50 Shades of Gray

Dave, operational deficit (2024 9k deficit) vs. budgetary deficit ($2.6M excess budget from 2023 plus the $299k deficit from 2024 budget) - if it’s such an easy thing to explain, why not just explain it in the management report so ALL can understand vs. the confusing report we get now?

Rather than judging members for wanting to understand the first terrible financial year we had – explain it – after all it is a number represented in the income and expenses statement. So, we can’t ask questions and expect an explanation???

Just sweeping those figures under the rug and focusing on the 9k deficit gives the appearance transparency is lacking.

First, Net Excess/Deficit BEFORE depreciation is similar to EBIDTA in a for-profit organization (a common financial number experts use to assess the overall health of an organization – if it’s in our statement, it would be wise to explain it). Budgets should be adjusted if the income isn’t there - not just continue to spend what hasn’t come in. And the $2.6M excess over 2023 BUDGETED income – where did that go? Thin air?

It’s that simple, explain where the 2023 $2.6M and the $299k deficit went – we spent OVER BUDGET – it went somewhere (this figure was also offset by PIF and CIF interest income – which a board member pointed out last December that interest income from PIF and CIF shouldn't be used to remove the appearance of excessive spend or lack of revenues). The $299k deficit number does exactly that and bottom line, BUDGET was overspent due to lack of revenues. We sent $299k plus the 2023 $2.6M EXCESS over BUDGETED amount somewhere. Where? The GM blew it somewhere. That’s all that’s being asked – an explanation of a number shared on the income and expenses statement. It’s that simple!

REDUCING SPENDING is a novel idea over touting that we OVER BUDGETED. Something now being done in 2025 - we are pulling way back on expenses to ensure we don’t go OVER the BUDGETED AMOUNT. What expenses are we pulling back on to accomplish the OVER BUDGETED figure issue??? That in itself is not good, either.

Help the LAYMAN understand – not just your high-level BS calling people names. There are smart members that truly want to understand a figure that is represented in the Income and Expenses Statement – get them that explanation.

 

Nope, never, ever said that, not even close to how i feel, have felt about this community. In 2006 Sun City evolved to a different style of governance. Historically we had been self-governed with a bottom up approach. When the board hired a new general manager, over the next three years they gave her more authority. As the years passed, we became a more traditional non-profit structure with a top down style of leadership. By the end of her reign, she began letting the board have more control as she was phasing out.

The pandemic changed this country and the RCSC in ways we are still sorting through. The former, former GM was short-lived. He was hand-picked because he appeared to be ready to carry-on in the vein of his predecessor. The events of 2020/2021 were classic cases of an organization trying to re-establish footing, but with little understanding of what they were doing or where they were going.

I took the time to post the changes made following the 2022 election of board members with each of the subsequent years, because members forget where we were and the strides we have made. 2024 was yet again another anomaly with a general manager hired who had his vision for Sun City. It was pretty clear they didn't ally with many of the members and clearly some of the board. Hence, he is no longer with us.

All of which is why i have been preaching for a return to our roots. The days when the membership had more of a stake in the ownership of the RCSC's success. The days when that sense of community was more prevalent. We've never been all that far removed from the tenets, we've simply drifted away from how we conveyed the message and how we embraced those living here as part of the solution.

There-in is the difference from those who love it here and the few of you that want out. Sun City was and still is a great place to live. The vast majority of those living here love all it offers, those just looking for a cheap place to live will be disappointed. We can't afford to ignore the challenges that come with owning 8 rec centers, 8 golf courses, a dog park, a softball field, a lake and park adjoining it with a staff of 450 employees.

Many of us have argued for better training for board members, more input from the membership, more effective communication from the RCSC and a heightened acknowledgment regarding the role committees fill. None of which meant Sun City "free-fell into hell's bathroom." Sun City is simply the most unique age restricted community of its kind, that place that so many have adopted, embraced and will call home till the day we die.

Publicly berating the board won't make them better. They are volunteers that have elected to do things others won't do. I often disagree with them, i never make it personal. Once it becomes personal and emotional it makes it far more difficult to find solutions. The hardening of hearts, minds, arteries and ideas is seldom conducive to finding solutions.

Ultimately, to each their own. For my money, i'll take Sun City Arizona and all it offers and be forever grateful we found it.

 

I had difficulty having people grasp what depreciation was and that golf was actually profitable during the teens. When you are on the fourth explanation of the same thing, it does get a bit frustrating. A rhetorical question, I like your post as I understood it, but why are you not helping the members understand the basics of a financial statement as you certainly have the chops’s for it. If I could convince RCSC to run 33k copies of my financial analysis sheet from my underwriting days , I believe with that document and either the monthly compilation statement or the Annual CPA audited statement financials would become clearer. The sheet is not complex to fill in as where it shows cash on the statement you would put it in the box on the sheet where it says cash. This is where I learned financials and analysis. I would like to show it to you sometime.

D

 

He can't, he excels at name calling and that's about it.

 

How long are you going to blame the pandemic for the failings of SC? How about between 2006 and 2020, no pandemic.

 

I didn't understand the golf financials Dave, but your remarks are simply not true. According to Kevin McCurdy, there was one year golf showed a profit. ONE. I was wrong about the depreciation and when you pointed it out, i admitted it. That said, the depreciation of equipment or capital investments does not mean the corporation wasn't subsidizing the golf courses which was why Kevin took the time to create the chart showing golfers that golf had only showed a profit that one year. That was coming out of the pandemic when there were 350,000 rounds of golf played and capital expenditures for golf equipment was down and the courses were beat to shit.

Please don't start up with that nonsense that golf revenue covers the costs that come with owning 8 golf courses. They are a massive money pit and with the 2025 water management plan kicking in, it will be worse than ever. We are looking at 6 million dollars on Quail Run and 18 million dollars on the South course. I guess the good news it's from PIF so it doesn't count eh? Wait, wait wait, we'll depreciate it so no big deal eh?

 

Bill, I took the numbers from the CPA audit report, did the math and reported what I found. According to the accountants, golf was showing a profit prior to the application of depreciation which is basically a tax write off. There was no line item for subsidies, so either the accountants were not being honest or I cannot subtract one figure from another that was listed by the accountants. According to the statements I have, golf was profitable minus depreciation. Of course we will depreciate the work you listed but it will be over a time span set by Generally Accepted Accounting Practices a/k/a GAAP.

Here’s the deal, if I can locate the four years of statements I have, meet with Kevin showing him my work and see what he says. If I am wrong I will admit it saying what caused me to say golf was profitable. If I am correct I want Kevin to say so and email you stating as such. The statements I used are here, I’m in a transitional stage and certain files are spread throughout the house. Throwing out useless stuff is time consuming and messy.

A couple of late thoughts, the statement years I have might not be the same as to what Kevin was using, hence comparing oranges to corn tortillas.
Capital investment is not subsidizing otherwise all capital purchases in Sun City are subsidies according to your logic.

 

So basically you are making statements based on financials that may or may not be accurate. You have a degree in history, not finance. Has the state ever audited this place?

 

What is the value of a tax write-off for a non profit?

I'm not sure how far back Kevin went but it was more than a handful of years.

 

For what it's worth, it's my understanding that the dollars allocated for the daily upkeep and maintenance of all those brick and mortar buildings on the the golf courses are actually charged to Buildings and Infrastructures and if they were actually charged to golf we would be even farther behind the eight-ball?

Figures don't lie, but liars figure?

 

FYI, they have no choice but to allocate that money to Buildings and Infrastructure in accounting, due to GAAP rules.

Our county libraries offer online classes for free if you have a library card and accounting is one of the topics.

https://education.gale.com/l-maricopa/

 

It is Emily and it was one of the reasons golf PIF expenditures never showed as high as they actually were.

 

I have taken many courses through the library. This is a wonderful FREE benefit from MCLDZ.

 

Dave, as a long-term member of the BF&A, couldn't you influence the explanation around the important figures - including Net Excess/Deficit before Depreciation? Just make sure the management and treasurers report reflect appropriate notes and when a number shows a significant deficit (and it's offset), I'd say that's an important figure to explain to the members. It wouldn't be bad to clearly explain why the focus on the operational deficit vs. the figure most experts use to assess the overall health of the organization. If you think your financial analysis sheet would do just that - recommend it . . . no need to run 33k copies - that doesn't happen with the handouts at the board meetings.

To others it seems depreciation, an accounting method, should not be included in short-term, single-year operational efficiency analysis. Short-term efficiency is better determined by what is simply done with the revenues and expenses. Adding in interest and investment income and then depreciation removes the short-term operational efficiency determination.

Bottom line, the stakeholders deserve an answer - particularly to the 2024 Financials. It's already the 2nd quarter of 2025, but the reasoning doesn't just go away with time.

 

Dang SBB, you sound like a pretty smart cookie. You must be one the few G d V says understands the financials.

Knowing there's an opening on the board, and knowing a board member asked/challenged you to throw your hat in the ring (aka submitting a resume to fill the open board position), hopefully you will consider doing just that.

The beauty of these interim appointments is it gives the person filling it an opportunity to see if it is a good fit for them. Way better than all those years where we just went and grabbed a retread.

Of course, this is just a guy's humble opinion.

 

SSB, the razzle dazzle with depreciation isn’t the only item in the financials that I have brought to the attention of management. First there was what I called “Brigadoon money” which magically appeared whenever the GM needed it. These funds never appeared on the financial statements. Lately they were referred to as cash carry forward funds which is not an accounting term. This practice has ended and these funds have been allocated to pay for the deferred maintenance but not all of it and the CIF fund is paying for the balance and future Capital improvements.

I have been complaining for over 15 years that the RCSC audited annual reports are not up to snuff, figures that should be broken down to what the consist of, items attributed to Board action but nobody on the Board seem to know what I was talking about. Now there are accounting practices prevent PIF money appearing as cash because it can only be recognized after it is spent. Now try explaining this to the members that are unfamiliar with financial statements and make it sound reasonable. Sometimes, to quote John Sebastian, “ it’s like trying to tell a stranger about rock and roll.”

Eliminating depreciation from the short term financial statements is not an option. The reason being that the asset and liability sides must balance, hence the name balance sheet. Now the financial statement that the RCSC issues monthly, while a compilation statement ( I’ll save an explanation of that for another time), while not completely in tune with bizarre accounting standards does present and accurate financial snapshot of the RCSC’s financial position, which if you have the Captain Midnight Decoder Ring, you can determine the financial stability. Spoiler, it is quite good.

I would like to hold a small class (10 at most) on financial statements and analysis using the sheet I mentioned. I do have a sense of humor and let’s face accounting is boring, but I can make informative while not putting everyone to sleep. I know questions will pop up regarding the budget, I can explain that but would rather concentrate on this.

Hope this answers your questions and if more arise ( it is Easter), let me know.

Happy Easter to all

 

Dave,

Thanks for sharing your perspective. What you point out is what I like to call the intoxicating effect of power. Those that become power drunk are unlikely to see anyone else as having a valid point of view. Those that understand the responsibility that comes with power are humbled by it. So why do I say we need expert help. Easy. Our system of electing decision makers is severely broken. Here is the way I view it. Those currently in power recruit candidates that they think agree with their vision regardless of ability or background. We end up with a herd mentality on the board that is created by the system that it perpetuates. As you look at any Board RCSC has had over the last decade please point out what experience prepared the board members for the responsibilities they undertook. For the most part, I found my board colleagues woefully unprepared to deal with the challenges the board faces. But and this is the clincher, pride prevents any board member from admitting they don't have the experience or training to address the issues in front of them. They feel immense pressure to "have all the answers" even though they may not even understand the questions. IMHO the only way to break out of this downward spiral is to invest in intelligent long-term planning and director and management training.

Hope that helps clarify my position.

John

 

Wonder when he will get knocked off his high horse. Like windmills to Don Quixote.

 

Agreed John, but is the answer better served to sit back and wait, or set some short term goals with tangible results and move forward? Putting together a training program and implementing it takes time and money. Hiring professionals to help set a new program for forward movement takes time and money. There’s a need for action now, not 18 months from now. Small changes can be made this week that could start the RCSC down a path of much needed change in process and development. Starting with the board meeting and no members allowed to speak openly. Next, amend the committee structure and free up the directors. Review the management team structure and incorporate staff members needed to be value added such as a comprehensive facilities manager. This should not take months, none of this. These are changes to be made by the board for the board. This is not rocket science.