What went wrong?

If you haven’t had time to listen to IVGID meetings, at least take a look at pp. 156-160 of the Board packet for the 1/31/24 meeting. The interim Finance Director, Bobby Magee, has listed numerous financial issues that either have been or still need to be addressed. With such an extensive list of major shortcomings in IVGID’s financials, it’s apparent that past leadership failed to provide adequate financial oversight of our recreational venues.

It’s pretty obvious from Board meetings, Audit Committee meetings and Golf Advisory Committee meetings, that our former GM failed to monitor the financial health of our recreation venues, either individually, or as a whole. The same can be said for the Community Services/Golf Director.

Before we hire a new general manager, IVGID needs to learn from past mistakes which have resulted in such serious breakdowns in financial reporting and performance. The GM”s job description, as well as those for all IVGID management positions, need to clearly define required experience and expectations in these areas.

Problem areas

Here’s just a partial list of items identified in the Interim Finance Director, Bobby Magee’s report.

• Food and Beverage Deep Dive (after there were reported losses of $2,000/day during the 2023 golf season).
• Cost allocation plan review – venue managers, as well as citizens with experience in other local government agencies have been complaining about the “simplistic” and unfair methodology of charging venues for allegedly essential services provided by IVGID’s HR, Finance, and now, finally, IT functions.  These costs have never been compared to the cost those same services could be provided by a third party, a requirement of NRS.
• Extensive use of procurement (credit) cards by employees without proper controls in place.
• Lack of reconciliation of revenues/lack of inventory reconciliations (e.g. food and beverage). Anyone who has ever operated food/liquor sales knows this is a must.
• Multiple problems with conversion to Tyler Munis. Converting to a new financial system is never easy, but responsible agencies defer startup of a new system until after thorough testing is successfully concluded.
• Failure to complete month end accounting. (Checklist has not been completed “in some time”. A new process for adherence is being developed.)
• Facility fees shown as revenue. For years IVGID tried to fool the public by including these fees as operating revenues, instead of what they truly are, i.e. subsidies.
• Budget presentations redesign. For years presentations have deceptively focused on revenues, but rarely, if ever, showed expenses. Now we all understand why. Venue managers all figured another venue would have a positive cash flow, or alternatively, the facility fee would make up for any negatives. Revenues compared to expenses was of no consequence, so there was no motivation to monitor expenses.
• Daily cash flow reports “Process for active cash management is now in place”. This apparently was not in place prior to the arrival of the interim GM.
• Failure to submit various reports to the State offices in a timely manner, including Annual Comprehensive Financial Report  (2 one-month extensions have been requested, and a 3^rd extension is likely), Statements of Cash Flow, and Quarterly Economic Surveys.

Why did this happen?

Many, but not all, of the problems stem from the premature and poorly planned conversion to a new accounting system in July of 2022. Proper testing was not accomplished before the rollout.

The lack of internal controls is another source of many financial mis-steps.

Last, but not least, IVGID’s finances have been intentionally deceptive for years. The term “cooking the books” was an understatement. It’s as if IVGID’s books were put through a food processor. After the data migration to the new system in 2022, it was difficult, if not impossible to compare revenues and expenses to earlier reporting periods.

Deceptive messaging and practices

Consider the following factors, all aimed at showing our recreational venues’ financial performance in a favorable light :

1: IVGID’s venues, collectively, do not operate at break-even.

The notion some call the “IVGID model” that IVGID’s venues, collectively, should operate or have operated at break-even is false. For years, IVGID has actually budgeted for operations to be subsidized by the facility fees. Click the link to see historical allocation, from the 5/25/23 Board packet. https://ivcbmatters.com/wp-content/uploads/2024/01/facilityfeehistory.jpg How on earth can venue managers assume that the venues, collectively, do not rely on subsidies? Simple answer, they can’t. If every venue manager believes some other venue has enough revenues to compensate for their losses, it’s a recipe for poor performance and failure.

2: Central services costs were unfairly allocated using bases that tend to overcharge some activities (especially utilities) and undercharge others (Community Services and Beach). This makes the financials skewed and unreliable. Mr. Magee has advised the Board to include a budget item for a consultant to develop a valid methodology for allocating central services.

3. It’s now widely known (and documented in Moss Adams consulting reports) that for years IVGID has been capitalizing millions of dollars of expenses that should have been listed as operating expenses. As a result, we can deduce that venues’ losses were even greater than shown in past reports; furthermore, “profits” were exaggerated.

4. Facility fees have been shown as operating revenue in financial reports, again presenting a deceptively rosy picture. The initial purpose of the fee was to pay off bonds to acquire the beaches. Over time, more and more of it was assigned to subsidize money losing operations.

5. Water rates favor our recreational venues’ snowmaking and irrigation uses, once again tending to lessen operating losses. According to the consultant who developed the utility rate plans, based on cost of service, Ski and Golf operations are not paying a fair price for their excessive water consumption.

First steps forward

It will take a tremendous effort to correct past improper accounting practices, and an even greater effort to change the IVGID culture that has come to rely on the so-called “facility fees” to prop up poorly managed operations, not facilities. Communicating expectations to a new GM, as well as staff, and rewriting the GM’s job description are important first steps.