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Please, everybody, come to these meetings if you possibly can. I keep hearing that the board and Andy think there are only a few people who don’t buy their line – they need to see that the whole community has questions and wants answers!
Is there any possibility that these meetings could be livestreamed or recorded for those of us who do not live in Albuquerque anymore?
Assuming Gary Gordon is going to use charts and graphs, I would like to suggest that in the spirit of transparency he share them with the community ahead of his presentation so they can be studied.
It’ll be a first to see documentation ahead of time or even afterwards. Mr. Watson does his budget meetings with departments and refuses to send out his magic spreadsheets for employyes to review and formulate informed questions. Smoke and mirrors, more the same. Perhaps Gary will, but I doubt it.
Great idea though. As well as the streaming suggested.Someone should really stand up in the meeting and ask why in 2005 Dick Elkins (treasurer) made a stunning $664,164.
Everyone should read these posts found in the “Finances” Forum prior to Gary Gordon’s presentations this Saturday and Monday. A careful read of the evaluations presented here will make the “smoke and mirrors” of Gordon’s presentation obvious when you hear it.
Written by “Retired CPA”
I just did a quick look at some of the information which can be found online, so all figures are approximations and opinions of what I have read, no formal analysis has been done.
Academy made several catastrophic decisions starting around 2000. The first of many was giving High Desert Investment and its subsidiaries approval to develop Mariposa. High desert was a huge success, sort of like selling beachfront property. It was a low risk development. Coming off the heels of this success, these same individuals embarked on an incredibly risky…..think swampland in Florida, development outside of Rio Rancho. It was the high desert for the masses. Highly risky and highly speculative. I remember hearing about this and thinking that’s crazy no one is going to want to live out there. Anyway, they must have sold this swampland development to the board and they they must have approved it. I appears that High Desert Investment Corp, and its 2 subsidiaries, along with the merry band of fools in charge, lost a massive amount of the endowment. The endowment is at a healthy 248 million in 2006-2007. In 2009-2010 it is around 176 million. One chart I looked at had an eye popping 60% of the endowment now sitting in real estate….
How could this happen? Well for starters let’s name names……Andy Watson was around during this whole time…..the buck or lacktherof stops here. So while overseeing the most fiscally irresponsible use of an endowment I have ever seen, Mr, Watson continues to line his own pockets to the tune of over 400,000 a year!
In 2009 the board appoints one of their own for the second time, Gary Gordon as CFO/treasurer.
What? Wait…..we appoint a trial lawyer to be CFO and manage 100’s of millions of dollars of an endowment. What could possibly go wrong he is after all a Phi Beta Kappa…but wait he has no experience as a CFO, he is not a CPA, and has no investment experience. I guess this means putting a huge portion of ones endowment into risky real
Estate doesn’t raise a red flag. It appears that no fundamentally sound investment practices were undertaken to safeguard the Academies endowment.
Gary Gordon just like Andy Watson continued to line his pockets with a far greater salary than any other comparable CFO’s in education in the area, all while running the school into the ground.
Why were executive administration positions being filled by board members at the Academy who were not qualified to do the job? Gary Gordon was also on the Board of the High Desert Investment Corp. Seems like a conflict to me.
Sadly, it is the ultimate responsibility of the board of trustees to ensure the endowment and school are run using sound accounting and investing practices. Why this did not happen is a puzzle.
Since my granddaughter was accepted to 3 private schools this week and received 50% financial aid from both Bosque and Sandia Prep and nothing from the Academy I decided to dig into why. It didn’t make any sense…..that is until I saw what the Administration and board had done to the endowment. I was shocked, beyond words….this once fine institution had been brought to its knee by a merry band of fools, and all kids present and future have been harmed by these greedy, arrogant self-serving individuals.
My granddaughter will not go to a school that I cannot guarantee will look anything like the prestigious school of the past….heck it may not even be a viable organization in 10 years. The endowment cannot be replaced. That much wealth squandered by risky real estate ventures and unsound investment practices can never be recouped. My granddaughter and my money will be going to a school who will take their fiduciary responsibilities seriously.
For more information and support for the above information please refer to the Los Ranchos 38 million dollar new issue bond for Albuquerque Academy 2009-2010.Click to access EA416088-EA324526-EA720335.pdf
Written by “Retired CPA”
The bond issue is a treasure trove of information. I would copy pages 43 to 53 to put on here, because people don’t understand the gravity of the situation.
On page 50 one sees the investment strategy…..I recommend people read the footnote on this. It basically says yes 50 percent in one high risk category of investment is unlike any other private school, but we are so knowledgeable and wise that sound tried and true investment policies don’t apply to us. The hubris is breathtaking.
Shocking financial disclosures include:
Tuition as percentage of total Revenue increased from 44% in 2006 to 72% in 2010.
2006-2010 a startling 35 million dollars was withdrawn from the endowment.
2009 unrealized loss on investments was 56 million dollars
2010 – unrealized loss on investment was 33 million
Per the 2008 audited financial statements the value of the Mariposa real estate was
103,862,000.
On the 2015 990 the Mariposa real estate value is 9,220,000.
During this same we also have the 38 million dollar bond. Please note that almost a million dollars a year will become due on this 4% bond in 5-7 years.
Another source of loss in 2012 was the Mariposa Lawsuit which sued High Desert Investment Corp president Doug Collister, Jack Eichorn, and Gary Gordon, along with the Academy, and a few others I think. I don’t know how much all the legal fees were, but they settled for 5 million dollars. So at least another 5+ million hit. They then appear to have defaulted on another 16 million dollar bond and from what I can tell just walked away from the development.
I suggest looking into this lawsuit for more information on how the AA investment arm operated. It was alleged in the lawsuit that land values had been inflated.
I would suggest independent CPA’s and attorneys to compile a complete report on what exactly happened and what would need to be done if the Academy is to survive. Those parents who have raised these issues should be commended. It takes great courage to address truth to power. Best of luckWritten by “4n6”
I’ve been studying that same document for a while now, so I won’t restate what Retired CPA has already identified. The best table for understanding the accelerating debt service payments is on page 10 of 168, which reflects debt service absorbing more and more of the available resources until peaking in 2033. More immediately concerning are the bond covenants on pages 21-24 of 168 of the bond offering document; the most significant of those covenants is the requirement that the School’s debts cannot exceed 40% of its assets, which it may have in fact already violated considering the amounts reported on the 2015 IRS Form 990 balance sheet on page 11 (Part X). The covenants state that the computation is based on the annual audited financial statements, so I don’t know if there is a permissible variance between the IRS Form 990 and the audited financial statements for the same period, but the ratio as of 12/31/2016 appears to exceed 40%, which could lead to a bond default. The bond covenants likely produced the Charged by Promise fundraising campaign to record future years’ donations as current receivables to repair the 40% debt ratio with additional assets, but that is hardly a sustainable solution as the recorded receivable is amortized unless future fundraising is equally successful in replacing the amortized amount aged off the balance sheet each year.
I would like to also add some concerns with the 2015 IRS Form 990 filing:
First, after always responding “Yes” to the question #22 on page 4 to “Did the organization report more than $5,000 of grants or other assistance to or for domestic individuals on Part IX, column (A), line 2?” as most similar organizations do, this filing responded “No” and then proceeded to report -0- for that corresponding line item (line 2 on page 10) thereby understating annual expenses; instead the financial assistance was buried as a subtraction from revenues on page 9, line 2a as a contra-revenue. This is neither consistent with all previous reporting nor is it accurate, so one must question the rationale for both the inaccurate reporting and the unnecessary change in reporting method for the annual expenses.
Second, in all the filings of the IRS Form 990 that I reviewed, the School’s reported endowment fund balance (see Schedule D Part V) is always substantially higher than the amount reported as “Total net assets or fund balances” on the same filing’s balance sheet (page 11). Aren’t they the same thing? How can any endowment be greater than the net of assets minus liabilities?
Finally, the amount reported on line 8 on page 10 (Part IX) for “Pension plan accruals and contributions” increased in a single year by $504,370 from $1,334,772 to $1,839,142, but the amounts reported for “Salaries and wages” and “Payroll taxes” barely increased, so how can that possibly be accurate? Is it reasonable for the pension accrual to increase by over 37% while the underlying payroll increased by under 2%? Was it previously being understated and this is a large multi-year correction?
To my eye, the end game here appears to be the phasing out of financial assistance, while tuition zooms past $30k/year for a student body of only full-pay students. The quick math is $36M of actual expenses ($35M on page 11 plus $1M of additional debt service) with no financial assistance and little endowment support with revenue spread over 1,200 students at $30,000/each. Albuquerque is not a large market, so could it even find 1,200 full-pay students at that price level? If it can, how low will its standards be relaxed to fill the School’s seats? One can argue about the exact mix, but I don’t see how tuition and financial assistance are not heading in opposite directions with the endowment treading water to maintain the 40% debt ratio.
The School is boxed in by that 40% bond covenant ratio, so potential solutions will be difficult to implement, but better to have a frank discussion among stakeholders than to continue pretending there is currently a sound plan already in place. The sooner we set aside the digestion of the historical malfeasance and figure out how to save the School, the better. From the information that is publicly available, it would be irresponsible to conclude that crimes were committed, so such discussions should stop; instead, it’s painfully clear that there has been a 3-decade long history of conflicts of interest, gross incompetence and poor financial stewardship, and it needs to change.Written by “AA Alum”
Thank you to Retired CPA and 4n6 for the information. Does anyone know if there are CPAs on the board? How many?
Did any board members raise their concerns about the investment by Academy into Mariposa? And in recent years as the endowment has significantly decreased? At present-day with the financial issues that this forum is bringing forward? Many times the board has commented about how complex and difficult it is to explain the 990, the endowment and financial situation but two contributors to this forum have provided more information to the community than the board has since this site went live.
Is it possible there are no finance and accounting professionals on the board and this is how we got to the point that we are asking “Is it really this bad?”Written by “Retired CPA”
Questions which should be addressed.
Administrative salaries are way above any comparable salaries locally. Benchmarks are irrelevant.
Why are there so many highly paid administrators. 7 individuals making close to 200,000 and higher. 3 in finance. A CFO, A business manager and a finance manager. That’s a lot of finance people making a lot of money with little noticeable benefit seen given the rapidly dwindling endowment.
Mariposa deal
In 1994-5 Mariposa land was bought for 4.5 million dollars.
In the Audited 2008 financials this land was valued at 103,000,000.
Why did AA not sale some of this land at this point to lock in their huge return on this investment?
Did anyone, CFO or trustees recommend locking in at least some of the profits at this point?
This investment is now valued around 9-10 million dollars.
But you have the lawsuit that cost 5-6 million, and probably several millions more of losses, but I don’t have the detail on this. Basically over 24 years a negative return on this money.
If however that 4.5 million had been invested in a conservative fund with a return of 6% over 24 years this would have doubled twice and would be worth 18 million dollars.
This highlights what conservative fiscal management would have accomplished as opposed to the highly risky ventures undertaken.
Finally, there is a 15,000,000 partnership on the 990’s. What is this. Need to get the details on this partnership.
Community is important and it is sad to see people who made financial decisions in part because of the solid reputation of the Academy, harmed. The financial situation is only one aspect of the problem….the loss of ones reputation seems to me to be the much bigger problem.Written by SDHeights
Form 990, 2005, Part V-A:
Dick Elkins, Treasurer: $628,941 base salary + $35,223 bonus/deferred.
Re: 4n6
“From the information that is publicly available, it would be irresponsible to conclude that crimes were committed, so such discussions should stop; instead, it’s painfully clear that there has been a 3-decade long history of conflicts of interest, gross incompetence and poor financial stewardship, and it needs to change.”
I’m not sure how fairly obvious conflicts of interest and complete lack of fiduciary responsibility don’t fall into the category of potential crimes that may have been committed.
The Mariposa lawsuit (filed on these same fine folks btw) was for, among other things, fraud.Thanks Claudia, and others, for really important updates and advice to prep for the upcoming meetings.
Please, all readers, attend if you can.
And read the posts above collected by Claudia from “Retired CPA.” They expose completely the reckless irresponsibility of the Board, and are written with a professional’s keen insight.
And Keith is right: Gordon owes us a copy of any materials before the meetings, so we can study them. Watson’s presentations in the past have been a rapid fire, utterly unintelligible sequence of dense slides, clearly designed to obfuscate, not illuminate.
Any updates on whether we can “attend” electronically? Periscope? Google hangout? Facebook live?
I feel that this would be crucial. Watson keeps citing that those who have concerns are a “small, vocal group.” But I live two time-zones away, and I’m concerned. How will anyone grasp the scope of concern if things are kept exclusively local, particularly when one of AA’s strengths is that it sends its alums far and wide?
If the Board and Watson are casual about the seriousness of their mismanagement, and believe there isn’t real and growing concern among the large and widespread Academy community, they are sorely mistaken. That said, I’d like to echo a number of comments and requests that these meetings be made available for livestreaming and replay later. The details of how the far-flung members of our community can attend these meetings virtually need to be shared ASAP. The Board and Watson will then truly see the depth of concern about their performance. Please make this happen for those of us that cannot attend! The first meeting is less than 24 hours away!
So… what happened? How did the meetings go?
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