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September 2010
LETTERS
Laguna Woods' Little Bell, or...
For Whom the Laguna Woods' (Dingle) Bells Toll
Open Letter to United Mutual Board Director M. Rubin By Connie Grunke
August 14, 2010
The
letter
below ( click on link to view the original file)
is in response to my comment at the 8/10/10 Board Meeting stating that we do not have control over the PCM salaries and are exposed to the same excesses as the Bell City salaries.
Mr. Rubin inferred that the annual salary budget is done with a bottom-up detailed analysis and that we could not be exposed to this in LWV.
I still maintain that with our limited knowledge of how PCM manages our village,
what we don't know has a potential for disaster
To:
Marty Rubin, United Mutual Director
From:
Conrad Grundke
Reference: Bell City Syndrome
At
the 8/10/10 United Board Meeting I commented that our
budget process DOES NOT prevent the
salaries
of our PCM staff from being prone to the same excesses
as those of the Bell City officials and
council
members. Unknown to the people of Bell City, who were
represented by their elected officials
(In
LWV terms, board members and managing agent), the City
Manager was the highest paid
government
employee in the United States with a base annual
salary of $787,637. When you add the
benefits
it came to an annual compensation of $1.5 million a
year. This also included 28 weeks of sick
leave
and vacation. Consider too that Bell City per capita
annual income is $24,800 and the city came in
UNDER BUDGET.
My
comment was to suggest that the United Board take
steps to prevent a similar lack of oversight on
the
part of our boards. An essential part of the Bell City
problem resulted from the electorate not being
aware
of the salaries. Once made aware of those salaries,
the hue and cry that resulted became a
national
scandal, and you probably were one of us who felt the
residents of Bell City were being
“robbed.”
Your
response to me was, and I paraphrase, “… the
United board takes sufficient action at the detailed
level
that such a problem could not exist in LWV.” I
suggest that you review the tape of your response
to
verify my accuracy in paraphrasing your answer. You
do NOT do a detailed line entry analysis of
staff salaries and you would not find a similar problem if it existed in LWV.
I
would also suggest that when you review your response,
listen to the comments of your President
and
also Director Beldner so that you all get in sync. You
are apparently unaware of what PCM can do
without
your, or the residents' knowledge. Your President
rightly stated that the salaries are done at
the
top level and we have no idea on the detail. Director
Beldner rightly stated that, “since PCM
salaries are confidential they are not obligated to provide the detail to YOU on the board.
For your edification, here are two ways to do a comprehensive salary analysis of a budget for LWV.
1)
A bottom up detailed procedure (not likely to get PCM
support):
a)
Determine the job titles.
b)
Define a job description for each job title.
c)
Establish a salary range for each job description.
d)
Establish the time for each job description task.
e)
Establish a salary for each individual based on the
tasks.
f)
Establish the cost of the salary benefits.
g)
Establish the overhead for each job title.
h) Use all of this information to do a comprehensive bottom up salary budget analysis, or,
2)
Have someone else do the analysis for us:
a)
By putting a process out for 3rd
party
bids, you can use the knowledge of another company to
establish
a “bid/budget.”
b)
This doesn’t guarantee the best results, but, if the
3rd party
wants the job, they will provide the
oversight
on the costs and you will have a measure against PCM.
Past
directors will say that; “No company is large enough
to undertake the job that PCM does (that is
not
true)” or “No company will put the effort into
doing a bid because they just assume that PCM will
get it” (Very likely since PCM was usually involved in reviewing the bids).
However
we have had some past success using the outside bid
process. For example, the last time item
2
was
done for the manor painting budget was in the mid
90’s, a third party contractor underbid PCM
by
a substantial amount. Not surprisingly, the following
year, PCM’s cost estimates were in line with
the
outside contractor and the job came back in-house.
Credit for lowering these painting costs for 3rd
Mutual
went to a past director, Ken Dooley. Unfortunately
this has not been done again for the past 15
years.
No director has been willing to pick up the gauntlet
of getting outside bids for major jobs and we
are
dictated to by PCM who most directors trust explicitly
even being aware of the “Credit Card and
Incentive Bonus fiascoes.”
When
you believe that you are doing a detailed line entry
salary budget analysis, you must be prepared
to
use the information in item 1 above. Look
through all your detail and see how many of the pieces
of
the
salary budget you have been provided by PCM. If
you do not have all the detail, you are incapable
of
establishing a true bottom-up salary budget. What you
are actually doing in the yearly budget is
accepting
each of the above “undisclosed” parameters from
PCM, without oversight, which results in a
top down budget base on whatever salary PCM thinks they can get away with.
In
my experience, PCM has only one objective in mind,
“To make as high a budget as possible and
come
out with extra salary that could be used for their
hidden employee benefits and unexpected
costs.”
As I recall, we have never come in over budget and
that can be the result of several things;
1)
Exceptionally good estimating skills (by the boards,
since they do the budget).
2)
Over estimating the budget to ensure coming in under
budget (by the boards/PCM).
3)
Exceptionally “good” PCM cost/income management
resulting in always coming in under budget.
PCM
gets awards for this, although, overestimating a
budget can also result in having success in
meeting a budget. We don’t really know for sure why we come in under budget.
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When things go wrong, PCM says, “We only do what the boards tells us to do.” Therefore, when things |
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The Grundkes |
Due
to lack of knowledge, directors have been prone to
confuse their understanding of the budget in
such
areas as; Incentive Bonus vs Safety Bonus or Salary
vs Wages. By confusing the issue of salary with
wages,
one can erroneously assume that the detail that is
done for union wages is done for the salaried
staff,
thusly allowing an open door for our budget to be
exposed to the “Bell Syndrome
Not
knowing “What We Don’t Know” is deadly in
business and that goes all the way from Enron,
Countrywide,
Fannie Mae, Bell City, etc., to LWV and the smallest
Home Owner Association. Not
considering
the possibility of a faulty salary budget generation
is being “willingly ignorant.” I don’t
accuse
anyone of fraud, however I will accuse the boards of
lack of oversight and ethics if they do not
look at all possibilities of how our money is being spent.
If
you would say to me that you don’t agree with my
assessment that we have an exposure to
excessive
salaries for our PCM staff and will take steps to
provide any necessary oversight, I can
accept
that. But, if you say that you have done everything
necessary to ensure that the salaries are
justifiable
you are providing a false sense of security in the
minds of our residents and deluding
yourself.
For
those who are following the Bell City salary review
(or PCM salary review), you can make a case
that
the salaries are legal. The Bell City council has
not broken any laws by generating the excessive
salaries.
What we should be looking at are the ethics of any
“managing agent” that could do such a
thing
and that is a part of your responsibility. Legal or
not, the state Attorney General is being asked to
review the Bell City salaries. Should he review PCM’s?
What
you are doing is trusting PCM without oversight in
the information that they provide. With PCM’s
track
record, how can you justify that we, the residents,
have been their highest priority over the past
15 years.
IF you TRUST then you MUST VERIFY. We want to see the VERIFICATION!
Connie Grundke
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Editor's
Note: For context, Mr.
Conrad's open letter, follows the Third
Mutual having filed a lawsuit against
its property
management company, PCM, Janet Price and
Milt Johns. The lawsuit, if it proceeds, is expected to shine the light to a whole slew of previously asked and as of yet un-answered questions. Subsequently, the defendants filed a demurrer, largely seen by some residents as a delaying tactic until new elections can take place, given that Isabell Meunnichow, Denise Welch and Sy Wellikson, three of the biggest PCM supporters and former board members during the secret incentive/credit card era are running for the Third Board. If they are elected it is speculated that the pendulum will swing
The Bell Syndrome is when a parasitic bureaucracy becomes irrational. Consequently, its decision-making focuses strictly on self-preservation. Strikss mostly communities where the electorate is apathetic, mis-informed, gullible, lazy, ignorant, or a combination thereof
Conclusion: Having covered government waste in general and the HOA/CID industry for a decade, we conclude that 1) Mr. Grunke is raising substantive issues that must be address thoughtfully and honestly by local governance and 2) The environment is certainly prime for the not only the existence of the Bell Syndrome but also for a pandemic.
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