Monday, June 22, 2020

The Tree of Money


The Tree of Money





Columbia Association's (CA) balance sheet for the periods ending April 30, 2016 though 2019. The April 30, 2020 financial statement will be available to the public this summer. Balance sheets represent a snap shot of the financial health of the organization versus the Income Statement that is similar to a video of the twelve month activities of the organization. The focus of this article will be an explanation of the financial trends in its balance sheet and Statement of Cash Flows. Only publicly available information will be used in this article. The table below is in thousands of dollars.

FY April 30,

2016

2017

2018

2019

Cash

702

1,845

68

72

Total Current Assets

14,300

10,826

4,919

4,750

Property, Plant, and Equipment

115,006

 

117,690

130,293

135,600

Total Assets

139,169

138,544

145,496

150,809

Line of Credit

0

1,845

5,905

11,001

Current Liabilities

25,519

21,391

 

25,901

29,258

Long Term Liabilities

27,640

26,041

24,225

22,345

Total Liabilities

53,159

47,432

50,126

51,603

Net Assets

86,010

91,112

95,370

99,206

Total Liabilities and Net Assets

139,169

138,544

145,496

150,809



Stakeholders utilize balance sheets to determine the liquidity of the entity. The ratios below have been calculated from publicly available financial data on CA's website. 

FY April 30,

2016

2017

2018

2019

Quick Ratio

0.0275:1

0.0863:1

0.0026:1

0.0034:1

Current Ratio

0.56:1

0.51:1

0.19:1

0.16:1


Accounting liquidity measures the ease which an entity can meet its financial obligations with its cash or near-cash assets and pay its debts or bills as they become due. There are two financial ratios, the quick ratio and current ratio, calculated above. They differ as to how they define "liquid assets." The current ratio includes all current assets against current liabilities. The Quick Ratio includes only cash and cash equivalents against current liabilities. Most businesses strive to have a current ratio of at least 1:1 to be considered liquid. CA's current ratio is less than 1:1, and has been trending downward since 2016. This data should be analyzed with CA's cash flow statement to provide stakeholders with a 360 degree view of CA's financial management. The table below is a summary of the Statement of Cash Flows from CA's financial statements available on its website. All numbers are stated in 000's.

 FY April 30,               2016 2017 2018 2019
 Increase in Unrestricted Net 
Assets (Net Income) 
     4,461 5,102 4,258  3,836
 Cash Generated From 
Operating Activities
 13,129 15,345 18,103 14,246
 Long Term Debt (Repayment) (1,567)(1,629) (1,690) (1,753)
 Capital Projects (9,955) (12,281) (23,774) (17,533)
 Cash(Repayment)Borrowing
 on Line of Credit
 (922) (307) 5,905 5,096
 Line of Credit Balance  307 - 5,905 11,001

The above summary of the cash flow of CA reflects a generous amount of cash generated from operations. However, CA did not use this cash flow to strengthen its financial position by setting up cash reserves or funds for use in an emergency situation. Instead, CA used the funds for an expansion in Sports and Fitness capital projects. There was little to no increase in revenue, no Increase in Net Unrestricted Assets (Net Income), and no measurable return on investment. 

Restructuring the line of credit to a term loan would improve the liquidity of the Association, but a cultural shift must occur to bring the continued reliance on lines of credit and not planning for a rainy day by funding cash escrow accounts to an end. 






  

Monday, June 8, 2020

Pools Mean Everything to Me.



As a child my father volunteered in the community to operate its 50 meter outdoor pool. He became certified as a pool operator and with the help of several teens cleaned and prepped the pool for the summer. I enjoyed playing in the bottom of the pool with my brothers. As his daughter, I  had the privilege of a parent who showed me the value community service.

When I was about six years of age my parents enrolled me in swimming lessons. Once I could swim across the pool, I wanted to swim with the summer swim team. It changed my life. I was surrounded by other children and families in the community. I learned social skills and team building while eating pancakes and pizza. Summer coaches were college students and encouraged each of us to strive to attend college while many of our parents were only high school graduates. This social experience was essential to obtaining my first job and later successes in life.

Upon my sixteenth birthday, I took the Red Cross Life Guard training class and got my first job as a life guard. Pool managers taught us how to interact with guests and each other, but most importantly talked about the value of a college education. I continued on to manage  pools and work as a summer swim team coach, remembering the value of each of these experiences. I recognized the possible impact I could have on young children and valued the time I had to mentor them. I continued to manage swimming pools as a second job to pay for my graduate school education.  

And, then there were my children, a boy and a girl, who learned to swim. Both had the privilege of swimming in the CNSL. My daughter has gone on to swim winters, work for CA, and coach winter swimming in Wisconsin. I could not be more proud of the lengths she would go to engage her staff and mentor your young winter swimmers. I have CA Aquatics to thank for the positive influence they have had on my adult children.  

 So, as you can see, pools mean everything to me.

And, then there is today. As a member of the Columbia Association (CA) Board of Directors I was faced with a heart-wrenching decision, whether or not to close the outdoor pools. I had to choose between two  competing values, community and financial solvency. CA has operated for years without cash reserves or a rainy day fund, a current ratio of less than 1:1 (inability to pay bills without borrowing), and a capital spending budget funded by a line of credit (similar to a credit card). As a voting member of the Board of Directors, I had to exercise my fiduciary responsibility of care or financial solvency. It costs approximately $200,000 to operate an outdoor pool during normal times. Today, given enhanced sanitation measures, extra training, and limited capacity, the losses from operating the pools could be financially devastating to CA. I voted to keep the outdoor pools closed to prevent a further deterioration of our cash flow. With careful financial planning, much of this could have been avoided.

Without a restructuring of CA's Balance Sheet and the reassessment of programs and assets that operate a loss, CA's financial situation will remain tenuous. CA must first finance its core services, open space and the village operations, and then prioritize its programs/facilities. CA will have little cash flow into the immediate future and cannot operate its programs/facilities at a loss. As a Board member I will request a "ramp up cash flow projection" for each program opening. Further, I am open to hearing your suggestions about improving CA's operations and financial solvency.  My cell phone number is 443-686-0702.       






Wednesday, June 3, 2020

The Ground has Shifted



Spring has transitioned into summer and that is good. The stay at home order has given each of us the time to look inward and rethink what is important to us, our families, and community. It has also given me time to reflect on Columbia.

Columbia Association essentially locked down a vast array of fitness facilities, pools, and before/after school programs. I have learned how intertwined and interconnected each of these programs are to the financial stability of the organization. The profit margins of each of these activities is dependent on membership traffic, and with the health and welfare of our neighbors  at risk, so is CA's micro-economy. All of this will change us as a community, and that is o'k. What I am certain of is that we will emerge as a kinder, more resilient community. 

The ground has shifted on CA, and for the first time we applauded those who kept our community operating, from health care professionals to open space crews. In Jim Rouses's view, "we are best in small communities where there is a sense of responsibility to one's city and to one's neighbor...a garden for the growing of people." Essential to the transformation of CA into the new normal should be an open, honest, and transparent conversation with community leaders. 

Each of CA's villages have also suffered financial devastation as the neighborhood centers have been forced to close and village sponsored programs cancelled. The village managers along with with their respective Boards of Directors have been forced to layoff or furlough most of their staff. CA and the Villages must be consistently supportive of each other, adding value to each other, and looking for ways to serve the greater community.

CA and the Villages must learn to be flexible and agile, while cultivating an atmosphere of teamwork. Specifically, the Villages were a creation of the CA Charter, By-Laws, and Declaration which skillfully outline Columbia Association's responsibility for the continuity of essential services to its residents, including open space and maintaining village operations like covenant enforcement. CA and the Villages should go forward with a new commitment to mutual respect as we pare down and design a more viable plan for financial stability. 

Soon the CA Board will be faced with more choices to ensure the financial viability of the organization. This brings me to leadership. Leadership is not just about a title; it is about each of us taking responsibility for Columbia. Ask questions and participate.  Many of my neighbors have contacted me about the grass not being cut, the pools closed, or the gyms not open. These are questions that deserve a "why" answer; not to blame anyone, but for understanding and planning for a more stable financial future. Talk to me, I will listen. 

Reprinted in part from the June 1st Villager      

Dollars and Sense Part I

It is important to explore "why" Columbia Association is currently experiencing a financial crisis. It is not helpful to assign blame today, but rather understand the contributing factors or history to improve our financial position. First, remember the thesis, operate and budget as a prudent household would: budget operations cautiously, manage capital expenditures judiciously, and plan for an economic downturn. Through a series of posts I will breakdown CA's financial problems for each of you to understand. I will only use information available to the public.No meaningful FY 2020 information is currently available. I am attempting to just present the facts, my comments will come much later. All numbers will be presented in thousands

Overall, Columbia Association appears to be profitable as can be seen from the Increase in Net Assets (Net Income):
 FY 2017  $5,102
 FY 2018  $4,258 
 FY 2019  $3,836

Further, CA, like most companies, generated cash from operations after non-cash expenses are added back to the Increase in Net Assets. Non-cash expenses are usually comprised primarily of depreciation, or the reduction of an asset over time due to wear and tear. CA's Cash Generated from Operations (in thousands) is: 
FY 2017   $15,232
FY 2018   $17,922
FY 2019   $14,361

CA then used the cash for debt service which averaged $1.5 million to $2 million annually and Capital Spending (in thousands) as follows:

FY 2017   ($12,281)
FY 2018   ($23,774)
FY 2019   ($20,275) 

The resulting Cash (Shortfall) Addition (in thousands) for each of these years was:

FY 2017     $1,450
FY 2018    ($7,682)
FY 2019    ($7,316)

And, the resulting short-term balance of the line of credit(in thousands) on April 30th of each of these fiscal year ends was:

FY  2017             0
FY  2018    $5,905
FY 2019    $11,001

This is only an overview of cash flow numbers. Do not jump to any conclusions. The current financial condition of  CA is the result of a multitude of factors.

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