A Publication of Residents Voice Aug 2010 Volume 3 Issue 4

The Voice
Have We Learned From The Past?
A
will only be doing the same thing over and
s Professor Einstein so eloquently stated;
“Insanity: doing the same thing over and over again and expect different results!”
over again and expecting different results.” La-
Here are some illustrations of what Professor Ein-
guna Woods Village is not immune from this com-
stein alluded to as we see it happening to us;
mon basic principle as it applies to our Mutual
Boards of Directors. The following are excerpts from a 2003 report gener-
ated by Warren Thurn and George Price (two ex-
Electing the same old directors year after year
resident project management specialists) who re-
does not effect a change, especially in identifying
viewed the results of two GRF initiated audits:
and correcting problems. Even when we analyze
the effectiveness of such steps as initiating an au- 1. A 1991 GRF financial audit by an independent
dit on our operation, it can only have positive re- company named SMC Management Services
sults if we have new Boards who want the audits, Group (SMC) who provided a report, “Business
and will take assertive steps to implement the rec- Analysis Report and Program Plan,” dated Febru-
ommended changes. ary 20, 1991.

We have historically elected directors and after a

(Continued on page 2)
few years we find that they have come to “trust”
PCM to the point where they only propagate a
management direction that has little oversight. Find us on the Web
WWW.RVOICE.ORG
Look at the current candidates and ask them if
Inside this issue:
they were on the Boards in the 2003 time frame.
Many of our problems stem from the direction The Past! 1
that those directors took and we are only now Residents Voice Bell Syndrome 4
beginning to question their actions. Meetings
Thursday, September 30 Track Record 6
“We cannot expect different results if we Thursday October 28 RV Position 7
continue to elect the same Directors who CH #5 6:30 pm Opinion 8

Page 1 of 8
A Publication of Residents Voice Aug 2010
2. An “Operational Review of the Maintenance Di-
vision,” dated September 1997, prepared by
Ernst & Young LLP (EYKL).
PCM appears to have agreed with many of the find-
ings and recommendations contained in the report
prepared by SMC, however, in financially critical
areas it would appear that the actions taken to im-
plement the recommendations were not effective.
For example:
PCM did in fact reduce the total staff years between
1990 to 1993, however, by 2003, they had again
added approximately 12 staff years. Of particular
interest is the fact that even though the total staff-
ing has increased by 12 staff years, the Mainte-
nance Division staffing in 2003 is approximately 13
staff years less than it was in 1993.
After the 1991 SMC study, PCM stated, “Work stan-
dards are in place in the Maintenance Division and
are used to measure productivity.”
However, the 1997 EYKL report states on page 28,
“There is no effective system in place whereby the
maintenance supervisors manage the productivity
level of their departments The standard times that
are used to schedule and budget tasks are signifi-
cantly overstated when compared to actual times.
This overstatement is so great that some depart-
ments claim productivity levels in excess of 250%.
Their studied opinion is that if an additional man-
agement study were to be performed today (2003
and surely 2010), most of the problems identified in
the above referenced studies would be found to still
exist. Thurn & Price had inquired if Ernst & Young
would be willing to validate selected cost critical
findings and recommendations of the management
study they performed in 1997. They recommended
that the Boards of Directors contract with EYKL to
perform a limited study to do this.
Page 2 of 8
Volume 3 Issue 4
The same Directors who initiated the GRF study
were unwilling to validate EYKL’s findings and would
not hold PCM’s feet to the fire.
Here are a few comments from the SMC report as
highlighted by the Thurn/Price analysis:
There is “Significant differences in the perception of
services vs. services received.”
“A lack of useful operating and control systems for
use by first line supervisors and managers.”
“A current Organization Structure that places as
much emphasis on internally focused activities as it
does on community/resident service activities.”
“Our findings indicate that the costs associated with
operating the business are high and the current
level of service can be improved.”
“Workers and managers are spending considerable
time with the paper, rather than being involved in
activities that are fundamental to the residents of
Leisure World.”
“Staffing requirements should be determined on
reasonable and realistic time standards. Unfortu-
nately, realistic work measurements or time stan-
dards are lacking in most departments.”
“It appears that as far back as 1986 , there has been
an overstaffing in Maintenance.”
“Employees are not accountable for their work and
the functional effectiveness of individuals and
groups is not being addressed.”
“The M.I.S. Department does not have a clear defi-
nition of its purpose. The Vice President estimates
that 90% of his time is spent justifying the existence
of the Department..”
(Continued on page 3)
A Publication of Residents Voice
“Streamline and flatten the organizational struc-
ture. (This was the legacy of Mike Curtis who
made this suggestion and created the contention
between PCM and himself).”
“Reduce the cost of Functional activities and place
greater emphasis on Service activities.”
“Increase the effectiveness of managers and em-
ployees.”
“Improve responsiveness, communication and
decision making.”
“There is an overabundance of managers, but an
inadequate amount of management..”
“The cost of maintenance can be reduced by
approx $800,000; management by $300,000; ad-
ministration by $180,000. Approximate yearly to-
tal of $1,280,000.”
“During our review, we noted limited overtime,
limited back log of work orders and employees
performing field work to fill an eight hour day.
These issues, along with overstated standard
times, indicate an over-staffing situation within
the Maintenance Division. For example, only 11%
of the actual work hours in the Electrical Depart-
ment during the first half of this year (1997) were
for electrical work orders, while 72% were for
light bulb replacement and 17% for special pro-
jects. In addition, the carpentry Department spent
38% of their time during the first half of this year
on resident service orders and 62% of their time
on ‘Special Projects.’”
“Painting cost comparison; PCM average cost per
sq. ft $0.68; other subcontractors average cost
per sq. ft. $0.48”
The prior comments are only a small percentage
of the conclusions by the auditors. The Boards
Aug 2010 Volume 3 Issue 4
worked with PCM in reviewing the responses to
each of these noted problems and many were ad-
dressed. For example, the painting costs the follow-
ing year were in line with the outside contractors
costs resulting in considerable cost reduction to the
residents.
The current reason for this article is not to have
PCM once again respond to the conclusions of the
auditors, but to open the eyes of the current Boards
to the way PCM will drift off of target if there is no
oversight. Directors who are elected time and again
to the Boards, have a tendency to “drift” with PCM
and our rising assessments are indicative of this lack
of control.
One of the most critical comments by EYKL that
must be on the minds of all potential candidates is
as follows;
“In addition to the recommendations in-
cluded in our report (Maintenance Division
only), which are estimated to produce sav-
ings for the Community exceeding $2 mil-
lion, we believe that there are additional
opportunities for improving the practices
and methodologies used by the Mainte-
nance Division which will justify the new
position of Director of Operational and Fi-
nance Affairs.”
This position could NOT be under the influence of
PCM but would need to have the Boards and Resi-
dents as it’s sole priority. As with all political pow-
ers, it is vital to keep a constant oversight on their
activity with someone who has the knowledge and
is capable of monitoring and evaluating the actions
of PCM as they perform their LWV duties.
Page 3 of 8
A Publication of Residents Voice Aug 2010
Bell Syndrome
M ost everyone is familiar with the events that
have occurred in Bell City.
At the 8/10/10 United Board Meeting I commented
that our budget process DOES NOT prevent the
salaries of our PCM staff from being prone to ex-
cesses as those of the Bell City officials and council
members except on a lesser scale. Unknown to the
people of Bell City, who were represented by their
elected officials (In LWV terms, board members and
managing agent), the City Manager was the highest
paid government employee in the United States
with a base annual salary of $787,637. When you
add the benefits it came to an annual compensation
of $1.5 million a year. This also included 28 weeks
of sick leave and vacation. Consider too that Bell
City per capita annual income is $24,800 and the
city came in UNDER BUDGET. Of course they also
had the highest taxes in the state.
Does that sound familiar; high assessments, un-
known salaries, under budget?
My comment was made to suggest that the United
Board take steps to prevent a similar lack of over-
sight on the part of our boards. An essential part of
the Bell City problem resulted from the electorate
not being aware of the council salaries. Once made
aware of those salaries, the hue and cry that re-
sulted became a national scandal, and most of us
felt the residents of Bell City were being “robbed.”
I do not want to imply that the PCM staff is receiv-
ing 700% higher salaries than is justified, as the Bell
City Council did. That would be obvious to the cur-
rent board members, however, a salary range that
is 20-50% higher than justified would very likely not
be noticed.
A Directors response to me was, and I paraphrase,
“… the United board takes sufficient action at the
Page 4 of 8
Volume 3 Issue 4
detailed level that such a problem could not exist in
LWV.” I suggest that he review the tape of his re-
sponse to verify my accuracy in paraphrasing his
answer. The Boards do NOT do a detailed line en-
try analysis of staff salaries and you would not find
a similar problem if it existed in LWV.
I would also suggest that when he reviewed his re-
sponse he should listen to the comments of his
President and also Director Beldner so that we all
get in sync. He is apparently unaware of what PCM
can do without his, or the residents, knowledge. His
President rightly stated that the salaries are done at
the top level and we have no idea on the detail. Di-
rector Beldner rightly stated that, “since PCM sala-
ries are confidential they are not obligated to pro-
vide the detail to YOU on the board.
For his edification, here are two ways to do a com-
prehensive salary analysis in a budget for LWV.
A bottom up detailed procedure (not likely
to get PCM support):
Determine the job titles.
Define a job description for each job title.
Establish a salary range for each job description.
Establish the time for each job description task.
Establish a salary for each individual based on
the tasks.
Establish the cost of the salary benefits.
Establish the overhead for each job title.
Use all of this information to do a comprehen-
sive bottom up salary budget analysis, or,
Have someone else do the analysis for us:
By putting a process out for 3rd party bids, you
can use the knowledge of another company
to establish a “bid/budget.”
This doesn’t guarantee the best results, but, if
the 3rd party wants the job, they will pro-
vide the oversight on the costs and you will
have a measure against PCM.
A Publication of Residents Voice Aug 2010
Past directors will say that; “No company is large
enough to undertake the job that PCM does (that is
not true)” or “No company will put the effort into
doing a bid because they just assume that PCM will
get it” (Very likely since PCM was usually involved in
reviewing the bids).
However we have had some past success using the
outside bid process. For example, the last time item
2 was done for the manor painting budget was in
the mid 90’s, a third party contractor underbid PCM
by a substantial amount, $0.48 per sq ft versus
$0.68 per sq ft. Not surprisingly, the following year,
PCM’s cost estimates were in line with the outside
contractor and the job came back in-house. Credit
for lowering these painting costs for 3rd Mutual
went to a past director, Ken Dooley. Unfortunately
this has not been done again for the past 15 years.
No director has been willing to pick up the gauntlet
of getting outside bids for major jobs and we are
dictated to by PCM who most directors trust explic-
itly even being aware of the “Credit Card and Incen-
tive Bonus fiascoes.”
When a Director believes that he is doing a detailed
line entry salary budget analysis, he must be pre-
pared to use the information in item 1 above. Look
through all available detail and see how many of the
pieces of the salary budget have been provided by
PCM. If you do not have all the detail, you are inca-
pable of establishing a true bottom-up salary
budget. What you are actually doing in the yearly
budget is accepting each of the above “undisclosed”
parameters from PCM, without oversight, which
results in a top down budget base on whatever sal-
ary PCM thinks is justified.
In my experience, PCM has only one objective in
mind, “To make as high a budget as possible and
come out with extra salary that could be used for
undisclosed employee benefits and unexpected
costs.” As I recall, we have never come in over
budget and that can be the result of several things;
Page 5 of 8
Volume 3 Issue 4
Exceptionally good estimating skills (by the boards,
since they do the budget).
Over estimating the budget to ensure coming in un-
der budget (by the boards/PCM).
Exceptionally “good” PCM cost/income manage-
ment resulting in always coming in under
budget. PCM gets awards for this, although,
overestimating a budget can also result in hav-
ing success in meeting a budget. We don’t really
know for sure why we come in under budget.
When things go wrong, PCM says, “We only do
what the boards tell us to do.” Therefore, when
things go right it must be because, “That is what the
boards told them to do.” As board members, how
many of you can truthfully stand up and say that
you have been instrumental in establishing each of
the “Line Items” in the yearly employee salary
budget?
Due to lack of knowledge, directors have been
prone to confuse their understanding of the budget
in such areas as; Incentive Bonus vs Safety Bonus or
Salary vs Wages. By confusing the issue of salary
with wages, one can erroneously assume that the
detail that is done for union wages is done for the
salaried staff, resulting in an open door for our
budget to be exposed to the “Bell City Syndrome
Not knowing “What We Don’t Know” is deadly in
business and that goes all the way from Enron,
Countrywide, Fannie Mae, Bell City, etc., to LWV
and the smallest Home Owner Association. Not con-
sidering the possibility of a faulty salary budget gen-
eration is being “willingly ignorant.” I don’t accuse
anyone of fraud, however I will accuse the boards of
lack of oversight and ethics if they do not look at all
possibilities of how our money is being spent.
If you would say to me that you don’t agree with
my assessment that we have an exposure to exces-
sive salaries for our PCM staff and will take steps
to provide any necessary oversight, I can accept
that. But, if you say that you have done everything
A Publication of Residents Voice Aug 2010
necessary to ensure that the salaries are justifiable
you are providing a false sense of security in the
minds of our residents and deluding yourself.
For those who are following the Bell City salary re-
view (or PCM salary review), you can make a case
that the salaries are legal. The Bell City council has
not broken any laws by generating the excessive
salaries. What we should be looking at are the eth-
ics of any “managing agent” that could do such a
thing and that is a part of a Directors responsibility.
Legal or not, the state Attorney General is being
asked to review the Bell City salaries. Should he re-
view PCM’s?
What complacent Directors are doing is trusting
PCM without oversight in the information that they
provide. With PCM’s track record, how can you jus-
tify that we, the residents, have been their highest
priority over the past 15 years.
IF you TRUST then you MUST VERIFY. We want to
see the VERIFICATION!
C. Grundke
Tr a c k R e c o r d s
M ost of us are used to measuring perform-
ance by the track record of results. Mutual
Directors are often selected using a similar criteria.
How has the candidate influenced the actions of
the board in the past?
This is commonly seen in our assessments and the
recognition and identification of our costs. Is the
management of our village going in the direction
that we think is positive, or has our progress been
questionable. Over the past few years, a number of
events have taken us by surprise.
As an example:
Some of the current Third Mutual candidates were
Page 6 of 8
Volume 3 Issue 4
members of the Third Mutual Board when the
Credit Card and Incentive Plans were in full swing.
They neither questioned them, nor, in all likelihood,
were even aware of the source and extent of these
costs to the mutuals. Should these individuals once
again be allowed to run our Mutuals with “closed
eyes?”
In 1999-2000, candidates Muennichow and Wellik-
son were on the Third Board and the basic assess-
ment went from $350.95 to $359.95. This was a
nominal 2.6% increase. We assume that their stew-
ardship of our budget justified this increase. In 2000
the unknown Incentive Plan cost the Mutual Mem-
bers $184,009. This plan was not common knowl-
edge by the Mutual Board Members and if either
candidate states that they were aware of this plan
and it’s costs, they should be asked why they kept
it hidden from other Directors and the Residents.
Hiding this information could be considered as be-
ing in collusion with PCM.
From 2002-2005, candidates Muennichow and
Welch were on the Third Board and the basic as-
sessments went from $387.55 to $483.00. This was
a 25% increase in assessments. The three yearly in-
creases from 2003-2005 were, 7.1%, 5.8% and
10.0%. A part of that increase was due to the Incen-
tive Plan Bonuses costing the Third members
$1,307,295, which the boards were not aware of,
nor were these directors even trying to bring this to
light..
In 2007 Director Muennichow was on the Third
Board and was unsupportive in forcing PCM to
make everyone aware of the justification for that
year’s $227,965 cost to the members for the Incen-
tive Plan Bonuses.
One of the questions that they should have been
asking themselves when they were on the Third
Board was, “Could this lack of oversight of the ac-
tions by PCM to restrict bringing just these two
items (Credit Card Usage & Incentive Plan Bonus) be
A Publication of Residents Voice Aug 2010
construed as a conspiracy with PCM to limit the
knowledge of the Board Members and Residents?
How do you answer your constituents on allowing
these monies to be unrecorded and hidden?
A review of the Third Mutual Board action on the
lack of contribution to the reserves during the 1999
-2005 time period brings up additional possible lack
of foresight on the part of Muennichow, Wellikson
and Welch. The average yearly contribution was
5.9% when in retrospect it should have been closer
to 15%.
This was especially critical since the problem with
the leaking copper pipes was evident and being
shown to be a potentially costly situation. Failure to
understand the potential problems without over-
sight of PCM places the Management priorities in
the wrong place.
Allowing PCM to dictate the managerial process
without knowledgeable oversight can be disastrous
and must be avoided at all costs. When the Direc-
tors are lacking in expertise, it is time for Audits and
Checks and Balances. These past Directors, Muen-
nichow, Welch and Wellikson have always been re-
luctant to have an audit.. Many Board members jus-
tify their reluctance in two ways; first, they will not
acknowledge their own inadequacies and rely 100%
on PCM, and second, they state, “It will cost too
much!”
Their shortsightedness fails to realize that the past
audits have paid for themselves time and again in
the savings that the auditors found. We have a ten-
dency to believe that PCM can audit themselves and
do so on a yearly basis. That is false! PCM is biased
and will always justify their actions. This is true of
any corporation and is a fact of life in the corporate
world.
Selecting candidates who answer your questions
with integrity, foresight and honesty should be our
prime consideration this fall. The Lawsuit filed by
Third should be the measuring block for all of us.
Page 7 of 8
Volume 3 Issue 4
RV Po s i t i o n
Residents Voice does not support any specific candi-
date and has a continued mission to provide resi-
dents with facts upon which they can make their
own decisions.
It is time for all the residents to be more aware of
what is happening and why! We are being told that
the GRF Board will be holding Town Hall Meetings
to update us on “Land Use Development Plans.” It
is critical that all residents are involved in this and
that you concur with your Board’s views.
There appears to be a consensus among residents
that there are two separate irreconcilable groups;
Those who Trust PCM totally without question, and
those who Question PCM on all fronts. Unfortu-
nately, this seems to be evident in the candidates
for the boards also. That makes your job more diffi-
cult because it is hard to know what and whom to
believe.
Questioning PCM’s actions is NOT A CRIME, unless
there is no justification. However, Not Questioning
PCM’s action IS A CRIME and is often cited as FIDU-
CIARY RESPONSIBIITY. Let’s make sure that we are
heading for our primary objective, and that is;
Ensuring that our homes are our first prior-
ity which can stand by themselves.
The amenities are our second priority and
cannot stand without our homes.
No one on one side really believes that the other
side is willingly trying to destroy Laguna Woods Vil-
lage. Committing suicide is not an option, BUT, be-
ing blind is a possibility and we must avoid that at
all costs.
A Publication of Residents Voice Aug 2010
Opinion
Selecting a Director for the Board
H ow does one select a candidate from a group
of nominees? One of the objectives is to se-
lect someone who has the same goals that you do.
The other objective is to avoid candidates who got
us in the current predicament and are unwilling to
change. Don’t take someone else’s word for it. It is
up to each one of us to find someone who fits the
bill. How do you do that?
Get direct answers from the candidates on what is
important to them and what they are willing to
work toward. Some sample questions to consider:
1. Have the past boards taken us where we want
to be and are you satisfied with the status quo
resulting from being managed by the same com-
pany for the past 35 years?
2. Are we expending an excessive amount of our
assessments on Land Development as opposed
to Housing Maintenance?
3. Do you support the development of our prop-
erty outside of our walls?
4. Are you aware of the amount of money PCM
has paid their employees in Incentive Bonus
payments from 2000 to 2007? ($5.2M)
5. Are you aware of any written authorization by
the Boards to support the bonus from 1996 to
2005? (None)
6. Should all of the directors have been made
aware of these payments? (Yes)
7. Would knowledge of the plan by only 3-4 direc-
tors constitute legal authorization? (No)
Page 8 of 8
Volume 3 Issue 4
8. Do you support refurbishing or replacing Club-
house #2?
9. Are you familiar with the Tomko Woll Report
comparing refurbishment vs rebuild of CH#2?
10. Are you familiar with the Bruce Collins analysis
of the Tomko Woll report?
11. What do you consider the highest priority; Land
Development or Maintenance of our homes and
facilities?
12. Do you believe that PCM is the only company
large enough to manage LWV?
13. Are you aware of the Ernst & Young audit that
was done in 1997 and have we learned and im-
plemented recommendations from that audit?
By getting answers to direct questions, we can hope
to elect directors who are looking out for our best
interests. We have had limited success with direc-
tors who have been unwilling to question PCM and
would prefer handing them the reigns without any
oversight.
It is unfortunate that we have to rely on directors
who have limited corporate management experi-
ence since they are the only ones who control PCM.
Past directors have a track record of sitting on their
haunches while PCM does what is in PCM’s best
interest and the resident/owners pay the price.
Residents Voice
(949) 683-7317
cgrundke@dslextreme.com