BOARD IN SPLIT VOTE RAISES QUARTERLY ASSESSMENT TO $800, IGNORES CALLS FOR AUDIT

In a split 4 to 3 vote, four members of the Quail Meadow board of directors Monday approved raising the quarterly maintenance assessment to $800.00, an increase of 60% in just one year. Those members ignored calls to conduct an audit of the association's books before increasing the assessment to determine the impact of successive boards' failure to adjust the quarterly assessments for inflation for over two decades.

Taking a stand against increasing the quarterly assessment absent first conducting an audit were board members Valerie Halaby, Linda Ward and Harriet Sacher. None are against the assessment increase per se; each understands that a substantial increase is necessary. Their objection is to adopting a new budget and assessment without first having real visibility into the association's finances. Specifically, without quantifying the deficit caused by failing to inflation-match for nearly two decades and the magnitude of the resulting free-rider problem, the real cost of performing all deferred maintenance and repair, current operating expenses and current reserve requirements, the budget and assessment are all likely to be misstated. The objective is not to stab in the dark to come up with a number but rather to use standard accounting techniques to arrive at as accurate a number as is reasonably possible.

During the meeting, Halaby expressly called for an audit of the association's books as good governance. The request fell on deaf ears as the "Gang of Four" in control of the board, Brenda Mueller, Anthony Chiarello, Sharon Bross and Lucy Connery, simply ignored the request, eschewing all consideration of opposing views, and railroaded the item to a vote. Prior to the meeting, in a letter delivered to board members on May 20th, the editor of this publication demanded that an audit be conducted before raising the quarterly maintenance. The letter also demanded that Anthony Chiarello resign as Treasurer. Neither the board nor any of its members has responded to the letter.

Attempting to justify proceeding without an audit, Realtime Property Management bookkeeper Ellen Cato pointed to the cost of an audit, $5,000 for each year to be audited, and then instructed the meeting participants that the Florida HOA laws do not require our community to conduct an audit. When the editor of this publication demanded that Cato qualify her comments by acknowledging that there are other valid reasons to conduct an audit even if not required by the HOA statute, Realtime's owner, Beth White, refused to allow Cato to answer. Cato also volunteered that, although in her view not required under the HOA statute, the association had engaged an accounting firm, Friedman, Feldmesser & Karpeles, CPA, LLC, to prepare "compilation" financial statements, a revelation that came as a complete surprise to several of the board members who were hearing of the engagement of an outside accountant for the very first time. Whether "the board" ever voted on retaining an outside accountant is unclear but minutes of an association board meeting where that business was discussed and/or voted upon has not been circulated to board members.

Answers to questions such as "How was the Friedman firm selected?" "Were requests for proposals to do the accounting work solicited from a number of firms?" "Was the Friedman firm effectively appointed by Realtime Property Management?" and "What will the compilation financials cost?", are unknown. The Association has been asked to provide a copy of the engagement letter retaining the accounting firm, but the Association has neither acknowledged the request nor provided the document.

The retention of an outside accounting firm to prepare "compilation" financial statements is, in any event, a meaningless exercise as far as digging into the Quail Meadow operational morass, and a waste of money if not required under the HOA statute. Unlike an audit which rigorously tests the information received from management and provides a "reasonable assurance" that the entity's financial statements are free from material misstatement, "compilation" financials rely on management's presentation of the accounting and internal controls and provide no assurances whatsoever. Depending on the details and conditions of the accountants' engagement, compilation financials may not be suitable even for distribution to third-parties such as banks and vendors. It is Realtime's position (as stated by Cato during the meeting) that under the HOA statute even compilation financials are not required; if that is the case, then why spend community funds on them at all? They will do nothing to help resolve any of the serious financial issues facing the community.

Monday's vote to increase the maintenance without first conducting an audit raises many questions, among them, why the Gang of Four is aggressively uninterested in discussing the necessity of an audit? Why they selected Mr. Chiarello to again serve as Treasurer given his abysmal record serving in that capacity, when Linda Ward, with a career in banking and financial planning, was willing to volunteer her professional expertise? Why did the Gang of Four aggressively recruit Ward to assist them in doing the Treasurer's work after appointing Chiarello to the position? Why are they ignoring the "free-rider" problem occasioned by the failure to adjust the quarterly maintenance assessment for inflation for over two decades? The question for the community is whether, after decades of mismanagement, and a change in the property management company after over a decade of service -- itself a legitimate reason to conduct an audit -- it is good governance, good accounting practice and in the best interests of the community's homeowners to invest in an audit, and why the Gang of Four doesn't think so.

About the only mention of why the budget and assessment increase had to be pushed through immediately is the Association's apparent current cash flow crunch, an acute shortfall caused it seems not by the quarterly assessment being too low (of course, it is far too low) but by carrying a $19,000 assessments receivable, six weeks into the fiscal quarter. The surprise disclosure by Treasurer Anthony Chiarello shocked meeting attendees. Did Chiarello explain what caused such an enormous receivable or why no action has been taken to collect the delinquent payments? Is it is a organic, pop-up"rent strike" in response to the notice to homeowners of coming maintenance increases? Chiarello offered no explanation. Nor did Chiarello explain why there has been no disclosure of a $19,000 dues receivable that jeopardizes the community's solvency. Chiarello did "assure" the participants that he thought the delinquent homeowners would pay. On what Chiarello based this "assurance," is unknown.

The lesson from this revelation -- apparently an unplanned disclosure -- is is that lack of transparency is alive and well among the Quail Meadow's board's executive directors. A $19,000 revenue shortfall from withheld assessment payments is a real cashflow problem for the association. Perhaps the ballooning dues receivable and the cash flow crisis it has caused is why the Gang of Four is characterizing the assessment increase as urgent. If true, it is yet another attempt to conceal astonishing incompetence. If the Treasurer can't manage the most basic of his financial responsibilities, i.e., to collect the quarterly maintenance, can the community continue to place its trust in this individual to protect our investments?

Quail Meadow consists of real estate currently valued at at least $35 million. For many homeowners, it is their single largest investment. Can homeowners really afford to select the association's board as though it were a grade school popularity contest? Can we as homeowners afford to assume that our board officers (president, treasurer, etc.) are qualified, with the good judgment, knowledge and character necessary properly to manage our community? Can we simply assume that board members understand their fiduciary duties to the community and will always put the community's best interests ahead of their own petty interests, without homeowner oversight?

For those who believe that asking these questions is disrupting and dividing the community, it is the Underground's belief that it is the failure to have asked these questions for so many years that is the very source of the toxic environment and turmoil. It is the impulse of some to sweep under the rug decades of association mismanagement. This misguided behavior will, with absolute certainty, foment division as the forces that seek transparency and accountability are met with resistance from those with other agendas.

Do not be swayed by rhetoric that does not hold up under scrutiny. Tranquility is a noble pursuit but the road there is not passive acquiescence in the foolishness, incompetence, and worse that has defined this association's legacy. Eliminating the root cause of the turmoil is the best way forward. Recently, it has become fashionable to never admit one's mistakes and to double-down on one's lies. Do not tolerate this behavior among the Association's leadership. Reject it outright. Demand accountability and make it known that Quail Meadow owners deserve and insist on better.