WUNSCH: PROBLEMS WITH FINANCIALS 1-17-2016

From: Regina Wunsch
Sent: Sunday, January 17, 2016 8:25 PM
To: info@glamontana.org
Cc: Glastonbury Landowners Group (glastonburylandownersgroup@gmail.com)
Subject: Problems with Nov. and Dec. ( year-end ) financial statements and Jan. 6 meeting with Julie Indreland

 

Dear Members of the Board,

 

First I would like to state that I disagree with President Charlotte Mizzi’s statement when she cut me off mid-sentence during the January 11, 2016 meeting, that financial matters concerning the GLA books are a matter of the Financial Committee and not a subject for the board meeting.

 

The entire board, not just the treasurer or the board member financial committee members, bears the responsible for the finances of the GLA.  As it is known that the books were not in order when handed over to the Accounting Service, it is the obligation of every board member to inform themselves as to the status of the corrections and any reviews needed.  Since the moneys involved belong to the landowners and not the GLA board members, the board also has the obligation to apprise the landowners of this information.

 

I would also like to suggest that the board revisits its policy regarding letting only board members ask questions after the presentation of the financial reports.  This puts a landowner into the position of having to choose between making a statement at the beginning of the meeting regarding any item on the agenda or waiting until the end, in case there are any questions regarding the financials and speaking at the end of the meeting, when all decisions regarding the agenda item have been made—when any input is basically moot.  If pertinent financial information comes to light at the end of the meeting, when everyone’s attention is on other matters and mainly on going home, the board may be put into the position of having to revisit certain decisions and thus prolonging the meeting longer, than the time that would have been taken up by presenting the information at the time it was needed.

 

As the financials were not made available until the meeting I was only able to take a quick glance at the December 31. 2015 Balance Sheet with September through December columns and the Accrual and Cash based Income section of the P&L during the meeting.

 

There is at least one problem on the November statement and there is at least one problem and one omission on the December statement and one entry in the November and December statements that needs to be explained.  (I have not had the time since then to go through the entire reports or any of the other financial reports presented )

 

1. The 003 Savings Other account (see Balance Sheet) should only contain the interest paid by Bank of the Rockies.  So it should not contain more money than the Other Income account (5000 Interest Income Bank on P&L).  That balance shows $159.31.  So the 003 Savings Other account–assuming this balance has been verified by checking the 12/31/15 bank statement balance– should not show more than that.  As Janice moved this money into the 004 Savings General Ops account except in June, the last financial statement she created for the GLA month , the amount should actually be less.

 

The December 31, 2015 comparison Balance Sheets show the following 003 Savings Other balances:  September $58.82,  October $70.88, November $12.13 and December $216.74.

 

Given the yearly total interest amount,  the change from September to October looks reasonable.  But the November and December values do not.  The November and December balances should have increased by the interest earned in each month.  As the this is not the case, one or more of the Savings subaccounts do not have the right balance in November and December (year- end). So the cause of these errors in the November and December Savings Other account must be tracked down and corrected and the October and November amounts verified.

 

2. It is the policy of the GLA to move any unspent budgeted road maintenance money into the respective Road Funds at the end of the year.  This has not been done.

 

The $2,369.18 440 Misc. Income that the GLA received from the insurance company for the guard rail repair needs to be moved to the NG Fund.  The contractor doing the repair was paid out of the 1035 A NG Grading & Gravel account and the insurance money was not used for roadwork in NG.

 

The $3,326.50 left in the NG 1035A account and the $925.20 left in the SG 1036 account also need to be put into the respective Road Funds.  This will of course change the year-end balance of the General Ops Savings account.

 

3. Questions. The accrual based November and January through December P&L. show $7,621.93 in account 440 Misc. Income.  The cash based P&Ls show that only the guard rail money has been paid.  So the extra $5,252.75 is still outstanding as of December 31,2015. There was no mention of this outstanding money during the financial presentation.  As all of the GLA’s income is generated from assessments, interest and penalties, what is this invoice for?  Who, other than the landowners, owes the GLA money? Why has the GLA  not received payment?

 

As Karleen told me at a past board meeting that the items in the member binders could be taken by the landowners, I took a copy of the financials home after the January board meeting.  But, as I stated above, I have not had the time to study them.  Therefore, I have no idea, if there are any other obvious problems and if yes, how many. As I found out during my “review” of the payables,  there are quite a few problems that are not evident from just looking at the financial reports.  One needs to drill down on the entries in the actual data base.  This means a review of the data from October 16 through December 31, 2015 is necessary to ensure that the books and hence the year-end financial reports are accurate.  Of course the finance charges for landowners with a transfer balance in 2005 and 2013 also need to be recalculated.

 

Given that the November and December statements are not accurate, the year end financials as approved by the board cannot be used for the required landowner mailing.  Even, if the above mentioned items are corrected, the financials can only be mailed with a clear statement that the accuracy of the data for a portion of the books still needs to be verified and the accounts receivable need correction.  A timeline should also be included for the this work and when landowners can expect amended accurate year-end financials.

 

 

When I met with Julie on Wednesday, January 6, I assumed it was just to help out with the assessment invoice generation process  But we spent over an hour going over the “fund system”, confusion about finance charges for landowners on the payment plan list and various items from the list of problems I had  found during my “review” of the payables data from July through October 15,2015 and from what I had gleaned from the month end financials presented for October and November 2015.

 

While going over all of this Julie never mentioned anything except my list of errors, so I inquired about the necessary review of the data from October 16 through December 31,2015.  From her response it appeared this subject had not been brought up.  She told me she had no time to do this and rightly pointed out that without being familiar with our operations, she would not be able to find everything anyway.  She offered to give me a copy of the QB so I could do it.  I declined, as I would basically only have one day for this job after getting the necessary permission from the board, in order to get feedback back to Julie in time for the generation of financials for the Monday board meeting.  As I have a full time job and had already shifted things to spend an afternoon with Julie, taking a whole day off at the end of the week with no notice was not an option for me.

 

Since she also did not mention the necessary finance charge recalculation as being on her the list either, I assumed she was not requested to handle this. I did not bring it up.

 

Julie had prepared a preliminary set of year end financials for me to take home so I could see to check to make sure all items on my list were fixed and if there was anything else that did not look right.  But since she still had to finish up some items that she had needed my input on, she thought it better, if I would do this with the “final” copy.  I presume, she assumed that someone on the board would forward a copy to me when she sent the financials to the board.  As I did not receive anything and the financials were not sent out before the meeting, I had no chance to look anything over before the Monday board meeting.

 

At the January board meeting it was stated that the financials for October and November presented were prepared by Julie Indreland, implying that therefor they were accurate.  As Julie Indreland was not hired to do a review of the books and she only checked the books based on the list of problems I had given her,  which did not include the month of December, the fact that she generated the new reports does not mean that the data contained in them is accurate. Furthermore, it was also implied that from now on all of the financials will be correct, because Julie is entering the data.  Julie is entering the data based on information she gets from the GLA.  So the data will only be as accurate as the information she gets. All data will be entered according to standard accounting practice however.

 

If one has hired someone to fix mistakes, it is standard practice to check the financial statements against the items on the list and anything not on the list (December).  It was stated at the Monday January board meeting that all errors had been fixed by Julie.  Who on the board verified that all data is correct?  Or even, if all items on the list I gave to Julie have been addressed? 

 

It is also standard practice to review any financial documents prepared by a hired agency or person, no matter who one has hired to prepare them:  CPA, accountant, accounting firm or self-employed bookkeeper.  Miscommunications are always possible.  Is this being done?

 

There are other matters of concern that came to my attention during the meeting with Julie.

 

1. Julie stated she did not receive all of the receipts for reimbursements made to Karleen, there were some missing in the folder that Rudy had dropped off.  She was still waiting for Rudy to supply them.  Aside from the fact that receipts are vital for petty cash reconciliation, it is a requirement for corporations that all financial transactions are backed up by paperwork.  For reimbursements of any kind this means receipts.

 

Therefore, I would like an assurance from the board at the next board meeting that all receipts have been found and are in the appropriate file.

 

2. In helping Julie and Micah with the assessing of finance charges and interpreting and completing the missing data on the rather confusing Payment Plan document, I discovered that a large number of the landowners on a plan have not paid for months.  I did not take notes, but I think there were three at most who were still paying $100 monthly.  One was paying $50 per month. 

 

Since the payments include the current year’s assessments the most one can expect for past dues next year for the $100 people, which I assume are in the land and dwelling category, is $3,600 – ($420 x 3) = $2,340.

 

The person paying $50 is most likely in the land category.  So that would mean $600 — $210 = $390.

 

Total past due income would be $2,730.

 

Given these collection numbers I do not believe it is prudent to base the balancing of the 2016 budget on $10,000 past due income as suggested by the proposed Final Budget presented at the January board meeting.  There is not even a guarantee that these landowners will stick to their plan.  It also assumes they have a whole year of payments left on their plan.

 

Furthermore it also needs to be ascertained how much of the past dues collected in 2014 and 2015 were actually payment plan collections and what portion was lien payments and more recent past dues paid up at the time of a property sale.  When I was handling the books and associated tasks for Janice for about 4 weeks in 2014, I was called by various title companies for past due balance information close to closing and credited and deposited the checks to the appropriate accounts.  Some of the amounts were quite high and did not consist of just 2014 past assessments.  I also helped Janice credit lien money received from a new owner after a sale to the previous owner’s inactivated account, so it would not show up as still owing.

 

3. There were two landowners on the Payment Plan list under a heading something like “Making an Effort” (I did not take notes) that were flagged as getting their finance charges frozen and penalties waived, although they were not even paying enough per month to cover their current assessments.  This is not in conformance with the payment plan terms that were agreed on at a board meeting in 2014 when Janice was treasurer.

 

Why are these two landowners given the opportunity to accrue debt to the association without being assessed finance charges and penalties as are all the other delinquent landowners?

 

Furthermore I would like to know on what bases the board calls any of the payment plans private agreements between the board and landowners.  The moneys owed are owed to the association—meaning the landowners—not to the members of the board.  The board is tasked to manage the moneys on behalf of the landowners.  This means, if payment plans or any other “deals” are offered, they need to follow the guidelines approved by the landowners.  By electing members to the board the landowners are not giving a carte blanche to the board to do as they wish with the association funds, collected and owed.  The governing documents clearly curtail the board’s authority to spend money and raise assessments as it pleases.  There is nothing that gives the board the authority to give assessment discounts, waive penalties and interest and reduce the repayment of moneys owed for certain landowners at their discretion.   On the contrary, the mandate is to collect all assessments suggests using liens and even foreclosure, if necessary.

 

I was rather taken aback at the suggestion that was made at the Monday January board meeting to go ahead with interest rate reduction, even retroactively, without even correcting the overcharges on the accounts for landowners with transfer balances in 2005 and 2013.  One would hope that the board would first check, if the corrected delinquent balances are collectable so as to recover as much money for the association as is possible.  Then, if mandated to lower the rates, these old balances are lowered to the highest rate that is collectable.

 

4. I am very concerned about the accuracy of the payroll and the information that Julie will being given to do the payroll.

 

This is why.

 

When I did my payables “review” there were no paychecks issued for Fred, only for Karleen.

 

In the November board meeting when October financials were made available, I discovered there was an account problem with Fred’s paycheck.  I was given a copy of the QB and determined that this was due to Fred being paid out of a payroll account that did not exist on the Ledger part of QB (snow payable account).

 

1. a) After that I received an email from the board member apparently taking over the timesheet breakdown responsibility, expressing confusion over Fred’s timesheets and Loader Rental invoice.

 

I explained what items were paid out of payroll and the corresponding payroll accounts that were used and what was a vendor payment.  In a nutshell, everything except the loader rental was payroll.  I also explained why the loader rental was not payroll and how it was billed.

 

1. b) Sometime thereafter I received an email from said board member stating that it had been discovered after doing the payroll that Fred had only been paid $20/hr. for plowing instead of $25/hr.  She asked me to confirm that the fix was to issue a second paycheck.  I had already explained in my “review” email to the board that this was not in compliance with the payroll laws.  Apparently she had not been apprised of this information.  I explained again why one could not issue a second check and in detail how to deal with the short payment.

 

1. c)  Then it came to light ( I think at the December board meeting) that Fred had been paid as a contractor for the truck repairs instead of as an employee.  This was in spite of the fact that I had clearly stated in the prior email asking for timesheet clarification that this was a payroll item. I assumed the correction would probably involve a phony wage advance, but as I have no experience with this kind of issue, I advised Rudy to contact Julie for instructions on how to correct this.

 

I received a call or an email from said board member after this came to light asking me why this was a payroll item and not a contractor item.  She expressed her understanding of Montana contractor laws, which unfortunately were not the same as had been conveyed to the board when there confusion by the board members about this matter when Fred was hired. I clarified the Montana contractor laws for her. I hope that the hiring practice instruction folder, should one exist or if none exists, one is created.

 

2016. d)  There was no resolution at the end of the December board meeting regarding when the books would be transferred to Julie, who would handle the final 2015 payroll and who would handle getting payroll information Julie for the first payroll of 2016.  Rudy mentioned that Julie could do the last payroll, so I assumed this was the case.

 

But shortly before the final payroll I received numerous emails from said board member about what to do, if Fred did not have enough payroll hours to cover the wage advance for the truck repair vendor payment. After giving detailed instructions for various scenarios regarding this, I received another email asking if one could not solve the payroll tax problem by levying payroll taxes for the vendor payment on the payroll advance. I told her no. Shortly thereafter I think, I received an email that Fred’s timesheet had enough hours to cover the advance.  Since at this point I was extremely worried that the wage advance fix was being “winged” by said board member and Rudy and this was a critical payroll, I gave said board member a detailed account of how I would handle the wage advance in case they were in the process of doing the payroll.

 

Then I emailed Julie and explained the entire situation to her for the above reason and the fix I had recommended, as I was not certain my fix was correct  To my surprise she replied that Rudy had contacted her to let her know he would be doing the last payroll and that she had given him instructions on how to correct the erroneous vendor payment in the paycheck.

 

Why was said board member not apprised of this? Had I known that Julie had told Rudy how to correct this problem, I would have told said board member to contact Julie about her questions, if Rudy did not have the time to do so.  I would not have given advice on the “what if” and alternate fix proposal or given instructions on a “fix”, had I known this and certainly not without any information about Julie’s instructions to Rudy. 

 

2016. e) I was not advised that I might be needed to basically approve the paycheck entry information for Fred’s payroll that was supplied to Julie for the first payroll of 2016.  So I was very surprised to see an email from said board member requesting I look over the information.  Here I would like to add that I saw this email by accident.  We had given our employees an extra week of paid vacation between Christmas and New Year, so I was not checking any email as my children and their families were visiting for that period.  The email came in while we were on an outing and I was checking on some information on my phone. Since I could tell it was from said board member I thought I had better check it.

 

That proved to be a good thing.

 

The first email instructed Julie to pay the loader rental as an employee cost, in spite of the fact that I had clearly stated in my prior email ( referenced above) that it was a vendor cost and the only non-payroll item submitted by Fred and why. The payroll needs to be checked to see, if there were any prior equipment rent invoices paid as payroll items in the 2015 “fall” snow season.

 

The next email to Julie with corrected instructions that reference my name, gave the incorrect wage for Fred’s sanding hours.  They were listed as being paid at the $20/hr. rate instead of $25/hr. The payroll needs to be checked if Fred has been underpaid for sanding in any prior 2015 “fall” payrolls.

 

I sent another correction email to both said board member and Julie. Since it was late in the day I gave Julie a call to make sure she had seen the latest correction email in case she was in the process of doing the payroll.   She had seen the emails and I went over things with her.  She asked if she could call me when she was ready to do the payroll to make sure she understood everything right.  She did call to run questions by me,

 

Another issue I noticed when taking a closer look at the timesheets was that there were no sand loading hours, although there were five equipment rental hours for that pay period. In previous snow seasons there had been sand loading hours corresponding with the loader rental hours on the timesheet.  I brought this to said board member’s attention and suggested she contact Fred’s wife Linda, who does the invoicing for Fred, to inquire, if this was an omission or if Fred was handling the loading cost differently this year.

 

Said board member sent me a copy of an email to Linda requesting that Fred break down the hours for sand loading and add them to the timesheet.  This resulted in an email from Linda, which Linda copied me on, that basically stated that Fred would quit, if he had to do this.

 

Fred had already threatened to quit about 2 or 3 months after being hired, because he was not getting paid by the GLA and he had also received no information on when he could expect payment for all of his services.  He only agreed to keep working for the GLA, because Walter assured him that I would take care of this right away and he would be paid in the very near future.  It was not my job, but I handled the situation. Therefore, I requested from said board member that I be allowed to handle this current matter.

 

I explained the reason for the inquiry about the loading hours to Linda.  She replied that Fred had changed his approach and I should talk to him directly so he could explain it.  I inquired about a convenient time to call.  But on the same day I ran into him.  He explained that the sand loading rate previously used had included travel time to bring the loader to the Quonset hut from his house and back to his house. Since this snow season the loader was more often parked at the Quonset hut than at his house, he thought it fairer to the GLA and less tedious, to stick with the original agreement of an hourly rate for loader use and only charge for sand loading when he had to scrape the sand to the front of the Quonset hut, not when he was loading the sander.  He stated, breaking it down and charging for the occasions he had to move the loader from his house and back to load the sand into the sander and only charging for the loading time when the loader was in place, would cost the GLA more.  He was happy with the rental payment alone to cover the time loading the sander.

 

From one of said board member’s emails I believe there is a chance that Julie paid for 5 hours of loading, although it was actually not verified at the time, if the “missing” hours were an omission or due to a billing change.  The email to Linda and my meeting with Fred were of a later date.  This would be an overpayment and needs to be checked.

 

I also noticed just before meeting with Fred, that there were no “travel” hours on the timesheets.  Travel time between NG and SG was always listed and divided between NG and SG equally in prior snow seasons.  I inquired with Fred about this.  He said he was adding the travel time to the SG plowing and/or sanding hours as applicable.  When I explained to him the reason for separating it out, he said, we would do so again. This means that SG plowing and/or sanding hours for the 2015 “fall” snow season and possibly the first payroll 2016 are inflated.

 

 

I regret having to address all the errors made concerning the financials and payroll in a public manner. It is not my intention to embarrass anyone. But I do not feel you, the board, have given me any other option.  Even after I pointed out errors in several financial statements presented at board meetings, no one on the board contacted me to suggest I review the data for those months or to inquire if I were willing to do so on a monthly basis, as I have done from 2014 through June 2015, so it would not have to be done in the public arena.  I had to call then president Daniel Kehoe and convince him that a review of the books was needed in order to get a copy for the July through October 15, 2015 “review” I did. I did not receive a reply from you, the board, regarding my email listing the findings in this “review” other than an auto response of receipt by the ticketing software. I have also not received a reply from the board to any of my other emails to you regarding concerns about financial matters other than an auto reply of receipt from the ticketing software, except an email from Rudy requesting I reconsider my decision not to work with him anymore.  I was not approached for any information regarding Fred’s paycheck details—accounts, pay rates etc. before the first check was issued.  I assumed someone had pulled a timesheet from the last snow season and the corresponding paycheck in QB to extract the pay rate and payroll account information as this would be standard procedure. When this proved to be untrue, I have tried to supply the necessary information regarding payroll by responding to email inquiries regarding this matter, but that has not proven to be effective.

 

My only other option appears to be silence. This, I believe, would imply to the landowners and also to the members of the board, I presume, that everything is fine with the financials presented. I am not willing to do that under the current circumstances.

 

I have copied this email to the Glastonbury Landowner Group, since the new meeting rules prohibited me from even commenting on the errors I found by giving a part of the presented financials a cursory glance at the January board meeting.  It is the landowners’ money and they have a right to know that the financial reports as approved by you, the board, with only board member input, are not accurate.  Since you, the board, are also hiring employees in the name of the association, meaning the landowners, they also have the right to know that things are not going smoothly and remedial action is needed.

 

I would like to urge all of you to rise up to your responsibility as members of the board to keep the books according to the standards mandated by law and insure their accuracy. And as you have chosen to be employers, to also rise up to your responsibility to ensure that the board member or employee assigned to handle the timesheets, invoices and the payroll information passed on to the Accounting Service, has been provided with up to date information regarding pay rates, payroll accounts, what are payroll and what are vendor payments and wage and hour laws. And that the board member or employee in charge of the hiring of new employees or engaging contractors is familiar with Montana hiring laws which includes contractor documentation and new hire reporting requirements.

 

In closing I would like to reiterate that hiring an accounting service will not guarantee correct information in the books and hence on the financial reports, nor correct payment of wages in the payroll or adherence to the requirements of Montana labor and hiring laws.  That responsibility rests with all of you.  An accounting service is a data entry service and will only guarantee that all data provided is entered according to standard accounting practice.  It is neither responsible for making sure you are fulfilling Montana hiring law and contractor law requirements , nor for verifying that the information that is given for data input is correct.

 

Sincerely,

 

Regina Wunsch

SG 72