Favil West on the

Status of the Trumpets Audit

are we at an impasse?

In last week's Ch. 99 President's Report, Favil West provided a welcomed update on the status of the Trumpets forensics audit.

As Mr. West noted, that audit was initiated by the Board more than ten months ago. For those you may not be aware, the purpose of the audit was to determine whether the lessee of Trumpets, S&D Cafe V LLC, had complied with the revenue sharing provisions of the lease. The revenue sharing provisions of the Association's lease provide that the Association shall receive a percentage override based on gross revenue received from conducting food operations in the kitchen operated by the lessee.

Since the principles of S&D Cafe V LLC, Victor Scotto and Michael Demitrieus, operated together, at least on paper, 18 other enterprises in Nevada during the Trumpets lease period, plus 5 additional enterprises in which Victor Scotto was a principle without Mr. Demitrieus, the the task of the auditors in determining and being able to verify the potential sources of gross revenue from Anthem operations must be a daunting one.

Here is the potential problem. The revenue received by any of those 23 other legal entitles for food that was prepared using our Anthem facilities but was consumed outside of Sun City must be taken into account in determining the lessee's gross receipts for revenue sharing purposes.

In his prepared statement, Mr. West told us that the auditors had yet to complete their audit. The auditors, it seems, have reached some sort of an impasse and we gather they are unable to proceed. What I found most interesting about Favil's announcement was the extent of the auditor’s progress in their efforts to perform the tasks that had been assigned to them.

According to Mr. West, the auditors had yet to respond to “the last three items” the Board had tasked the auditors to perform. What did that mean? The impression given by Mr. West's announcement is that the auditors are lacking the information from the lessee that would verify the accuracy of the information the lessee had submitted to the auditors. Why do I say that? I say that because of the nature of "the last three items" the Board tasked the auditors to perform. As it turns out, those items just happen to be the items that would allow the auditors to verify the accuracy of the information that the lessee had submitted.

Assuming that to be the case and if the auditors are unable to verify the accuracy of the lessee’s information, the auditors will be unable to perform their assigned tasks. Under those circumstances, it's unclear what conclusions the Associaiton will be able to draw from the audit's results.

That may be one reason why Mr. West said that the Association, not the lessee, will be paying for the audit.