August 16, 2007 Issue
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Classified Chestnut Hill Local Online Editor Don't Miss an Issue, Tell us what you see or Winner of Two |
Opinion
At a crossroads This perpetual dilemma is likely common for people who live in and are concerned about the preservation of an historic place like Chestnut Hill. Change is often, if not always, greeted with apprehension, a sign of good times past slipping further away. Today, the change on most people’s mind when they look at the Avenue is the increase in banks. Suddenly, there seems to be one or more on every corner of the upper 8000 blocks of Germantown Avenue. Nowhere is this more evident than the corner of Evergreen and Germantown avenues where major bank branches occupy three of four corners. Suddenly Chestnut Hill has become the financial center of Northwest Philadelphia. Is this a boon or the road to bust? In the next two issues of the Local, staff writer Kristin Pazulski talked to many Chestnut Hill merchants, residents and community leaders in addition to marketing, planning and bank professionals in an attempt to answer that question. For the next two issues, her report will cover what she learned and what the real harm is, or may be, as these large financial institutions take up residency in many of the Hill’s most visible (and prized) corner real estate locations. If Chestnut Hill is indeed at a crossroads, if it is on the edge of an important decision, it must act now to adapt, whether it means restricting new banks from entering the neighborhood or discovering the best way to live with them There is certainly reason to be concerned. The banks bring a lot of issues with them that need to be addressed. This is not the first time the neighborhood has been faced with climate change. But this time, the challenge could be substantial. It’s important to take the right path. Pete Mazzaccaro CHCA politics has rapidly taken the face of our national disgrace where partisan sniping and personal attacks have replaced issue debate, oversight and constructive criticism. The Oversight Committee was created with a two-year mandate to look into the highly-publicized managerial and financial chaos that characterized this organization for several years ending in June 2006. A committee of elected and non-elected board members, individuals who were not on the board, and with backgrounds as diverse as one could imagine, spent countless volunteer hours researching the history of how this organization ran itself into accumulated losses of at least $160,000 at the CHCA, internally generated debt of $180,000, and a Fund endowment that was actually losing on its investments. Despite a plethora of “suggestions” from board and community members that we “look into” this person and that incident for questionable behavior and connections, we chose instead to use the tried and true guidelines of oversight and “follow the money” unless there was overwhelming clear documentation that some laws had been broken or written guidelines sidestepped. The train wreck in the internal financial process we found could not be overstated. Part-time clerks had unlimited check-signing authority with no oversight. Deposit and borrowing resolutions at banks were out-of-date or non-existent. Internal financial records were missing essential postings of the largest debtors. Minutes of CHCA and trustee meetings were incomplete or did not exist. Contracts, loan documents and tax returns were signed by those who had no authorization, and the debt of the organizations as stated on the records was considerably understated while availability of credit was considerably overstated. All this within a 50-year-old professional organization that had a 50 member board and established trustees — or so it seemed. We found the board had no problem reforming the “easy stuff” like check signers, routine administrative procedures and documents, but when it came to actually admitting how extensive the problems had become, that was another matter. Accountants’ audited financial statements are the shorthand reflection of how management has performed and how solvent an entity is at a given point in time. It was concluded that the CHCA and fund statements fell short in this regard for several prior years. This is where the rubber meets the road and where a small cadre of currently controlling individuals within both organizations (CHCA and fund) want to dial out the members and the public, claiming “we can fix it up in later years”. That is not how the written regulations of the organizations themselves or the regulatory authorities expect it to be done. The long-delinquent financial reports of the CHCA and the fund as of 3/31/06 were recently posted on the CHCA website (www.chestnuthill.org) for all to review. These were filed with the State and Federal Government despite recommendations they were incomplete and erroneous. We will outline here individually some of the most elementary portions of both of these statements that, in our view, reflect substantial variations from the facts and financial requirements when reporting operations of these two distinct corporate entities. However, only an audit by a professional with expertise in non-profit/for profit affiliated corporations can produce the detailed reports we presently require.
CHESTNUT HILL COMMUNITY ASSOCIATION Our currently filed tax return or 1120 audit report states the association has a line of credit with a local bank of $300,000 with $267,000 available. In point of fact, no such line of credit exists or ever existed, and the bank in question has an outstanding balance with the CHCA of $33,080 which it wants repaid. One must wonder how anyone reviewing an audited statement of a company showing a net worth of only $24,000 and accumulated losses of $167,000 could possibly qualify for a line of credit of $300,000. When an auditor does not even verify a bank line of credit to the degree it grossly exaggerates financial condition, one must wonder about the entire report. Further research indicates this same error was present on prior year’s statements. Even if one was to assume that management erroneously told the auditor it has such a line of credit, it must be verified each and every year.
CHESTNUT HILL COMMUNITY FUND The value of the endowment fund continues to deteriorate as shown on the audit that became the Federal 990 filing for 3/31/06, though we contend that is understated by $180,000 as the debt created by borrowing against the fund assets was for CHCA and not Fund purposes. Therefore an asset “Due to Fund” of a like amount should appear on the Fund statement. Of course the structure of how that debt is to be repaid would have to be included in the accountant’s notes. However, the accountant’s notes presently project what we consider a complete misunderstanding of the distinctly different nature and purpose of the CHCA and the fund. As presently written it reads: “The Organization (fund) is affiliated, through common management, with the Chestnut Hill Community Association, a membership organization.” In actuality that is totally incorrect, for by design the fund has entirely different management in the trustees who are to manage the investments and control disbursements of earned income, and cannot hold a common position on the CHCA board or within its administration. It seems apparent the current accountant misunderstands the very fundamental distinction how a tax-free endowment trust must operate at complete arm’s length from the association. Details regarding the Trust Declaration and the names of trustees should be part of this report. One can read those statements on the CHCA website. What has been reported above is only the result of a fundamental overview of the statements as presented and filed. We have concerns that go beyond those aspects that only a qualified expert can answer. It should be pointed out that both the Oversight Committee and the (2006/2007) Executive Committee strongly recommended that a new and more qualified accountant perform this work. An independent auditor with no local ties was interviewed, furnished verification of his experience with non-profit/for profit companies, examined the CHCA records, and then provided a competitive estimate to complete the unfinished audits. He received Board authorization to proceed in April, 2007. Because the annual election creates both a new board and a new administration of officers, the outgoing President agreed, in May at the 11th hour, to allow the new president and treasurer to have time to examine both the reports of the Oversight Committee and the financial records before resuming the contract with the new auditor. Without the new president or the treasurer meeting with any member of the Oversight Committee, and without even reading the exhaustive March 2007 Oversight Committee Report (available on www.chestnuthilllocal.com, archives March 29, 2007 issue), by June 2007 they support a full-fledged internally-generated effort to stop the March 31, 2006 audit examination and the Oversight Committee was voted out of existence by a small margin — a year short of its approved time frame. One must question why so much effort has been expended to stop the March 31, 2006 audit from being prepared by other than insider control. Immediately following was the one-year early dissolution of the Oversight Committee by narrow vote. Why? Foster and Haley are former members of the recently decommissioned Oversight Committee. Foster is a current board member.
Opinion: Tick, tick tick The countdown continues. As I prepare to jettison the escape pod that will carry me from the airless land of a living Edith Wharton novel, I take the time for some clarifications, some reminiscences and some warnings. The New Order (aka The Action Alliance, aka the CHCA Executive Committee, aka The Budget and Finance Committee, aka The Dornemann Regime that tried to spay and neuter the newspaper and will try again) is nothing if not organized. The phone lines were singing, orchestrating the attack on Jim Foster. I’m so jealous! Why don’t they call me names any more? But their discussions should have coordinated the consistency of their content, as well as some dealing with the self-induced memory lapses endemic to the “let’s move on” crowd. For example, Marie Lachat’s letter that criticizes Jim for not living in Chestnut Hill (although I do think he could pass the blood test) should not have been immediately followed by Mary Anna’s (resident of Wayne, Pa.) or faced the page that had Dina Hitchcock’s (resident of Glenside Pa.) chatty, if worn, series of denials. These two don’t even live in Philadelphia. In a rare Hypocrisy Daily Double, Marie, an elected member of an elected board, on which sits Councilman Frank Rizzo’s assistant, Stew Graham, accuses Jim of political motives. Marie, look at your pot. It’s black. The phone lines were used to great effect before the last Board meeting as well. How else to explain the sudden reappearance of both Joe Pie, newspaper consultant, and Sanjiv Jain, real estate tycoon and liquor license hopeful? These two, long absent after embarrassing defeats and exposure (by me), resurface just in time to find a sympathetic board, willing to accept a canceled check by Mr. Jain as evidence of no wrongdoing in the renting of the former CHCA property, now Snowden-owned. Walter Sullivan defends Mr. Jain in a letter. I exposed this affair on these pages. Perhaps you have forgotten. I’ll be quick. Sanjiv was appointed, not elected to the board by Maxine. Maxine appointed Sanjiv property manager of the building. He billed the CHCA for maintenance on the building. He did not respond to a city code violation. The CHCA was fined $2600. I brought this up at a meeting. A vote was begun on whether he should be retained as manager. He quit the position in the middle of the vote. His company signage (Legacy Real Estate) remained on the property. I brought this up at the next meeting. Maxine said he was now managing pro bono. That means without pay — it has nothing to do with Sonny and Cher. The building was rented within days of the election of me and my crew. And in the fastest issuing of a check to anyone in the history of the CHCA, Betty Brady, responding to e-mail by Sanjiv, issued the check. Now Walter defends the action because Sanjiv has a canceled check to someone that isn’t him. Walter, I realize it’s been quite a while since your first day of law school, but before the seat was warm, the term “contract” was brought up. The third party recipient of this check had no contract with the CHCA. Maybe she had one with Sanjiv. It doesn’t matter to us. His verbal and public contract with us was for pro bono services in the tradition of volunteerism so important to the Hill. So, Walter, do your homework, and Sanjiv give us back the $2600 and the $3240. But he won’t. Even though Dina told me she would “look into” this, the board will not because this marks the return of the old days. Sanjiv will apply for a liquor license for an indoor children’s play space. You think I’m kidding, don’t you? Maxine will return, as will Doug Doman. All is forgiven. Or hidden. Foster demonized, others marginalized, Feldman, whereabouts unknown. But before I leave, allow me to bestow some parting gifts. I have been fighting with Jim Foster and the other members of the Oversight Committee since its inception. They all wanted to give the A.A. crowd a chance to clear up their past action in-house through an independent audit and the continuance of oversight. I took a more forceful approach. “Call the cops,” I said. “There is enough fraud, altered grant applications, non-compliance with governmental agencies, and general incompetence to have this place crawling with investigators ‘til Snowden rents the Blue Moon. (Keep’em flyin’ Gene!) Well, maybe not that long. They fought me. Let’s give the new trustee Jeanne Hemphill a chance, they said. I told them not to trust her and I was right. At her first Board meeting, before which she told me she didn’t have enough information to comment on past misdeeds, she proceeded to comment, and absolve those accused. When my hand shot up after her statement, she excused herself, and left the building. The Dark Side recruits another. So, as we are all exposed to the prying eyes of the CHBA’s cameras, (I have called the ACLU) the board runs and hides. What are they afraid of? Exposure, embarrassment, fines, exclusion from grants, “outsiders” looking into their schemes? All of the above. And with their latest acts of hubris, my case was won. The “reasonable” members of the Oversight Committee were finally convinced to turn over a voluminous amount of evidence to various governmental agencies. What is about to hit the fan will clash with your dockers and deck shoes. I am notifying every private and public entity the CHCA does or seeks to partner with that their money and their reputations will be in jeopardy due to an upcoming investigation and attendant scandal. The CHCA has thoughtfully provided me with their names. I suggest you get out before the storm. I am.
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