2013 Financial Statement: The Juicy Parts

  • Posted: May 4, 2014

The 111 East Chestnut Condominium Insider 2013 Financial Statement: The Juicy Parts  In today’s 24-hour ADHD-driven news cycle, who’s got time to read? In the spirit of “just give me the juicy parts,” here are the highlights of this year’s Financial Statement. Be forewarned, it’s a bit of a spill.

By way of a brief preface: a Financial Statement typically inspires either applaud or blame, either someone’s gonna be thanked and praised, or chastised and strung up. In the condo setting, that would be the board. The buck literally stops there.  It’s the law.

Section 8 of our By-Laws provides for the duties of the board. The two pertinent clauses are: (b) Administer the affairs of the association; and (i) To estimate the amount of the annual budget… and to provide reasonable reserves.  Similarly, Section 18.4 of the Illinois Condominium Act provides that: “In the performance of their duties, the officers and members of the board, whether appointed by the developer or elected by the unit owners, shall exercise the care required of a fiduciary of the unit owners.” A fiduciary is an individual in whom another has placed the utmost trust and confidence to manage and protect property or money. The relationship wherein one person has an obligation to act for another’s benefit. A fiduciary duty is the highest standard of care at either equity or law.

Okay, keeping that in mind, here’s a partial list of juicy parts:

– From 2012 to 2013, our “current assets” decreased by 78%. In 2012 it was $1,721,053 and 2013 only $383,591. Also of note: as of the end of 2013, our Reserve Fund was a mere $38,461.

– The principal balance on the Barrington loan in December 2013 was $975,307 down only $307,260 from 2012. And in December 2013, the board also quietly increased a second separate line of credit from $1,000,000 to $1,750,000.

Then there’s the budget versus what was actually spent:

– The 2013 budget earmarked $30,000 for bad debt expense. The actual came to $46,699 or 56% over budget.

– The 2013 budget allocated $42,000 for legal fees. The actual was $68,745 or 63% over budget. (Of note, the actual for 2012 was $38,991. Bottom line: we’ve had a 76% increase in legal fees in one year. Let alone that in the majority of instances, the board made the very mess we are now paying to clean up; also keep in mind, we were told by the board that hiring Kovitz Shifrin Nesbit was going to lower our legal expense.)

– The 2013 budget earmarked $125,000 for the new boilers. The audit has the total at $407,536 or 226% over budget.

– The 2013 budget had the loading dock at $100,000. The final cost to us was $262,381 or 162% over budget.

The following are a few miscellaneous items. Keep in mind, it all adds up:

– $50 in homeowner fines was collected in 2012; and $500 was budgeted for 2013. $2,500 was collected in the last quarter of 2013 resulting in two more lawsuits against the board and the Association.

– The 2013 budget had $4,900 earmarked for exterminating. The actual was $12,431, or 154% over budget.

– $2,500 was budgeted for pagers and radios. The actual was $8,595 or 244% over budget.

– $7,500 was budgeted for landscaping. The actual was $11,381 or 52% over budget.

– $3,000 was budgeted for loading dock maintenance. The actual was $11,284 or 276% over budget.

– $35,000 was budgeted for general repairs. The actual was $83,333 or 138% over budget.

– $25,000 was budgeted for HVAC miscellaneous. The actual was $63,296 or 153% over budget.

– $3,500 was budgeted for miscellaneous administrative. The actual was $10,853 or 210% over budget.

Does that sound like due care? Is that how you manage your own money? Of course not. What’s apparent is that care-less is the board’s standard operating procedure.

And here’s where it turns from insult to injury. Note particularly the timing of the release of the audit. It’s no coincidence it was after the board election. Picker & Associates dated the audit and appraised the board on March 19. And on April 11, six days before the election, our board president sent out a note to voters saying: “The truth is that our building’s long-neglected infrastructure projects are steadily getting completed in an appropriate manner. Despite the frantic economic predictions from those who have been issuing these for many years, our Association’s financial status is very sound.”  Echoes of last September when he told us “The Board is very much aware of our Association’s budgetary constraints and indeed has carefully planned this year’s spending initiatives accordingly.”  Really?!

The real message is “Look away.” And the fact is, that message could not be more cynical regarding the intelligence of the association membership. One has gotta wonder how a rational body politic could be so utterly out of touch and/or susceptible to, and influenced by, constructive fraud. Fact is, our board president does not wonder.

Then again, there’s a great New Yorker cartoon by Robert Mankoff. He’s got two business execs sitting across from each other and the one says, “I’m really quite comfortable with failure at this level.”  Maybe we are, too.

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