The Rancho Santa Fe Association board provided an update in response to the “serious financial and managerial concerns” alleged by the Past Presidents Council in August. At the Sept. 1 meeting, RSF Association board treasurer Janet Danola said she has been “ticking off all of the financial issues raised in the letter one at a time” as her schedule permits.
The Past Presidents Council (PPC) was formed five months ago and includes 10 past Association presidents and four past Covenant Design Review Committee/Art Jury presidents. They hired a consulting group made up of people who collectively represent over 60 years of service to the Association (past managers Walt Ekard and Pete Smith, and former covenant administrators Keith Behner and Ivan Holler) to examine Association actions and make recommendations.
At the meeting, Danola answered the PPC’s concerns, including administrative department operating costs and authorized signers on bank accounts.
In its letter, the PPC had questioned why the Association’s administrative operating expenses have increased year over year, from $1.8 million in 2015 to $2.1 million in 2016 — which represents a $349,000 increase.
Danola explained there was an increase in payroll, an increase in legal and litigation expenses and an increase in public relations, which were offset by a decrease in the CHP contract and a decrease in consulting services.
Administrative payroll expense was $1.2 million in 2016, up from $900,000 in 2015.
“Of the $327,000 increase expense during 2016, all but $7,000 was included in the 2016 budget for overall administrative payroll,” Danola said. “The increase in expense in 2016 over 2015 was due to three things: The hiring of two administrative managers which were included in the budget; number two, severance payment for two former employees not included in the budget; and number three, higher health care costs. Those three increases in cost were offset by lower staffing levels. “
Danola said the legal and litigation expenses, which went from $162,000 in 2015 to $290,000 in 2016, were equally divided between administrative land use issues, and potential litigation and settlements.
Danola said the board intends to make every effort to control the spending on the administrative land use component, but the potential litigation piece is difficult to control and difficult to estimate accurately for budgeting purposes.
The budget for legal and litigation for 2017 is $275,000.
The PPC also asked why the board of directors’ expense was $23,000 this year, up from $12,000 in 2015. Danola said the increase was due entirely to printing and mailing of the governing documents.
The PPC’s letter asked the board to address why Association checks were being signed by someone without the authority of the board.
Danola said in April 2016, then-treasurer Kim Eggleston signed the bank-issued authorization form that added Association Controller Matthew Ditonto as the authorized signer of the Union Bank operating account. Ditonto began signing checks in April 2016.
In July 2016, the new board passed a resolution that gives signing authority to Ditonto, Danola said. In addition, Director of Accounting, Technology and Compliance Don May visually examined all checks below $1,000 from the operating account from February through July.
“Nothing appeared out of the ordinary,” Danola said. “Over 1,000 checks were visually inspected.”
A second issue regarding checks raised by the PPC was that checks were being signed by a computer-generated signature when the signer was no longer employed by the Association or present in the office for a five-month period.
The letter stated that as recently as Aug. 6 checks were issued under a signature of a former employee.
“Authorized signers as of today are either employees of the Association or board members,” Danola said.
RSF resident Marie Addario was the only member of the PPC in attendance at the meeting and expressed her gratitude for the board’s attention to the letter’s concerns.
“As a representative of the Past Presidents Council, I want to thank you and the board for dealing with our questions,” Addario said. “We appreciate the time spent, and we really appreciate this cooperation.”