With Nalley's leadership we had a horrible tone at the top from which to expect good accounting. (What follows is from new input today September 10, 2021, and after I insert this, the old article will pick up to completion because it is too important and critical to be left out!!)
I Clark Vernon have been spreading and analyzing financial statements since I was a junior in college in 1968. HERE IS A LITTLE OF WHAT I OBSERVED FROM THE VILLAGES ANNUAL AUDITS GOING BACK TO AND INCLUDING 2010 a period of 11 years.
Revenues totaled $467.3 million, Expenses before depreciation and other non-cash charges totaled $381.9 million. Therefore the net is $85, 4 million. That is $7.8 million a year. Other than the water plant expansion which occurred back in 2014 and which consumed $6.2 million, we have had no major expenditures on infrastructure. Where did this money go? Board why don't you tell us or have you committee show us?
If that wasn't enough, let's discuss what these statement show us. Of the $381.9 million in cumulative expenses "Admin" took $106 million or 27.9%. That is a lot of admin. Even better Public Safety took $26.6 million which is 7%. GOLF took $110.6 million which is 29% and even better lost $26.1 over 11 years. (More on this later.) Parks and Recreation took $33.6 million which is 8.9% but even better managed to loss 18.5 million over 11 years. Also, although Nalley liked to play with the chart of accounts and create new profit and loss centers, if we add the "Clubs & Services center now defunct for 6 years to the new Food & Beverage in existence for 6 years we get $11.6 million of cumulative expenses generating a nice $4 million loss!.
So lets address some specifics: (1) Golf's cumulative 11 year loss of $26.1 million equates to $2.375 million / year - and the last 3 years loss starting with 2020 (an aberration that year due to increased utilization from covid shut-ins.) was $986 thousand, $2.1M and 1.8M.; (2) Food and Beverage lost $2.7M over the last 6 years with the losses per year at 732 thousand, 563 thousand and 481 thousand for the last 3 years starting with 2020 first (Clearly showing an accelerating trend) (3)and lastly let's talk about one winner PUBLIC UTILITIES (in existence as a separate center for the last six years - they generated a $14.3M net positive(!) which is an average per year of $2.39Million. The amount experienced a year for the last 3 starting in 2020 was $3.4M, $2.5M, and 2.4M respectively. Wondered why you rates were going so high? Rob Peter to pay Paul no matter that this a regressive tax that benefits the lakes and golf course lots who are already heavily supported by everyone else.
One more observation: In almost every year that Nalley was either CFO or CEO the subsequent years previous year numbers comparison to the new year being reported, showed some change when review back to the previous year, i.e., 2018 for the 2019/2018 statement is different when compared to the 2018/2017 statement and the 2016 in the 2017/2016 statement is different to the 2016 in the 2016/2015 statement. It was warming to see that the 2019 and 2020 had no such comparative changes - but of course Nalley was gone for 2020.
STILL THINK WE DON'T NEED A CONTROL AUDIT? TOO EXPENSIVE? A small piece of the $85.3M (maybe) net is not justified to be spent to find out?
If you want a copy of the excel spreadsheet, e-mail me at email@example.com
The quality of accounting and financial reporting, (directly related to the appropriateness and adherence to good accounting practice), is directly related to the adequacy of internal controls over accounting procedures both in their design and most importantly in their application. The quality of internal control over accounting procedures and processes "the control environment" starts at the top of an organization with the top of the managerial hierarchy.
The control environment In Hot Springs Village is more than suspect, particularly when you consider the source of the unease - Leslie Nalley. Here is a women that had a license (and may still have) to practice public accounting in Arkansas. Yet she willingly schedules annual meetings before annual audited financial statements are released and reviewed by property owners; She has bent facts for the political gain of David Twiggs and the Board; she has no empathy for lot owners preferring that they pay taxes above reasonable assessed values, and will willingly divert utility capacity to commercial uses and take said capacity from lot owners who have already paid for the capacity to the site of their lots.
Worse -- now that she is in control as "CEO" she downgraded her former position of CFO to Controller in order to maintain a better grip. She spearheaded the accounting conversion and we are using her version of accounting practices. And no one has really looked at all this. We definitely need a complete audit of internal controls to assure ourselves that we have the assets we are supposed to have, that the accounting system works and that our money is safe.
We need lots of "Sunshine" folks and there is no reason not to have it unless "The Friends" have much to hide. It is way past time to find out - let's have our internal control audit!
You will hear about dire needs. In 2015 when Nalley was CFO she support Manager Twiggs push for a large increase by pointing out that the POA was in danger of not making payroll. Single widows with out business experience voted yes. So did the non- resident owners since it was made clear to them that they would pay a minor amount more. That the resident owners would pay the bill. This time you will hear about the infrastructure is falling in around our ears , that we need to "reatain" our valuable employees because we are not paying enough to keep them, and that they are too irreplaceable. And of course they will trot out how they will be protecting our property values.
Let's talk about what the "Friends" lead Board and community power structure have done for you. They gave us Twiggs, and Nalley. They sold a bunch of "take-back" lots under agreement in bulk to some Californians for a net $160 each. Is the lot under your house worth $160? How about later when the buyers stopped paying the per lot assessment and the POA found themselves with a buy/sell agreement in which they didn't contemplate remedies for major default? Yes! Our POA. Or once they dedided to get into the lot business of which they knew nothing about the offered to sell lots for $500 each, and when that didn't work six months later they offered to give them away if one would promise to build within a year. Now what's a lot worth? Everything they did had a detrimental effect on not just resident property owners but more particularly non-resident lot owners. Of course this occured in the middle of the "great recession of 2008 -2012, but hear is the thing. The rest of the country recovered real estate values lost, but not Arkansas, and more so Hot Springs Village. For years their was no premium to an improved built on golf course frontage. Prices were stagnant. But the POA keep buying take-back lots, and after a few years decided to sell them for $2,000 each. No thought to property lot owners who they were affecting by being in the market and competing with you, and keeping values down in the process. Did they ever think to keep POA lots off the market, so there might be a little created demand and to improve your lot values? Of course not. Now the latest. It has been the practice for realtors to accept 10% commission on vacant lot sales. With the values so low most weren't interested. But prices with the pandemic did recover in the Village as flight took effect from bigger cities, artificially propping up real estate values even a little bit in the Village. So what did the POA do? They offered their lots with the stipulation that realtors could keep a 50% commission. Now, if you were a buyer, and you knew that a 10% commission is normal what is a lot worth under such circumstances? Easy answer, 50% of the asking price plus 10%, which brings it back to normal. But what if the asking price was near what value had returned to lots? Then the POA has done it again - kicked you the lot owner in the teeth!
Every Board chair going back too many years to remember has been a "Friends" member, except just recently, before those chairs were ousted in power plays. None have been a friend to infrastructure spending - preferring to go off chasing rainbows and spending the property owners money frivolously. From exorbitant salaries, to unnecessary employees due to empire building, to wasteful spending on addition cost non-revenue producing assets (absolutely wasted money).
You can be sure to impress their urgency on you they have accelerated their proposed infrastructure spending. But we have no control over these people and they are not willing to give us reasonable control as a community for us to be assured they won't once again go chasing rainbows to satisfy some pet "Friends" project. And they absolutely do not have the moxie to shut down gold courses and control they losses before asking for more money, which therefore is already speaking to the lie of infrastructure. Hemorrhaging golf and parks and recreation needs to be fixed first. Better yet, if you the POA are so certain, then give the property owners' the right to recall, and approve projects outside of normal day to day and specific infrastructure. After all the prime problem we face is the failure of the Village to appeal to the public for 50 years now. So, let's deal with this problem accordingly with the realities at hand, and get realistic.
Our documents give one vote per property owner. But their is a wide range of value difference from just a few thousand to over a million. The lower values are carrying the water for the more well to do. This is a very aggressive tax. Without spending controls, recall votes, and a Control Audit and proper accounting - VOTE NO!
Copyright © 2018 AmericanWhen,LLC