8/16/7 Residents Voice Meeting 1

“Following the Money”

8/16/2007

Conrad Grundke

On the Trail . . . . .

8/16/7 Residents Voice Meeting 2

The Money Trail (Cont):

The Last Episode:• 2007 Update on Credit Card Data• Aug 1 GRF Special Meeting• Bonus & Incentive Plans

This Episode:• Audit – WHY/WHAT?• History of LW (leisure World)• Guidelines/Policies/Management Agreements• The Future

8/16/7 Residents Voice Meeting 3

Audits

• Purpose of Financial Audits:

1. “Yearly” Audit is a “Balance Sheet” Audit– Ensures that Balance Sheet figures were derived from

acceptable accounting standards.– These companies all passed yearly audits; GM, ULHM,

Starbucks, TLHM, IBM, Enron, GRF, WorldCom, etc.

2. “Forensic” Audit is a “Detailed” Audit– It can locate “creative”“creative” bookkeeping.– CouldCould prevent such accounting problems as; Enron,

WorldCom, Tyco, Global Crossing, etc.

8/16/7 Residents Voice Meeting 4

History – 1960’s

Ross Cortese

Leisure World

Build

LW Resales

Sell

PCM

Maintenance

8/16/7 Residents Voice Meeting 5

Evolution of PCM1964 2008

Maintenance

Land Development

%

OF

EFFORT

8/16/7 Residents Voice Meeting 6

Determining Controls viaManagement Agreement

0102030405060708090

100

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

ACTUAL Money Spent

Knowing WHERE spent CONTROLS

8/16/7 Residents Voice Meeting 7

The Future - Guidelines, policies, & controls

0102030405060708090

100

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

ACTUAL Money Spent

Knowing WHERE spentCONTROLSCONTROLS

RESULTS

8/16/7 Residents Voice Meeting 8

Desc One Time Annual Year To Date

Prop Tax 1,500,000 550,000 2005 2,600,000

Fed Tax 600,000 250,000 2001 2,100,000

State Tax 500,000 50,000 1996 1,050,000

Grants 400,000 2000 400,000

Emerg Access Rd 950,000 2007 950,000

Landscape Staffing 480,000 1992 7,200,000

Cable TV 850,000 2003 3,400,000

Wrkr Comp 350,000 1994 4,550,000

Hi-speed Internet 500,000 2005 1,000,000

Composting 225,000 1992 3,375,000

Why would we need controls with the following savings !

8/16/7 Residents Voice Meeting 9

PCM Cost Savings (Cont)

Desc One Time Annual Year To Date

Gate Clearance 200,000 2006 200,000

Nursery 185,000 1990 3,145,000

Recycling 130,000 1994 1,690,000

In-house Interior 70,000 2006 70,000

Total 3,950,000 3,840,000 31,730,000

8/16/7 Residents Voice Meeting 10

Let’s create a simple Budget

• Assumptions:

–No Growth

• Fixed Amount of Facilities

–No Additional Service Levels

8/16/7 Residents Voice Meeting 11

A simple projection

0

50

100

150

200

250

300

350

400

450

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

$259

3% CPI Increase

8/16/7 Residents Voice Meeting 12

Let’s review the actual

0

50

100

150

200

250

300

350

400

450

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

$259

3% CPI Increase

3% CPI yearly Increase!

4.2% Cost Saving! $90 mil budget and we save $3.8 mil

Where should our actual be if we have a 4% cost savings per year ? What happened to the savings?

Actual

8/16/7 Residents Voice Meeting 13

Ask Your Candidate!

Support Forensic

Audit?

Understand Ledgers?

Renegotiate Contract?

8/16/7 Residents Voice Meeting 14

We return to the major ingredient

between the Owners & PCM?

TRUST

8/16/7 Residents Voice Meeting 15

How do we get it?

Measure&

Verify

8/16/7 Residents Voice Meeting 16

A Success Story

Beginning

In 1987

8/16/7 Residents Voice Meeting 17

Nebraska

California or Bust

8/16/7 Residents Voice Meeting 18

Reaching Paradise

8/16/7 Residents Voice Meeting 19

Community ActivitiesUnited Board Room

Committee Rooms

8/16/7 Residents Voice Meeting 20

Business woman/editor

Jan’s

Exterminating Co.

8/16/7 Residents Voice Meeting 21

The (Ex)Terminator

The “Voice”

8/16/7 Residents Voice Meeting 22

Jan’s guaranteeJan’s guaranteeEliminate from:

•Home

•LWV Community

•Board Meetings

•LW Globe Articles

Any future :

Residents Voice

Infestation!

PCM Rodents will be protected.

8/16/7 Residents Voice Meeting 23

Jan’s Promise !Jan’s Promise !Yearly Cost for this serviceYearly Cost for this service

will be a minimal:will be a minimal:

1% of Yearly Budget

Not to exceed $900,000

8/16/7 Residents Voice Meeting 24

The End