How did your HOA save money?

Our annual meeting two weeks ago was certainly an eye opener for our Board and residents. Not only did it last FIVE hours (normally it's only two) but we had almost 100 residents stay for the whole thing! In the seven years I've been associated with an HOA I've never witnessed a Board take the (deserved) beating that this one did. The Board was trying to obtain the authority to negotiate and sign a 30 year lease with the YMCA in which they would get to build a new facility on our recreation property in exchange for taking over the maintenance and operating costs associated with our pool. Of course the Board inflated the costs of running the pool to make the offer look that much more inviting to the membership. They got called on their budget summary so now they're having to hire a certified accountant to provide an accurate budget report to all the residents. When they found out that we were holding a record 91 proxies (against their 7) they started trying to come up with a way to postpone the vote on the subject. But thankfully no one bought into their scheme because we had exposed them before they were prepared for the information to come out. We never even had to use the proxies but it sure helped send a message.

One thing that came out of this was the concern that the Board does not do enough to try and save money. In about five years our mowing bill has gone from ~$7K to over $16K and the quality of service only continues to deteriorate. We're already looking into reducing our mowing costs by letting a couple of acres of our recreation area "return to green" (won't have to mow it). I'd be interested in knowing some of the things that your HOA has successfully done to reduce costs. Hopefully it will give us some more ideas that we can take to this years Board and they'll have to defend themselves if they choose to ignore good ideas.

Thanks,

Randal

Wow, that is a huge question. Given that your association is a legal entity, it is like asking "How can our company save money?" There are numerous ways and lots of opinions on this one. Probably the best answer is that you have to have someone focus on every aspect of your spending and not just the obvious ones such as grass cutting. A tried and proven approach is to identify the top 5 budget spending categories (like the previous poster mentioned) and then devote resources to do what ever you can to bring the costs down. It is not obvious from your question if you have a budgeting problem (inaccurate estimates)or a management control problem (exceeding the allowed budgeted spending). I will assume that it is a budgeting problem with inefficient use of your incoming funds.

As the current president of a small condo association, I will offer you the following suggestions on what we did.

1. One of the most important things that we initially did was to establish the management control infrastructure. This defined how the Board would make decisions, what core business process would be used, how member input would be gathered, and finally, how information would be processed. Besides your direct spending accounts this can be a huge financial and time drain if you have an ineffective or inefficient management. If you are interested in more detail on all the things we did during this inagural year, it can be found at www.********.com under the Contents section.

2. Your BoD shoud develop a written budget philosophy to help it decide what should be included in the budget and to also provide a stable and consistent approach for managing the association's funds. Once established, you can now test it against all of your budget items to determine if there are any opportunities for cost savings. Here is an excerpt from our Budget Philosophy that describes the policies we follow:

A)Manage the association’s money as if it were our own
B)Only budget for those items that meet the following criteria:
1) Is this a non-discretionary expense to the association that
a) Is an obligation spelled out in the bylaws
b) Is necessary for the association to function
2) Is this a discretionary expense to the association that:
a)Is needed for the safety and security of the association or its property
b)Increases the overall value of the association property
c)Prevents a larger future expense to the association
d)Provides a desirable benefit to the overwhelming majority of members
C) Target the reserve fund balance at a ___% fully-funded level for maintenance/replacement of long-term capital assets
D)Whenever possible, offer optional participation for expenses that are discretionary in nature
E)Obtain two to three competing bids whenever possible for contracted services
F)Maintain a small contingency fund to respond to unforeseen conditions/opportunities
G)Use Co-Owner expertise or volunteer labor to defray expenses whenever possible.
H)Strategically use special assessments to cover the cost of non-reoccurring expenses rather than increasing association monthly dues.

If you follow these steps, you should have a solid foundation for assuring that your hard earned association dues are getting the biggest bang for the buck.

Good Luck.

JoeK

When I first became treasurer I demanded and got the MC to use the TOPS SYSTEM it is a community hoa type of accounting program that keeps track of every dime spent.
Then I took our 2 previous years expenditures and had a graph made by our MC on excell to make sure of where we spen the most money then I started a small work group from our community to chip away at the top 5 expenses

1. MC Fees
2. Lawn Service ( We cut front yards-rear yards-side yards as well as common land inside and around the outside of our perimeter wall)
3. Electric Bill ( We pay for the street lights 35.8 acres )
4. Pool Maintenance ( 2 pools )
5. Monthly Janitor-Handyman Fees

We are now after 20 years finally hitting 100 bucks a month for assoc. monthly fees. Keep in mind we are a starter community where people live starting out in life most houses are selling in the 200 to 250,000 dollar range. We started out 20 years ago at 50 to 94000 bucks
I have less that 7% accounts in arrears. We own 1 house in foreclosure with 2 emplty houses. Many houses rent spare bedrooms and we allow them for 2 years then they must stop with the boarders.