State Parkway Again Rejects Request to Inspect Year-End Trial Balance and Adjusting Journal Entries

UPDATE: MAY 8, 2017

On May 2, 2017, my wife and I received an anonymous email from the association through Lieberman Management Services, Inc., saying “Upon attorney review, these files will be turned over. They will require a few days to compile and redact.”

However, as of this today, my wife and I have yet to inspect the payroll records we initially requested on April 20, 2017.

 

UPDATE: APRIL 29, 2017

State Parkway confirmed that the 2016 Holiday Fund Bonus was paid in December 2016 and January 2017. A close examination of State Parkway’s books and records shows approximately 2/3rds of the $16K of the year-end bonus was booked in December 2016, with the remainder booked in January 2017. However, State Parkway rejected our request to inspect certain payroll records such as timesheets even though personal information will be redacted. This rejection led to my wife and I filing our 15th complaint with the City of Chicago. In any event, it’s clear that State Parkway’s auditor neglected to accrue the 2016 Holiday Fund charge in January 2017 as part of 2016’s accrued payroll. I was also able to confirm the $2K of accounting invoices for services rendered in 2016, were improperly charged to 2017 and not recorded as accounts payable as of December 31, 2016.

But the sad truth is that by improperly deferring tens of thousands of dollars of expenses into 2017, the 2017 budget cannot accommodate these budget overruns. In fact, it has gotten to the point whenever the board approves an unbudgeted expense, the board is, in essence, approving an assessment increase without unit owners receiving advance notice.

 

UPDATE: APRIL 20, 2017

After my wife and I filed our fourteenth complaint with the City of Chicago for State Parkway’s failure to make its books and records available for inspection, the other day my wife and I finally received a copy of State Parkway’s year-end trial balance and adjusting journal entries for the year 2016.

Because State Parkway’s year-end payroll accrual seems too low (just $7K of accrued payroll at the end of 2016 vs. $22K accrued at the end of 2015, but the final paychecks for 2016 and 2015 were through December 29, 2016, and December 31, 2015, respectively; and doorstaff’s December backpay wasn’t paid until January 2017 respectively), my wife and I recently submitted our request to inspect certain payroll records during the years 2015 and 2016. The names and other personal identifying information will, of course, be redacted.

Meanwhile, it appears the 2016 holiday bonus was booked in both December 2016, and January 2017. Further investigation is needed via the payroll records my wife and I wish to inspect. Perhaps this is why the property manager resigned shortly after the release of State Parkway’s January 2017, interim financial statements?

State Parkway’s March 2017 financial statements have yet to be posted on e-Star.

 

UPDATE: APRIL 5, 2017

This afternoon I learned from a unit owner that, unlike my wife and I, she has yet to receive her copy of State Parkway’s 2016 Financial Review. State Parkway’s By-Laws make it clear unit owners should receive their annual accounting of the previous calendar year by April 1st. So if you haven’t received your copy of the 2016 Financial Review, you can request it from the property manager.

Earlier today, my wife and I informed the Association’s independent accountant, Picker & Associates of the many other errors in the 2016 Financial Review.

Finally, my wife and I are still waiting to inspect State Parkway’s 2016 federal and state tax returns and related tax worksheets.

 

UPDATE: APRIL 2, 2017

In my blog, I had confidently projected that State Parkway’s Operating Fund would lose about $70K during the year 2016. The 2016 Financial Review my wife and I received late Friday, March 31, 2017, shows State Parkway’s Operating Fund only lost $31K. What happened to my $70K projection? Even though State Parkway refused mine and my wife’s request to inspect the independent accountant’s year-end trial balance and adjusting journal entries for the year 2016, I was able to figure out how the books were cooked.

Including the $7-plus million gross understatement of future reserve expenditures, State Parkway’s independent accountant also made the following errors in the 2016 Financial Review:

  1. Understated Garage Operations Losses by $14K via “errors” in the adjusting journal entries;
  2. Understated Payroll Expenses by $16K by failing to accrue the 2016 Holiday Bonus in 2016;
  3. Understated write-offs by $8K by failing to write-off the lost scavenger rebates per Alderman Smith’s office; and
  4. Understated Fees from State Parkway’s independent accountants (CondoCPA and Picker and Associates) by failing to accrue $2K of invoices that were sent in December 2016.

 

Altogether, correction of the aforementioned four errors would put the actual Operating Fund loss to about $71K instead of $31K. Meanwhile, State Parkway’s handling of painting and wallpapering work done in the 4th quarter of 2016 need to be investigated as it appears they were not accounted for correctly.

“Errors” by State Parkway’s independent accountants and other professional consultants have been going on for a very long time. In fact, twelve years ago this week, I, in my capacity as director, found that State Parkway’s independent accountant overstated State Parkway’s year-end Replacement Reserve Fund balance in the 2004 Audited Financial Statements by some $128K ($673K as reported vs. instead of $545K actual). It took Brad Schneider of CondoCPA seven weeks to admit I was correct (even though it took me just minutes to find and report the error).

The bottom line is State Parkway still has about $475K (28.4%) to $500K (30%) of deferred assessment increases looming.

 

ORIGINAL POST

On March 3, 2017, my wife and I received an email from LMS, rejecting our February 22, 2017, request to inspect the year-end trial balance and adjusting journal entries for the 2016 Financial Review. Despite the Association producing the year end workpapers for previous years in December 2016 as a result of our complaints to the City of Chicago, the Association said on March 2, 2017, that “[t]he audit workpapers and federal and state tax worksheets are not records of the Association because they are not delivered as part of either the draft or final audit and taxes. That being said, Picker’s office is extending the same offer that was extended last year to view these documents; at their offices for a price. That is $600 prepaid, for requested documents to be reviewed, under observation of one of their employees. Should additional documents be required, those can be attained at an additional price of $250 per hour, inclusive of time to produce these documents. For your information, neither is the 2016 [financial review] or taxes is complete at this time.”

My wife and I immediately responded, asking if the Association was reversing policy? Notwithstanding, we reminded the Association that State Parkway’s board of directors has a fiduciary duty to review all accounting and tax transactions and adjustments, prior to not only their approval but also prior to the board appointing an officer to sign the tax return on behalf of the Association.

LMS immediately responded, saying “If Picker does any adjustments as part of the 2016 engaged Review (not audit) these items should not be included in the final review documents. To restate; NEITHER the 2016 taxes or Financial Review has been completed so there are no documents to be delivered at this time. [no emphasis added]”

Yesterday my wife and I received a copy of State Parkway’s 2016 Financial Review from State Parkway’s property manager, Bill Southall. The end of Note 2 in the 2016 Financial Review (on page 7) states: “In preparing the [2016] financial statements, the Association has evaluated events and transactions for potential recognition or disclosure through, February 13, 2017, the date that the financial statements were available to be issued.”

CondoCPA was State Parkway’s independent accountant until shortly after Director Howard Robinson, State Parkway’s President since January 2017, was elected to the board of directors in September 2014. Picker & Associates had done accounting work for Director Robinson’s development company.

While my wife and I await to inspect the 2016 Financial Review year-end trial balance and accounting adjustments, I’ve notice a number of material “errors” in the 2016 Financial Review, including the following: 1) no write off for $9K of Scavenger Rebates lost per Alderman Smith; 2) some $15K-to-$16K of 2016 Holiday Fund expenses and related liabilities were improperly deferred to 2017; 3) painting and wallpaper expenses were also improperly deferred to 2017; and 4) the reported garage operating deficit ($271K) during 2016 is suspiciously too low, especially as compared to SP+’s accounting ($291.3K). [LMS reported the garage lost $305K during 2016 but LMS’ financial statements, as I have demonstrated, are bogus.] Consequently, State Parkway’s reported $31,302 Operating Fund loss during the year 2016 has been grossly understated.

My wife and I will soon file another complaint with the City of Chicago on the very same issue we had thought was resolved. It will be out 14th complaint since late last May.

 

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