December 3, 2021
Dear Residents,
Please see attached for the 2021 budget meeting minutes.
Q: I think the people who did our reserve study should return the funds, and this board lacks common and financial sense.
A: We would ask that you provide evidence to support your claim. Falcon Engineering, which performed the study, is one of the most recommended reserve study firms in the area and the Community Associations Institute. We rely on industry best practices and our professionals when making decisions.
Q: A homeowner at the meeting said that we had an engineer do a reserve study in the past. Why are you saying that this is the first one? He also said we used to put $50,000 a year into the reserves. Why isn’t that enough now?
A: We had a fabulous former board member and resident who was also an engineer named Bernie Sopko. While we have no doubt that Mr. Sopko could perform a reserve analysis given his background, there is no evidence on paper in any of the Glen records that we found. What we did find is a software program that our former longtime administrative assistant used to try to provide a reserve forecasting tool for former boards. Over the last six years, an audited review of our reserve funding shows an average reserve funding of $42,000 per year from transfer fees and interest, with an average fund spending of $47,000. The primary method for funding the reserve accounts was through transfer fees. Although transfer fees are essential in this process, the reserve study clarified that it would not be enough to replace our roads, nor is it a reliable, consistent funding source on its own.
Q: On the attached file, which Saw Creek puts online, they have $590000 in reserves for 3,000 homes. Why do we need nearly double the reserve of a community 7 times our size???
A: First off, no two communities are the same, so you can’t compare them. Every community has a unique infrastructure, assets, and members. We have about 9 miles of roads in this community that are in fair to poor condition, with many requiring replacements at this time. The estimated cost to replace those roads accounts for most of the reserve funding needs. The longer we have to wait to replace the roads, the worse they will get, and costs will increase as a result. The reserve assessment we calculated is the lowest amount and the longest duration we could safely impose, with the most negligible impact on our members by spreading it out over monthly payments. If we don’t do this now, the odds are that we will all be hit with a special emergency assessment soon of thousands of dollars in one year. That is unacceptable. Second, Saw Creek is facing the same type of inflation pain that we are, and the numbers you provided in your example are outdated. Saw Creek’s reserve assessment to every member for 2022 is $275 (not the $125 they had assessed in 2020) to have their fund reach one million dollars.
Q: My neighbor told me that the board donated a security jeep to the fire company. Now we are all stuck paying for a new truck. Why would the board waste our money like that?
A: The jeep in question was a 2012 Liberty with 105,000 miles on it, two factory recalls for airbags, a busted transmission, check engine light on, and wouldn’t start back in May 2020. The Kelly Blue Book value of the vehicle was $750. The board of directors at the time tried to sell the jeep and had no offers. Finally, the board voted and agreed to donate the vehicle to the fire company that towed it out at their expense for extrication drill practice. We received a donation letter for this vehicle. It was not safe or driveable. If we had not entered into a contract with Securitas, we would have replaced that vehicle last year. Furthermore, when we presented the new security plan to the community after the vote, included in the total cost was $9400 per year per diem for the compliance officers’ use of their vehicle. We are still staying within that forecasted budget with the lease payment plus gas.
Q: What is the issue with the resale certificate that was mentioned in the meeting? Why is that man saying you committed bank fraud? This is very troubling if it’s true.
A: We would like to thank our member, Mr. Donohue, for bringing this typographical error to the boards’ attention at the budget meeting. FirstService has a separate resale department out of their corporate office to prepare these certificates, as stated in the meeting. This is their first year doing so for our community, and they made an honest mistake based on inaccurate information they received from NEPA during the transition. We are pleased to inform everyone that FirstService Residential has since corrected the error and assured us there was no intent to deceive anyone.
Q: Money being spent buying fireworks was only mentioned in the June 28th meeting. This was communicated to the community on July 28th. How will the BOD address the issue of not informing this community in a timely fashion?
A: We told the community about the fireworks show starting with the June 18th Weekly Update and continued publicizing it every week leading up to the July 4th celebration. There were 226 residents in attendance for the show, with 204 of them over the age of 15 paying $10 per person. Between the ticket sales for that event and the bake sale conducted a few weeks later, the finances for the event were covered completely. So, as you can see, the events committee is self-sustaining. Moving forward, we have developed a project tracking plan that we will present at the December 4th meeting. Barring unforeseen emergencies, this will inform the community of projects planned in 2022. We are committed to communicating more frequently with all of you and in every possible manner.
Q: Many feel this BOD spent money they shouldn’t have. The BOD stated they didn’t know in March when they were discussing the Lake that certain issues would arise. Knowing there were 100 homes delinquent with their dues yet still went ahead with the plan. The BOD also had their results in hand from their professional Reserve Study. This being said, how can we as a community trust that our money will not be squandered on projects that shouldn’t be?
A: We thank you for expressing your opinion. Although the assessments are annual, most of our owners take advantage of the payment plan we offer, ending on June 1st. Unfortunately, some members start making payments and then stop. Thanks to the efforts of our management team, many of these delinquent accounts are now on payment plans. We pursue others in court through judgments. We also hoped to recover money from Burke Asphalt through a civil suit. Going forward, the board is drafting a strategic plan listing all necessary projects in order of priority and presenting this to the community. While we can never fully predict the future, we can make a solid plan and protect our community assets. We welcome all members in good standing to join the finance or related committee and have more input on guiding the community into the future.
Q: The BOD is currently operating in the RED. If it wasn’t for the reserve account, we would be broke. Why are you putting us into bankruptcy with your spending?
A: We respectfully suggest that you please look at the financial statements available in the secure members portal every month. The association uses the accrual accounting method of accounting, which is more complicated and challenging to understand than the cash method we all use to balance our household bank accounts. We are happy to meet with any member to explain the balance sheet, which shows we are not operating in the red on borrowed money.
Q: First, I understand, and correct me if I am wrong, that we used to allocate about $50.000 per year to the Reserve Fund and that this has not been done for 2020 nor 2021. If this is correct, then we not only have spent $200,000 from the Reserve, but additionally, we have to include another $100,000 that we did not put in the Fund for almost 2 years. Since the new proposal for the Reserve is now separate from dues, what will happen with the $50,000 that we used to allocate in the budget for the fund?
A: As explained above, the reserve account was funded primarily by transfer fees from home resales. At the end of each year, when accountants finish the financials, they typically transfer excess operating funds to the reserve account as well. The reserve study indicates that we need to continue those funding methods and add a consistent line item to the budget for funding going forward. This will ensure we have adequate dedicated reserves moving forward. Additionally, home resales fluctuate from year to year. Although an important source, records from prior years indicate, they are not a reliable way of ensuring we provide for the future community needs on their own due to the condition of our roads as identified in the study.
Q: Socially speaking, we have become more of a community than before. We have a nice parking lot, new flooring, new chairs, a new compactor and more room for recyclables. The roads are now better, and grass and snow removal is OK. On the horizon, I hope for no surprises with the pool and a semi-good outcome with the water company, but the most important item is the security issue. I also pray for a board that is much more austere. Since the beginning of the new board, everybody noticed with concern the way that money was being spent. I can’t forget the day that, together with talking of hard times ahead and of closing the clubhouse because of the virus, the board had also decided to replace all the chairs. We also talked about flooring, carpeting, replacing doors, exercise machines, and other indications that someone thought we had too much money in the kitty. Of course, most big ticket items were no choice, but as an example, last year’s road repairs had obvious problems as the work was being completed, like not sealing the seams at the patches that came apart the first winter. With this type of contract, usually the customer holds part of the payment until you are satisfied. We should have been more demanding with our money, and the same goes with Securitas. I never heard of a company walking away from a contract without trying to make it work first so not to be liable. Future contracts should be better reviewed. I am sure it is not easy being on the board and having to make these decisions, knowing that you will never make everyone happy. We are dealing with peoples’ money in difficult times, and this is a big responsibility.
A: We appreciate your comments and have taken them to heart. We pledge to the community that we evaluate all expenditure requests on a need versus want basis and will communicate that to the members. Admittedly, none of us are perfect, but we aim to make the best decision in the community’s interest with the information we have at the moment, which often includes relying on expert opinions. As mentioned above, we will be presenting the community with a strategic plan outlining the planned expenditures for the future.
Q: I would like to suggest a 5% discount on our annual dues when paid in full by January 15th, 2022, to give homeowners an incentive to pay the annual dues in full by January 15th, 2022. Cindy made a comment that it was difficult for FirstService Residential to incorporate this in their payment system. I suggest that FirstService Residential give people a 5% refund after homeowners have paid the full amount by January 15th, 2022. The refund could be given by February 1, 2022. This way it might be possible to give the homeowners the discount after all.
A: We appreciate your suggestion! With member approval at the December 4th meeting, we will offer a $50 discount to all members who pay in full prior to January 15th. After numerous sessions with the accountants and bookkeepers at FirstService Residential, we feel optimistic that they can manage this without causing our members unnecessary frustration over incorrect account balances. That being said, please reach out to our Community Manager Scott immediately if you notice an incorrect balance.
Q: This board only makes excuses and never takes responsibility for spending money the community didn’t have.
A: With respect, we don’t feel that communicating the facts to the membership is indicative of our failing to take responsibility. We are unsure what you consider as a qualification for “taking responsibility” when the BOD makes a course correction and reports the change to the community. As an example of responsible action on a problem, the road repair in 2020 was not done to industry standards and caused further damage. This spring, large chunks of asphalt were completely missing on the roads. That created a safety hazard that we needed to address while still hoping to recover damages from the previous asphalt contractor. We did not borrow money to do this because we did have funds allocated in our reserve account. The planned lake improvements were communicated in meeting minutes as far back as spring of 2020, including a special announcement sent to the membership back on July 23, 2020.
Q: I heard that the board refused to meet with former treasurer Ron Porcoro. Is this true?
A: Thankfully, this is not true. We received an email from him to which we responded. He never asked for a meeting with us. After the false statement saying the board refused a meeting was posted on social media, we again reached out to him to see if we misunderstood his request for an answer. He reiterated that he did not request a meeting, just a response.
Q: Why would we budget the INCOME unknowns that have a propensity to have unreliable histories?
A: The association budget always includes these income categories historically. This is industry best practice. In addition, having these historical predicted and actual values aids in forecasting for the upcoming budget year. An example of this type of income category is tenant registration income. By reviewing the most recent five-year historical data and factoring in the current market conditions, we arrive at a budget for the upcoming year. If we created a budget solely on guaranteed income, the increase in dues would be very high.
Q: We do not know what choices the BOD made to start the work or the decision process made to go forward by methodology. The underlying assumptions for the decision process remain unknown. We do know a goal of $1,000,000 has been chosen, and a special assessment has been selected to charge every owner for at least five years.
A: The reserve study indicates the need to redo our roads and plan for maintenance and refurbishment of our significant assets. We carefully evaluated the funding schedule listed in the study. As a board, we made a unanimous decision that we could not ask the community for an extra $1,100 + a year for five years on top of the dues. However, we all agreed to start preparing for road replacement now. So, we consulted our engineers, accountants, and other professionals to conclude that $30 a month for five years is the lowest amount and longest duration that we could start consistently contributing. Transfer fees will still add to the fund, as will any interest the fund earns.
Q: The reserve study indicates a budget threshold of the lowest total project cost the association wants to fund using the reserves. What is ours?
A: Great question! The board decided to use $500 as the threshold for funding through the reserves.
Q: Are we in compliance with the FHA and HUD lending requirements for reserve fund balances held by the association?
A: Yes, we are. Current requirements are ten percent of the operating budget in reserves.
Q: The reserve study indicates that no project should be funded in more than one place. Is the association following that and allocating projects to the operating or reserve budget and not both?
A: Yes, we are. Please refer to the 2022 budget documents for both capital and operating.
Q: The reserved study indicates that some associations have assets that the local town or municipality is responsible for maintaining in part or whole. Does that apply to our community in any way?
A: Everything owned by our association, including the roadways in the reserve study, is the responsibility of our community. Lehman township and Pike County accept no responsibility or liability for Glen-owned road or other assets.
Q: What is the time window that the reserve study is based on?
A: We accepted the industry standard of thirty years, with the acknowledgment that we should do updates every three years at a minimum.
Q: The reserve study mentions taking average interest and inflation rates into account. Have we done that for this study?
A: When Falcon prepared this study in the winter of last year, we did ask for the industry-standard interest and inflation rate to be accounted for at that time. As you know, both these factors have changed significantly in the past year. That is why we included a reserve study update in next year’s operating budget. We recognize that significant interest and inflation rates changes can significantly impact the study recommendations.
Q: Which of the three funding methodologies mentioned in the reserve study. Which one did our community use?
A: We are using the component methodology.
Q: Donations and the “free stuff” remain unknown to all. Perhaps it would be best to let the entire community know about this.
A: Thank you for the suggestion. Our committee members add so much value to our community and even save us money. We are starting to put committee meetings on the Glen calendar and publish committee meeting minutes. In addition, we will make a point of recognizing donations to the community more frequently.
Here are just a few recent examples: An anonymous homeowner donated $250 worth of items for the holiday raffle. Events committee members used their own cookware, decorations, and food for the Veterans Appreciation Dinner. The lake committee members fabricated and installed signs free of charge. Feisal Khan donated audio/visual equipment for our Zoom hybrid meetings. John Kis contributed a Santa suit to the Glen. Suzanne and Barry Tremper came to the rescue when Scott discovered that the community menorah had broken last week. Alvin White and Joe Radomski donated their time and expertise to evaluate our reserve study.
Q: What happened to the $50,000 we saved by Securitas terminating our contract at the end of September?
A: Although we are not paying Securitas the contracted $18,961 a month for October through December, we are still paying temporary staff to operate the gate 24 hours a day through December 13th. As we told the membership in our September Homeowner meeting, the cost for temporary staffing is $22.75 per hour. So far, the charge is approximately $39,000 as of November 30th.
Q: Your management team and board have been doing a great job, and we want you to know that we are with you. The changes over the past year have been positive and sorely needed. I feel proud to tell people that I live here. The new website, the weekly updates, all the events, a welcoming clubhouse and office, and the swales finally cleared of decades of leaf debris are all appreciated. The road issues are an unfortunate reality that we have to face, and I hope that Burke Asphalt gets charged criminally. However, I am glad to see that we plan to maintain our assets here in the future. If it costs me the price of a Starbucks coffee every week, I am good with that.
A: Thank you for your support. We truly appreciate everyone’s input and all our staff and volunteers who work to make this a place where we can all live, play, and thrive as a community.
Q: I have reviewed the financial deck distributed in preparation for participation in the December 4th budget meeting. Before I present my questions that I would like clarification or additional information on, I would like to review my observations:
I believe this Board, on behalf of our whole community, have made many tough decisions over the past year or so that have established a particular direction for all of us that I think has significant potential to put us on a stronger financial footing, function much more effectively as a community, and most importantly allows clear accountability for what is working and what needs change. I have personal experience as a Board Trustee and officer on Corporate Boards as well as not-for-profit Boards – and for me, a Corporate Board is far easier, much more orderly, and comes with far more recognition of your time, effort, and expertise. So to each of the Board Members, Thank you for all you do that we can see and more so for all you do that we don’t see!
Clarifying questions:
Is there any reason why we can’t separate the Reserve Fund activity from the Operating Expenses totally from a reporting standpoint? I would suggest that we monitor it separately toward ensuring that whatever goal number we want to or need to get to in a reserve fund is clear, including the time period. I personally agree with the position that was expressed at the last meeting that we need to have a reserve fund (is there a number in the charter of the community that indicates what that will, should, or is required to be either governed by the charter or legally) that is for capital expenses and not without significant discussion used to cover shortfalls on what would be characterized as routine operating expenses. I have yet to sit on a Board associated with a not-for-profit organization where the biggest argument hasn’t always been the size of the reserve fund and how and when it can be used. You can often get around this by taking a line of credit – which at this point I wouldn’t suggest doing unless our shortfalls were really cash flow issues not spending issues and we need to cover expenses before the dues are collected for the year.
A: Actually, reserve fund activity is reported separately from operating expenditures’ monthly financials. Your points are well made, and we agree, which is why we created the separate reserve budget for 2022 and will refine the budget details even more in the future.
Q: Something to consider with respect to the reserve fund is to assign a separate person to manage a process to control its use. Let them report to the board as an advisor on when the proposed use doesn’t meet the charter of the reserve fund or that the money is just too low in the fund or when from the funds perspective it is fine. You don’t need to do this forever, just till we can get the fund back up to a number that makes everyone more comfortable or everyone has gotten used to the assessment. Just a thought.
A: Great idea. We welcome a reserve committee, even if it’s a committee of one. Of course, we would love to have even more members participate.
Q: In the determination of the 2022 revenue from dues the calculation looks to me like it assumes all dues will be paid in the year they are due? Am I misreading this? If I am right, could you please provide the breakdown of those owners (not names, just by category) who are more than one year delinquent in payment of dues? Again if I am right, I would include this amount as a likely negative against income for 2022 so that we all realize that if our current rate of delinquency occurs in 2022, we will need to make that amount up in some other way either by raising everyone’s dues a little more, finding something to eliminate, holding more fundraisers or voting on taking it out of the reserve fund.
A: You are not misreading that. Every member has an obligation to pay their assessments in total every year. We use the accrual accounting method, which also makes that same assumption. As of November 2nd, we have 26 undeveloped lots that have multi-year owed dues (16 still on the county repository list and 3 recently sold at the county off the repository list). In addition, we have 32 developed lots with multi-year owed dues that we are taking legal action against and 10 on signed payment plans. When homeowners fail to pay mortgage or taxes, their property gets listed for sheriff’s sale. When a lot owner fails to pay taxes, their property gets listed by the county on the repository sale list. In each case, the owners have multiple opportunities to bring their tax and/or mortgage account current and have failed to do so. When a sheriff or repository sale finally takes place, the new buyer does not have to pay the delinquent assessments, leaving the association to “write off” the balance as uncollectable debt. We are serious about collecting unpaid dues and encourage members who owe the association to reach out now to avoid legal action.
Q: There is a bad debt number on the expense page, but I can’t figure out what it is in that number. Can you please let me know what that number is and how it is calculated?
I am not familiar with the bad debt loss and financial reporting for write-off purposes in the Commonwealth of Pa. At the time, I had this kind of responsibility I was working in NY for a publicly-traded company, and you could not carry any unpaid bill for longer than a year even if you were in the process of trying to get your money. What are the rules in Pa as they relate to an organization like ours?
A: The average yearly uncollectable total over the past ten years is $45,000. Repository lots and sheriffs sales make up the bulk of this amount. It is also called “allowance for doubtful accounts.” Standard accounting practices include that uncollectable accounts like these be written off on a regular or annual basis. Some of these accounts have been uncollectable for ten years or longer, impacting our bottom line. Our treasurer will be presenting the write-off information to the community at the meeting on December 4th.
Q: I realize there was a lot of work done on the account clean-up, classification, and such and that the backup sheets are in account number order – but for the purpose of community discussion it might be helpful to categorize the account by activity. The way I look at it, especially since we are almost entirely from a financial standpoint in a vendor mgt situation, if we listed the accounts by what they do, it gives you an easy opportunity to see what is going on and could/will bring the discussion to use and effectiveness of spending. We could test this out and see if it helps the discussion, I have found out the hard way that it is best to meet people if you can in the way they are thinking about it. Just a thought. It is clear to me that our issues are not expense issues as much as they are revenue issues. The demographics of the community are not the same. Many people are part-timers, some are full-timers on a tight fixed income, others are single parents without good support groups, and others still are renters. The challenge is to be sure everyone feels there is a place here for them to feel a part of what is going on. I think we have little or no choice but to do some fundraising for the event committee on stuff that can be fun and not a huge amount of work. Silent Auctions, Bingo games (I don’t know if you are allowed to do that legally or not, but when the hotel was here, it was where everyone was at 4:00 daily) Speakers on topics of interest (not political). Just something to think about.
A: We agree with so much of what you are stating here. We have a wonderfully diverse community, and all signs indicate that our level of diversity will continue in the near future. Our Events Committee holds their first raffle with the winners to be drawn at the monthly Common Grounds event at 11:00 AM on 12/18/21. Four great raffle items are donated, and all proceeds will benefit the community. We would love to purchase the necessary licenses to have Bingo and other small games of chance; however, we need a certain level of regular participation for this to make sense. Currently, we have two speakers planning on presentations in the early part of 2022; one on the multicultural heritage in our national parks and one on Red Cross home safety tips. It all comes down to interest and participation. We have the desire and willingness to try; all we need are members willing to engage. We encourage everyone to get involved in whatever level of participation they can. Suggest an idea, volunteer for a committee, donate an item or service, engage with us to better serve you. We have an open-door policy and would love to hear your ideas.
Sincerely,
Marissa Johnson
Assistant Community Manager
