Budget question

Our HOA has run out of money due to a 2009 budget error that has just been realized. We changed management companies in May of 2008. When the 'new management company' showed the proposed 2009 budget to the board 'at that time' nothing seemed amiss and the budget was approved. Now that we are nearing the end of 2009 with No Money, the present board is scrambling as to what to do. (Our elections are in June. We have 5 board members with 2 changed out June of 2009) For the 2009 budget, the management company listed their fees as $4200.00 instead of the actual $7200.00. One reason it probably wasn't caught was the old management fees were $4200.00 in 2008 and 2009 was also listed $4200.00. Now we have the 2010 budget showing the management figure $7200.00. We questioned the CM and she said it was incorrect and should be $4200.00. That's when all the lights and whistles went off. The real budget figure should be $7200.00. There was also a $500 discrepancy with the CPA figure. All along they have been taking out a monthly figure equal to the $7200.00 annual. My question is: do we have any recourse with the Management company to uphold the Annual Figure given to us in the 2009 Budget?

The Attorney fees are also mounting due to all the Foreclosures. Each time a Foreclosure Complaint letter is sent to the attorney for a response it costs the HOA $250.00. I was recently told by the a President of another HOA that he responds to the Foreclosure letters and doesn't have the attorney handle it due to the cost involved. Does anyone have any thoughts on this? If it's that easy, Self Management might be a way out of this problem. I don't think we could do any worse.

BTW: The neighborhood is 3 years old with 64 homes. Since 2006, 18 have gone into foreclosure.

Your board needs to figure out what exactly the "tasks" are that this company is doing for you.

Then figure out a per hour rate and hire these jobs out.

Sorry, but IMHO, for an HOA with 64 homes, your board should scale back and sub-contract out all work.

Meg,

The mgmt co fee should be stated in their contract. Regardless of what has been budgeted, the assn must pay them the fee that is stated in their contract. Even if the mgr showed the wrong figure on the budget, a board member (the treas) should have noticed the error. It should be no surprise what the mgmt co fee is.

When a member account is turned over to your attorney for collection, the attorney should bill his fee directly to the member. This is the procedure used by my assn and our attorney. This way the HOA does not have to pay the attorney fees then try to collect them from the member. BTW, what is a foreclosure complaint letter?

With only 64 homes your board may want to consider self-management with the possibility of hiring a bookkeeping service. Of course that would mean that the board members would have more work to do including taking care of CCR violations.

Thx Glen.