Belvue Apartments Crosslease 93132
I would like to raise the following issues onto the agenda of Friday's AGM:At the same time, I also supplied the following corrections and comments to the circulated first version of the AGM 2014 Minutes:The failure to send out the financial accounts in adequate time prior to the scheduled AGM. It was already raised at the 2013 AGM by David Lee (305) that if you can't provide the financial statements 2 weeks ahead of the meeting, then the meeting date should be appropriately postponed.
Building Manager Pay.
I've raised and explained the issue already prior to last year's AGM and have all the details documented on http://belvue.org.nz/ when you follow the link "Manager Pay". At the 2014 AGM, Glenn admitted that some mistake was made by BCA and that this matter is being followed up with IRD, without being able to provide the details. I request that you now present the corrected Manager-Pay/PAYE-calculation from May 2013 onwards with sufficient details to allow for independant verification of the numbers.
Under point 4 (Annual Accounts): The verbal admission by Glenn Kwok that some mistake was made by BCA with regard to the "Manager Pay" issue naturally means that the annual accounts for the period 1.10.2013-30.9.2014 cannot be considered as finally agreed to, until such time as the underlying raised isses have been satisfactorily resolved.During the AGM 2015, it was agreed that my corrections and comments to the circulated first version of the AGM 2014 Minutes would be made part of the official record.
Despite my timely request to have the "Manager Pay" calculation disclosed, the requested information has not been supplied at the 2015 AGM. I verbally repeated at the 2015 AGM that the information I'm seeking consists of the details behind the summary item "Caretaker - Wages & Expenses", so that Net Monthly Wage Payments, Net Holiday Payments, PAYE Payments and (non-wage) Expenses can be traced separately. (This is usually part of the *full* financial statements supplied by BCA to the Owners Committee at each of their meetings.) It was promised at the 2015 AGM that this information would be disclosed to me. At the time of this writing (January 2016), this information has not yet been supplied by BCA.
The current accounts cleverly disguise, there must have been a late filing "correction" of PAYE-Payments to IRD for the months since May 2013, made some time during the 2014/2015 budget year! And it is exactly this "correcting calculation" that will reveal the truth about Graham Smith's unilateral decision in May 2013 to increase the Building Manager's pay in violation of the authorised budget and his deception of the Owners at the AGM 2013 that this was just previously authorised back-pay. The Committee was made fully aware of the matter as far back as August 2013 by this letter. I've notified our Auditor with this letter in November 2013 about it and as a consequence our Auditor made a provision of $1,358.00 for PAYE Payable in our 2013/2014 accounts.
Despite being "audited", the accounts are still wrong! What most people don't understand is that an audit only broadly checks that money flows are appropriately recorded and that only a small sample of transactions may be looked at in detail. An audit does not check that money spent was in line with the budgeted amounts authorised at the AGM or that any payment for which a written record exists was indeed justified. It is the role of the Owners Committee and ultimately us Owners to check that this is the case!
Here are just 2 things that are wrong in the current accounts to 30.9.2015:
The mis-representations in our accounts seem to always involve payments or other benefits for Katrina.
Most people will be unfamiliar with what this means. The "Section 147" referred to is actually Section 147 of the "Unit Titles Act 2010", which is a law that does not apply to us. BCA should know this! The money BCA is attempting to claim from us in our accounts here is actually the cost between an apartment seller and buyer for a certificate that tells the buyer that the seller has no outstanding debt related to the apartment. This cost is a private matter between the seller and buyer and under no circumstances a cost to us other owners.
I had no reply yet to the Manager Pay issue, as forwarded to you in February (see below). At the 2013 AGM, I raised the point that the budget position for "Caretaker - Wages & Expenses" should have been increased by the CPI index from the *authorised* 2013 budget, rather than from the *actual* wrongly increased 2013 wage payments. Catherine Byrne promised on behalf of the Committee, that this issue would be "worked-through" with me. I have kept my part of the bargain and responded speedily on receipt of the required information. I've documented everything and it is on record at http://belvue.org.nz. The delays caused by the Owners Committee and/or by BCA have now accumulated to significant wrong overspending. I'm asking the Committee to respond to my February questions below, preferably in writing with sufficient detail to allow for an independant review of the matter.As expected, the Owners Committee did not reply in time for the AGM. During the AGM's discussion of financial accounts, it was mostly Glenn Kwok (BCA) trying to explain the accounts (but only in vague terms and at times shedding more confusion than light). Members of the Owners Committee were remarkably quiet on this matter.
First, I pointed out the real meaning of the entry "Provision: PAYE Payable $1,358" on page 7 of our financial statements. It is an entry added to our accounts by our Auditor saying that PAYE (which stands for "Pay As You Earn", not "Pay maybe 2 years later") has most likely been *underpaid* and will therefore have to be corrected. This is a "provision", i.e. an estimate only. When the AGM meeting accepted our audited financial statements, the AGM effectively confirmed that our payments during the last 12 months were WRONG and the Owners Committee/BCA/our Auditor still haven't finalised the RIGHT numbers! This is exactly what I've been criticising in my posting below and the associated history page from the first moment I had a glimpse of Graham Smith's May 2013 pay increase to our building manager.
In response, Glenn Kwok admitted that some calculation was made wrongly by BCA staff. He expressed it as PAYE tax being calculated on the total of "Caretaker Wages & Expenses", when it should only have been calculated on "Caretaker Wages" (excluding "Expenses"). This explanation is confused --- if it were true, we would receive an IRD *refund* for overpaid PAYE on Expenses. But exactly the opposite is the case here! We seem to *owe* payments to IRD for underpaid PAYE. Glenn said, BCA is currently working with IRD to resolve this issue, but it is a complicated matter.
Later during the discussion on our financial statements, Nitya Reddy (503) asked about the sudden jump in "Rent Received - Caretaker's Flat" from $6,616 in 2013 to $18,720 in 2014 (on page 5). This is a re-valuation only (no actual "rent" is received on the caretaker's flat). The jump is a correction my interaction with our Auditor forced upon the BCA accountant, as explained on the Audit page. It is also the main reason why our PAYE payments are wrong. Glenn replied to Nitya's question, that the sudden jump is not as big as it seems, because it is an "accrual over two years", which has to be averaged-out over these two years. This statement of Glenn is a further piece of confused non-sense! "Accrual" has absolutely nothing to do with this jump.
This complete farce being played out in front of an astonished and increasingly confused AGM meeting is a rather sad story of an Owners Committee and Body Corporate Administrator lacking in basic understanding of accounting, but nevertheless too proud to admit their shortcomings and trying to press on maintaining a sense of credibility, while being hopelessly tied-up in their own spin without any real chance to undo the knots in their reasoning. My advice is this: take a deep breath first and try to understand the problem, or get help from someone who can understand it. If you don't really understand what the problem is, any attempt to solve it will actually make things much worse! The problem started with Graham Smith's unilateral and unauthorised pay increase to our building manager in May 2013 in violation of the approved budget limits. Now, 19 months later (December 2014), there is still no real hope the people currently in charge can succeed undoing what was wrong from the beginning --- unless forced to by external forces.
On 3.2.14, BCA Ltd. has finally supplied the long-requested calculation that led to the controversial payment increase in May 2013. You can see this original for yourself and try to understand what it all means. I've appended it into archive protected.zip under file name "BCAcalculation.pdf" (accessible as explained on the Privacy page). Here is a more descriptive explanation of all relevant facts.
At the outset, our "total employment costs" are first sub-divided into "cash costs" and a "non-cash benefit".
The rental value of the ground floor "building manager apartment", which is made available to the building manager as a personal living space, is the "non-cash benefit" and forms part of the total employment benefits package. Its cash worth has been valued at $6,616.00 per year in recent times. All other costs are classified as "cash costs" and further subdivided into "fixed" and "variable" costs.
The "fixed costs" include
Budgets voted on at the AGMs set out the expected spending limits for the upcoming year's total "cash costs". It is true that "variable costs" are sometimes difficult to estimate and may occasionaly overrun the authorised budget (e.g. sick pay is usually unpredictable). But the "fixed costs" should certainly stay within the authorised spending limits.
The same wrong calculation was done for accounting year 2011/2012 ($15,810.00 / 12 months = $1,317.50 "gross monthly wages") and the accumulated difference between the newly calculated payments and the past actual payments was turned into a one-off "back-pay", supposedly necessary to bring the building manager pay in line with the last 2 year's 2% and 1.58% CPI increases.
In reality, the "net monthly wage" increase made in May 2013 from $829.73 to $1,163.08 is a staggering 40%(!) and the one-off "back-pay" of $4,952.60 on top of that is equally over-inflated.
As a result of applying the wrong formula, our 2012/2013 authorised budget was exceeded by $6,244.17 (this budget-overrun is documented in our financial accounts "Budget versus Actual" table in the column "Variance 12 months").
Graham Smith insisted at the AGM, that the May 2013 wage increase and back-pay was within the limits of previously approved budgets, when viewed over the time frame since we introduced the inflation-adjustments.
The facts speak against him. Look up your past AGM documents: they show you, inflation-adjustments were introduced in budget year 2011/2012 and the total "cash costs" spent in the 2 years since were $37,080.73, while the total budget in the 2 years was $31,869.80, an overspend by more than $5,000.00.
With both Graham's and my versions of accounting now available for anyone to verify, I have forwarded a copy of this web page to the Owners Committee via BCA and
request that the Committee double-checks all facts and numbers as presented here, determines where the liability for our financial loss through unauthorised overspending lies and then presents a remedy to the issue, which is acceptable to the majority of owners.As always, I'm happy to work constructively in the common interest of all owners to help get our financials corrected.
I'm eagerly awaiting the response and what the AGM Meeting Minutes and the Full Audited Version of our 2012/2013 accounts have to say on this matter.