Developments - September 2016 - 54

MANAGEMENT/FINANCE * * * * * * the resort's collection trends, and it is very significant. Housekeeping - this can represent either on-staff housekeepers or a contract service, and all related expenses, such as supplies and uniforms. Insurance - typically includes directors and officers, employee health, liability, property, workers compensation, and other types of applicable and necessary coverage. Management fees - the cost of management, whether contracted out to a management company or paid to an in-house manager. This does not include reimbursement for payroll and other operating costs that may be paid to a management company. Repairs and maintenance - all repairs the property requires annually, such as swimming-pool repairs, minor fixes and patches to elevator and fire systems, pest control, related supplies, and labor costs whether paid to contractors or employees. This does not include replacement reserve expenses. Utilities - includes cable TV, electricity, natural gas, refuse collection, and water and wastewater treatment. Other - expenses that don't fit into another functional category, such as depreciation, security, transportation, and unusual expenses. Operating Expense Summary Among other data available, the study provides a general analysis of where operating maintenance fee dollars are spent. Of course, not all resorts present their financial data in the exact same format or use the exact same categories to classify expenses. For example, expenses for Internet connectivity could be classified as utilities or as general and administrative expenses. These types of differences are not really deemed material to skew the averages presented below. Also, it should be noted that payroll costs are not presented as a separate component. Most resorts include their payroll costs in the functional category they are associated with (i.e., housekeeping, maintenance, security, etc.), not in 54 - Developments arda.org a stand-alone payroll category. Payroll and related costs are typically the largest expense in a resort operations budget, however, running normally between 25 and 40 percent. Figure 1 shows how those funds were spent as a percentage by functional category as defined above. Figure 2 Figure 1 Replacement Reserve Summary On average for the year of data presented here, replacement reserve assessments were 16% of total assessments charged to owners. This is clearly a significant percentage of the dollars assessed in any given year, although the amounts as projects are undertaken. Unlike operating assessments, where the expenditures match the period of the assessments, the replacement reserves are designed to be a longer term savings to fund large, capital projects which extend the useful life of the property. In any given year, these funds may be used very little or a large project (either planned or unplanned) can decimate the accumulated savings. Also, as resorts are aging, a significantly larger piece of these funds are being spent annually. For the example year shown here, the replacement reserve expenditures were 99.43% on average of the related assessments. This kind of spending does not result in long-term savings and could present a significant problem for resorts in the future. Figure 2 shows how the replacement reserve funds were spent as a percentage by functional category. Does the Past Predict the Future? Understanding the past is critical for any resort to planning for the future. Planning for coming years is a difficult task-we cannot predict what is to come. But we can glean some hints from historical data. For example: * Assessed property values are rising. * Utility rates rarely go down. * Collections percentages do not typically improve over night. * Payroll and related employee benefit costs rise annually. * Older resorts require more maintenance (and they age each year). * Spending all of the current year replacement reserve funding will likely result in there not being enough money for other projects when they are due. Using the trends of the industry-coupled with a resort's own historical data-will put the board and management in a solid position to support the decisions that are made going forward. A solid foothold in budgeting also results in less need for special assessments, healthier replacement reserve savings, and a decreased potential for large assessment increases year over year. And this translates to happier owners, board members, and managers, which all contribute to a resort's total well-being. Lena G. Combs, CPA CGMA, RRP, is a partner with Withum and her Combs's email is Lcombs@ withum.com. http://www.arda.org

Table of Contents for the Digital Edition of Developments - September 2016

UP FRONT
FIRST WORD
AROUND THE INDUSTRY
TRUSTEE TALK
INTERNATIONAL BRIEF
RESEARCH
MEMBER MATTERS
SPECIAL HR SECTION: PART II
CUSTOMER CARE
CREATIVE RESALE STRATEGIES
FRONTLINE TACTICS
RENOVATIONS: “IF MONEY WERE NO ISSUE?”
WHERE DO THE DOLLARS GO?
HOAS AND THE NEW OVERTIME RULES
CAUTION ABOUT YOUR FINANCE OPTIONS
FOCUS ON: REPUTATION MANAGEMENT
FACES FROM THE FRONTLINES
MEMBERSHIP UPDATES
Developments - September 2016 - 1
Developments - September 2016 - Cover1
Developments - September 2016 - Cover2
Developments - September 2016 - 1
Developments - September 2016 - 2
Developments - September 2016 - 3
Developments - September 2016 - 4
Developments - September 2016 - 5
Developments - September 2016 - UP FRONT
Developments - September 2016 - 7
Developments - September 2016 - FIRST WORD
Developments - September 2016 - 9
Developments - September 2016 - AROUND THE INDUSTRY
Developments - September 2016 - 11
Developments - September 2016 - 12
Developments - September 2016 - 13
Developments - September 2016 - 14
Developments - September 2016 - 15
Developments - September 2016 - 16
Developments - September 2016 - 17
Developments - September 2016 - 18
Developments - September 2016 - 19
Developments - September 2016 - TRUSTEE TALK
Developments - September 2016 - 21
Developments - September 2016 - INTERNATIONAL BRIEF
Developments - September 2016 - 23
Developments - September 2016 - RESEARCH
Developments - September 2016 - 25
Developments - September 2016 - 26
Developments - September 2016 - 27
Developments - September 2016 - MEMBER MATTERS
Developments - September 2016 - 29
Developments - September 2016 - SPECIAL HR SECTION: PART II
Developments - September 2016 - 31
Developments - September 2016 - 32
Developments - September 2016 - 33
Developments - September 2016 - CUSTOMER CARE
Developments - September 2016 - 35
Developments - September 2016 - 36
Developments - September 2016 - 37
Developments - September 2016 - CREATIVE RESALE STRATEGIES
Developments - September 2016 - 39
Developments - September 2016 - 40
Developments - September 2016 - 41
Developments - September 2016 - FRONTLINE TACTICS
Developments - September 2016 - 43
Developments - September 2016 - 44
Developments - September 2016 - 45
Developments - September 2016 - 46
Developments - September 2016 - 47
Developments - September 2016 - RENOVATIONS: “IF MONEY WERE NO ISSUE?”
Developments - September 2016 - 49
Developments - September 2016 - 50
Developments - September 2016 - 51
Developments - September 2016 - WHERE DO THE DOLLARS GO?
Developments - September 2016 - 53
Developments - September 2016 - 54
Developments - September 2016 - 55
Developments - September 2016 - HOAS AND THE NEW OVERTIME RULES
Developments - September 2016 - 57
Developments - September 2016 - CAUTION ABOUT YOUR FINANCE OPTIONS
Developments - September 2016 - 59
Developments - September 2016 - FOCUS ON: REPUTATION MANAGEMENT
Developments - September 2016 - 61
Developments - September 2016 - FACES FROM THE FRONTLINES
Developments - September 2016 - 63
Developments - September 2016 - MEMBERSHIP UPDATES
Developments - September 2016 - 65
Developments - September 2016 - 66
Developments - September 2016 - 67
Developments - September 2016 - 68
Developments - September 2016 - 69
Developments - September 2016 - 70
Developments - September 2016 - 71
Developments - September 2016 - 72
Developments - September 2016 - Cover3
Developments - September 2016 - Cover4
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