Minutes - Finance Committee

Draft Minutes (Rev A  2/28/19)

Finance Committee Special Meeting Tuesday, February 27, 2019

9:30 AM Conference Room

 

Distributions: Draft Agenda, Proposed Contract Materials, Draft Procurement Recommendation

 

Attendance:  Committee members Fred Miller, David Sorkin, Dan Drobnis, Sal Monaco (Chair); Board members Joseph Guiterrez (Treasurer/Liaison), Todd Handy, David McDonald (President); HOAMCO staff Julie Navarro (General Manager),

 Public Comment/Announcements. None

Additions to/Adoption of Agenda—Discussion of CD Reinvestment.

 Discussion of CD Reinvestment.

Julie distributed copies of the Financial Balance Sheet dated 2/26/19 to allow a quick check of Reserve cash available to fund about $808K of now-identified Replacement Reserve projects for 2019.  Analysis:

GL 1050      Reserve Money Mkt        $   5,516.98

GL 1051      Reserve ICS                     $120,955.12

GL 1055      Reserve CD 2/28/19        $228,841.30

GL 1095      Due from Op to Reserve  $291,478.60

                    Budgeted 2019 xfr in       $156,184.00

2019 Reserve Cash        $802,976.00

         

This appears to be very tight, but sufficient at this point in the year.

The combination of Operating checking, ICS, and anticipated additional cash from assessments appears to allow the investment of the $150K of Operating Reserve Contingency in a 12-month CD for $150K.  The Treasurer requested advice: Motion 1 (below).

 

Discussion of Pool Rehab Project proposed contracts.

The Committee discussed the proposed contracts for four areas of the Pool Rehabilitation:  Bathhouse, Water handling, Pool Deck, and Electrical.  Shortcomings were identified:

  • Failure to follow Board Procurement Policy, particularly regarding file materials and Board Attorney opinion.
  • Concerns regarding fulfillment of Board Member fiduciary responsibilities regarding fixed prices, construction risks, liability insurance, and surety bonds, warranties, and plausible schedule.
    • Motion 2 (below) was adopted   
    •                                                                                                                                                                                        Next Meetings

Finance Committee Regular Meeting Tuesday, Mar 12, 2018, at 9:30 AM.

Adjourn—11:25 AM

 

Motion 1:  While the investment of the Association’s funds is the Treasurer’s responsibility, the Finance Committee feels comfortable with an investment of the $150K of Operating Reserve in a 12-month CD.  (4-0-0)

 

Motion 2:  The following advice to the Board is adopted. (4-0-0)

 

Finance Committee Review of Proposed Pool Rehabilitation Contracts—2/27/19

Summary:  The Finance Committee cannot recommend proceeding with the subject procurements with the existing information at this time.  A more realistic schedule may provide Pool Users with a better facility, and ECIA members with better financial management.

 

Detailed Analysis:  The Finance Committee received the following documents at 12:08 PM on Feb. 25, 2019 (and additional documents furnished on 2/27) and was asked to review them for a Board Meeting on the evening of Feb. 27:

Contract Requirements

Projects Cover Page

Casa de Suenos bid for Poolhouse Remodel and ancillary construction

Water Management & Associates water-related construction

Poolside work on Deck and Skimmer replacement

Electrical Services

To the extent that the limited time has allowed, the Finance Committee has reviewed the above documents in accordance with the ECIA’s Procurement Policy of 4/18/13, and in accordance with its Charter requirement to advise the Board members on fulfilling their Fiduciary Responsibilities and finds that:

The following provisions of the Procurement Policy have not been met:

It appears that the proposed total pool procurement now exceeds total Replacement Reserve funds established for the Pool.  This is new information as of 2/27.

The requirements of a formal Procurement File have not been met, or if so have not been presented to the Finance Committee.

A probable cost for the entire Pool Rehabilitation Project has not been presented to the Finance Committee, and every informal estimate has been alarmingly larger than the previous one.

To our knowledge, the proposed contracts have not been reviewed by the Board Attorney.

The following issues relate to the Board’s Fiduciary Responsibilities:

The Finance Committee has not seen a credible overall plan or schedule for the entire Pool Rehabilitation project that would provide confidence that the project is under control and tightly managed.

The requirement for liability insurance naming the Association as additional insured does not appear to be part of the individual contracts.  Since it appears that the Association is acting as its own General Contractor, at least $10M from subcontractors in liability appears prudent in light of past unfortunate experience at the pool.

The Casa de Suenos contract in particular is not for a Firm Fixed Price, and the approximate prices appear extremely high when compared to residential construction of similar size and scope, and when compared to the architect’s estimate.

The size of the Pool Rehabilitation Project, particularly if it goes out of control, has the potential to wipe out most, if not all of the Association’s Replacement and Cash reserves.  This calls for the utmost prudence and confidence before proceeding.

Recommendations:

  1. The Board forego the notion that that the Pool must open on Memorial Day, or indeed at any time during 2019, in favor of having the job done properly, with minimum financial or physical risk.  This will assist the good people working on the Pool Rehabilitation Project to provide thoughtful oversight and management.
  2. The Board members understand the implications of a large project that could damage the overall finances of the Association.
  3. The Board properly weigh the disappointment of Pool users at missing some or all of the 2019 season, with the unhappiness of all Association members at large assessment increases necessary to recover from a poorly controlled major project.
  4. Our former pool facility provided enjoyment and value to the community for 40 years.  This work needs to last another 40 years.  Our joint legacy should not be the financial and physical risk of a hastily implemented, shoddy, overpriced job.