The Ocean Pines Board of Directors has issued a follow-up to questions that were presented to the Board and Membership at the time of the April 19 town hall meeting in the Assateague Room of the Ocean Pines Community Center.
Q1: Many restaurants in the area perform daily inventory to compare product consumed with sales receipts to identify overages immediately, and address with personnel. Are you going to employ an in-house or contracted inventory auditor? Why are you only doing the Beach Club and Yacht, what about the other areas of Food and Beverage in the Association, like Terns Grille and Pool food?
Answer: Addressed during town hall meeting
Q2: In December of 2016, the OPA financials showed AR – Other at $293,702 with $124,623 coming from Golf per the EZ Links AR Report. A year later, in December 2017, OPA Financials showed AR – Other at $250,213. How much of that number is Golf? Also, what departments make up the other roughly 60% of our accounts receivable?
Answer: The current March 2018 golf membership/hotels account balance per the general ledger is $75,338. There are various other receivable accounts in the March ending balance including, but not limited to casino proceeds, Mediacom fees, Worcester road revenues and amounts due from Seacrets.
Q3: At the March 29 board meeting Director Supik stated in her presentation on the deep dive audit that all recommendations for petty cash and cash receipts have been implemented. Were they implemented fully before or after cash issue that occurred in Feb 2018 with the Tern’s Grill money bags?
Answer: The deep dive audit results and actions by management are fully detailed in the report on the OPA website. As indicated numerous times, our auditors, as part of their audit this year, will be reviewing all their deep dive recommendations to ensure they are in practice and being followed. In addition, our forensic auditors will be addressing internal controls. As to any issue with a drop bag, there was actually more money than was previously reported and it appears the issue was a miscount. As part of the enhanced procedures, the plan is also to reconcile records on a daily basis in order to prevent the issue from happening again. Further, the outsourcing to Matt Ortt of both the YC and Beach Club will go a long way to eliminating the operational issues promulgated in these areas in particular over the past several years.
Q4: Have you received any written communication from either the Worcester County Investigative Bureau or our County Commissioners on the progress of the criminal investigation regarding the 25000+ missing from the Administration Building and, if so, what did they tell you?
Answer: Yes, the Board reached out to Mr. Bertino to assist with trying to get information on the investigation. He responded, stating that the county was now waiting on the results of the OPA Forensic Audit to complete their investigation. Given this response, it is obvious based on information provided to the WCBI that they have not been able to come to a conclusion. We will continue to fully cooperate and provide them any additional information they request along with pertinent results from the Forensic Audit.
Q5: Regarding the forensic audit, has the planning meeting with Gross Mendelsohn & Associates been completed? Who specifically will GMA be reporting to? What interim reporting will be required? What are your plans to share this information with the homeowners?
Answer: The initial meeting took place on Friday, April 20th. This topic will be discussed and an update will be provided at Board’s April 28th meeting.
Q6: We had a contract committee made up of legal and contract individuals within our community that reviewed our OPA contracts. What are the Board’s plans of bringing this group as part of the process of purchasing in OPA (such as Matt Ort, the forensic audit, country club design firm). Would the board consider making the contract committee an official board sanctioned committee with regular meetings and updates and member appointment by the board?
Answer: The Contract Review Team was a small group (never more than three members) established by former OPA GM Tom Olson (and continued under GM Bob Thompson) to help him with drafting/negotiating contracts prior to them being submitted to the Board of Directors for consideration. The team was not established or appointed by the Board, nor did they report to the Board. The key to this team working effectively was the understanding that the role was not to set policy or to argue the merits of an agreement, but simply to provide advice and negotiation strategy to the GM. In all the years the team existed there was never a formal meeting. The members communicated primarily by email, marking up and commenting on contracts. It is unknown why the team was not used by AGM Brett Hill in particular given the obvious serious and ultimately expensive issue(s) that have arisen over contract provisions. Currently, we are using legal counsel and working on establishing some standard contract agreement terms and conditions. It will be up to the current GM to determine if he wants to reconstitute a Contract Review Team.
Q7: We know the Technology Working Group is another unofficial committee like the contract review groups. Are there any other unofficial committees like this? Should all these unofficial committee be sanctioned by the board to make sure the MD HOA Act is being followed and is there work being properly reported back to the BOD?
Answer: As of now the only working group is the Technology Working Group. Working groups, such as the Reserve Study Group, the Ten-Year Task Force, the Community Center Task Force are short-term entities created to focus on one specific area, problem and/or project and then disappear. We will remind all advisory committees and work groups of their requirement to conduct meetings pursuant to the requirements noted in the Maryland HOA Act
Q8: The most recent monthly financial statements indicate AR – Assessments reflecting FY19 collections as well, but last months had AR – Assessments at $902,753. Per the Maryland Judiciary, we only have $189,638 in open personal judgments across 67 homeowners. How many homeowners make up the remaining ~$700k that were on our books last month? How many homeowners are on payment plans and what percentage of our total AR does that makeup?
Answer: In addition to personal judgments, OPA’s assessments receivable consists of delinquent accounts that are still open and at various stages with attorneys (wage garnishments, rid of summons, reopening cases, formal settlement agreements, etc.). There were 346 members who entered into payment plans in 2018.
Q9: At the May 27, 2017 board meeting, the board passed a motion approving the creation and submission of a RFP for fiber connectivity within the community. Late in the summer, Director Parks notified the board that the RFP was going to be postponed until the TWG could meet with the new GM. Now, 11 months after that board approval, why has this RFP not been released and are facing a virtually automatic renewal of our contract with Mediacom?
Answer: The RFP was never finalized nor was it submitted to the street for consideration. Neither the RFP, or the RFI that was sent out and responded to, had anything to do with Mediacom. OPA had a problem with connectivity between their operational facilities. The network that connected the systems at these locations was unreliable, problematic and often non-operational to the point of affecting the ability to run a business at these facilities. The RFI was to solicit input to design/build reliable connectivity between these anchor facilities so the business operations could be run. Before the new GM arrived, the IT folks on staff were able to get the network that connected the facilities to a stable level of reliability allowing operations to run uninterrupted as required.
Q10: At the July 28, 2017 board meeting, the board was presented a design/build proposal from Willow Construction that was based on the then existing Beach Club construction contact for $536,000 for the 2nd floor of the Country Club. Now, 9 months later, after an approved $40,000 expenditure on new drawings and a new bid, the board is looking at an expense of almost $1,000,000 for the same project, and facing another summer with an unusable facility. What is the board’s plan to get this project done now on the original budget?
Answer: Projects of this size require three bids per OPA operating procedures. That was not provided nor was a full contract, with inclusions and exclusions. Experienced construction contractors will confirm that pricing based solely on SF prices when the requirements and needs are not clearly defined is a recipe for disaster. This is exactly the methodology that was employed to complete the YC pool by sole sourcing contracts. While it may seem attractive, multiple-bid is one of the checks and balances that protect the association and are part of best practices. As you may be aware, the total project cost in the 2016-2017 budget was $80,000 (upgrades and engineering) and OPA spent $249,594.45 not inclusive of $14,090.66 in unbudgeted equipment replacement in Terns Grille. Then the sprinkler system debacle last year which added expense and delayed the project and coupled with the Board unrest delayed the project significantly. The 2017-18 budget included project was $417,000. As of 10/31/17 an additional $109,735.73 had been spent inclusive of the sprinkler problems. Therefore, the budget total (2 years) of $497,000 had already expended nearly $360,000. At that point, we had seen enough to know that we needed to look at the phasing of this project and step back, reassess use going forward and address structural column locations, the multiple interior roof lines, multi-purposing the building to expand use, providing for golf, reassess splitting the administrative staff between buildings and look at the totality of the building rather than proceeding without an overall plan. After all, these major changes are designed for at least twenty years. The layout was adjusted to make more practical wider association use of the facility – beyond golf – to fix basic building design flaws and to incorporate two future phases of the upgrade and renovation in the design. The building is now designed to accommodate an elevator to comply with ADA requirements and is designed to incorporate changes to the front of the building regardless if the county approves a grading change or not as part of the Phase II portion. The third phase will be to complete a “warming kitchen” to support events. Phase II and Phase III may be combined and or incorporated into Phase I. Multiple pricing, in particular on large projects without immediate deadlines, is important as a check and balance in the association. We will be rebidding the project in the near future.
Q11: At the March 29, 2018 board meeting, Director Supik presented a financial “Cost per Household” for the Association. Below all of the operational costs, which totaled $792 per household, Director Supik lists Capital and Replacement Reserve costs. Cost is defined as “an amount that has to be paid or spent to buy or obtain something.” Based on the Feb 2018 financial statements, at total of $113 per household has been paid into items for new capital and replacements, making a total COST per household for the current fiscal year of $905, with $16 per household as surplus from the collected assessment. With these figures, how does the board justify raising the assessment by $30 per household for next year, when in reality, there is an extra $16 from every household for this year on this year alone? If you take the same per household equation back two fiscal years, there is an additional $135 collected in assessments versus expenditures, leaving OPA with a cash surplus of over One Million Dollars for the last 36 months. Along the same lines, less than 10% of bulkhead assessment was spent in bulkhead expenditures this year, with a balance of over $2.5 Million in bulkhead reserves. How does the board justify the $450 bulkhead assessment for the upcoming fiscal year with no bulkhead plan, and such a large balance?
Answer: In the opinion of the majority of the Board, the projected and carryover operational losses justify the increase in assessments. Reserves increases are separate and apart from the operational financial performance. Review the latest cash position (March 2018) of the Association. Reserves are up but look at operational cash position which has dropped from $2.573 million to $1.090. That is operational day to day. We believe everyone would agree that May, June, July, and August are the profitable months for OPA and where we have the highest income and expenses. Look at the following:
YTD Operating Fund Variance August 2016 +$ 18,422 (Note previous 3 yr. avg. + $76,209)
YTD Operating Fund Variance August 2017 -$745,911
In those first 4 months of the current budget year, each owner lost $88.25 and the Association lost $186,477 per month in what is normally our most productive part of the year. With a projected budget loss of $1,500,000 this year and a carryover operational deficit of $363,640, it is obvious that unless the association were to rob the Reserves, three things had to happen: first, we needed to budget realistically – unlike the 17-18 budget – which we did; second, we needed to make cuts in operations to include addressing benefits, which we did; and third, we needed to address ongoing operational expenses and address F&B, which we did. Finally, we are proceeding with a bulkhead replacement plan. Work was suspended last year but suspending and delaying work does not make it go away. We have projects underway and continuing and will be bidding more work to start this Fall. All of this was presented in detail during the Board budget meetings. Contact Public Works if you would like more detail.
Q12: During regular board meetings, public comments/questions are abundant. Yet these comments are seemingly falling on deaf ears since the Board not only does not answer them during the meeting but does not provide a response in any manner after the meeting. What protocol can be put in place so that they will to be answered within 7 days and available for the public to see?
Answer: Meetings are conducted using Roberts Rules of Order. Comments and opinions are the majority of the input during the Public Comments portion of the meeting. We endeavor to answer actual questions and have a long-established protocol of having members send an email to firstname.lastname@example.org which will be responded to by various members of the Board.
Q13: According to MD Homeowners Act §11B-111 (4), “…a meeting…MAY be held in closed session…” The word “may” indicates a closed session is an option, not a requirement. In light of the current environment of mistrust in the Board, it would be prudent to end the closed session meetings and have all discussions in the open. What is the Board’s response to this recommendation?
Answer: Discussion of contracts and personnel as well other subjects that meet the definition for a closed-session meeting as noted in the Maryland Homeowners Act will continue to be held in closed session.
Q14: The confirmed theft of money from the safe in the administration building is indicative of a much larger problem. We all know that criminals are rarely caught the first time they commit a crime, so the confessed thief likely stole from the safe on multiple occasions over a period of time. Additionally, individuals who commit theft usually do not do so from just one place. I would surmise, based on my experiences, this individual also committed theft/fraud in other areas that they had access to. Employee theft and fraud is a crime of opportunity. The employee of the yacht club obviously identified an opportunity to commit theft from the OPA a took advantage of it. If fraud, theft, and corruption has occurred in one area of Ocean Pines, it can occur in other areas of Ocean Pines’ businesses. What is being done to address this?
Answer: The additional procedures for the deep dive audit requested by the BOD in the spring of 2017 and completed in September of that year reviewed 31 significant transactional areas of OP with recommendations for management to improve the safeguarding of OP’s assets in each area. To date, only one of those areas, asset ID tags, is still under a cost-benefit evaluation. All other recommendations either have been implemented or are in the process of being implemented. The recommended procedures for the yacht club will fall under the purview of MOC since they will be managing the yacht club and cash transactions associated with it. Included in this year’s financial statement audit which begins in May, the auditor will review management’s implementation of the recommended procedures and provide a report on their findings. In addition, the general manager is reviewing operations and making improvements as necessary.
Q15: Where are the rewards points from our credit cards and other corporate accounts and why are they not listed in revenues portion of the general administration budget, like the casino fund interest etc.? I have an American express and I know I can go into mine and print out a summary of where and what my points were used for?
Answer: These American Express points have primarily been utilized to reduce vendor billings (i.e. Amazon) for various spending categories such as office supplies.
Q16: In the February financial statements, I already addressed the fact that alcohol was at over $62,000. Now, in the March financial statements, our alcohol inventory is even higher, over $63,000. The board has still not answered my questions from the last board meeting. Is there any explanation as why we purchased even more alcohol?
Answer: As Matt Ortt discussed during the town hall meeting, the F&B operation and the purchasing plan implementation last summer were a disaster. Poorly managed purchases and a lack of understanding the operational requirement contributed to the issue with food and alcohol inventory levels. The MOC will bring significant changes to that inventory number as we proceed to correct the situation in F&B.
Q17: Four years ago, the board of directors elected to have a professional reserve study. We sent out an RFP and hired the best company, at a healthy price. In some states, these studies are required by law. If you go more than five years without such a study, you can be deemed derelict in your fiduciary duty. Why, after employing this company, and they delivered their first report in January 2015, are we not using their report?
Answer: Maryland does not require a Reserve Plan. Regardless, the current plan is the first and only plan ever done in the 50-year existence of the Association. Like many proper and good ideas in OPA, implementation of the Reserve Study became embroiled in various Board’s good faith attempts to develop a Capital Plan in conjunction with the Reserve Study rather than allowing the plan to stand on its own and adding new capital projects if and when completed. Most recently a Reserve Study Group was in place. Recognizing that the process needed a jump start, at the Board meeting on January 27, 2018, the following motion was approved by a 7-0 vote.
MOTION: The Board shall proceed with completing the Reserve Study as follows:
- Dissolve the Reserve Study Group effective immediately, publicly recognizing the structure they brought to the process and thanking them for their efforts in ensuring OPA can now complete the process.
- Direct the GM to complete the review of reserve components (items) no later than April 1, 2018 and provide the revised list to the Reserve Study Contractor (Design Management Associates, Inc.) to update the Reserve Study.
- Upon completion of upgrading the study, DMA will make a presentation to the Board and Budget & Finance Committee on the updated report to include presenting various funding options available to OPA based on industry “best practices” and guidelines.
- The Board, with the Budget & Finance Committee’s input and recommendation per Section 8.03 of the Bylaws, will determine the number and type of Reserve Funds and set funding parameters/formulas for each fund and modify Resolution F-03 accordingly.
Subsequent to the meeting the Reserve Study Group was abolished, the GM and staff have scrubbed the reserve components, and they have been provided to DMA to update the current Reserve Study. We are at step three and upon notification from DMA will schedule a meeting as outlined therein. We are on schedule.
Q18: At the last board meeting, six of the seven board members voted against Director Herrick’s motion for a RFP for outsourced HOA management and software. How could the majority of the board be against seeking competitive pricing for solutions to what are obvious issues in our management? We had a very competitive bid at a $159,000/annually which included software and staffing presented last summer, so we know viable solutions exist.
Answer: As to the single, specific document from last summer, OPA procurement procedures require three bids for this type of contract. We did not have any other bids provided. Other specific issues include that the July 21, 2017 letter from Legum & Norman, Inc. did not provide a final price. It stated the price was a “ball park” price because it was based on Legum’s “assumptions” and was “pending further discussions with the Board on a final scope of work”, therefore could not be considered a final proposal or contract. They also stated, “The final contract would include a schedule of charges based on negotiations with the Board”. The interpretation by OPA was that clearly this was a preliminary document in the hope the parties would “continue our discussions in the near future.” Legum did not have a scope or a final price, and to approve a contract based on this document would have been fiduciarily indefensible.