Retrospective Review of SCA Expense Management in FY2016 Cameron Station’s 2016 fiscal year began extraordinarily well in financial terms. There was one principal reason: Board members, with independent counsel, had negotiated (during 2015) financial settlements with three different corporate entities. The combined gross recovery was a shade over $200,000, none which of had been contemplated in setting budgets or assessment retes for the year. All of the receipts were collected in February and March of 2016. This “windfall” income (less related legal expenses) was confirmed by tax counsel to create a tax obligation in the range of $45,000-$50,000. Per CMC accounting policy, this charge would not be recorded, or accrued, in financial statements before December, when the taxes would ultimately be paid. Regardless of the tax payment date, management, Board and FAC members had every reason to expect a net surplus for the fiscal year close to $150,000 as long as. operating expenses could be held close to budget. Despite a year-to-date budget deficit of $22,000 for snow removal, year-to-date expense variance was favorable in the first quarter, by a modest $3,200. As the year progressed, however, the net variance gradually “slipped” to unfavorable — by $13,800 as of June 30 and then $44,200 by September 30. The FAC and Board took note of the trend and substantially attributed it to several event-driven expenditures, including but not limited to, the 20-inch January snow event among them. It is also fair to say that the aforementioned $150,000 “windfall” on the revenue side helped to lessen the anxiety. The fourth quarter slid gradually from “somewhat concerning” to much worse than that. In the final three months, the cumulative unfavorable expense variance reached $197,600 a 3-month increase of $153,400, of which $119,400 was expensed in December alone. ‘When this result was initially released to the Board and FAC on January 27 (2017), a chorus of “What happened? Are you sure?” arose. Another four weeks were spent in identifying minor corrections and adjustments, but no truly significant changes or corrections were made. Shortly thereafter, the chorus changed to “Who allowed this to happen and why?” The CSCA/CMC Management Agreement and established practice clearly place the responsibility with the Community Manager for approval ofall expenditures (subject to Board oversight above $1,500). Month-to-date expenditures per budget code can be accessed on request, but this is not done routinely. More important, these reports reflect only completed transactions ~ not those projects still being considered for approval or in progress. CMC's records confirm that the proper chain of approvals was followed consistently for all ‘expenditures during the period in question. Later in 2017, the independent audit of the 2016 books similarly found no evidence of breakdown in this regard. ‘The point that is hardest to confirm is the level of attention given to the budget in evaluating Proposed expenditures before commitments are made or contracts signed. Specifically, had the of “margin” in the year-to-date line item and category budgets is lacking, the manager checked the availabi sufficient to cover each item proposed? In general, when that margi Management Agreement stipulates ~ and we in the FAC believe ~ that the manager should do at\/ least one of the following: deny the request altogether, scale down the project/purchase to fit the budget, or appeal to the Board for approval of a variance. The available evidence strongly suggests, though does not prove, that few if any of the above-noted pre-approval steps were routinely followed, especially inthe final weeks of 2016. ‘Annagging question remains: whether, or to what extent, the presence of the additional income from the “windfall” weakened the resistance of any or all parties (CMC management, Board, FAC) to overspending as the year progressed. A difficult review process became all but impossible when the individual holding the community manager position in 2016 left her post ‘on personal leave in February of 2017 — never to return. Thus, the one individual at the center of the process that broke down so severely is no longer available to elaborate further. ‘Asa final note, the current manager has introduced procedural changes that focus specifically on checking the affected budget lines before purchases are made or projects commenced. Following these procedures since her mid-year arrival, she was recently able to report a very favorable net income of $132,000 for 2017, as highlighted in the accompanying table. This table, developed by and for the interested “numerati,” focuses on 2026 but, for context, also shows the same statistics for both 2015 and 2017, There are two views of the monthly and year-to date data: ©. The upper half displays net financial results, ie., Revenue less Expenditures © The lower half covers Expenditures only, detailing amounts spent, corresponding. ‘monthly budgets and the differences (expiense variances) Certain individual entries are highlighted in red. These are extraordinary amounts, situations in Which a single month’s result had an outsized effect on a full year’s results, eg., the windfall income in February/March of 2016 or the extraordinary expenditures in December of the same year.‘roeysert wreeae'es sroz___ soe IS Sea aie Oreo, swoon om 2260-01-12, w ANRMOWN LTO STOR