A Demonstration on Creative Accounting Part II

Previously, we reviewed how the Board had created profitability for FY 2025. I thought I would take the year-end accounting a step further and show everybody how $453,129.67 of profit, albeit fictitious profit, just disappeared into thin air. We, as a community, have a number of issues to deal with. They are:

1. Fictitious revenue of $1,012,789.00 appearing out of nowhere.

2. $453,129.67 not added to Retained Earnings and disappearing.

3. Operating Loss of ($317,114.95) completely ignored.

Lets start with November 2025 Balance Sheet:

Acct #260127 is the SPA 2024. It has a value of $483,336. This is an error.

Acct #360000 is Retained Earnings. It has a value, as of November of $1,582,424.54, also an error.

Net Income is a derived value. It is a YTD value of $16,979.45, which is incorrect.

We start with November 2025 Balance Sheet so that we can see the changes that occur between months.

Next we need to document the Profit that was reported for the full-year 2025. We get this from the Consolidated Income Statement for December and YTD 2025.

We can see the operating segment experienced a loss but the SPA 2021 generated a profit of $770,244.62, resulting in a $453,129.67 profit.

Truly remarkable!

What next? What do we do with our profits? We post the profits (or loss) to Retained Earnings on the Balance Sheet.

Now let's examine the December 2025 Balance Sheet

This is interesting. Our profit of $453,129.67 has been posted but what happened to Acct #260127 Special Assessment? Its gone!

Also, what happened to Acct #360000? It has lost $647,639.04 of value! Our Retained Earrnings is now only $934,785.50.

It is interesting to note that our profit has been posted but other accounts have had their values reduced significantly.

The 2025 Profit is a fictitious profit. What really happened is a ($317,114.95) loss. In order for the Balance Sheet to balance, values had to be reduced to compensate. Whoever prepared the statements chose to remove the Special Assessment 2024 and reduce Retained Earnings.

This next financial statement is amazing. I hope everyone can appreciate this.

Now for the January 2026 Balance Sheet

Notice in January 2026, the SPA 2024 is back! Acct #260127 is back but this time with a value of $417,344.42.

It is obvious management used this account to balance the statement.

Notice also Acct #360000 has had its value increase by only $34,218.28. Why? It should have the 2025 Profit added to it.

Year-end accounting procedures require that once a new year starts, the previous year's Net Income is added to Retained Earnings. Retained Earnings should have had the $453,129.67 added to $934,785.50 for a value of $1,387,915.17. But it wasn't added. Why? Because $453,129.67 is fictitious.

Instead, the $453,129.67 was deleted. And, in order to balance the Balance Sheet, they had to bring back SPA 2024, but with a lower value.

Because of the operating loss, Retained Earnings should actually be (934,785.50 - 317,114.95) = $617,670.55. SPA 2021 has not provided any surplus funds for 2025.

So there you have it. Our Treasurer first created $1,012,789 of fake revenue. Used the fake revenue to hide a ($317,114.95) operating loss. Then posted it to the Balance Sheet for the December 2025 Year-end results ---

And then deleted it on January 1st, 2026. $453,129.67 gone!

Please ask yourself this:

1. What laws permit our Board to fabricate $1 million of revenue?

2. What laws permit our Board to remove an account from the Balance Sheet then return it one month later?

3. What laws permit our Board to post a $453,129.67 profit in December and have it disappear in January?

4. Don't forget, the ($317,114.95) loss. What laws permit removal?.

These were trick questions. There are no laws permitting these practices. But there are laws prohibiting them.

These are very serious offenses. I bring this to the attention of the community. These manipulations were intentional. Our Board has intentionally misled and provided false financial information. The size of the values, in my opinion, make these very serious crimes. Fabricating $1 million in revenue, welcome to the big leagues.

Does this community want leadership that intentionally provides false financial information?

Why are they doing this? Because the HOA is insolvent. Fake revenue to boost the HOA. Losses at the LLC have decimated the financial health of the HOA. We are in trouble and the Board will not be honest with residents.

Ed Fredericks

For the People

June 1, 2026