The general fiscal statement I presented at the meeting of September 24, 2007. This was when I was just coming to grips with the state of the “books” (a QuickBooks file) and the use of QuickBooks. It was an attempt to give a general sense, in plain English, of how much we spend per year, how much we take in, and how much we would need to increase income in order to save for some target amount by some distant date.
First cut at a formal summary statement of activities for the first quarter of our fiscal year 2007-2008 (July, August, September 2007). It looks like we broke even, pretty much. However, that’s very misleading; read on…
Okay, here’s the problem. When you write an invoice, under the accrual accounting method, the amount of the invoice is recorded as income and counts as an asset (accounts receivable), even though you haven’t collected any money yet. So when you read in the statement linked from the preceding paragraph that we had dues revenue of $5,515.00, that means we billed for that amount. But we didn’t necessarily collect it, so we didn’t actually have that much income.
In order to reflect the cold hard reality, therefore, I went back and made an accounting adjustment, balancing all our uncollected dues in a separate account and subtracting from our income. Here’s the revised statement of activities for the first quarter. This is too pessimistic the other way, because I’m counting all the accumulated dues of the past year against this one quarter. But I’d rather do that than give a misleading impression of more income than we’re really taking in.
Detailed statement of expenditures. This is probably the document most likely to be of interest to, as well as being readily legible by, the layman, because it isn’t in “bookkeepingese” — it’s just a list of checks paid out. I’ll try to regenerate this from time to time so that it stays pretty much up to date. Right now it runs from the beginning of the fiscal year (July 1, 2007) to November 30, 2007. Note that I didn’t come on board until mid-September, so expenditures earlier than that didn’t happen on my watch, as they say.
Statement of current financial position as of October 10, 2007. We had $87000 in the bank, ready to spend approximately $75000 on repaving the road. However, you should probably ignore this, because shortly afterwards I did the revision noted in the previous paragraph, and generated a new statement…
Here is the updated statement of current financial position, as of October 16, 2007. The differences from the previous statement are (1) there is a little more in the bank, because a few more dues checks have come in, and (2) the accounts receivable assets are now reduced by the amount I created to show past dues that have gone unpaid.
Documents for the meeting of November 13, 2007.
Documents for the meeting of December 6, 2007.
Current financial position. Our bank account was down to $18566, with a further $10914 of bills in the till, meaning that after the bills are paid our bank account will be down to $7652 - well below the $10000 cushion I wanted to maintain when we started budgeting for the road paving. And what’s more, there will be more road expenditures, depleting our account still further. This is because of the heavy (to us) cost overruns connected with the road paving… Read on…
Detail of past checks and current bills connected with the road paving. Of these, only the $67880 to Pavement Coatings was budgeted for (and even that is slated to rise - see next document). The $10851 to J&H Engineering is a considerable overrun from the $7000 that the Board approved, and the other things are all surprises and not approved or budgeted for, except for the signage (for which we had to approve money, mostly because of our opening the gate and the subsequent kerfuffle over the one-way designation). Thus, in effect, we have already spend $79688 on the road - and there is more to come! Keep reading…
Summary of total known cost overruns connected with the paving of the road. In addition to the $79688 detailed in the previous document, we have approved expenditure for signage, plus the J&H Engineering bill is slated to rise by an unspecified amount (here, $1000 is used a fill-in guess), plus the REAS paving bill has risen by $730. Thus, our total expenditure will be about $83000 - compare that to the $77000 which was claimed as the total cost back in September when we agreed to go this route. (And at that time, we had just $84000 in the bank.) So we’re spending $6000 more on the road paving than we approved. This is why the bank account is essentially about to be depleted to just a couple thousand dollars, instead of the $10000 cushion I had asked that we aim for.
Rough annual budget - how much money the GCSC takes in and how it spends it, each year. This information (which was never presented at the meeting, as there wasn’t time) is not much different from what I presented at the September 24th meeting. The idea was simply to suggest, once again, that we only have about $2500 wiggle room between what we take in and what we disburse. This is not enough for us to pay unexpected expenses, and very likely not enough to pay taxes if we have to pay them (taxes are not taken into account anywhere in the document). Furthermore, it is certainly not enough to allow us to save money reliably, socking it away with a view to being able to pave the road again in the future. As you can probably guess, my own personal view is that we should raise the dues (by about 25%, if you must know; for example, I’d like those of us paying $25 a month to be paying $30 a month).
Summary of overspending on the road paving. The situation, as this document shows, is simple. The Board of Directors of the GCSC authorized a total of $75,855 in engineering and paving work to be contracted for. The Road Committee (in the person of board member Jerome Landfield) has so far (as of 12/21/07) submitted $87,941 in bills! This larger amount was never authorized; in fact, we didn’t even have that much money. We couldn’t possibly pay it. So: now what?
Corresponding to the above: Financial position for the meeting of December 22, 2007. The total of accounts payable (bills currently in the till) exceeds our bank account.
Position at the end of the second quarter of our fiscal year, December 31, 2007. As already mentioned, the total of accounts payable (bills currently in the till) exceeds our bank account: we had $9,000 in the bank, but we had bills against us for nearly $10,000. The reason for this, as already explained, is the cost overruns associated with the paving of the road. The Board authorized nearly $76,000 for this purpose; this was money we had. But the actual bills came in at nearly $88,000. The chief discrepancy was that we authorized $7000 for engineering, but the bills from J&H Engineering came in at a total of more than $18,000. The excess is apparently due to extra work done on Arundale Road that was authorized by Road Committee’s representative personally without checking with, or communicating to, the Board as a whole. In accordance with the decision taken at the meeting of December 22, 2007, we have paid about $8500 of the J&H Engineering bill, but how we are to furnish the remaining $9500 remains an open question that the Board must face.
Position on February 15, 2008, in preparation for the meeting the following week. The position is just as in the previous paragraph: we have about $9000 in the bank, but the cost overruns from the road paving (which have actually increased, because another bill has arrived) mean that there is the J&H Engineering bill of $9500 standing against us, more than we have in the world.
Position on April 2, 2008. At the GCSC Board meeting of February 18, 2008, I was instructed to take any necessary measures to pay the remaining balance to J&H Engineering. Since we didn’t have the money, it had to be borrowed. As there was a credit crunch, our bank refused to lend us the money; we might have been able to borrow the money from the community bank, but this would have been costly ($2000 to borrow $6000). To avoid this cost, I borrowed against the future by offering homeowners a one-time opportunity to submit an advance against their monthly fees with a promise of exemption from any increase in fees while the advance lasts. The response from the community created cash flow ($12,850 in advances were received) that permitted us to pay off J&H, and at the time of the position shown in the attached PDF, we were free and clear of all accounts payable and liabilities. Do not, however, be misled by the large-looking bank balance shown in this statement: it will quickly be depleted, because the advances mean that our monthly (quarterly) income will be correspondingly reduced. In other words, this is merely borrowed money (borrowed against the future). In fact, we now have three reasons why fees need to be raised: (1) Our annual income is barely sufficient to meet our annual bills, and those bills (mostly the garbage collection and insurance) are likely to rise in the near future; (2) we need to be saving for future road repairs; (3) we need to be offsetting the money borrowed against the future, esp. in case we need to pay some of it back. (What happens, for example, if a homeowner who submitted an advance moves away before the advance expires? We will need cash on hand to repay the balance.) Therefore I continue to urge that we should raise fees $5 a month. When you consider that monthly fees on a house will be only $30, and that this includes garbage collection, this will remain a far better deal than could be obtained without the GCSC.
Position on June 19, 2008. This is a clearer picture of the situation than the previous printout, because the previous printout was made right after trimonthly bills had gone out, which inflated the Accounts Receivable. On this printout, which is at the end of a trimester when most trimonthly bills have been paid, Accounts Receivable is much more deeply negative and you can see that our assets, despite the large bank balance, are very small. This is because the money in the bank is entirely borrowed against the future; it simply represents future bills that certain households will not have to pay because they paid it in advance. One nice thing about this printout, though, is that it takes place after reconciliation of a number of delinquent properties; only one property is now in significant long-term delinquency.
Incidentally, I did some more math on the question of raising the fees, and discovered: (1) If there had been a cost-of-living increase, in accordance with Government figures, in the size of the fees since 1987, the monthly fees for a house would now be about $41 instead of $25; and (2) if we were to raise the monthly fees starting at the first of the year to something like $35 for a house (and $25 for a duplex), then I believe that with careful management, and assuming a 4% rate of annual increase in our costs (and, of course, barring unforeseen expenses), we might save about $80,000 for road paving by the year 2020.
Position at the time of the board meeting of July 14, 2008. Rather than trying to explain a QuickBooks printout, I will just describe it in words as I described it at the meeting:
We physically have about $12,320 in the bank.
Of that, $10,900 is what remains of the advances (see the discussion of April 2, above) so it isn’t really available. That leaves $1420.
We owe Ralph $120. That leaves $1300.
We spend about $1000 a month (garbage, water, Fidel). So if I pay all the normal bills that will come due over the next month, that leaves $300.
But this is tax time, and our accountant is even now auditing the books and closing them, and then will do our taxes. That will cost us more than $300, leaving zero.
The fiscal year having just ended, I have also put together an unofficial total of our expenditures for the past fiscal year. Bear in mind that this is unofficial: it isn’t direct QuickBooks output, and it precedes the completion of our accountant’s audit. It is just a total of actual checks in various categories. But it is useful in part as suggesting what a reasonable budget for the future would consist of. It shows our regular annual expenditures, which are very much in line with my projections of ten months ago (total: about $17,500); then it shows some one-time or otherwise extraordinary expenditures such as the road paving.
The trouble, of course, as I have said from the beginning, is that this is untenable. Our annual influx of monthly fees is slightly higher than what we spend in a typical year, but not sufficiently higher to guard against a surprise large expenditure; for example, in the last fiscal year, a single brush clearing wiped out that difference, and then of course the overages in the road-related expenditures destroyed all our savings as well (which is why even now we have zero genuine cash savings). We need to increase our influx of fees, partly to guard against increases in our regular expenses (e.g. the cost of trash collection and insurance will probably rise), partly to provide a cushion so as to remain solvent, and especially so that we have a surplus each year that we can save towards the next road paving; otherwise, the corporation cannot fulfill its mandate of taking care of the road. That is why I proposed the fee increase described above.
Official accounts for Fiscal Year July 2007 to June 2008: the balance sheet and profit and loss report as submitted by our accountant to the state and federal tax folks. Observe that the road improvements count as a fixed asset, on which annual depreciation will continue to be taken in subsequent years.