Agenda 04 24 08

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1. Audits
2. Shared Costs

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Agenda 04 24 08

  1. 1. LWV April 04, 2008 Residents Voice 04/24/08 Residents Voice 1
  2. 2. “Following the Money” 4/24/2008 Tonight’s Subjects ! • “Audits” •“Shared Cost” 04/24/08 Residents Voice 2
  3. 3. Purpose of Presentation • Provide Resident/Owners with the knowledge necessary to understand and question the Financial Budget Process. – What do we know from the Annual Audit? – What don’t we know from the Annual Audit? • Explain the “Shared Cost” options? – Everyone share in the cost. – Users only cover the cost. 04/24/08 Residents Voice 3
  4. 4. KPMG Annual Audit C. Grundke 04/24/08 Residents Voice 4
  5. 5. What is it? • It is an “Audit of Financial Statements!” – It is an examination by an independent third party of the financial statements of our Corporations, resulting in the publication of an independent opinion on whether or not those ”financial statements” are relevant, accurate, complete, and fairly presented ! 04/24/08 Residents Voice 5
  6. 6. When is it Done? • An “Engagement Letter” is written in the Fall hiring the auditor and defining scope. • The Audit is then done yearly at the completion of our fiscal year. • The Auditor made a presentation to the Boards on April 18, 2008 for the 2007 Financial Statements. • The Boards passed a resolution accepting the Audited “Financial Statements” at this meeting. 04/24/08 Residents Voice 6
  7. 7. Which Financial Statements? • Those statements Defined in the “Engagement Letter” that is written by the PCM Finance Officer. • The “Engagement Letter” defines the “Scope/Detail” of the Audit. 04/24/08 Residents Voice 7
  8. 8. Purpose of the Audit! • To add credibility to the implied assertion by an organization's management (the Board) that its financial statements fairly represent the organization's position and performance to the Corporate Members (the Resident/Owners). 04/24/08 Residents Voice 8
  9. 9. Objective • The audit is designed to reduce the possibility of a material misstatement. • A misstatement is defined as; false or missing information, whether caused by fraud (including deliberate misstatement) or error. 04/24/08 Residents Voice 9
  10. 10. Levels of Audit • Could be by; – $ Division (Financial, Maintenance, etc.) – $$ Work Center (300, 310, etc.) – $$$ Account Number (Wages, Travel, vehicles etc.) – $$$$ Detailed Audit (Work Order, Invoice, Accounts Receivable, etc.) 04/24/08 Residents Voice 10
  11. 11. $39 m Mutual Horizontal - No Detail Div $10 m $29 m Work $07 m $03 m $15 m $4m $10 m Center Account Work Order 04/24/08 Residents Voice 11
  12. 12. What do we know after the Audit? • The “numbers” (dollars) for the defined level of audit add up to the published “Financial Statements.” • PERIOD!.... 04/24/08 Residents Voice 12
  13. 13. What don’t we know after the Audit? • If the “numbers” (dollars) for the defined level of audit are the optimum costs for the tasks defined. – Does not ensure that we are getting the “most for our money” (i.e.; minimum cost for cutting our grass). – Does not ensure that we have optimum management structure (i.e.; minimum administrative man hours). • If the detail costs are reasonable? – i.e.; Sees Candies, Birthday Lunches, Incentives, etc. 04/24/08 Residents Voice 13
  14. 14. Conclusions • We can go to sleep tonight knowing that our “Financial Statement” numbers add up to the proper “Totals!” • However, we have NO idea if the “Totals” are the minimum cost! 04/24/08 Residents Voice 14
  15. 15. What Can We Do? • Provide a complete ledger to anyone that wants to review it. • Allow residents to look for anomalies (something that the Board cannot answer) in the ledger. • Present justification for additional review of those areas to the Boards. • Have the Boards include a detailed audit of those areas in the “Engagement Letter.” 04/24/08 Residents Voice 15
  16. 16. $39 m Mutual Vertical - Detail Div $10 m $29 m Work $07 m $03 m $15 m $4m $10 m Center $5 m $2m Account $ .06 $ .9 $ 3.5 $ 1.0 $0.5 $0.3 $1.2 Work Order 04/24/08 Residents Voice 16
  17. 17. Shared Cost C. Grundke 04/24/08 Residents Voice 17
  18. 18. LWV Definition of Shared Cost • Most common area costs are allocated evenly between all residents (i.e.; Buses, Golf, Rooms, etc.) • The remaining “minimal” costs are covered by fee charges to the user when the facility is used. (i.e.; Golf $8, Room Rentals, Equestrian Center, etc.) 04/24/08 Residents Voice 18
  19. 19. Proposals Being Considered • Reduce Monthly Assessment for all Resident/Owners. • Increase Fees so that “Facility Users” will pay a greater share of the costs when they use the facility. 04/24/08 Residents Voice 19
  20. 20. How Wise Are We? • Can we measure the impact of increased fees on “manor sales?” • What is the “tipping” point between Usage and Fee. – Low Fee = High Usage – High Fee = Low Usage • When does increasing the fee result in reducing the usage? 04/24/08 Residents Voice 20
  21. 21. Users vs Fee 4500 4000 3500 3000 Users 2500 2000 1500 1000 500 0 $8 $18 $24 $32 $40 $1,150 Fee 04/24/08 Residents Voice 21
  22. 22. Where does this lead to? • Country Club environment with an increasing yearly membership fee. • How do we track costs by facility? – Will golfers costs get mixed in with equestrian costs. – Separate tracking of costs will increase costs (per PCM). • What incentive is there to reduce fees through improved cost controls? 04/24/08 Residents Voice 22
  23. 23. Conclusion • Only two ways to cover the increasing costs: – Increase the Fees – Increase the Usage • Increased Fees will reduce usage. • Increasing the usage can only occur via non-LWV usage. 04/24/08 Residents Voice 23
  24. 24. THE END 04/24/08 Residents Voice 24

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