May 15, 1999
from Stan Myrda to KWVA Officers and Directors:
[KWE Note: Myrda explains status & issues surrounding insurance
Dear Officers and Directors;
The purpose of this management letter is to address several issues
relating to the financial status of the Association.
1.) INSURANCE CLAIM STATUS & ISSUES:
It has been suggested that further investigation and work on the
claim be concluded at this point, and that it has taken too long.
I would like to address this and other issues.
A: This matter has been discussed with Judge Joseph Cunningham,
who has helped us in getting the findings properly filed with the
legal authorities without publicity, and has been helpful in several
areas and helped us with several issues, particularly with the
insurance company, etc.
The question here is whether the Board would meet its legal responsibility
to the members and the organization by not allowing the continued
investigation to go forward. The Board has the responsibility to
recover every dollar it has lost in this situation and to investigate
the matter from te time Mr. Maison became Treasurer. The Board
also has the responsibility to do so within reasonable cost. Where
the cost would exceed the amount to be collected, then a review
of the matter would have to be made based on all the facts and
be discussed with the FB. Both the FBI and the Internal Revenue
Service are expecting us to complete the ivnestigation to its conclusion,
which as I understand, includes going back to the time Mr. Maison
became Treasurer. Presently the amount collected to date and the
amount of the present claim under dispute, if collected, would
exceed the cost of investiation including preparing the report
and providing the supporting documentation. Projecting the cost
would be difficult to determine the cost since the year of 1994
and 1995 that have not been totally investigated.
The Internal Revenue Service asked for and received an extention
on their right to hold the case open. Their position was that they
are expecting additional information and they want more time since
it is a slow process within the IRS to carry their action to completion.
The FBI stated originally that their action was dependent on the
maxium [sic] amount to be uncovered and expected the investigation
to cover the period of Mr. Maison’s term as Treasurer.
Therfor [sic] at this time, the board must allow the investigation
to go forward thereby exercizing its legal and fiduciary responsibility
to the members to recover all of the membership’s money that
it can recover.
The Board must understand that, my time isl imited as I have other
clients that I must continue to service. I have devoted as much
time as I can and will continue to do so. Part of the time has
been spent after normal business hours. I hope that I can conclude
the investigation and file all the claims and respond to the insurance
company’s list of disallowed claim items at least by the
end of this year. As I complete the review and response to the
disallowed items, these will be filed separately. I may file a
partial response as I complete the review and response to half
of the present disallowable items.
Much of the time will depend on the insurance company’s
acceptance and rejection of individual items. Most of the rejections
we are now working on take time. Mr. Maison did not keep most of
the invoices, our only record is a cancelled check without support
documentation to determine the purpose of the expenditure and its
relation to the KWVA. Therfor [sic], we must establish that the
purchase was unrelated to the KWVA’s activity or benefit.
In some cases it is difficult to locate the vendor to determine
what business thhe vendor is in, what products the vendor sells,
and what product Mr. Maison actually purchased. Only by establishing
that the purchase is unrelated to the KWVA’s activity, including
the quartermaster operation and the organization’s operation
will the insurance company consider the claim. It must also establish
that the purchase was for Mr. Maison’s personal benefit.
2.) KWVA AS A GOING CONCERN
The issue of a going concern is addressed many times by a CPA
in preparing financial statements and tax returns for an organization,
regardless whether it is a not-for-profit or a for-profit organization.
The giong concern issue is whether the organization has sufficient
resources presently and whether its income stream is sufficient
in the coming months and years that the organization can survive
The issue is very critical with the KWVA national organization.
The organization’s income is from 1) dues, 2) raffle sales,
3) merchandise sales, and 4) donations.
1. Regaring the dues, the long term potential is that the dues
revenue will steadly [sic] decline. With the low cost life membership,
it is surprising that 90 to 90% of the members do not purchase
a life membership. The life expectancy of the average member at
age 65 is 20 year; at age 70 is 16 years and at age 75 is 12.5.
2. Based on the current year’s operating expenses, reunion
and greybeard cost net of revenue, the organization must have a
cash flow of $207,000 to $210,000 per year. Based on the status
quo of regular dues paying members and life fund contribution based
on the number of members adjusted for life expectancy, your positive
cash flow will last approximate three to a maxium [sic] of 5 years
and 6 months.
This assumes that the raffle, the greybeard, and the reunion will
continue thru the six year period, in order for the estimated revenue
to cover expenses.
However,t his does not take in consideration any special activity,
including the 2002 anniversary. The merchandise sales are NOT taken
into consideration in these calculations.
The dfficulty is when you use life expentancy [sic] charts, there
is an assumption that the members of the KWVA reflect the general
population. This may or may not be true.
This is my calculation and is based on members life expectancy,
present cost increases for cost of living at the rate of 5% per
year. The income stream includes raffle sales based on the decreasing
factor of life expectancy.
It is my position that the issue must be addressed and all factors
in the equation must be taken into consideration.
(signed) Stan Myrda, CPA