Audit Report for W&S Association Management Audit – Submitted 1/8/02

 

Introduction: A Management Audit of the W&S Association was conducted on 12/8/01 in accordance with the requirements of Association By-laws. The representatives of the Association present were: Jerry Eubanks, Eugene Watt, Keith Weeks, Alinea Coy (Board Members), Kent Christen (Manager). Jerry Ryan was absent (gave prior notice).

The Audit Team present consisted of Gene Carroll (Lead Auditor), Jim Chisholm, B.J. Buhrman, and Nancy Blackwell.

The Audit Team generally followed the W&S Audit Plan (12/3/01), the Management Audit Procedure (9/25/01), and were guided by the Management Audit Checklist – W&S Board (11/11/01), all of which were submitted to the auditees well in advance of the audit.

The Audit Team also used information obtained from reading documents, policies, procedures, minutes of board meetings, summaries of motions and other records of the Association as well as information from regular attendance at board meetings and audits of individual staff members.

 

General Findings and Observations: The Audit Team wishes to acknowledge and highlight some positive elements and commend the Board, the Manager and the Staff on the following:

1. Perseverance and continuous effort in managing the Association during a period of significant stress with ongoing litigation, community discord, growth of the subdivision, high turnover, etc.

2. Strong effort to communicate with the membership on litigation status and other issues and to listen to the various and disparate inputs from the members.

3. The support of the development and expansion to the Association Website to provide the membership ready access to important Association documents and information even to members who don’t live on site or locally (which still represents a large percentage of the membership base).

4. Diligence in holding an acceptable number (by historical standards) of regular and special board meetings (including Joint Meetings with R&R).

5. Good control of expenditures, tracking of expenses and revenues and planning for long term capital growth needs. Also very good availability of financial status information and other handouts at meetings.

6. Good mix of projects to handle water supply alternatives, environmental issues, new regulatory demands and water/septic issues related to growth and increased service demand.

7. Special commendation for obtaining acceptable D/O Liability Insurance when prospects looked dim.

The Audit Team expresses thanks on behalf of the members for these accomplishments.


The Audit Team provides the following general observations, derived from the audit, to suggest areas where there is a decided opportunity for improvement:

1. The efficiency of board meetings can be improved to accomplish the primary objective, to carry out the business of the Association. For W&S this is more of an issue at joint meetings than at regular W&S meetings, since attendance at Wednesday evening meetings is substantially less than Saturday meetings.

2. The W&S Association relies on the Water Decree and governmental regulations to guide its major directions and decisions. The Water Decree and regulations are very legalistic, technical, and confusing to the general membership. The Board needs to develop and publish Rules and Regulations and enforcement means that are understandable to the members.

3. The basic Association documents, policies, procedures and records must be controlled organized and safeguarded.

4. The Board needs to address the subject of compliance with the Association By-laws and Statutes as part of its normal business activity. This audit process, and specifically the action plan, should provide a starting point to develop the needed structure. It will likely be a long but rewarding process.


Specific Findings and Recommendations:



A. Non-conformances: Certain non-conformances were identified during the audit and have been agreed upon by the Audit Team. Each must be addressed in an Action Plan developed by the Board per the requirements of the By-laws and the Audit Procedure. They are enumerated as follows:

1. The Board had no means to know, with confidence, what Association documents, policies, procedures exist and whether they are current, approved and otherwise controlled. This can be accomplished by "Master Lists", which would identify name, author, date written, date approved by board motion, location, file name (if applicable), etc. References for this non-conformance include 5.1, 5.1.1.H, 5.1.2.A, B and C.

2. The Bylaws require that Standing Committees be staffed, confirmed and operational by the 60th day of the fiscal year (8/30/01), Reference 5.1.2.G. The board is also required in 10.1 "to define the specific function of each committee; its authority and powers;" etc. The Budget Committee does not currently have a Charter or other means to define the scope of authority, duties, responsibilities, etc. that has been approved by the Board.

3. Certain key processes required by the Bylaws, 5.1.2.O, have not been documented into procedures and supported with the requisite records. These include:
#2- a process to provide continuous safety inspections…..
#3- a process for handling of complaints.
Also for process #1 the collection procedures for dues, fees, which are covered in the Billing Policy, the Delinquent Account Policy (Uniform Schedule of Penalties), etc. have not been carried out as defined. Other references for this non-conformance are 7.1.4,5,6 and 7.2.1,2.

4. The Bylaws, 5.1.2.R, require proper record-keeping to meet Statute requirements and Association Rules. The Board/Manager had no Master List of records to be kept; no procedures, protocols or rules for records; and some Directors were not generally familiar with specific statute requirements. Statute references are as follows: 7-136-101, 102, 103 and 33-33.3-117(8).

5. Upon reviewing the motions that have been made by this Board it was determined that no motion was recorded to validate the election of officers (5.4). Note: If the nomination/selection of officers is done in Exec. Session, then the motion to validate elections should be done in the convened open meeting or at the next Board meeting.

6. Board Meetings have not generally followed the Rules of Order, as required by 8.2. This has contributed to some inefficient meetings with many spontaneous interruptions that detract from the central business focus that is expected for board meetings.


B. Recommendations:
The following recommendations are made by the Audit Team for consideration by the Board:

1. Establish a procedure for use of the Association facilities, equipment, etc., by members, guests, employees, board members, committees, etc.

2. Establish a procedure to be used for the hiring/termination and review of managers, employees, and contract workers.

3. Establish a single consolidated procedure that covers all aspects of funding, billing, collection, delinquencies, fees, penalties, liens, invoice and notice forms. Ensure that it conforms to bylaw requirements, statutes, and can be conveniently handled in view of our current/proposed accounting software.

4. Ensure that at least the end of year statements (income statement and balance sheet) have been certified by Association CPA and are sent to members per requirements of 5.1.2.N

5. In the "Safety Inspection Process" include the logs/records that must be maintained, e.g. safety, health, environmental, etc. complaints and resolution.

6. Suggest periodic checkpoints to ensure that all Board Motions are clear and unambiguous, and that they have been effectively carried out including any changes to affected policies and procedures.

7. Ensure that a process exists to update Attachment 1 (page 14) of the W&S By-laws as new lots are ratified. Whenever a copy of the By-laws is made or distributed it must have the current version of the Attachment.

8. Develop a list and file of standard forms, e.g. proxy, invoices, notices. Also create an "NOA" form (see 6.3.2.a) to ensure that any appeals are properly carried out.


Gene Carroll and Jim Chisholm, 1/8/02