizens live in about 3,000 common interest communities and they expect the NV numbers to continue to grow at a greater rate than the national averages during the next decade–despite the economic depression.

There can be no doubt that a Common Interest Community (frequently called a Home Owner Association or HOA) in Nevada is both a corporation and a representative form of local government intended by the Legislature to serve the best interests of the unit owners. The developers and their preferred attorneys, auditors and reserve study companies have the money and organizations to take care of themselves. The home owners need help and protections from the greed and misconduct that is invariably associated with big-money operations–particularly in a senior/retirement HOA.

In other words, the basic intent of HOA laws is to protect the interests of home owners. However, some laws exist that clearly favor the commercial interests, and home owners must work together to balance the power. In the meantime, most directors claim (during and after campaigns) to be home owner representatives. But, most of them quickly reverse themselves after the elections. The typical HOA director becomes a developer-advocate and tends to ignore the major home owner interests while serving on the boards. It often takes a decade or more for the homeowners to get wise to the game and aggressively move to convert to resident-focused leadership.

In SCA’s case, the sources of most of the 2007-2009 disputes between the controlling SCA directors and I were related to this policy issue. A similar situation exists in Sun City Summerlin and other Del Webb/Pulte-developed HOAs. In SCA, the hundreds of thousands of dollar of receivables going uncollected for years from the developer clearly proves bias in favor of Del Webb/Pulte interests. And, the 5 years of unjustified overcharging of home owner assessments to pay up the reserve accounts to over 90% and offset the developer’s failure to pay what it has owed is yet another clear example of bias towards the developer’s interests. The big winner has been Pulte, and the big losers have been our 7,000+ SCA unit owners.

My fellow directors would usually argue that such major losses were “unfortunate” and/or “unavoidable”. I claim those failures were evidence of “stealing” from our members. (Definition of stealing in this case: “the illegal taking of another person’s property without that person’s freely-given consent.”) Board failures to not even attempt to correct the mistakes, and collect the funds due from the developer, could be considered criminal acts–not simple negligence.

It should not come as a surprise to anyone that graft, corruption and embezzlement are common in HOA boards. It is something that large HOAs such as Sun City Anthem must be particularly watchful for as we have so much money that can so easily be misappropriated. While harsh warnings of potential problems in SCA, and calls for selected forensic audits have not been well received by some members, rooting out corruption is never an easy or polite process. And, those who scream the loudest in protest against professional audits of questionable financial situations are the ones most likely to be worried about their own (or their friends) personal interests and/or potential culpability.

During these times of extremely serious financial misconduct involving billions of dollars of losses to our citizens by national government leaders, no one should be surprised that we have local examples of hundreds of thousands of dollars of financial misbehavior right here in our community. The kind of near-absolute power and huge revenues our board majority enjoys creates many opportunities for abuse.  At our ages, we should know that we can not trust a board or committee member who claims that we have had no past management problems, and nothing can be done to be improve our management.

We must always be mindful that board members do not undergo background checks or resume verifications before being elected. National averages would suggest that we might expect more than 15% of our board members to have criminal records or other past records of misconduct that (if known) would be considered by voters to be disqualifying for a board or committee position involved in spending millions of other peoples money.  So, why do so many members blindly trust people to spend our millions that we know almost nothing about? Nowhere else in our society do we give so much authority to so many individuals–with so little verification!

History shows that white-collar criminals are usually presentable, affable, and are well-liked. They work very hard to build confidence so they are the least-likely suspects of misconduct.  As a result, the culprits are not usually caught until damning evidence is dug up through special audits, investigations and/or by whistle-blowers.

We seniors tend to be lazy and less alert to such misconduct and become even easier targets than the general population. In other words, more of our SCA members must pay much closer attention to the financial details in the future. Otherwise, the misdirection and outright deception practiced by some board members and and their friends will undermine the long-term financial structure of our entire community.

Posted in Truth Squad, SCA Board, Community Affairs, Operations | Print | No Comments »

August 9, 2009 by bobfrank.

In response to recent posts on Ron Johnson’s Blog by Forrest Fetherolf and Norman McCullough:

1. Forrest, I hope the rumors of coming management improvements by the current board turn out to be true. The Property & Grounds and Finance Committees are a VERY long ways from performing their duties to anticipate and help prevent waste and abuse by RMI. Having been promised so much, for so long, by so many, and receiving so little progress in terms of quality purchasing and contracting, I am compelled say “show me” before I can be encouraged.

2. Norm, agree that the Reserve Study contractor should be replaced. I should have included that in my list. After about 10 years of such engineering and financial services by only one company who was originally hired by the developer, the community should demand replacement based on just good management. A new reserve specialist would be motivated to scrub down the old company’s work and see if a fresh view of such an important element of SCA’s resources could be used to significantly improve our future financial posture.

3. Norm, you are right that only through a forensic audit of the reserves processes between 2004 and 2008 could the community be assured of being able to collect money owned by the developer. Since the boards have publicly agreed via its look-back study and during board meetings that the developer owes SCA over $700,000 for our reserves, we need an (independent) law firm working on a “contingency fee” basis in order to finally settle the long-standing financial disputes in this reserves area.

Two separate law firms specializing in such matters told the board in 2007 that they are usually highly successful in collecting underfunded reserve funds from big companies like Pulte/Del Webb. But, such action needs to be done on a recovery basis by a law firm that does not have conflicts of interest with the developer.

As a board member, I have often proposed the above method to resolve this dispute, but our association attorney, the finance committee, and the board members who trust everything the attorney says, have refused to even seriously consider the possibilities of such an alternative approach. Those failures to act since 2005 have been costing the members hundreds of thousands of dollars–while the statutes of limitation are expiring.

Who benefits from such consistent board failures to act since 2005?  Only the developer and the association law firm. Such flagrant misconduct and negligence by the finance committee and the board are serious breeches of the statutes and the CC&R contracts. No matter how much good work is done by the “volunteers”, why should such major failures be tolerated or forgiven?

If the jobs are too big for them to handle, board and committee members should resign and let more capable members be elected or appointed to deal with such complex issues.  Losses of hundreds of thousands of member assessment dollars are NOT trivial matters.

Posted in Truth Squad, SCA Board, Laws & Rules, Operations | Print | No Comments »

August 6, 2009 by bobfrank.

Richard (Dick) Arendt posted on Ron Johnson’s blog about how disrespectfully he had been treated by RMI’s Senior Manager, Carren Carreo.  See this file to review his comments:  arendt_posting_6aug09.pdf

My response is as follows:

Richard, I feel your pain. The “idiot treatment” you received from Ms. Carrero is similar to what every member (including disagreeing board members) get who dare to question anything done by the CAM or any board. This has been true under Arnie Snow/Favil West, Terry DaSilva/Mike Dixon+Roz Berman and Caren Carrero/Roz Berman.

But, don’t be surprised at RMI’s community manager behavior. They are highly paid to do EXACTLY what the board president directs. You can be sure they face termination if they say or do anything contrary to what is directed by the board president.

In SCA’s situation, a member has to file affidavits with the State against the CAM license holder, AND the board president, to have a chance of enforcing compliance with the statutes and community rules. SCA boards have never allowed local mediation on disputes.  The Del Webb/Pulte-appointed attorney John Leach has always suggested conflicts of interest by instructing the boards to avoid compromises on disputes and to avoid asking for member participation in major decisions. That is why so many disputes HAVE to be sent to the NV Real Estate Division for action.  And, that is why the number of formal affidavit complaints will continue to grow rapidly until the board makes a sincere attempt to fairly settle major disputes within our community.

So, face it. Your disrespectful treatment by RMI’s managers are because Roz Berman has decreed it, and a majority of the other directors are unwilling to inconvenience themselves to insist on respectful treatment of members and full compliance with the laws. It is obvious the board of directors considers themselves to be just a special social club, elected by machine politics, where only two or three directors really know the full story and laws about what is going on. Those few individuals have been controlling our resources for years, and they consider themselves entitled to do whatever they wish with our money and facilities.

SCA’s management problems have always been caused by dictatorial board presidents West, Dixon, and Berman, and their treasurer accomplices. Such a position (in control of millions of dollars, vast facilities, and dozens of contractors) attracts control freaks who relish being able to rule through the absolute power granted by the state and abetted by attorney Leach. Until that style of dictator/mob-like behavior is purged, we are destined for much more of the same.

Some people enjoy pandering to such power and mistakenly comment about how much they appreciate the “volunteer” work of such directors.  But, that only encourages more misconduct, and it denies the reality of hundreds of thousands of dollars being wasted each year under such incompetent “volunteers”.

Many members agree with me it has been conclusively proven this association would SAVE hundreds of thousands of dollars each year if we:

(1) treated SCA members as “shareholders” and implemented a just, dispute-resolution process,

(2) replaced RMI with a professional management company that truly practiced competitive purchasing and contracting (sole source negotiations are now underway for a multi-year/multi-million extension of RMI’s contract in 2010),

(3) replaced the attorney, auditor, and reserve fund study contractor, and

(4) held the board and community managers truly accountable for financial mismanagement.

Since the board’s “unity cabal” is not likely to implement any of those required 4 items, we need many more members involved to ensure we elect competent individuals next time with the courage to always put the community interests ahead of their own.

Posted in SCA Board, Community Affairs, Operations | Print | No Comments »

August 3, 2009 by bobfrank.

Many members have been asking “why are so many facilities projects so poorly planned and designed and the contracts so poorly managed so they wind up wasting so much of our money?”

While there are a variety of causes for such mismanagement, it all comes down to the failure of the due diligence and oversight of the standing committees and the board. In every one of the major facility and equipment projects in 2008 and 2009 where large sums of our money was wasted, there was also a failure to dig into the project details ahead of time, and failures to demand precise answers to common sense questions BEFORE contracts were awarded.

This problem has been common place in both the Property & Grounds Committee and the Finance Committee and how they interact with the board and RMI. When anyone dares to challenge the judgments of how RMI and those committees are spending our money, the member become a target for hateful attacks and threaten legal actions. But, such acrimony is avoidable. The past situation can be avoided–where there is the common desire to work together to do better for the whole community.

For example, remember the following failed or over-priced facility projects in the past year?

(1) Independence Center premature hot water tank failures and replacements, patio area sun shade structure failures, and the gold-plated lift to carry handicapped members to the mezzanine work area in Freedom Hall, etc.?

(2) Anthem Center wasted funds on excessive Lutron lighting pricing, overpriced hardscape project, unnecessary full shower area tile replacements instead of limited repair, unnecessary restaurant facility and equipment refurbishments/replacements before negotiating a new lease, gold-plated solar heating system approval before finding out if the roof can stand the excessive weight, complete front entrance paver replacement project instead of limited repairs, etc.?

It has been said that the time to deal with such wasteful facility projects is during the early stages of the planning cycle. While some members DID ask hard questions during the approval process last year, they were summarily dismissed and personally attacked for asking basic questions.

But, this is a new year, and we can do better. If you agree, then Tuesday, August 4 @ 10 AM in the Anthem Center  would be a good time to start.  That is when the Property & Grounds Committee meets.  Here is the agenda from the SCA web site:

“UNFINISHED BUSINESS
a. Freedom Hall theater communication devices

NEW BUSINESS
a. AC hot water tank
b. Architectural services for tennis court shade structure
c. Bocce court shade structure
d. AC fire control room phone switch
e. Replacement vehicle for Security Patrol”

Notes and some candidate questions to be answered:

1.  Why do members not deserve the courtesy to be given at least a paragraph about what the agenda topic is about?  No one can guess what the agenda item is about, or what it might cost.  Is that not disrespectful?

2. Solar Heating Project: NOT on the agenda is a detailed report on the results of an engineering study to discover IF the Anthem Center roof can STAND the excessive weight of the already approved solar heating system! Why not? Who is responsible for oversight of RMI on this quarter-million-dollar project (not including the unknown tens of thousands of dollars likely needed to shore up the roof!)

3. What is the story on the Anthem Center hot water tank? Is there yet another surprise failure coming in this area? What other hot water tank repairs and replacements (at what costs) have there been in Anthem Center in the past? Are we maintaining our installed equipment and avoiding early replacement costs? etc…

4. What “tennis court shade structure” has been anticipated?  What has the tennis club requested, and where is the public justification for all SCA members to review and comment?

5. Who says more shade is urgently needed at the Bocce courts?  Where is the study to justify additional expenditures that members have had a chance to review and comment BEFORE a project is recommended for approval by the committees and the board?

6. Why would a fire control room not already have an emergency phone capability within a reasonable distance?

7. What kind of vehicle will be proposed this year for the Security Patrol? Last time the board and finance committee pushed through the purchase of a high-cost, 6-cylinder SUV.  Will there be a report available on the cost-effectiveness of the various types of SP vehicle operations?  Has the SP membership and leadership been polled and allowed to propose a lower-cost option this time?

Of course, there will be complaints by the committee volunteers when (a) hard questions are asked and they were not provided the advanced info by RMI, or (b) they do not have the time or expertise to provide answers to such types of questions before they vote to spend the money.  If so, that situation would come back to the Board President who has never directed/required RMI to provide adequate and timely support to the committees.

Meanwhile, if committees can not do what is required, then we have to truly understand the problems, and move to fix them.  We simply can not continue to tolerate more of the same failures involving hundreds of thousands of our hard-earned dollars.

Posted in SCA Board, Community Affairs, Operations | Print | No Comments »