GVR has prepared a formula that shows a deficit of $97,940 for the year ended Dec. 31, 2018, and this analysis is very difficult to understand or believe.
GVR budgets on a cash basis. This method lists all revenue items minus all expense items for the net income amount. Depreciation is not a cash expense. It is simply a book entry to reduce the value of GVR’s assets on the balance sheet. When budgeting, we add back the depreciation amount to our net income and then show our additional uses of cash (capital expenditures and contributions to reserves).
GVR has failed to report performance against the entire 2018 consolidated budget. When reported correctly, the resultant number would be our “cash” surplus or deficit for the year and our reserves would be adjusted accordingly. No need for a formula. The failure to report performance against the entire budget for each of the last four years has resulted in a $2 million understatement of GVR’s reserves as of Dec.31 2018. GVR’s reserves should always be funded by cash. If you look at the assets on GVR’s balance sheet as of Dec. 31, 2018, cash and Edward Jones investments add up to $12,095,603. In the liability section, deferred dues and programs add up to $1,366,555, representing cash received in advance for the year 2019. The resulting excess cash number is $10,729,048. Our total reserves as of Dec. 31, 2018, are $8,682,185 and they are understated by $2,046,863.
If GVR had correctly reported the performance against the entire budget (each year), I think that our reserves would be more in line with what they should be. GVR recently published a job opening for a full-time financial analyst. I am not sure why GVR needs another full-time staff member.
Jim Cassidy, Green Valley