The 2015 election campaign for the Sun City board of directors likely will be highlighted by a debate about the advisory committee system that is meant to serve the board.
Bill Berendt, a veteran community and governance leader, believes the advisory committee system, especially as it relates to the Finance Advisory Committee, is broken. He said he is seeking a seat on the 2016 board of directors so he can help fix the problem.
Berendt recently resigned as a member of the Finance Advisory Committee, along with chairman Bob McGouey. Berendt said both men did so because they are upset about the process recently used by the association board of directors, Sun City staff, and First Service Residential (FSR), Sun City’s management company, to make decisions regarding the out-sourcing of Sun City financial and accounting functions to FSR.
Berendt, whose career background is corporate finance and management, has served 11 years on the Finance Committee, and is a past member of the board of directors. He played an active role in the transition from a developer-directed governance system in Sun City to a resident-directed program after the build out of Sun City homes was completed a few years ago.
By a 4-3 vote, the board voted late in 2014 to out-source its financial activities to the FSR home office in Pennsylvania, a move that Berendt says was recommended by FSR. A one-year out-source contract between the association and its management company took effect on January 1. Finance-related activities and the out-sourcing process were flawed, Berendt says, adding that the Finance Committee (FC) was by-passed, and residents were not informed that the Finance Committee did not recommend that the out-sourcing agreement be signed
“In early 2014, FSR decided to improve the management function at Sun City by replacing most of the key staff,” he said. “This was certainly their right to do, but the problem was that there was no plan on how they were going to get the work done, or maybe their plan failed. The result was that the accounting/finance department fell apart and the finance committee didn’t receive timely or accurate financial report for several months. The board could not present treasurer’s reports at their meetings.
“While hiding the process from the committee, FSR prepared a proposal to solve the ‘current crisis’ by out-sourcing the accounting function to them. Over the next few months, things didn’t improve and the FC happened to find out about the proposal the board was considering. During the board meeting where the contract was up for a vote, the fact that it had not been reviewed by the finance committee caused an issue and forced the board to postpone the vote until the next board meeting,” Berendt continued. “At the next meeting, the board approved the one-year out-sourcing contract without informing the residents that the committee had not recommended it be signed. It seemed strange to me that the solution to the ‘current crisis’ was to out-source our books to FSR the next year.
“FSR then brought in extensive help to get Sun City’s books cleaned up so FSR could transfer data to their system at year-end,” Berendt went on. “At this point, it seemed obvious to me that, had they applied this effort back in the spring of 2014 when the problem started, there would not have been a ‘crisis’ or a need for the out-sourcing. It seemed amazing to me that FSR caused the problem, and then was rewarded with an out-sourcing contract allowing them the opportunity to make additional profit.
After several months dealing with the proprietary information supplied by the FSR system, I solidified my opinion that the out-sourcing had significantly diminished the effectiveness of the finance committee and its ability to advise the board.
“The only qualification required to be on the board is that you be an owner and current with your assessments,” Berendt continued. “The residents have always felt that the advisory committee structure was essential to help the board make informed, valid decisions. Having spent 11 years on the committee and board trying to make sure that this structure stayed intact, it has been disheartening to see it begin to collapse. I no longer wanted my name associated with what was going on, so I resigned.”
The association is now seeking applications from residents to replace Berendt and McGouey on the seven-member finance committee. This process has not been completed. Qualified residents may serve on an advisory committee for a maximum of six years, or three two-year terms.
Berendt and McGouey resigned in late June. While Berendt says that other finance committee members agreed with him about the out-sourcing problems and communicated their concerns to the board, Berendt now is the only committee member speaking out publicly. He said he decided to state his views in detail after he received “many” phone calls from friends and governance colleagues after a July 16 Sun Day article revealed his out-sourcing concerns. Berendt emphasizes that he is speaking for himself and not the committee.
“How can actions be taken on the biggest financial decision in this community’s history without running it through the finance committee?” he says. “Our committee advisory system, especially regarding finance, has worked well for more than 12 years. It is an important part of association governance. Nobody seems to have a plan.
“Following the resignations, the board discussed the situation at a public committee of the whole meeting in July. I didn’t attend that meeting, but several people who were there told me that it appeared some board members had been making all the decisions related to the committee and the rest of the board had been kept in the dark.
“In my opinion, FSR’s request to form a four-member ad hoc committee to review FSR’s system and the out-sourcing, is an attempt to discredit the committee and convince the board to renew the out-sourcing contract, which expires on December 31,” Berendt concluded. “They would have the residents believe that the committee is just being petty and is totally adverse to change. The reality is that all the committee wants is information that allows it to perform proper financial reviews and to be assured that the necessary internal controls are in place.”
In response, Board President Bonnie Bayser sent the following response to the Sun Day: “The financial reports are being generated to meet the needs of the board. The financial details are more transparent with board members having the ability to have access to information pertinent to perform their duties. The board is satisfied with the current program.”
McGouey has not returned several phone calls seeking comment on this issue.
