PMCPOA Finances

Originally published online April 20, 2007

A Good Exchange of Ideas at PMC Budget Meeting
Report and Commentary by Jim McDevitt
[Editor’s Note: Mr. McDevitt used an audio tape of the meeting to prepare this report. Patric Hedlund, editor of The Mountain Enterprise, also attended much of the meeting, and has added notes (in brackets) in this report.]

On April 14 members of the Pine Mountain Club Property Owners Association gathered as Gita Nelson, Chair of the PMCPOA Board of Directors and Treasurer Rachel Unell conducted a meeting to discuss questions and provide answers raised during the April 7 meeting, at which property owners were broken into groups to give comments about the association’s current deficit.

Noticeably absent at this April 14 meeting was former COO, Jeff Kohl, who was PMCPOA’s manager during most of the period this large deficit accumulated and who is still a resident and member of the association.

A 14-page handout was provided which contained answers and board comments to the April 7 questions. Included sections of the document were Budget Highlights, Proposed Budget and Deficit, Suggested Budget Cuts, Association Services, Operations/Personnel and Comments.

Ms. Nelson opened the meeting with introductory comments concerning past budgets, the one-time $100 refund which she said she voted for and which in hindsight she felt was a mistake. She said a monthly line-by-line review of profit and loss statements with variances explained will be done every month hereafter.

Ms. Nelson said, “…One other thing I would like to mention to you that I am frankly very upset about. We had intended that all the answers to the questions would be on the website by now. There has been a staff issue, a problem, they are not on the website. I’m hoping that ths will be corrected by Monday.”

Ms. Unell, the new volunteer board Treasurer, then discussed some items in the handout, starting with an overview of how the budget is developed. “The annual budget is the result of several months of work. The Chief Operating Officer/General Manager meets with the department heads and committees as they submit their financial needs for the following year and justify the expenditures. Then the general manager, committee chairs and board of directors, discuss project needs and financial needs…,” she explained.

The Budget Highlights in the handout were covered next, followed by some of the questions and answers in the handout listed under Proposed Budget and Deficit. Also included in Ms. Unell’s presentation were some items under Association Services.

Ms. Unell explained that, because of the time it would take, not everything in the 14-page handout could be covered in the time allocated for the meeting and she focused on items under selected categories to present a good overview of the contents. Everyone present who wanted a handout had one, which permitted us to follow along and later, review the contents in detail.

Ms. Unell said in answering a question about financial oversight, “…Bylaw 6.08 states in part that the corporate treasurer shall monitor the actions of the General Manager in his role of custodian in disbursing…..funds”

Ms. Unell also covered the report of the Budget and Finance Committee meeting of Apr 13 saying “The Committee reviewed a line by line, department by department budget that was prepared by management. We also reviewed an alternative budget prepared by Jack Throckmorton and a few people recommended developing an alternative budget and there was one developed. We reviewed it, it took two hours and interestingly enough, it was noted that the budget differed only by $12,000 with regard to the debt expense for running the Association.” Ms. Unell said after the review, the Committee voted to recommend the management budget prepared for the Board.

Currently the proposed assessment is at $1298, an increase of $213. She added, “We are still working on it and there are still several items still under review for reduction.”

Ms. Unell offered to take questions and to answer them as best as she could, explaining she has only lived in PMC a couple of years and that she has been the treasurer for a short time.
In answer to a question raised by Kim Ryan (a resident who is a professional auditor) about internal controls, Ms. Unell said “I understand your point and I do agree with you and that is why I am personally committed to going in and looking at the internal controls. You are absolutely correct about the audits. They are not responsible for divulging or even looking for any irregularities in accounting.”

Mel Weinstein, a PMC homeowner, read a prepared statement: “Two and a half years ago Pine Mountain Club hired a manager with a high salary and no property management experience. The reason given to us for this unusual financial arrangement was that he would create a great deal of new revenue for Pine Mountain Club and expenses would be controlled so Pine Mountain would remain affordable.

“Seven months later, with many people being unhappy… a group of PMC members including the present board chair ran on a platform to remove him from office, transparency, keeping PMC affordable and fiscal responsibility. Last year, that board elected the current chair who changed her position from removing the manager….

“The consequence is the membership is paying for unnecessary and unbelievable errors. Now that he has resigned…we have the largest budget deficit in PMC history and no one seems to be accountable.” Mr. Weinstein also included in his remarks, a concern over the $70,000 expenditure in overtime and the continued losses at the Bistro, explaining that closing the restaurant would provide a large savings.

Mr. Weinstein went on to say, “The job of the board is to protect the membership, not punish them,” further pointing out that unless he missed it, there were no cuts proposed in this budget but yet the membership was being forced to pay almost a 20% increase, the legal limit, in association dues.

Ms. Nelson responded, stating, “First of all, let me tell you totally and unequivocally…I at no time stated that I [was in favor of] dismissing our now-previous COO…this may have been something that was suggested or anticipated by the person who just spoke and I don’t want to get into that….”  Ms. Nelson continued “…I am in no way interested in making this [meeting] a spectacle for entertainment or going into history. What we need to look at is the current financial situation, our budget issues and to move forward and forgot about all this personal nonsense. Let’s deal with our community finances.”

Unlike the meeting of April 7 at which no questions were answered, Ms. Nelson did entertain questions and provide answers. From what I could see, no one there was entertained. That said, it took courage to be the only board member up in front to take questions and provide answers. It wasn’t easy for Ms. Nelson and she was the recipient of many questions about what is perceived, at least by myself, as a poor performance of the former COO and the lack of action by the entire board to intercede to control expenses and question the large drops in revenue.

For example, in the Equestrian department, revenue in June 2006 was $102,452, yet this year it’s projected to be $92,524; Golf Course revenue in June 2006 was $180,919 and in June 2007 it’s projected to be $165,750; the Lounge earned $119,183 in 2006 while this year it’s projected to be $103,000, though the cost of liquor is only $1,537 less then the previous year although the income was over $16,000 more in 2006. The Bistro revenue in June 2006 was $316,441 and this year it is expected to be $225,000, a decrease of $91,441.

In my opinion, these questions need to be asked of the entire board and, most importantly, the former COO.

Jeff Kohl could help the entire community if he would attend one of these meetings to provide the answers rather then have all the frustration at the financial situation directed to Ms. Nelson.

I believe the way to avoid errors of the past, is not to bury the past but instead examine it so we can learn from past mistakes. It has been disconcerting to many people to hear Ms. Nelson defend Mr. Kohl’s performance, never offering constructive criticism of his performance.

Mr. Kohl may well have valid explanations for the decreases in revenue, the expense overruns in the budget, the lack of financial data provided to the Finance Committee, but unless he steps forward to explain, these questions go unanswered and deemed off-limits by
Ms. Nelson as “history.”

Questions from the members continued. “What percentage of the homeowners use the golf course?”  Ms. Nelson answered, “You know, again, all this information has been published in the past, it has been well publicized. I don’t think there is any point in going into history, let’s move forward into the new budget and where we go from here and let’s be productive.”  The lady’s question went unanswered by Ms. Nelson and, for the record, I am not aware of any publication where the percentage of homeowners who use the golf course is revealed.

Member Brad Kramer made the suggestion that we close facilities where we are not making a profit and by doing so, we would have an immediate savings of thousands of dollars. Ms. Unell responded by stating this was something she would personally bring up to the Board. Mr. Kramer also recommended the equestrian department be closed because we continue to lose money in that department. “We cannot continue to afford to pay $150,000 for a golf course that only 5% of the population…is using,” Mr. Kramer said.

Howard Meythaler {a member of the Budget and Finance Committee] stated that to cut Bistro costs, vending machines could be put in, instead of having the staff expenses we now have. He said that caterers take care of food service for weddings and special events. Ms. Unell responded that these were all valid points and she was monitoring everyone’s input.

Edie Stafford, a board member who was seated in the audience, suggested that in business we have to make a profit or close and she asked why we cannot charge the individual horse owner for the hay and feed it costs to run the stable: “Why should we all pay for the horses food? Nobody compensates me for my cat and dog food or anybody else’s. So why are we compensating the horse owner?”
[Editor’s note: Complaints regarding ‘the cost of hay,’ appear to be unfamiliar with the nature of the horse boarding business. Providing feed and cleaning the stalls is the service for which people are paying; that is standard on the mountain. The  fees charged for horse boarding in Pine Mountain ($162.50 to $235 for accommodations ranging from pasture, pipe-stall or barn stall) are higher than market norm in this region. Until the Day fire, the stables had been used to capacity for years, with waiting lists, but following evacuation of horses for the fire, seven boarders never returned. Currently there are 11 openings at the stable.]

Chuck Testa, another board member seated in the audience, said “Last year and the year before, I offered my services to do the buying for the café. I’m experienced in it. Free of charge, just as I do as a director so that we price properly, we would make those tables full every day downstairs, which are always empty. I was turned down….”

In response to questions from the members about who had refused his offer, he pointed to Ms. Nelson, saying “She’s one of them, because Jeff Kohl turned me down and she supported him. So apparently, [someone doesn’t] want to take care of this problem.”

Another member [Richard Kaschak]stated he has lived in Pine Mountain for twenty five years and for twenty five years he had been subsidizing the golf course which now will take a half million dollars to repair. He added he does not want to subsidize the small number of people who use the golf course and feels that senior citizens are being mistreated.

Howard Meythaler (member of the Finance Committee) said it is in the bylaws that we have to maintain the Equestrian Center but that we should charge for the hay and feed at the stable [see note above:  hay and feed are paid for in the boarding feeEditor]. He said we could save $250,000 by delaying road paving for one year.

Gita Nelson said two board members have been driving around Pine Mountain to assess roads, seeking solutions for saving money this year. Member Jim Welles stated he has been in property management for 35 years and “when maintenance is delayed, it often ends up costing more.” In his opinion, having a golf course adds value to everyone’s home. Several property owners

Howard Meythaler pointed out the number of employees have to be kept below 50 to avoid more government regulations. He warned we had exceeded that limit. He also said employee payroll increases have far outstripped cost of living increases.

Ms. Nelson said there were “wild rumors circulating” about $100,000 in overtime, “when in reality the overtime was $68,000.” She said there was overtime in the Equestrian Center and she believed at the pool. She said “We live in an isolated community where the labor pool is very small and sometimes people might end up doing overtime. The only department in which overtime is acceptable is in Roads which is for snowplowing and we are budgeted for that.”

Ms. Nelson called on Sigrid Insull Lucking, another board member seated in the audience, who explained the overtime occurred when there were a number of unfilled positions and people were working two positions to cover the vacancies. She added, “I believe we were closer to $60,000 over payroll budget.” Ms. Nelson replied “I believe we are coming in under total payroll even with the overtime.”

Chuck Testa, board member seated in the audience, stated “There were 70 hours given out in overtime to someone who works our computers and I’m still waiting for accountability of that.” Ms. Nelson responded saying “Chuck, I’ve asked you as you well know, we cannot discuss individual personal issues.”
[Editor’s Note: Many will remember the importance to the community during the Day fire of the online information at generated by the PMCPOA clubhouse computer tech. Many evacuees—as well as those who stayed— referred to it constantly for updates about the fire’s growth and movement. This 24/7 service is part of what is represented in that 70 hours of overtime.]

Mel Weinstein asked about shifting salary expenses for the chef from the restaurant budget to the administrative department, “to lessen the Bistro loss and create an artificial profit for the Bistro.” Ms. Nelson said, “We are not here to discuss personnel policies.”

[Editor’s Note: Kim Ware followed with a question about how personnel costs are attributed to specific cost centers when one employee provides services to more than one area. In this case, the employee in question is managing the kitchen as well as coordinating the recreational program for the association. Each of these is its own cost center in our current accounting system.
Ware said it is customary to charge a percentage of the salary to each cost center, proportional to the amount of time spent on each.]

Rachel Unell said a lot of changes have been made and are continuing to be made to make the budget reporting more accurate. Kim Ryan expressed concerns for a need for an internal audit explaining that ordinary audits do not look at internal controls.

Mel Weinstein asked a question of Ms. Nelson in regard to changing the Finance Committee’s meeting from Wednesday to Friday, saying the committee voted to keep meeting on Wednesdays, yet the meeting times were changed to Fridays by the board chair.  Many of the longtime volunteer committee members cannot attend on Fridays.

Another gentleman asked why a three-year contract was given to the new manager instead of a one-year contract. Ms. Nelson responded saying “Richard your question is quite valid. About a three-year contract or any contract. I think we would all have liked not to give out a contract, however it’s not realistic to expect a person, and by the way, Richard, we do check references and your statement that this is someone we don’t know anything about is just not accurate. We very thoroughly check and there have been a number of interviews with department heads and a very, very thorough discussion. Now lets get back to the contract issue, unless you hire a local person, you are not going to get anyone to move their home from another state or another city. Nobody in their right mind would do that and we’d rather not hire somebody whose not in their right mind.”

I asked Ms. Nelson why she didn’t answer Mel Weinstein’s question about the board chair changing the Finance Committee’s meeting time.

She said, “Committees are not private clubs. Some Committees at times degenerate into appearing like private little clubs. It’s not what we need and I’m sure you all recognize the major financial issues that we have here. We need to gather professional financial people onto the committee. By having the Committee meet on a Friday, it allows a Certified Public Accountant to be on that committee, a former Board Treasurer, as well as another former board member. By having this on Friday, all three people will add financial support which we have not had. These people are weekenders and are still willing to give of their time.” Ms. Nelson acknowledged that the Finance Committee voted to keep meeting on Wednesday but said none of the professionals she mentioned were able to meet on that day.

[Editor’s Note—Ms. Nelson implied that the difficulties in the current budget process were evidence that the Budget and Finance Committee had not done an adequate job. To this observer, that seemed unfair, given that the committee did not receive complete financial statements from the former COO for much of the year. The difficulties with generating competent statements have been attributed by the former COO to problems with converting from the old to the new computer accounting system. The new accounting system was selected by the former COO, but management of the conversion appears to have not been smoothly accomplished; it has been costly for the association. Not only were there over $20,000 in excess costs to accountants during this time, the lack of dependable financial reporting has contributed to the current controversy regarding cost controls, oversight and proposed assessment increases.]

Chuck Testa asked if he understood it correctly that a husband and wife cannot be on the same committee. Ms. Nelson replied “Yes and no. The reality is that husbands and wives can serve on the Committee but have only one vote.” Ms.Nelson said this was the opinion of legal counsel.

[Editor’s note—Mr. McDevitt also asked why Ms. Nelson would spend association money to get legal judgement on an issue of this nature. The implication was that the chair was specifically attempting to limit the role of a specific couple, former board chair Dave Martin and his wife Brenda Martin, who are members of the Budget and Finance Committee who are not able to meet on Fridays. Ms. Nelson said, ‘Oh, no, it was mixed in with other association business, it wasn’t a specific charge for just this….” ]

After the meeting concluded, I had the opportunity to talk with several members and it was the general feeling of those I talked with that this meeting was much better then the meeting of April 7 when no questions were allowed to be asked or answered.

This is part of the July 7, 2017 online edition of The Mountain Enterprise.

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