[Lnc-business] incorrect reserve calculations in monthly financials

Sun Apr 7 13:22:43 EDT 2019

Has anyone else taken a look at this?  I am very interested in what is
going on here.

On Wed, Apr 3, 2019 at 12:43 AM Alicia Mattson via Lnc-business <
lnc-business at hq.lp.org> wrote:

> Colleagues,
>
> It looks to me like the February financial report we just received
> overstates our reserve amount by about $37k.
>
> I am trying to make sense of the reserve calculations published in our
> monthly financial statements (p. 3, Reserve Adequacy Trend chart), and not
> just for this one most recent month.
>
> Over the past two years, the FORMULA used to calculate the blue number in
> that chart (called "Curr Month Resv" in the header) has changed several
> times without our knowledge.  As I will show you, the several different
> formulas used at different times give very different answers when applied
> to the same month's data, often portraying our financial position as being
> better than I think it really is.
>
> It seems that for some LNC members, the reserve is the main number they
> look at for a quick snapshot of our current position, so it's important to
> get that number right.
>
> First, a big-picture concept: what does our reserve level calculate?  Why
> is it an important measure?  It calculates whether we have enough
> unrestricted cash on hand to pay the next month's worth of occupancy,
> labor, and governance expenses.  The amount of cash we need to meet that
> goal is listed as the "Resv Target" in that p. 3 chart on our monthly
> financials.  The blue number is the available cash we currently have
> relative to that target number.  The 2019 goal is to have $57,225 at the
> end of each month.  The February 2019 chart shows us at -$11,529, but I
> think we're really at -$48,839.
>
> Please refer to the attached spreadsheet, and below I will walk you through
> it.  You won't be able to follow this well on a phone...get your full-sized
> screen.  :-)
>
> The numbers in rows 4 - 15 are copied/pasted directly from the monthly
> financial reports sent to the LNC on this email list.  I have listed the
> page and line numbers where those figures can be found in each month's
> report.  These are the data points that (at various times) have been (or
> ought to be) used in the reserve calculation.
>
> Row 21 is each month's reported reserve amount, also copied/pasted directly
> from the blue "Curr Month Resv" in the p. 3 Reserve Adequacy Trend chart in
> the monthly financial reports.
>
> Row 16 contains the formula that represents how I believe the reserve
> should be consistently calculated.
>
> Rows 17-20 show four of the several different formulas that seem to have
> been used at different times over the past two years to calculate row 21.
> You'll quickly notice that the results of the four different formulas
> applied to the same month's data aren't even similar figures.
>
> MAR - SEPT 2017
> From March 2017 to September 2017, it seems that the formula in Row 17 was
> used to calculate the published number in Row 21.  This formula is close to
> my proposed formula in Row 16 for that time frame.  For three of those
> seven months I noticed manual errors were made in calculating the published
> number, as described in rows 25 - 27, but otherwise that formula was used
> consistently for those seven months.
>
> OCT - DEC 2017
> I have no theory about how the October to December 2017 figures in Row 21
> were derived.  The numbers don't track with any of the other formulas I
> identified here.
>
> JAN - FEB 2018
> It seems the formula in Row 18 was used to calculate the published number
> in Row 21, but only for two months.
>
> MAR - MAY 2018
> It seems the formula in Row 19 was used to calculate the published number
> in Row 21, but only for three months.
>
> JUN - JULY 2018
> I have no theory about how the figures in Row 21 were derived.  The numbers
> don't track with any of the other formulas I identified here.
>
> AUG - DEC 2018
> It seems the formula in Row 20 was used to calculate the published number
> in Row 21 (with the exception of a $1000 manual error described in Row 28).
>
> Whatever the correct formula is, it should be the same formula from month
> to month, not changing at least five times within a two-year period, with
> such wildly different results which overstate our position.
>
> I had an email discussion with Mr. Hagan and Mr. Kraus about these
> fluctuations just prior to our March 9-10 LNC meeting, and Mr. Hagan
> intended to work with Mr. Kraus during that weekend to establish an
> approved formula.  Now we have a new financial statement, and I can't
> figure out how this one was calculated, either.
>
> It may well be that Mr. Hagan and Mr. Kraus didn't have a chance to work on
> it during the weekend of that meeting, but since the reserve is the lead
> number that was referenced when the February report was sent to us, it
> seems this should be sorted out sooner rather than later so that the LNC
> can rely on consistent data.
>
> -Alicia
>

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