State Parkway’s October 2018 Financial Statements Not Yet Posted On Lieberman Management Services’ eSTAR Portal

ORIGINAL POST: NOVEMBER 20, 2018

Today is November 20, 2018, and Lieberman Management Services, Inc., has yet to make State Parkway’s financial statements for the month and year-to-date ending October 31, 2018, available on its e-STAR portal. Apparently the “Time for Transparency” Board is not yet ready for transparency.

The Last Word On The Proposed 2019 Budget*

ORIGINAL POST: NOVEMBER 19, 2018

Less than one week from today, the corrupt and incompetent board of directors will meet to formally adopt the Proposed 2019 Budget. The question is will the board adopt it in its current form, with six fatal errors, or will it amend the budget and distribute it to unit owners for their 25-day review?

I will take you through everything that’s wrong with the 2019 Proposed Budget. But first, let’s start with board president Tom Battista’s budget cover letter:

Budget Cover Letter:

The budget cover letter is false, misleading and deceptive. In fact, contrary to the representation in the first reason for the massive increase, at least 100% of the 2019 Proposed Assessment Increase is for Non-Litigation Expenses. Moreover, the bulk of the 2019 assessment increase is due to the actual $135K (but the Association only budgeted $80K) 2017 budget deficit as well as the $246,605 2018 projected deficit. The deficits are so large because for years the board approved sham budgets prepared by management.

The second reason for the massive assessment increase admits to accounting irregularities. However, the board’s inclusion of the issue of property manager William Southall leaving unrecorded litigation invoices in his drawer is double counting, which I had explained to the board at it’s October 3, 2018, board meeting. This is because there are sufficient funds in the $500K Special Assessment Fund for litigation expenses that can easily absorb approximately $100K for unrecorded litigation invoices from 2017, especially since the Association will continue making installment payments. Meanwhile, the Association only recorded a $80K NOI Shortfall from 2017 in the 2018 Projection. As I mentioned in the preceding paragraph, this amount is $55K too short. However, the 2018 Projection includes a dubious $380K projection in the 4th quarter of 2018, which is impossible as the Association’s Operating Fund does not have anything close to this kind of cash on hand. In fact, as of October 31, 2018, the Operating Fund only had $26K of cash on hand. Finally, it should be noted that the accounting irregularities, totaling over $275K, were a direct result of budgetary pressures the board and management faced.

The budget cover letter fails to explain what the board plans to do with the purported $300K reserve/”contingency” for Legal Expenses and Judgments, and Related Legal Expenses. Some of the funds were already spent on budget overruns.

 

2019 Proposed Budget:

The 11.94454% assessment increase in the 2019 Proposed Budget includes the following fatal errors:

  • ($250,008) for Legal Services – Special. Changes in the special assessment income and expense accounts cannot cause a change in regular and parking assessments.** This is because the two-year Special Assessment Budget is independent of the annual assessment budgets.
  • $227,497 for Provision for NOI Shortfall in the 2018 Projection, because of both double counting and improper use of Special Assessment income and expense accounts, $120,076, and  improper $300K projection for Provision for Other/AP.
  • ($2,232) for Cable T.V. Fees in excess of Cable T.V. Expenses. The board does not have the authority to set a pass-through fee in excess of the underlying expense. This is because unit owners are assessed based on each owner’s proportionate market share.
  • $114,905 or $35,354 for allocating losses from unrelated business activities (including allocation of 45% and 31% for garage valet parking services to non-exempt, respectively) to Common Area Maintenance (“CAM”). The board does not have authority to assess unit owners for non-CAM expenses.
  • $106,919 for Special Assessment Income. Again, changes in the special assessment income and expense accounts cannot cause a change in regular and parking assessments.
  • $0 for federal taxes, state taxes, and local property taxes. This demonstrates the board and management’s willful intent to continue evading these various taxes.

 

Correcting the aforementioned fatal errors, assuming 31% of garage valet parking expenses are allocated to non-exempt, results in a 15.84221% assessment increase.

 

What board and management need to do:

  • Reconcile the Association’s financial statements with those of the 2017 Audited Financial Statements and record all automatic reversing entries so 2017 expenses are not included with the 2018 actuals.
  • Update the 2018 Projection using 10 months of actuals and 2 months of estimates.
  • Amend the budget so Special Assessment Income and Expenses are identical to one another in each 2018 and 2019.
  • Amend the budget to exclude unrelated business income, expenses and losses from the budget. In addition, seek to minimize UBI losses or make profits. A good example of this are the three vending machines only produced a total of $59 of gross commission income during the past dozen years, but cost several thousands of dollars in electricity annually to operate. Consequently, the board and management have not replaced any of these three vending machines.
  • The board needs to make a decision on Unit 906, which has been vacant shortly after it became a hot potato in May 2015. If the board is still claiming 100% of the Association’s expenses are qualifying expenditures, then 1.5% of expenses for Unit 906 cannot be a problem for the Association meeting the 90% expenditure test. Meanwhile, Unit 906 is still not a common area accessible to unit owners, which means its clearly not a common area expense. Nor is Unit 906 is a “storage room for accounting records.”
  • Amend the budget so Cable T.V. Fees equal Cable T.V. Expenses.
  • Make a decision what’s going to be done with the controversial $300K Reserve for Legal Expenses and Judgments Reserve/”Contingency”, which is much less than $300K, let alone cannot be “spent” in full by December 31, 2018. Do the math as the Association doesn’t have much cash on hand.
  • The board of directors has to make a decision:
    • make the correct allocation of garage valet parking expenses to non-exempt based on sp+’s actual car count (110 exempt and 49 non-exempt) and pay federal and state taxes, and allocate the exempt garage expenses to unit owners in the budget.
    • or allocate garage valet parking expenses to non-exempt based on corrupt CondoCPA’s unlawful “estimate” (110 exempt, 90 non-exempt) which grossly exceeds sp+s actual monthly count, evade federal and state taxes, and only allocate the “purported” exempt garage expenses, which will be significantly lower, to unit owners in the budget.
  • Amend the budget so both the 2017 actual budget shortfall and projected 2018 shortfall are in the “Provision for NOI Shortfall” account. This is not Fantasy Budget League.
  • Distribute the complete 29-page amended budget to unit owners for their 25-day review.
  • Last, but not least, the board needs to fire Lieberman Management Services, Inc., as managing agent, and Treasurer Pauline Oberland needs to resign from the board ASAP.

 

*Note: At the time of this blog post, the Association, run by a corrupt and opaque board of directors and management, had yet to respond to a handful of budget questions. The “Time for Transparency” Board’s failure to respond to simple questions stinks to high heaven.

**2019 is the ninth year of special assessments at State Parkway, but the first year where changes in the Special Assessment accounts caused a direct change in the annual assessment budget.

cc: Board President Tom Battista, LMS Regional Director Sara Kacheris

Where’s The Fat In The 2019 Proposed Budget?

ORIGINAL POST: NOVEMBER 18, 2018

When I finally received the 2019 Proposed Budget details, I noticed the 2019 proposed cash flows did not equal the 2019 proposed budget. The 2019 Budget cash flow was $32,010 lower than the total Proposed 2019 Budget. Then I noticed 100% of the differences were all within the “Payroll” or “Personnel” budget, which increased a whopping 7.9% over the 2018 budget. They are broken down as follows:

2019         Cash Flow

Description                  Budget    Over/(Under)

On Site Manager           $86,628       +1,431

Janitorial Personnel      $85,255           -471

Maintenance Eng.         $62,340            -44

Doormen/Security      $160,074       -4,594

Doorman Overtime      $26,000     -24,528

Payroll Process Fees      $2,200         -1,360

Misc. Payroll Benefit     $15,600        -2,400

 

Along with the $44 budget surplus for the year 2019, this gives the Association $32,010 of fat in the 2019 Budget. This comes to 1.623%, or 13.593% of the 11.94454% assessment increase. But the Association hasn’t been very good at managing its workforce. For example, the 2017 and 2018 workforce budgets were each blown to bits by excess overtime, which also makes up the bulk of the 2019 fat. However, the Association recently hired several part-time doormen, but not until after I wrote a September 12, 2018, blog post (see below) criticizing the Association’s poor workforce management.

 

Letter To Treasurer Pauline Oberland Regarding Poor Workforce Managment

Board And Management’s Dilemma: Willful Misconduct, Gross Incompetence Or Gross Negligence?

ORIGINAL POST: NOVEMBER 17, 2018

State Parkway’s Board of Directors and management, no strangers in conduct involving moral turpitude, dishonesty, and corruption, have a new problem. Is the current budget snafu, is the board guilty of willful misconduct, gross incompetence or gross negligence?

State Parkway’s Proposed 2019 Budget calls for an 11.94454% increase. However, due to five fatal errors, including double billing and improper use of Special Assessment accounts, the Proposed 2019 Budget actually calls for a 10.453% assessment decrease. Moreover, there’s also a fatal error involving the Association’s budgeted Cable T.V. Fee.

Despite board and management being informed of these  errors, not to mention the board and management’s extensive history of budgeting errors and woefully inaccurate projections, not to mention their failure to control spending, they are denying the existence of the fatal errors. This is nothing new. The board, management and even CondoCPA denied the presence of fatal errors in State Parkway’s 2007 and 2008 proposed budgets when the percent increases were each 5.39% too high because of their failure to allocate the full assessment increase among the entire ownership. Lieberman Management Services, Inc., however, quietly corrected the errors but not until after these budgets were formally adopted by the board of directors.

The 2019 proposed assessment increase, however, is 22.48% overstated. The problem for the board and management is that many of the fatal errors were initially reported to them before the 2019 Proposed Budget was approved for distribution to the unit owners by the board. To make matters worse, the board and management incredulously continue to deny the existence of the fatal errors.

State Parkway’s unit owners will be irreparably harmed if they’re forced to overpay for assessments due to board and management’s failure to correct the fatal errors in the 2019 Proposed Budget.

The current embattled board of directors, comprised of President Thomas M. Battista, Secretary Margaret “Meg” Doyle Stingle, Treasurer Pauline Oberland, and Director Kevin Phelan have already spent the past eight weeks struggling with proxy/ballot fraud, financial reporting fraud, federal income tax fraud, state income tax fraud, and property tax fraud. No wonder the fifth director position has been vacant almost the entire time. To make matters worse, board President Tom Battista constantly talks out of his ass. Make no mistake, this is a corrupt board of directors and management team.

In any event, board and management will have to decide to be guilty of willful misconduct by falsely denying the presence of the six fatal errors in the Proposed 2019 Budget. Or are they (President Tom Battista, Secretary Meg Doyle Stingle, Treasurer Pauline Oberland and Director Kevin Phelan and/or LMS’ Regional Director Sara Kacheris) guilty of Gross Incompetence? Or are they guilty of Gross Negligence by recklessly disregarding the safety and rights of State Parkway’s 160 unit owners? None of these options are good for State Parkway’s Board of Directors and Lieberman Management Services, Inc.

Correcting the six fatal errors would mean the board and management amending the 2019 Proposed Budget, the board re-approving it for distribution for unit owners’ 25-day review and the board formally adopting the 2019 Proposed Budget around Christmas or after the New Year’s Day, and being labeled both corrupt and incompetent.

But, if the board and management do nothing, then they risk being labeled both corrupt and grossly negligent, except Treasurer Oberland would also be labeled as grossly incompetent.

I don’t envy the board of directors or management.

The Efficiency Of Gifting State Parkway’s Employees Yourself

ORIGINAL POST: NOVEMBER 16, 2018

Unit owners and residents have numerous choices this holiday season: they can contribute year-end gifts to employees directly or contribute through the Holiday Fund. Let me show you how each one works.

Gifting the employees through the Holiday Fund requires the Association to withhold payroll taxes from the employees’ paychecks, with the tax payments remitted to the appropriate authorities. All this is done by payroll deduction. However, this option is not available for garage staff.

However, if you gift the doorman, janitors, engineer and mail carrier directly, the employees can keep more of the gifts. In fact, this is the approach I advocated to parents of students during my 2o+ years as CFO at private special education schools, not to mention my family and I also contributed directly to our daughter’s teacher during her 14 years of primary and secondary education. The important thing is not to forget to include all the doormen, engineer, janitors and mail carrier. In addition, don’t forget to include the garage staff if you use valet parking services.

Seasons Greetings!

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