Rancho Santa Fe Association board to discuss tax form errors

By Joe Tash

Discrepancies in the Rancho Santa Fe Association’s annual federal tax form will be discussed by the Association board in closed session Thursday, March 6, followed by a public statement on the matter by the board.

Each year, the Association, as a tax-exempt organization, must file a Form 990 with the Internal Revenue Service. The form details an organization’s revenue and expenses, including compensation for employees earning over $100,000, along with other information. The Association’s three most recent Form 990s are posted on its web site.

Discussion of the tax form comes against a backdrop of upheaval within the Association. Last month, the Association board voted 5-2 to strip the board presidency from director Ann Boon, citing a loss of confidence in her leadership. In addition, longtime manager Pete Smith went out on indefinite sick leave.

The topic of the tax form discrepancies first came up at a recent board meeting, said Ivan Holler, who was appointed acting manager in Smith’s absence. The issue was discussed by the Association’s Finance Committee, which made a recommendation that will be considered by the Association board.

According to Larry Spitcaufsky, an Association board member who sits on the Finance Committee, two apparent errors were discovered on the form covering the Association’s 2012-2013 fiscal year: one had to do with whether the Form 990 was distributed to the Association board before being filed, and the other regarding whether a compensation survey was conducted to establish the manager’s pay and benefits. The form indicated both things had been done last year, when they actually had not, Spitcaufsky said. (A compensation survey was conducted the year before, he said.)

Newly appointed board president Philip Wilkinson wrote last week in a column in the Rancho Santa Fe Review that, based on opinions by legal counsel and the Association’s outside counsel, “the purported errors in the Form 990 filings appear to be merely clerical in nature; they do not have any effect on the Association’s finances and they do not appear to expose the Association to liability.”

The Finance Committee basically concurred with Wilkinson’s assessment, said Spitcaufsky.

“Based on the opinion letter from the attorney, this is not a thing to be overly alarmed about,” he said.

In the future, Spitscaufsky said, outside auditors preparing the form must be sure to check the proper box, indicating whether the form was distributed to the board, and whether a compensation survey was conducted that year.

But some in the community were troubled by the inaccurate information in the form.

Association member Terry Peay said Boon had asked her fellow board members if they had received the Form 990, and none of them had.

“Based on the public testimony of the board of directors, that information (on the Form 990) is inaccurate,” he said.

Peay said he believes the Association should bring in an independent reviewer — rather than its long-standing legal and financial advisers — to determine which information in the tax filing is incorrect, and why. The review would also look at how the manager’s compensation was set.

Spitcaufsky said the compensation survey affects only the manager’s salary, so it doesn’t need to be conducted every year. The Association just needs to make sure that if a survey is not conducted in a given year, the Form 990 reflects that accurately, he said.

As to the wider issues, Peay contends that Boon was removed from the presidency — she remains on the board — because she asked during a public meeting for information on employee compensation that should be readily available to both the board and Association members.

“The board ought to have complete access to any employee’s contract and be fully informed about any compensation paid to any of (the Association’s) employees. You can’t have good governance if that’s not the case,” Peay said.

The Association collected $5.4 million in membership assessments for 2012-1013, according to last year’s Form 990. Eight employees earned salary and benefits over $100,000, including Smith, whose compensation was $271,181, plus non-taxable benefits of $18,983.

Spitcaufsky denied any lack of transparency by the Association regarding employee compensation.

“As treasurer, anything I’ve ever asked for I’ve received. I’m totally aware what the compensation is,” he said, and believes the other board members are as well. “It’s available. Quite frankly, I don’t understand what that concern is.”