There was a full house at the Lake Room on Wednesday, July 11th. It was embarrassing to watch the Board race to improperly remove Cyndi Price from her board seat. They would not even wait a few minutes to hear from her attorney, who had driven from San Jose and was in the parking lot as they adjourned

For those in attendance, you’ll know what happened.  There was a terrific rush by the Board to hold their vote. The issue clearly had been decided well before the meeting began (typical of this board).

FOLW has decided that the Board’s unfair and noncompliant decision to recall Cyndi Price must be opposed and corrected.  We have, therefore, hired Michael Thomas, Esq., an experienced HOA attorney, who will file suit next week to enjoin the Board’s actions.  Each individual Board member who voted in favor of Cyndi’s removal will be held to account because they knowingly violated our Bylaws.  That may enable us to recover Association funds they may spend defending themselves.

Mr. Thomas has assessed our chances as follows:  

“I have been practicing common interest development law for over 27 years and this is one of the most egregious cases of Board malfeasance I have seen. While I cannot guaranty the results of an action, Cyndi, or any member of the Association, has a very good case.

If you share our anger over the Board’s improper actions, please consider contributing a comfortable amount to our legal efforts on behalf of the members.  Even $10 or $20 from all of our friends will really help.

All contributions will be kept confidential but will be recorded and placed in my Trust Account. Every dollar or portion thereof will be accounted for.

Please mail a check to Byron Maynard Realty Trust at 11376 Pleasant Valley Road, Penn Valley, CA 95946.  Or stop by my office in Wildwood Business Center (above Tuscany Gardens Restaurant), to contribute cash.

By Maynard


What’s Being Hidden from members and Why?

It shall be the policy of the Association to fully disclose its financial status to all members.

                                                                                                                     Finance Policy 4.30

Over the past four years, FOLW has noticed a number of symptoms that point toward potentially serious deficiencies in the Association’s financial management and reporting practices. For example, the Auditor’s 2015 post-audit Management Letter to the Board identified inadequate Internal financial controls that necessitated twenty-three adjustments to financial results provided by management, including adjustments ranging from $10,000 to $5 million. The Auditor also reported that there was no formal cash management process in place, which resulted in some instances of non-sufficient funds and inadequate reporting of cash balances. He warned that the existence of such internal control weaknesses could prevent management or employees from detecting misstatements on a timely basis.  He again reported internal control weaknesses this past year.

Not concerned yet?  Please read on. We believe you will see an emerging pattern of symptoms that reveal inadequate financial management, misleading, even deceptive, financial reporting, and growing efforts to obscure or hide financial results from members.

  • For more than fifteen years, the Association excluded about 75% of our major common facilities and common elements from replacement reserve reporting and funding to keep assessments low. After closing the Clubhouse in January 2014, the Board added all previously excluded common assets to the reserve study, preliminarily increasing current replacement costs $10 million.
  • The May 31, 2014 Audited financial statements understated current replacement reserve obligations by more than $10 million because the Finance Manager submitted results from the 2013 Reserve Study instead of 2014. Internal audit processes did not catch that error, which occurred during the period members were voting on a $4 million special assessment to replace the Clubhouse.  Hmmm
  • In February 2015, the Board approved the expenditure of $1.5 million from Replacement Reserves to help fund Clubhouse cost overruns. That action was improper because the closed Clubhouse structure was not included in reserve reporting, no reserve funds had been saved for that purpose, and it was not even listed as an asset on the books of the Association. No loss was reported when the Clubhouse was closed.
  • The Association, for the first time, hired a credentialed reserve specialist to produce the Reserve Study in 2015. That study increased current replacement costs for major common elements another $5 million. Surprisingly, the 2015 reserve study departed from past practice and did not report the discrete financial status of our two restricted and segregated replacement reserve funds. Instead, it consolidated them into a single account, which made it very difficult to track funding discipline.  Discrete reporting was important since reserves for capitalized assets were only 20.5% funded while non-capital reserves were 148% funded in the 2014/15 budget.
  • On March 22, 2016, the Board resolved to transfer the Audit function of the Finance Committee to a new Board Audit Committee. That authorized the Board to audit its own financial decisions and practices, as well as those of management. Minutes from Board Audit Committee meetings provide virtually no significant financial information and, although the committee is required to submit an annual report to the Board, there is no record of that financial report in Board or Audit Committee minutes.
  • Between October 2016 and April 2017, FOLW submitted seven written requests for copies of the quarterly financial reconciliation reports for the two reserve funds, which the Board is required to review quarterly. The Association declined to provide discrete budget vs. actual reserve expense reconciliations or fund balance information.
  • According to Finance Committee minutes, required monthly and quarterly financial reports were chronically late the first seven months of fiscal 2017/18. It was also reported that bank account reconciliations were up to 3 months late. Finance Committee members expressed frustration with the absence of required reports, including Board Audit Committee reports.
  • On September 26, 2017, the Board and Finance Committee held a joint meeting to review the Auditor’s Management Letter. Neither the Board nor the Finance Committee published minutes of that meeting.  However, the Board Audit Committee noted that the Auditor’s May 31, 2017 management letter reported “Internal Control Weaknesses Found During Audit.” The committee also commented that “Audit Committee Charter and Modifications needed” with no further explanation.
  • At the regular Board Meeting that same day, the Board accepted the Auditor’s report without comment or debate. The Treasurer reported that the tardy June, July & August Financials would be completed in October.  When two audience members asked the Board how many adjustments to financial information were made by the Auditor, those requests were rejected

After the meeting, FOLW submitted three written requests for a copy of the Auditor’s 2017 Management Letter, all of which were denied. We believe those actions were inconsistent with Association Finance Policy 4.30, which stipulates that,it shall be the policy of the Association to fully disclose its financial status to all members.

  • In November 2017, FOLW noticed that the Charter for the Board Audit Committee on the LWA website had been changed to read “Board Executive Audit Committee.By law, an executive committee functions similar to an Executive Meeting of the Board in that it’s actions and decisions are not reported to, or available to, the membership. When FOLW asked the General Manager to provide copies of the Board resolution approving that change he could not find one. The GM then removed the revised Charter from the website.
  • FOLW recently noticed that the new Website again displays a revised charter for the Board Executive Audit Committee. Again, no Board resolution approving that change is published in Board minutes.
  • In March 2018, the Board approved very substantial amendments to Association replacement reserve Finance Rules. The two restricted reserve funds were formally consolidated and most restrictions on reserve expenditures were eliminated. Those changes created a virtually unrestricted fund that can be spent at Board discretion.
  • At that same meeting, the Board approved the expenditure of $61,533 to replace a $1,000 Clubhouse dumpster enclosure using reserve funds saved for other purposes. That component was not included in the 2017/18 reserve study, but the Board improperly approved a mid-year addition to the Reserve Study, which is the property of the consultant. FOLW challenged that action but received no response.
  • The Association did not retain the reserve specialist to produce the 2018/19 Reserve Study and, instead, allowed uncredentialed “members and management” to produce that report. FOLW wonders if that was done to enable the Board to make unapproved changes to the reserve study and funding plan?
  • Because the reserve specialist was not hired this year, the required inspection of major common facilities, which must be completed every 3 years, was not conducted and there was no independent review of the Reserve Study or Funding plan.
  • The internally generated FY 2018/19 Reserve Study projects a need to increase annual reserve assessments 13% over each of the next five years, increasing annual reserve assessments from $695 to $1,133. That increase is based on the “need” to fund $3.5 to $5 million in renovations to the golf course and to raise funding to 30% of full funded obligations. Please recall that the Board unilaterally cancelled the Self-supporting Amenity rule for Golf in 2012.
  • In four of the last five years, the Board has imposed maximum special assessments to cover deferred maintenance. That, despite having stated in the Reserve Summary to members, The board of directors as of the date of this study does not anticipate the levy of a special assessment for the repair, replacement, or restoration of the major components.” Special assessments are generally considered to be an indicator of poor planning. 
  • This year, the Association established a banking relationship with a Las Vegas Bank, presumably to obtain a $1.25 million loan to repay replacement reserve funds borrowed last year. It then required members to submit their $7.1 million in annual assessments to a post office box (lock box) in Vegas without explaining the full nature of our relationship to that bank.

It is well known that lock box banking can be very risky. Bank employees who have access to lockboxes are rarely supervised, which opens the situation up to possible fraud. The fraud primarily occurs in the form of check counterfeiting because the checks that are in the lockboxes provide all the information needed to make counterfeit checks. A company can protect itself from such fraud by using a bank that it trusts and by constantly monitoring its lockbox.  Sounds like lots more work for LWA employees to me.  What concerns FOLW most is the fact that the Association’s Auditor has repeatedly reported the Association suffers from inadequate internal controls (including FY 2017/18) and that we have no formal cash management processes. 

FOLW will sponsor a series of workshops during the next few months to acquaint members with an emerging pattern of inadequate financial management, misleading, even deceptive, financial reporting, and growing efforts to obscure or hide financial results from members.

Workshop attendees will be introduced to specific instances of financial improprieties and their effects. They will then be asked to consider alternative corrective actions to those unwelcome financial practices. Based on participant feedback, FOLW will prepare a survey that’s aimed at identifying the needs and preferences of the membership. Findings and recommendations from that survey will be presented to the Board, along with a request to produce a responsive Action plan.

Please respond to this message (or send an email to FOLW at bymaynard@gmail.com) if you are interested in participating in one of the planned workshops or if you would like to be added to the Friends of Lake Wildwood distribution list.  

We believe that your participation can help awaken the great silent majority of Lake Wildwood members and improve our common financial prospects.



The Financial State of Our Association?

. . . it has been very difficult to maintain our ability to prepare monthly and quarterly financial closes timely. We are behind on the year-end close and Audit, and financial reporting set-up in Jonas (hence no June, July or August results as of yet). The Financial Statement reports are being designed, and the budget and beginning audited balances loaded. We expect to have the first quarter financial reports at the October Board meeting. (Emphasis supplied)

                                                              MANAGEMENT FINANCE REPORT (9/26/2017)

That information is not our opinion.  It was a small part of the status report provided in the written Management Report at the 9/26/2017 Regular Board meeting.

Friends of Lake Wildwood (FOLW) attended that meeting, at which the Agenda called for acceptance of the 2017 Annual Audit Report and review and discussion of the First Quarter Financial Report. Board minutes for the meeting reported the following results regarding those financial issues:

3. QUARTERLY FINANCIAL REPORT – The Board discussed the quarterly financial update during Treasurer’s Report.

7. ACCEPTANCE OF ANNUAL AUDIT REPORT – Representatives from the McClintock Accountancy Corporation, the firm that conducted an audit of our 2016/17 Fiscal Year expenditures and financial status presented their findings during Reports to the Board. The Board accepted this report.

In fact, the Association has not produced timely monthly financial reports for the past six months and the 2017 First Quarter Financial Report was unavailable for review at the September Board meeting.  It was also unavailable a month later at the October meeting.

The Auditor did deliver a summary video presentation of his Audit report in a half dozen, barely legible slides, that did not include standard elements of a financial audit such as the Balance Sheet, Statement of Revenues and Expenses, Statement of Fund Balances, or Statements of Cash Flows. He concluded his summary with a statement that he had issued a “clean opinion” without qualification. 

The Board then accepted the Audited Report without further review or discussion.  We wonder when the required review occurred?

Frankly, we have difficulty understanding how the Auditor could issue an unqualified report given the current status of Association financial reporting!

But sometimes an auditor will not identify material weaknesses in an audit and will, instead, report internal control deficiencies and recommendations for improvement in a “management letter” to the association. Auditor McClintock submitted a “management letter” to the Board with the  2016 and 2017 audits.

It’s useful to know that the term “internal controls” refers to a system of financial checks and balances that are designed to ensure reliable financial reporting and safeguard the association’s assets against error, fraud, and embezzlement.

After the Auditor’s presentation, members Tom Cross and Fred Huberty both asked the Board what issues or findings had been identified in the Auditors’ management letter. Board VP, Nita Edwards, stated that since the management letter addressed personnel issues, that information could not be disclosed.  She was then asked to state how many findings had been identified by the Auditor without disclosing their content.  Again, Ms. Edwards stated that the Management Letter was not subject to disclosure because personnel issues were discussed in the management letter.

The inclusion of “personnel issues” in the Auditor’s management letter is not a legitimate reason set forth in Bylaws, Article XII, Section 1 (e) for withholding or redacting information from the Association’s accounting books, records, or minutes.

To expand your sense of why access to the “management letter” seems particularly important at this time, we suggest you read the minutes of the Finance Committee. For example, the following comments appear in the August 17, 2017 meeting minutes:

  • The full year-end closing reports of May 31, 2017, as well as the June and July budget/actual reports were unavailable.
  •  Bank statement reconciliations are behind by 3 months.
  • Food and beverage is still a concern.  Revenues are down but labor is still high. 
  • Former President, Mike Zemetra, expressed concerns that the Audit Committee had not made a required report to members and that there is a lack of transparency with the Audit Committee because they have not provided minutes of all their meetings.
  • The Treasurer also expressed frustration with the absence of financial reporting.

If you want more hard facts, read the FINANCE section of the Management Report that’s posted in the Hot Topics section on the Association website.  Our new General Manager is doing an admirable job of providing us with important information.

FOLW also wrote the Auditor on May 17, 2017, expressing our concerns regarding what appear to be multiple instances of false or incomplete financial reporting and improper reserve expenditures. We asked Mr. McClintock to review our concerns with the Board.

Although we never received a response to our letter from the Auditor or the Board, we learned from the May 25, 2017 Audit Committee meeting minutes that “Letters sent to the Auditor by a member related to Reserves was discussed with the auditors.  The external auditor did not plan on providing a response to the member and felt the concerns had no merit based on their opinion.

On October 16, 2017, member Bob Bumgarner wrote President John Valentine, requesting to view and copy the management letters for 2016 and 2017, in part, to validate that assertion. Jack rejected his request on grounds that, “Correspondence to the Association is simply NOT an “Association Record” that is open to member inspection under Civil Code section 5200.

In his October 23, 2017 reply to that rejection, Bob pointed out that the Association had already provided him with a copy of the Management Representations Letter to the Auditor, which falls into the same category of association records as the Management Letter from the Auditor.

Moreover, to the extent that Association governing documents are more stringent than Civil Code 5200, they must be followed. For example, Bob cited Finance Policy 4.30, which provides that:

  1. It shall be the policy of the Association to fully disclose its financial status to all members.
  1. Such disclosure shall conform to all Federal and State laws and Association Governing Documents.  (Emphasis supplied)

Bylaws Article XII, Section 1, Inspection of Books and Records, also requires:

The accounting [CC 1365.2] books, records, minutes (except executive session minutes), operating rules … and Member lists of the Association shall at all times, during reasonable business hours, be subject to the inspection of any Member or his duly appointed representative at the offices of the Association for any purpose reasonably related to the Member’s interest as such.

Civil Code ¶1365 defined Financial Records and Reporting requirements, “Unless the governing documents impose more stringent standards . . .”  Although ¶1365 was superseded when the entire Davis-Stirling Act was amended and recodified in 2014, new ¶5305 regarding Review of Financial Statements continues to subordinate statutory requirements to more stringent provisions in an association’s governing documents.  Our Association has yet to incorporate any of those amendments into the governing documents three years later.

We consider the Board’s actions to reject proper requests to review the management letter(s) that could explain reporting irregularities this year and last are unreasonable and improper.  We have even heard that the Board has denied the Finance Committee access to the management letter.

We will continue to pursue our investigation regarding inadequate financial reporting and provide you with further information on October 31 when the Association is required by law to provide Mr. Bumgarner with copies of the current management letter.

The Clubhouse Project: A Financial Review

FOLW Advisory Team

Owners, especially those on fixed incomes, have limited resources. They may not  be able to afford the large special assessments that would be required if reserves are insufficient to cover a major replacement. Special assessments have the reputation of being indicative of poor management.

Community Associations Institute,  Replacement Policy

It’s been just over three years since the Clubhouse was shuttered and closed by the Board.  The new Clubhouse is open, the food is good, the views are lovely, and it’s being well-attended.  With the plan now realized, it is good business practice to conduct a post-completion project review to identify which elements of the project were successful and which were not so successful.

At the request of the Friends of Lake Wildwood (FOLW) Coordinator, this document summarizes financial events related to the cost of constructing a replacement for the Clubhouse, Clubhouse funding sources and methods, the accuracy and understandability of financial reporting to the membership. It also extends an invitation to FOLW and other members of Lake Wildwood Association to participate in a conversation about the future of our community prior to the coming Board election.

CLUBHOUSE CLOSURE: The Board closed the Clubhouse on January 1, 2014 due to “extensive unsafe building conditions” and “life safety issues.”  That severe level of disrepair did not develop over night.

In a courageous mea culpa article two months later, the Board President admitted that the Association had, for 15 years, excluded about 75% of all common facilities and common elements from the Reserve Study and funding to keep assessments low.  That resulted in substantial deferred maintenance and the transfer of costs to a future generation of owners.

About a month after the Clubhouse closed, the Board amended Association Finance Rules, adding all previously excluded assets to the Replacement Reserve Study.  As a result, estimated reserve obligations increased $10 million in FY 2014/15 and another $5 million the following year.

CLUBHOUSE COSTS:  The Board shuttered and closed the old Clubhouse on January 1, 2014.  It then proposed building a larger, upscale Clubhouse at cost of $5.5 million.  The special assessment prospectus for the new Clubhouse expressed a high degree of confidence in cost estimates.

With only a 5% cost overrun allowance, the project was $1.2 million over budget (24%) prior to the start of construction.  Many costs were underestimated (furniture/fixtures/equipment, professional fees, loan points), some were not included (landscaping, an estimate for code changes), and some costs were added when special interest groups asked for changes to the original plan

While Association Declaration Article IX requires the Board to obtain competitive bids from licensed contractors, that did not happen.  Instead, the architect preferred a specific contractor whose profit margins were substantially higher than other builders under consideration.  The Board adopted that recommendation by a 4 to 3 vote.

CLUBHOUSE FUNDING:  The $5.5 million in Clubhouse replacement costs were to be financed by a $4 million loan, the sale of four Association-owned lots for about $1.25 million, and the balance of about $250,000 from replacement reserves.  The Board proposed to assess each membership interest $1,500 to repay the $4 million construction loan.  That assessment was approved by the members in September 2014.

Sale of the four lots netted $943,000, leaving a shortage of $367,000.  That, plus the $1.2 million cost overruns compelled the Board to raise another $1,567,000.  The Board funded most of that shortfall by improperly spending $1,511,826 from Replacement Reserves.

Here’s the problem with that expenditure. The Association maintains two reserve funds: a Replacement Reserve Fund for capitalized assets and a Non-capitalized (Maintenance) Reserve Fund for assets that have not been capitalized.  Finance RULE R-4.10.10 defines capitalized assets as those that have been “booked” or added to the Association’s balance sheet.

The Association never capitalized the old Clubhouse, as required by Finance RULE R-4.20.80. That’s why the 2014 Audit reported no reduction in asset values due to Clubhouse closure. It’s also one reason why spending $1.5 million from the Replacement Reserve Fund for capitalized assets may have been improper.

To keep assessments low, Association reserve policy had long excluded structural components of the Clubhouse and all common facilities, along with the golf course, lake, dam, 5 parks, culverts, etc..  Consequently, the 2014 Audit reported only $374,300 in replacement costs for the Clubhouse, comprised almost entirely of furniture, fixtures, and equipment. NO reserves were targeted for replacement of the Clubhouse structure at the time it was closed.

We have been advised that the Board’s $1.5 million reserve expenditure on replacement of the old Clubhouse was likely improper because: (1) Exclusion of the Clubhouse structure for so many years confirms that it was not a purpose for which the Replacement Reserve Fund was established; and (2) When the Board decides to replace a destroyed or no longer usable asset such as the Clubhouse, its replacement must be funded out of the operating account unless it involves a like-for-like replacement.  The new Clubhouse certainly does not constitute a like-for-like replacement for the old building.

FINANCIAL REPORTING: At a time when many people wanted to know about reserve liabilities before voting on the clubhouse assessment, the 2014 Audit improperly reported reserve obligations based on the prior year’s Replacement Reserve Study. That caused estimated replacement costs for all major common elements to be understated by $10 million. With no oversight, only a single manager signed the Management Representations letter to the Auditor, thus failing to comply with the two-signature requirement for an audited statement.

In 2015, the Board hired a credentialed reserve specialist to produce the reserve study and funding plans.  Although a major step in the right direction, the new Reserve Study does not provide a complete and understandable picture of the cost of replacing major common facilities and common elements. Instead, the Member Summary reports only the cost of replacing sub-component parts of common facilities like concrete, decking and balconies, roofing, lighting, etc., but does not aggregate those sub-component parts under major common facilities or even the major component categories listed in the full Reserve Study. That makes it very difficult for members — or Board Members — to assess the reasonableness of reserve obligations and funding.

The Reserve Study Member Summary reports available funds from only a single “Reserve Fund” and does not disclose the respective funding status of the Association’s two restricted reserve funds. Consolidation of the two reserve funds into a single Reserve Fund, as has been done the past two years, makes it impossible to see if money is being spent from the proper source or if funds are being improperly co-mingled.

The Association has repeatedly asserted that $1.5 million was available in the reserves to replace the Clubhouse and, has in fact, spent that sum on the Clubhouse project.  However, as previously noted, NO reserves were targeted for replacement of the Clubhouse structure prior to its closure.  By law, the Board may not expend reserve funds for any purpose other that the repairs, restoration, replacement, or maintenance of major components for which the reserve fund was established.

Replacement Reserve Fund expenditures are also restricted to the renovation or replacement of capitalized assets that have been booked to the balance sheet. Since the Association never capitalized the old Clubhouse, the expenditure of $1.5 million on the Clubhouse from the Replacement Reserve Fund for capitalized assets may have been improper.

LET’S FIX THE SYSTEM  This article has presented a troubling list of inadequate construction cost controls, false or misleading financial reports, and improper use of replacement reserve funds.  However, it is not our intent to fault the actions of our well-intentioned Board Members.  

The volunteer Board members who have served Lake Wildwood Association over the years have generally acted with intelligence and in good faith, but sometimes without a clear understanding of what was required of them. Recent results have made clear that we are outgrowing the system of governance and financial management created nearly a half century ago by the developer.

As a starting point for a change conversation, we ask you to think about the following factors as possible contributors to the concerns we’ve presented:

  1. The Board is restructured by elections every year, thus interrupting the continuity of Board planning and actions and leading to inconsistent decision making.
  2. Long-term memory regarding Association policies and practice resides in our standing committees.  The Board has recently circumvented those committees by appointing ad hoc committees that report directly to the Board to serve specific purposes.  Previously, it was Board policy to appoint sub-committees under the standing committees.
  3. The Board eliminated the audit function of the Finance Audit Committee last year, transferring that responsibility to a new Audit Committee populated and controlled primarily by Board Members.  The Audit Committee, which will be restructured annually along with the Board, is not independent and cannot objectively audit Board financial planning and actions.
  4. Volunteer Board Members often have no prior corporate management or Board experience and do not receive adequate training on the highly specialized statutory requirements that apply to homeowner associations in California.  Perhaps all new Board members should be provided with more complete training such as the Leadership Training Course for Board Members that’s offered by the Community Associations Institute?

We ask each of you to respond to the five-question survey we’ve prepared.  Simply click on the following link, and you’ll be taken to the Survey.  We intend to present a summary of the results to the Board, but your answers will remain unattributed and confidential.


                                   YOU CAN MAKE A DIFFERENCE!

. . . with Liberty and Justice for All

America will never be destroyed from the outside.  If we falter and lose our freedoms, it will be because we destroyed ourselves.

                                                                                                Abraham Lincoln

As our nation approaches the 240th anniversary of its birth, it seems fitting that we should pause for a moment to consider some of the important principles that made it a great and unique democracy.

For example, the Pledge of Allegiance, faithfully uttered by all members prior to the start of each Board or membership meeting, is no ordinary sentence. It is a definition of American democracy and a constant reaffirmation of our dedication to the fundamental principles of that democracy.  The last six words of the Pledge underscore the applicability of those principles to each individual citizen.

When we become citizens of this Great Nation, at birth or otherwise, we get a warranty that guarantees certain inalienable rights, including a Bill of Rights that defines certain personal freedoms and rights. That warranty is supposed to be honored by every government franchise in every city and town of this nation. It is not transferable and it is good for life.  Those are principles veterans in our community fought to defend.

But our association is not a governmental entity; it is organized as a private non-profit corporation.  As such, it is not required to honor the freedoms and liberties set forth in the Bill of Rights or the freedom of speech provisions in our State Constitution.  Instead, our rights are defined and delimited by the governing documents of the Association and sometimes unclear statutory requirements.

According to the Adams & Stirling Law Firm, “Free speech issues are often misunderstood when it comes to community associations. First Amendment constitutional protections apply to governmental restrictions on free speech and do not apply to private organizations. The same is true for state constitutional protections. In Golden Gateway v. Golden Gateway, the California Supreme Court made it clear that the California Constitution protects against restrictions by the state, not private organizations.”

Aggravating the absence of such important Constitutional protections, Lake Wildwood Association is controlled by volunteer board members who are often lay people without prior corporate finance or management experience. There are no minimum training or experience requirements and few board members posses the knowledge needed to manage a multi-million dollar corporation, how to run meetings, how to fairly pass rules, or understand their fiduciary duty to act in the best interests of the association even if at the expense of their own interests.

Despite such shortcomings, board members are granted plenary authority to make rules (like a legislature), enforce rules (like an executive), and resolve disputes over rules (like a judge).  Such extraordinary, unchecked power, coupled with inadequate accountability, can result in ill-advised, uninformed, and highly detrimental business decisions and governance actions.

Over the past several years, our community has wrestled with an increasing number of difficult financial and administrative challenges. The list of issues includes long-term deferred maintenance on most of our commonly-owned facilities, inadequate replacement reserve savings, inaccurate and misleading financial statements and reserve reports, and multiple procedural deviations from the Association governing documents.  With $3 million in reserves, the 2016 replacement reserve study reported that nearly $70 million ($25,000 per property) in reserve assessments will be needed to repair and replace our major common elements over the next 30 years, not including the cost of maintaining and replacing our new Clubhouse, the Dam, or Deer Creek Bridge, etc.

Members dissatisfied with the workings of this flawed, autocratic system often feel powerless to influence Board policies and plans. In fact, many members now believe that the Board can do pretty much what it wants with impunity and that it’s a waste of time to attend Board or Membership meetings.  That frustration is reflected by low voter turnout in the election of new Board Members – typically less than 50%.  And now, with three Board Seats open for election, only a single member volunteered to run.

Even members who remain committed to the need for change are frustrated by Board actions that deny them the ability to communicate with other members via the same electronic mail facilities used by the Board to support its viewpoints and positions. Denying members access to electronic mail for purposes of exchanging ideas relative to issues that affect their interests as members eliminates any realistic possibility of timely, interactive, and cost-effective  communication. That’s because the Association offers, alternatively, only regular mail at a cost of around $3,000 per membership message.  That effectively muzzles members, denying them their free speech rights and the ability to use political processes as a check on unbridled corporate power.

If we, as member-citizens of Lake Wildwood Association, hope to restore the promise of liberty and justice for all, it is important that we engage in a discussion aimed at generating member consensus regarding appropriate amendments to our system of governance.[1]  The goal of making our community more vibrant, responsive, and attractive in the real estate market should be the context for that discussion.

With those goals in mind, the Friends of Lake Wildwood will soon sponsor and conduct one or more Forums to enable interested members to think together in a safe space about those critical issues. To stimulate critical thought and participation, FOLW has drafted a Lake Wildwood Association Homeowner Bill of Rights. That draft is modeled on the AARP BILL of RIGHTS for HOMEOWNERS in ASSOCIATIONS, which can be found at:


The draft Lake Wildwood Homeowner Bill of Rights follows.  Please read that document, think seriously about each of the proposed rights, and feel free to share your  comments and suggestions.  Your participation can make a real difference in the future well-being of our community.

[1]  Consensus is a group decision making process that seeks the consent of participants, not necessarily complete agreement, and the resolution of objections.  “I can live with that” is the test.

Draft LWA Homeowner Bill of Rights


Modeled on the Preamble and Amendments to the U.S. Constitution and an AARP-proposed Bill of Rights for Homeowners in Associations,[1] this draft Bill of Rights seeks to inspire member confidence in the concept of private government, to ensure amicable and equitable relations between homeowners and our association, and to provide a simple definition of member rights.

I        Homeowners and prospective homeowners must be provided with full written       disclosure regarding the Association’s governing documents and fees.

The Declaration of Covenants, Conditions, and Restrictions (CC&Rs) of the Association constitutes a contract between the association and each owner. Homeowners shall be told–before buying–of the association’s broad powers and the association may not exercise any power not clearly disclosed to the homeowner if the power unreasonably interferes with homeownership.

II      Homeowners shall have a right to stability in the Association’s Governing Documents.

Homeowners shall have the right to vote on additions or amendments to the Association’s Articles of Incorporation, Bylaws, and the Declaration, as well as their termination.  Where the association’s directors resolve to rescind, amend, or deviate from operating rules in the governing documents (policies, rules, and procedures), homeowners shall be provided with adequate prior notice and an opportunity, by majority vote, to rescind new rules or amendments thereto.

III     Homeowners shall be entitled to freedom of speech, freedom of assembly, and free interaction with other members regarding issues that affect their interests as members.

The association shall not abridge a member’s freedom of speech or of the press through policy, direct order, or intimidation or any kind of public abuse.  The association shall neither deny nor impeded any member’s ability to communicate with other members regarding matters that directly relate to their interests as members.

IV     Homeowners have a right to privacy regarding their personal contact information.

To protect each member’s right to privacy, the association shall establish and maintain a procedure that enables members who prefer not to share their personal contact information with other members to Opt Out and, instead, to instruct the association to provide a reasonable alternate method of distributing proper messages to them in a timely and cost-effective manner.  Electronic mail addresses shall be shared in accordance with the Opt Out Policy.

V       Homeowners shall not be deprived of property without speedy due process of law.

The association shall not foreclose against a homeowner except for significant unpaid assessments and any such foreclosure shall require judicial review to ensure fairness.  The association may not foreclose against a homeowner on any lien except under express authority granted by the CC&Rs and with the approval by a two-thirds vote by the directors.

VI     Homeowners shall have a right to individual autonomy.

Homeowners shall not be unreasonably required to surrender any essential rights of individual autonomy because they live in a common-interest community.  The governing documents of the association may not include provisions that are illegal or contrary to public policy.  Provisions that violate public policy include: (1) terms that are arbitrary, spiteful, or capricious; (2) terms that unreasonably burden a fundamental constitutional right; (3) terms that impose an unreasonable restraint on the right to sell property; or (4) terms that are unconscionable.

VII   Homeowners shall have the right to oversight of the Association and Directors.

Homeowners shall have reasonable access to records and meetings, as well as specified abilities to call special meetings, to obtain oversight of elections and other votes, and to recall directors.  They shall be provided with timely, accurate, and understandable accounts regarding the financial condition of the association, the status of reserve accounts,  minutes and records of actions by the board and its standing committees, and policies regarding administration and operations. Upon request, homeowners shall be entitled to copies of all such records in a timely manner.

VIII  Regular and Special meetings of the Board of Directors shall be open to all members and will be conducted in accordance with the requirements of the Open Meeting Act.

Open meetings favor public deliberation by association boards. The Board shall not hold Executive Sessions or other secret meetings that exclude members except in the case of issues that involve pending litigation or employment or disciplinary actions regarding employees. Matters discussed during Executive Sessions must be outlined in the agenda for the meeting, the results from which shall be summarized and disclosed to members at the next regular Board Meeting.

IX     Homeowners shall have a right to prompt resolution of disputes without the need to resort to litigation.

Homeowners shall have access to non-judicial, internal dispute resolution (IDR) and alternative dispute resolution (ADR) to reduce the need for expensive litigation.  IDR and ADR shall be conducted in a prompt, respectful, and private manner with the intent of resolving disputes.

X       Homeowners have a right to governance by adequately trained board members.

Members of the Association Board of Directors shall be adequately trained for their position as guardians of the well-being of the community and its members.  At a minimum, new board members shall be required to complete training comparable to the Board Leadership Development Workshop offered by the Community Associations Institute,  expanded as necessary to inform each board member regarding requirements of the California statutes applicable to common interest developments and the governing documents of Lake Wildwood Association.

[1]   A BILL of RIGHTS for HOMEOWNERS in ASSOCIATIONS: Basic Principles of Consumer Protection and Sample Model Statute.  AARP Public Policy Institute (2006);(http://assets.aarp.org/rgcenter/consume/inb128_homeowner.pdf).

Going Unarmed, The Stonegate Security Plan

Going Unarmed, LWW as of 3/21/2016

LWW Stonegate Protection Team,

Effective Monday, March 21, 2016, all shiftwork will be unarmed. Understandably, this change impacts our Patrol Officers. Until we create a safe and consistent procedure for traffic stops (beyond drawing on previous experience in Law Enforcement) we will use our marked vehicles with active patrolling as a deterrent, combined with our usage of the PA system to kindly articulate speed warnings to drivers (“Please slow down, excess speed. Courtesy Reminder (repeat if needed)”). This means that effective March 21, traffic stops will NOT be conducted until further notice. Less than lethal tools may continue to be carried at work if your BSIS training is current, but please understand that firearms are not permitted while working at LWW under any circumstances beginning March 21, 2016.

The aforementioned, combined with an “Observe and Report” philosophy where we increase our safe distance from threats, utilize the Nevada County Sheriff when potentially exigent circumstances arise (as currently done), and put our heads together as a team to enforce traffic through creative means, we will successfully enforce traffic across the 32 miles of roadway we are responsible for.

Shortly, we will be crafting a ghost car program where we strategically place unused security vehicles throughout the community, safely away from the roadway, but visible to mitigate speeding. We will do security checks on these vehicles as well. Hang tough for now and I am truly looking forward to being safe and forward-thinking about the challenges we face as an Organization.

ln your service,

Benjamin McNulty