Sun City Anthem
Board
Director
3rd Motion
Expansion of
Finance-Related Committee
Director Nona Tobin continues to make yet another attempt to enhance the usage of resident knowledge and talent. This time, it's enhancing the efficiency of insurance & financial matters.
This is the motion, along with
the rationale she plans to address at the July 27, 2017 Sun City Anthem Board
meeting.
Motion
"I move the Board approve the creation of a study group, including interested owners and Board members, to be charged with investigation into the possible establishment of a new Committees or an expansion of the Finance Committee to utilize resident expertise in Insurance/Risk Management and Investments under the authority provided in Article V of our bylaws."
Background
There have always been homeowner committees to assist the Board in its policy-making role, to offer volunteer opportunities to residents with a particular interest, and to take advantage of the substantial expertise of SCA’s residents.
Sun City Anthem changed from being managed by a management company to being self-managed on April 1, 2016.
At that time, several Board members reviewed the existing committee and
made some changes, nearly all of which reduced the opportunities for
owner-involvement in favor of delegating these functions to management.
This is an unnecessarily costly strategy and wastes the opportunity to
benefit from the knowledge of experienced residents.
However, there are several areas of financial management, Insurance/Risk Management and Investments, which have important implications to how much homeowners pay in assessments that could benefit from the expertise available in our community.
Sun City Summerlin, the only age-restricted HOA in Nevada larger than Sun City Anthem, has a sub-committee to the Finance Committee for Insurance and another one for Investments.
The success of these committees in terms of savings for owners and in
identifying hazards or waste that could be avoided should be examined to
determine if such a model could be adapted to Sun City Anthem to the benefit of
our owners.
There is no need to reinvent the wheel as we develop the critical systems
needed under self-management for cost-effectively protecting our assets and
lifestyle.
Analysis
Attached is the Sun City Summerlin’s September 9, 2004 policy governing the Finance Committee with it September 26, 2006 investment policy for operating funds.
Summerlin has an open website at:
...which makes available to the public all of the governing documents, budgets,
financial reports, and a wealth of other information which would benefit Sun
City Anthem in setting up an adequate administrative policy framework essential
to protect the association’s finances as we complete the transition to
self-management.
All documents referenced herein can be located online.
This recommendation is for a study group to develop a possible charter for a newly-formed resident Insurance/Risk Management Committee and an Investment Committee.
However, the study group should work closely with the Finance Committee and
include their opinions/preferences about modifying the Finance Committee Charter
to expand its advisory role in these areas.
Either way, the purpose of the first committee is to utilize resident
experts in risk management/ insurance to assist management and the Board to
reduce the number of claims and the cost of claims.
The purpose of the second committee is to increase oversight on
SCA’s investment policy and to ensure that the strategies are prudent
protection of principal and minimize overhead/fees on the
transactions.
Why should the Board consider adding an Insurance/Risk Management Advisory
Committee now?
There was an issue recently regarding the necessity of placing additional insurance requirements on the vendors for club events which upset a lot of owners, particularly club Presidents involved with entertainment.
The owner relations issue has been resolved temporarily by the addition of
association-paid insurance called TULIP.
However, when this policy was added, the Board did so only for six months, at which time, a Board decision will be made as to whether to continue the buying the policy, and if so, who should pay for it.
However, when this policy was added, the Board did so only for six months, at which time, a Board decision will be made as to whether to continue the buying the policy, and if so, who should pay for it.
The Board decided to buy Tenant Users Liability Insurance Protection (TULIP) with the hope (not based on an actual evaluation of the underlying general liability claims experience) that possible claims occurring during Club events that were due to the errors of the vendors would be diverted to TULIP and would not increase the negative claims experience of the more expensive general liability policy.
However, without any analysis of what caused SCA to have such negative
claims experience on the General liability policy, it is impossible to know
whether the larger risk management issues are being addressed.
Concerned owners’ participation in the analysis is important to make sure buying TULIP isn’t just “kicking the can down the road”.
Fortunately, several residents with insurance expertise offered to analyze
SCA’s claims history for free if the raw data (without names) is provided to
them.
Results will always be better if the expertise of resident volunteers is
welcomed, and formally chartering a committee will ensure that there is an
explicit statement of committee members’ access to required information is
embedded in the system.
Starting with impetus for the TULIP policy purchase, a newly chartered resident insurance advisory group could analyze what SCA’s risk management problem is based on our actual claims experience:
1. Why were there 53 claims against SCA’s general liability insurance over the last fiveyears that cost $1,385,300?
2. Since having an average of 10 claims/year that cost on average $277,060/year is making it hard to insure SCA, what can we do to reduce these accidents/claims and bring the costs down?
3. How much of these claims could have been diverted to TULIP because the claims were caused by vendors at Club events?
4. If claims during the six-month trial period are caused by vendors/Club
events, Clubs/vendors need to expect that management will recommend the vendors
pay the premiums since TULIP will be working as intended.
5. If so, what can Clubs do to avoid accidents or conditions that cause claims, if any, at Club events?
6. What else can the association do to more effectively manage risks of all types and reduce the cost of the premiums?
Why should the Board consider an Investments Advisory Committee?
Just as an example:
When a resident offered a suggestion that SCA buy bonds at a wholesale rate through Treasury Direct, the idea died without a full analysis because there was no structure in place for such an idea to be evaluated by resident experts.
Without a review and cost-analysis, SCA possibly lost an opportunity to
increase our return by reducing the overhead cost of trading.
To the extent that we can utilize volunteer owners’ expertise to maximize
the return on our investments, SCA can minimize overhead to help keep
assessments and under control.
Additionally, there may be some value to the organization to consider
whether our investment policy (if there is one) is prudent.
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Your thoughts on Nona Tobin's proposal?
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Kudos to Ms. Tobin....I have long held that SCA has a wealth of retired expertise at their finger-tips.