Minutes of the MAC Telephonic Meeting of February 12, 2014

The minutes of this meeting are readable at 2-12-14_Meeting_Minutes_DRAFT_final

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Meeting Summaries of the February 2014 On-Island Meeting

The following PDF files contain the summaries of the Meetings:

1- On February 6th, with Mark Smith, the Club’s audit partner with Deloitte, - 2-6-14_Deloitte_mtg_draft

2- Later that day, with Bermuda Government – specifically the Minister of Tourism, Shawn Crockwell, and the Director of the Department of Tourism, Billy Griffith - Government_mtg_2-6-14_(final), and

3- On Friday the 7th, with the Club Management Team - Management_mtg_2-7-14_final

If after reading these summaries, you have questions, please direct them to one of the MAC members.

 

 

 

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Status Update on the Accumulated Final Assessment

We have now written to the Minister of Tourism Development and Transportation.   But we think that our discussion with him will be more productive if MAC does not circulate the precise wording of what we told him before he gets the chance to react.
After our own analysis, and after listening to the 3 dozen or so members who have written to us since The Club’s announcement of the new assessment, the MAC is trying to construct at least one alternative proposal to the managing agent’s new “Accumulated Final Assessment” – proposal(s) that we believe will be more equitable to the membership as a whole – and, importantly, more likely to be collectible!
These are proposal(s) that we want to discuss with BDOT and the Minister, and with John and Sally as well, should they become interested in hearing our advice between now and the February meeting.
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Minutes of MAC Teleconference – Jan 5, 2014

The Minutes of the MAC Teleconference meeting of January 5, 2014 are

available at 1-5-14_Meeting_Minutes

MAC is pursuing its analysis of the Accumulated Final Assessment, and will post additional material as appropriate.

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The Minutes of the Newark Meetings

The Minutes of the MAC Meeting that took place prior to the AGM are here: 2013 Minutes of MAC meeting Oct 25

and

The Minutes of the AGM itself are here : 2013 AGM Minute Package final draft.  This file also contains the full set of handouts from the AGM meeting

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Mobile Internet Options in Bermuda

The Club discontinued offering its “business internet” service in the middle of 2013. Club Members who are looking for a more robust and flexible internet service while on the island may want to consider a personal hot spot.  Several MAC members have used this service in 2013 with good success.

Digicel Bermuda has a pre-paid SIM card option where you can buy 1 gigabyte of data for $59 or 5 gigabytes for $99, good for one month.

Digicel Bermuda Plans: http://www.digicelbermuda.com/en/prepaid/data-plans

There is also a small fee to get the SIM card ($15 to $20) which then becomes credit you can use towards the data charges, and there is a $7/month government fee for all mobile phone service in Bermuda. If you have an unlocked cell phone, you could use the SIM card for calls as well if you like.  SIM cards can be purchased at any Digicel Bermuda reseller, including AllTalk at 1 King Street, St. George’s, (441) 297-3151, which is right off the main square in town:  http://local.bermuda.com/Bermuda/All-Talk/profile

Then you need a device to use the SIM card in. Digicel offers a Huawei E5836, which is a personal hot spot. It takes the Bermuda cellular data signal and converts it into a WiFi hot spot. It has a battery so you can take it around the island with you. While you can purchase it from Digicel, you can likely get a better deal purchasing one in advance off a site like eBay or Amazon.com. Make sure to purchase an unlocked device (e.g. a device not tied to a particular mobile phone company).

Another option is to buy a USB stick cellular modem, such as the Huawei E303. This plugs into a single laptop and only provides internet access for that one laptop, as opposed to the personal hot spot which supports several devices at once.

Please note that neither the Club nor the MAC is able to provide support for this solution. The Digicel stores in St. George’s and Hamilton can provide some support for members who try one of these solutions.

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Approved Minutes of Q2 2013 MAC Meeting

The MAC met in Northern Virginia on June 21st, 2013, including a one hour-plus teleconference with the Developer/Club Manager and the Managing Agent.

The minutes, as approved at the Q4 2013 MAC Meeting, are  of that meeting are in PDF format here: 2013-06-21-MAC-Q2-Meeting-Minutes-FINAL

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2013 AGM This Saturday

A reminder that the Club’s 2013 AGM – the first one to be held in the New York City area since 1998 – will be this coming Saturday, October 26th, starting at 2PM.  Place will be the Newark Airport Marriot Hotel.  The meeting will be preceded by a quarterly meeting of MAC (these are not open to the public) on Friday at the same location.

MAC welcomes ALL members, but particularly those in the NY-NJ Metropolitan area, to the meeting.  Parking will be free at the airport parking lot – get your receipt when you drive in and then pick up a payment card from MAC at the meeting)

The tentative Agenda for Saturday includes a presentation of the State of the Club, a summary of MAC activity during the past year, and at least 45 minutes of Q&A with members who can attend. Should conclude between 5 and 6PM.

We hope to see a lot of you there.  Here is the tentative agenda, still in DRAFT form

St Georges Club

MAC 2013 AGM Agenda – Draft

October 26, 2013 – Newark Airport Marriott

 

 

Call to Order & Welcome (incl thanks to Planner)                         Chairman – Roy Van Brunt

Approval of the Minutes of the previous AGM                       Secretary – Michael Dennis

Introduction of members of 2013 MAC                                 Chairman – Roy Van Brunt

Comments of the Chairman

Summarizing 2013 MAC Activity                      Roy Van Brunt

Summarizing Financial Information                       Roy (& Phil)

Reports from MAC members

Treasurer – summary of MAC Expenses             Treasurer – Phil Wood

Exchange System                                                  Vice Chairman – Ryan Brown

Communications with members                                       Roy Van Brunt

Report of the Results of the 2013 Election                    Michael Dennis &

Steve Wexler

Questions and Answer Session for Member Participation

Introduction of MAC Chair elected for 2014

Remarks of the Incoming Chair

Adjourn

 

 

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MAC’s Summary of the Club’s 2012 Financial Position After Review of the Audited Accounts

MAC has used the time between the September 23rd email from the Club announcing the availability of the 2012 audited accounts to read and analyze what is contained in them, and has prepared a PDF file summary at this link

MAC’s Summary of the Club’s 2012 Post-Audit Financial Position.

For those who prefer to read the summary on this web page, rather than in the PDF file, it follows:

Things we know from the Club’s audited accounts released last week
The Managing Agent has been, and continues to use an accounting policy for bad debts (essentially unpaid delinquent member assessments) that does not conform to generally accepted accounting in Bermuda and Canada.
The new auditor, Deloitte, chosen by John Kyle to replace the former auditor, Arthur Morris & Company, who resigned last November, discovered this practice, and when unchanged by the Managing Agent, took exception to it in its independent auditor report by issuing a “qualified” rather than a “clean” opinion after its audit of the 2012 accounts.
Even after Deloitte pointed out the error, the Managing Agent continues to use the unacceptable accounting, and has published the Club’s 2012 statements using that unacceptable accounting anyway.  MAC has asked, but not received a reply as to why he made that decision.  In the business world, using accounting that is not “generally accepted” creates the presumption that accounts using that unacceptable accounting are misleading.
What the Managing Agent has been doing is to delay evaluating billed receivables for collectibility until they are two years old – that is, not until the time the delinquent account is moved, under Club Rules, from “Delinquent”‘ to “Suspended” category.  This delay has the effect of not expensing the write-off of what is not collectible.  Proper accounting requires the Club to estimate the true collection probablility of All accounts, Every Year.
This means that the reported 2012 accounts receivable balance of $2.638 million shown in the Club’s accounts as an asset, includes some assessment receivables that were billed in 2011 and 2012 and have not yet been collected, and whose collection is doubtful.  In addition, because the Club continues to bill members who have not paid assessments until they are suspended, it also includes the amounts billed to these same members for their 2013 assessments.
Deloitte’s independent auditor’s report states that of the $2.638 million balance shown in in the accounts as “Accounts Receivable” it considers the total to be overstated by $.871 million (or roughly 33%.)
$.693 million of that overstatement is 2011 and 2012 billed and thus far uncollected annual and supplemental assessments;  Deloitte is of the opinion that the nearly $700,000 of unpaid assessments for 2011 and 2012 should have been written off before now, but are still on the books.  Deloitte also believes that $.178 million billed to these members for their 2013 assessments is similarly uncollectible and should not be shown as Accounts Receivable at the end of 2012.
From the information in the accounts, we are unable to say with any certainty how much of the nearly $700,000 is Regular Annual Assessments, versus the 2011 Supplemental Assessments; nor do we know how much is 2011 versus 2012 billings.  Remember that 2011 was the year of the Supplemental Assessment.
We do know that the Managing Agent earlier reported an operating loss of $326 thousand in 2012, and an operating profit of $147 thousand in 2011 – or a combined loss for those two years of $179 thousand.  Had the Managing Agent used accounting that is “generally accepted” in Bermuda, that loss would have been $693 thousand larger, and in fact, the Club has really lost $840,000 in those two years.
We also know that even using the wrong bad debt accounting in these 2012 accounts, the Managing Agent reports that The Club incurred another $194 thousand of Operating Losses in 2012, for a cumulative total of over $1.03 million dollars for the last three years, and the true, accurate, and correct Operating Fund Accumulated Deficit at the end of 2012 is really $3.8 million rather than the $3.1 million the Managing Agent reports.
The $1.03 million dollars of cumulative three-year losses represents the amount that, even given the extra Supplemental Assessment in 2011, the Club has spent IN EXCESS of what it has billed as assessments, thus increasing the Accumulated Deficit.
In each of the past three years – 2010, 2011, and 2012, The Club has reported Operating Expenses in the range of $5 million a year.  At December 2012 The Club really had only $1.8 million of collectible Assessment Receivables that will provide cash flow in 2013.
The fact is that cash flow is, and always has been, a very large concern at the Club – and is referred to by the Managing Agent frequently.  That is not new. It’s why he holds a raffle every year to give away 10 weeks of assessments to those who agree to pay the next year’s assessments in September of the current year.  And it’s very likely the reason that he is offering this week an Interval International Dream Week vacation for those who, not having paid early in in September, will pay by this November.  Speaking simply, the Managing Agent needs that cash for 2014 assssments in order to operate through the end of 2013.
It is therefore reasonable to look into the 2014 operating year.  Over the past three years, The Club has skillfully availed itself of a variety of ways to avoid paying obligations, largely to government, as a way to conserve cash.  Without opposition from the government, the Managing Agent has spent the money that you send in every year on your assessments to pay “Timeshare Tax,” to pay instead Club Operations expenses, and allow the tax amounts to accumulate as debt.  The Managing Agent has also delayed paying almost a half million dollars of bills owed to the Ministry of Public Works for utility bills.
The footnotes to the 2012 financial accounts disclose that the Managing Agent has now entered into payment plans that will require him to start paying those government obligations in 2013 (and the half million dollars debt to the Public Works Ministry is pledged to be paid in full by February 2014).  These payment plans have introduced an additional and continuing cash drain – besides routine operational expenses – on the Club.
The source of cash to meet those obligations is not readily apparent to MAC, particularly since there was just $1.6 million of assessment receivables that could provide that cash going into 2013, and member assessment revenue is the principal source of cash.
It is fair to say that what we are witnessing, while nothing dramatically new, is a continuation of the history of the Club’s past Managing Agents – Seasons Ltd since 2007, and RCIM in the years before.  This is therefore not simply about ” the Kyles”.  It is about the Club of which we are members, and how that vacation opportunity that each of us bought is being managed.
This Club cannot, and has never been operated within the billed assessment amounts or available cash flow, and that fact is shown by the now nearly $4 million Accumulated Deficit in the Operating Fund.
The impending cash crisis is just much, much more severe now than it seemed might have been the case before we read Deloitte’s qualified audit report on the 2012 accounts.
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The Royal Gazette’s Recent Announcement of the Abolishment of the Bermuda Department of Tourism (BDOT)

http://www.royalgazette.com/article/20130829/NEWS04/130829701

This is a link to the recent article describing the end of the Bermuda Department of Tourism, and its employees now eligible to apply for jobs with the Tourism Authority that is being created by the newly elected government.

This is of high interest to all members and the MAC since it was this department that had been assigned responsibility for regulating the Timesharing scheme on the Island.

MAC is following this, and will update the members as more details become available.  John Kyle has told one MAC member that “licensing” is not being given to the Tourism Authority, but he did not speak to regulation.

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