An independent source of news and commentary concerning Lake Holiday POA in Cross Junction, VA
 

February 19, 2007

Dear John,

3)   At the end of 2006, the Association had approximately $194,000 in cash and borrowings from Wachovia on a recent line of credit of over $340,000.  In addition, there was over $118,000 in accounts payable and payroll liabilities.  These liabilities alone exceed cash on hand by over $264,000.  In light of these obvious financial challenges, why has the Board not acted aggressively to reduce spending?  Why has the Board not been more open about discussing the Association's cash crunch?  Certainly, the answer to the cash crunch is not the sale of the Utility.  This sale is a one-time event, and budgeted capital expenditures for 2007 are far in excess of the actual Utility proceeds. 

4)  What was the actual amount of proceeds received from the Utility sale?  In February of 2006, then President Chris Allison indicated proceeds would be $2 ½ million.  I have learned that the actual amount received was much less than half that sum, or approximately $1.1 million.  This is one of the largest transactions in the history of this Association, and there has been no detailed comparison of the expected to the actual proceeds.  Why has the Board been unwilling to communicate accurate financial information on the Utility sale?

5)   General Legal Fee expenses exceeded $475,000 for the year 2006.  The budgeted amount was $60,000.  There is no discussion or approval in the minutes for exceeding the budget amount by over $415,000.  Who authorized these additional expenses?  This is an absurd amount for any community to pay for legal fees.  We have heard that legal expenses are so high because of Ogunquit's law suit, but this claim does not hold up to scrutiny since our insurance carrier selected and is paying for our attorney in that case.  What subject matters are covered by these legal fees, and who from the Association communicates with the attorneys that submitted these invoices?  If this board wants to control legal fees, why does it act in such a secretive manner and make decisions that will only cause additional law suits?  Please answer these questions and provide me with a breakdown of all expenses for General Ledger account 5102-Legal Fees.  Further, please provide me with a copy of each invoice that was charged to this account for 2005 and 2006.

6)  Legal fees for Collections expenses exceeded $83,000 for the year 2006.  The budgeted amount was $50,000.  There is no discussion or approval in the minutes for exceeding the budget amount by over $33,000.  Who authorized these additional expenses?  Why do we have such a large amount for legal fees for collections at a time when our accounts receivables (past due amounts) is at an all time?  The most recent AR report shows an Average Days Billings Outstanding of 85.27 days, with a total outstanding due amount of $429,826 when at the end of 2005 it was just 59.70 days with a total outstanding due amount of $275,614.  Days outstanding have increased over 42%, and the amount outstanding has increased over 55%, but legal expenses for collections are going up and over budget.  Clearly, these increased expenditures are not producing positive results.  Is it true that legal fees for collections increased so dramatically because the Association changed the law firm handling this matter?  If this is the case, were directors informed of the financial consequences of changing the law firm charged with collection issues?  Please provide me with a copy of each invoice that was charged to this account for 2006.

8)   Postage expenses were nearly $28,000 for the year 2006.  The budgeted amount for 2006 was $12,240.  There is no discussion or approval in the minutes for exceeding the budget amount by nearly $16,000.  Who authorized these additional expenses and when were they authorized?  Does the $28,000 include postage for the proposed governing documents and political mailings?  It was my understanding that Miller & Smith had agreed to pay for the postage for related to proposed governing documents.  Did they make this payment?  If not, why not?  Please answer these questions and provide me with a breakdown of all expenses for General Ledger account 5010-Postage and provide me with a copy of each invoice that was charged to this account for 2006.

9)    Printing and Copying expenses exceeded $64,500 for the year 2006.  The budgeted amount was $30,000.  There is no discussion or approval in the minutes for exceeding the budget amount by over $34,500.  Who authorized these additional expenses and when were there authorized?  Does the $64,500 include printing and copying for the proposed governing documents and political mailings?  Did Miller & Smith pay for the printing expenses for the proposed governing documents, and if not, why not?  Please answer these questions and provide me with a breakdown of all expenses for General Ledger account 5015-Printing and Copying.  Please provide me with a copy of each invoice that was charged to this account for 2006.

10)  Patrol Services charges for 2006 totaled over $54,000.  Yet the budget for 2006 was only $29,066.  There is no discussion or approval in the minutes for exceeding the budget amount by approximately $25,000.  Who authorized these additional expenses?  Why do we have 3 security patrols in the winter?  We were told that Miller & Smith was paying for extra security.  Did they pay for any extra security as the Board has claimed?  If Miller and Smith did pay for any security, please provide me with a copy of the reimbursement check that applies to the extra security detail.

      Bill Masters