Rancho Santa Fe Association hires new controller, improves accounting practices
RSF Association Manager Bill Overton announced that the Rancho Santa Fe Association has hired Don May as its new controller/CPA. May, who will replace Steve Comstock, has 30 years of experience as a controller and Chief Financial Officer for managed care-type environments in Sun City, Ariz. His first official day was March 30.
Recently, during a review of the Association’s accounting department, outside consultants found a significant internal reporting error: Both restricted reserves and free reserves for all the entities within the Association appear to have been miscalculated by about $1.6 million. Overton said in their accounting practice overhaul, they are never using the term “free reserves” again — the proper term is “fund balance.”
With the accounting efficiency study, RSF Association President Ann Boon said their goals were to move to a full accrual accounting and separate balance sheets.
“The task became so much bigger when discrepancies were found,” Boon said.
She said there was a lot of concern voiced from the board about the discrepancies, but the staff handled the problem well.
Overton said the error is not uncommon when converting from a cash to an accounting accrual process as full accrual statements give a more accurate picture of what’s going on.
Overton said they determined there was no malfeasance or theft.
“It’s very easy when juggling several spread sheets to make that error — a monthly balance sheet precludes these problems which is why they are converting to the full accrual system,” Overton said.
Treasurer Kim Eggleston said he was happy to see the switch after the problems that accumulated over the years due to a misunderstanding of accounting principles.
The board has also requested a “quick and easy” financial dashboard review that they will view monthly. Eggleston said dashboards created in the past were too confusing and changed every time there was a new treasurer on the board. In the interest of efficiency, Eggleston recommended they keep it a simplistic, generally accepted accounting principles (GAAP)-oriented form that can’t be changed with each treasurer.
Overton said he and May would come up with a possible dashboard form and present it to the finance committee and to the board for their review.
Overton said it was unfortunate but necessary that they had to discuss the topic of the discrepancies at the meeting.
“We want you to know what’s going on and we’re handling it in the best way possible,” Overton said. “We have nowhere to go but up from here. We’re pointing in the right direction, we have stabilized things.”
As the RSF Association board has been diligent in looking into all major services in the organization, they also recently evaluated requests for proposals for their banking services. Four finalists were selected, including their existing provider Union Bank, as well as Wells Fargo Bank, Torrey Pines Bank and Bank of America.
The Association has decided to stay with Union Bank but the banking relationship has changed in a very positive way, Overton said.
Union Bank will offer a significantly superior interest rate of 3.25 percent for the Association’s existing $4.5 million Golf Club loan—75 basis points less than what they pay right now, resulting in a $275,000 savings over the life of the loan. Union Bank also reduced its banking fees and made adjustments internally to better facilitate Association investment and reporting needs.
The board offered kudos to Eggleston for initiating the review of the Association’s banking practices. They said the take-away from the process is that they should look at their major vendors on a regular basis to make sure they are getting the best deal. Currently, they are also evaluating their legal firm services and are down to consideration of two new firms in addition to their existing firm.
“Imagine that, running an HOA like a business,” Philip Wilkinson remarked.