Who Moved My Auditor?

[What follows is a copy of a fairly self-explanatory e-mail to Jacob Myers, Board Chair of Weaver Street Market, who is standing for re-election as a Worker-Owner Director in 2008]

Dear Jacob,

I write this e-mail with the greatest of respect to all of its recipients, not least you; but also with a heavy dose of reluctance and sadness.

I have attended almost every Board meeting this past year, along with engaging in the work of the WSM Elections Task Force at the beginning of this year.

I have closely followed every step of the implementation of the capital building projects associated with Expansion. I have listened to what we have been told, and have read what has been written. And I’ve done a good deal of commenting of my own!

I have two further specific questions in this e-mail. I apologize for the lateness in asking them. Bluntly, that is because I have had to work out the premises all on my own.

The information that has allowed me finally to make the necessary deductions has been withheld or presented in a less than full manner. I’m sorry to have to say that. But it is true.

I am writing this e-mail, even at this late stage, to give you and the General Manager the opportunity, in your remarks to the Annual Meeting, to address the answers to these two questions; to the various previous questions I have asked about debt, the Auditor’s Report and the expenditure on the capital building projects; and to address the summary points I raise at the end of this e-mail.

[For those of you reading this e-mail, who have not seen the Auditor’s Report, he puts the co-op’s long-term liabilities at $9.3 million (not the $7 million our Annual Report states); and he has the debt repayments ballooning from $170,000 this year, to to $700,000 in 2012, and $1.5 million in 2013 – which our Annual Report doesn’t mention at all…I have asked, without success, for the Auditor’s Report to be available at the Annual Meeting.]

If you do not so address these issues, then reluctantly I reserve the right to raise them myself, in the form of questions to you two at that Meeting, and at the various Candidate Forums.

Transparency and accountability are the touchstones of our co-operative integrity. Those running this co-op simply can not ignore the unsustainable debt that has been created for this co-op; the unsustainable repayment amounts; the manner in which we arrived at this situation; and the sensible steps now needed to take us forward.

My two questions:

1) Why was the roughly $400,000 which the GM has attributed to ‘one-off’ expenses associated with the Expansion building projects paid out of the Operating Expenditure Account rather than by the monies raised and borrowed specifically for the purpose of the Expansion building projects?

In other words, why was any part of capital expenditure covered by monies available properly for the use of operating expenditure? Was there no more capital money available?

This rather strange allocation of operational monies was the sole cause of the Worker-Owner Dividend being wiped out. It is an issue that has never been addressed by you, by the Board or by senior management. And that is why it has taken me so long to work out.

It is also the reason the Board is now finding itself distracted into talking about filling the hole by changing the Consumer-Owner Discount, rather than properly filling that hole by addressing the overly high level of debt that has been incurred by overruns on the Expansion building projects.

2) Why was the Worker-Owner Dividend not paid out of the central Worker-Owner Account, in which is retained all of the ‘excess’ monies vested by Worker-Owner contributions each year?

Since you have already established that you can use operating money for capital purposes, why did you not use that Worker-Owner capital to pay the Worker-Owner ‘operating’ Dividend?

And why was none of this explained to the Board, and to Worker-Owners?

The facts are these: the Expansion building projects were advanced as concepts to address pressing problems. Hillsborough wanted its own Weaver Street. And we all wanted better quality food; more of it; and better facilities and more space for our food production workers.

I have re-checked the original game plan for consultation on these concepts. At no point was it ever planned to ask Owners what they wanted or would allow. I think we can now all agree that was a mistake.

You have not answered my questions about what formal studies, analyses, comparisons and the like were undertaken to gauge the true need for the Expansion projects as conceptualized, their cost, and so on. I have to assume there were none.

In other words, we pretty much backed into this whole deal on the basis of our own feelings.

When implementation finally got underway, the projects fell behind schedule; there were problems with equipment, among other things; and eventually, we ran over budget.

At that point, instead of asking Worker-Owners and Consumer-Owners for their permission, we over-borrowed, and when we were no longer able to do that, we simply dipped into operational funds – again without asking Worker-Owners, whose Dividend we were about to wipe out.

And now, to make even more room for this over-extension and over-indebtedness, we are beginning a process of trying to change the Consumer-Owner Discount.

I say ‘we.’ I’m the one being disingenuous now. Absolutely none of this was done with my support. I either didn’t know, wasn’t told, wasn’t asked, or vehemently objected – at Board meetings; in person; or on my blog and in e-mails.

Back to the Consumer-Owner Discount. Sure, there are co-ops around the country who are addressing the issue of increased competition by changing the Consumer-Owner Discount to a Consumer-Owner Dividend.

But, that is in response to unavoidable competition coming from outside, not from over-extension and over-indebtedness coming from within.

And it is part of a two-part approach to increase Consumer-Owner loyalty. What goes hand-in-hand with the change in return on investment is the notion that Owners be allowed much more say in the running of their co-ops.

The premise is: if your return is now to be dependent on the co-op’s performance, then you, the Owners, must be allowed much more say in the performance of the co-op.

I’ve been pushing for the last point for the past three years. I’ve written two strategy documents and a blog on the subject. But that’s the part you, the Board and senior management have not been addressing so far.

Will you address it at the Annual Meeting? Indeed, will you finally come clean on all of these points at the Annual Meeting. Will you, the Board and senior management finally practice the transparency and accountability we tell our Owners (not least all over our purple trays!) is an integral part of our approach to ‘Co-op Ownership’?

What we need to do now, in my opinion, is:

A) Review our “Ownership Culture,” so as to ensure that no further important decisions are made in our co-op without the meaningful input of Owners.

B) Re-structure our debt, so that the financial sustainability of our co-op is no longer endangered – and to do so in a way that retains the benefits of Expansion, and to do so in a manner that does not further alienate our Worker- and Consumer-Owners.

See you at the Annual Meeting and the Candidate Forums.

Published in: on September 26, 2008 at 7:41 am  Leave a Comment  

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