This is a story about one of Sun City’s biggest controversies, which is now ending on a positive note. This issue is also playing a major role in the launching of one of the most significant new initiatives in the community’s governance history.
Late in 2014, the community’s board of directors announced a decision to outsource all of the community’s accounting and financial billing and reporting systems to First Service Residential (FSR), the Pennsylvania-based management firm that hires the staff members that operate and coordinate Sun City’s activities and maintain its facilities. This decision triggered some controversy inside the community’s governance. It led to resident questions about the community’s management control of its finances.
Two members of the finance advisory committee, one of them the chairman, resigned in the middle of it. This past spring, The board announced a decision reversing the out-sourcing action and saying that accounting and financial reporting and billing functions will be returned to Huntley and association control on Jan 1, 2017.
This is a report on what really happened on this subject, from its beginning two years ago to the present day. Most of what follows has not been published by the Sun Day previously. It was revealed by Dennis O’Leary, who served on the board when this issue emerged and currently is board president. He also is a past member of both the Facility and Finance Advisory committees.
In 2012 and 2013, not long after a resident-board took over from Sun City’s original developers, the association decided to conduct a productivity study to determine if the staff, at all levels, was sufficiently productive and efficient. This led to considerable reorganizing of staff and some downsizing. Here’s how O’Leary described how these activities affected Sun City’s finance department:
“We were trying to reduce costs, and we were evaluating our staff resources. It was determined that our finance department at the time was too large and expensive. Some staff reductions were made, but then things took an unexpected turn. We lost other finance staff to resignations, and all of a sudden the necessary finance work wasn’t getting done. We consulted with FSR, and they offered to help us out and take over some of the accounting and financial activities. It was agreed, by contract, to do this for one year beginning January 1, 2015. We would continue to monitor FSR’s service for the year, and after that, we would do an assessment whether it was working properly.
“During that year, things started popping up. The finance committee was used to receiving periodic reports that were no longer available. FSR does a lot of work for clients, but most of them are small, and they do not have the chart of accounts that we require. We could no longer able to track some information that we needed to track. FSR also was having trouble tracking assessment payments and billing to and from our residents. Residents used a variety of ways to pay bills, and the FSR system couldn’t handle that, and when finance staff members left, some things were dropped. Sales documentation that we used to make money on was no longer consistently available. This got controversial enough that the chairman of the finance committee resigned in the summer of 2015 because he was not satisfied with the services we were getting. I received phone calls from a number of residents complaining about their assessment bills. Residents pay and receive bills in a wide variety of ways, and FSR had some trouble keeping up. Board and staff inquiries for data sometimes took some time. Some of the information provided was incorrect.
“We established an ad hoc financial review committee. It was tasked to answer two questions:
1. Was out-sourcing necessary and desirable, and 2. Were we realizing savings in the process?
The committee found that management control was the major issue, and it initially was inadequate, although it was corrected somewhat later. The committee did determine that we did realize some savings from the out-sourcing, but we also asked how FSR accomplished that. We then determined that we could achieve those savings here as well as there. About this same time, we decided to adopt an enterprise, integrated system in our finances. We realized by now that we had a system in which various parts of our accounting system didn’t talk to each other. If a resident bought a ticket to an event, the payment went only to one account. To transfer it or process it required a manual handoff. We have found an enterprise system that has been developed for our kind of homeowner association. We determined that we could achieve cost savings through this system. We decided earlier this year to adopt it to integrate all of our financial and accounting systems, and also to bring our activities back to our own control here. Enterprise systems have been done in corporate America for many years. But it is only recently that a system designed specifically for homeowner associations like ours have been developed. We can do this financial work for about the same cost as we paid when FSR was doing it. There shouldn’t be any additional cost. There will be some additional hires; we will be hiring a short-term person to help the transition of this activity, and to work with the consultant that is helping us implement the enterprise system. We think we will have to eventually hire one or two permanent additional staff persons. The cost of these hires has been factored into the money we are paying to establish the enterprise system.
“One of the reasons Lauren Lee was hired as executive director in 2013 was to study our staffing and find ways to reduce costs. She was engaged in that effort in the finance area, and in this case it didn’t work out as planned. This transition will take place over time and will culminate on Jan. 1, 2017,” said O’Leary.
O’Leary also offered that he does not critique the previous financial decisions.
“I don’t want to criticize FSR or put them in a bad light over this,” O’Leary said. “They offered to help us through a rough patch and they did their best. The board has taken the time to do these right things now in the right way. I believe we are on track to retake control of our finances and move forward with an improved financial program.”
