Typically, homeowner associations will appoint a treasurer to keep track of monthly expenses, create a working budget, and allocate funds appropriately. Yet, it is not the sole responsibility of the treasurer to manage the budget. One of the essential duties of the entire HOA board is to continuously review the annual budget and make adjustments when necessary.
Unfortunately, not every budget will have very much wiggle room, especially when it comes to things like vendors and utility costs. The good news, however, is that there are things that the members of the board can do to help trim the budget to more manageable levels.
Review the Insurance Policy
The association insurance policy can be one of the largest expenses in any association budget, which means it can be difficult to navigate around. Of course, insurance for the community is absolutely necessary, as is making sure it’s a well-rounded policy with good coverage. Well-rounded doesn’t always have to mean expensive, though. Insurance prices are fluid, meaning they don’t stay the same throughout the years. Instead, they rise and fall in accordance with the insurance world. A great way to maximize your HOA budget is to consult with the community insurance agent to see what prices are out there that may be better suited to the association. Getting suitable coverage at the right price is completely feasible, but it won’t happen on it’s own. Consider looking over the budget on an annual basis (at the very least) and make a point to review the current insurance policy and prices.
Outsource Back-Office Duties
There are numerous variables that need to be taken into account when creating the annual budget, each one costing the association a certain amount. Instead of treating these as individual duties and their respective costs, consider combining them under one, much less expensive, title. Hiring a company such as Clark Simson Miller to remotely handle some or all of the board’s back-office responsibilities can be an effective budget-trimming technique. Potential duties that can be outsourced include: reviewing and bidding on vendor contracts, analyzing reserve funds and creating an action plan, managing collection services, and much more. By placing all of these responsibilities under one roof, an HOA board can save a lot in their annual budget.
Analyze Utility Costs
The primary utility that board members should take notice of when reviewing the annual budget is electric costs. Are these figures getting too large? Do you notice any discrepancies regarding usage in common areas versus separate interests? Day versus night? It’s important to analyze electric usage in common areas as well as individual units.
The easiest fix for electric costs that are just getting too high is to implement an efficiency strategy. Something as simple as replacing old light bulbs with new, energy-efficient ones can end up saving the association a lot of money by the year’s end. Also consider managing electricity usage in common areas by installing lights that automatically turn off when nobody is using the facility or other energy-saving means. It isn’t just the boards responsibility to manage electricity costs. Members of the community should be brought on board as well. Most community members would agree that turning the lights off when they leave a room is a much better solution compared to raising their dues. Board members should speak with homeowners and make them aware of rising electricity usage.
Negotiate Lower Contracts
Board members aren’t the ones out there mowing everyone’s lawns or installing new windows in community areas – they hire vendors and contractors to do these things for the community. Unfortunately, some of these contracts can cost the association more than they can budget for.
Instead of eliminating these contracts altogether, the board should review each contract and consult with the vendors to negotiate lower prices. That might mean that the landscapers come once a week rather than twice, but if the result ultimately saves the budget then it might be worth considering. Although, not every contract negotiation will result in both a lower price and less work. Don’t forget that it’s a competitive market and that most vendors will offer lower pricing if they think you’ll look elsewhere. If you and the other members of the board are unable to negotiate the contracts yourselves, consider contacting a management company such as CSM.
There are many more ways to reduce your annual budget but it’s important not to immediately jump to raising the monthly dues, as that will lead to widespread community dissatisfaction. It’s also good to remember that, while the position you hold is critical to the association, the board members aren’t paid professionals. Hiring someone who is can make the difference between success and failure. Consider requesting a proposal from CSM so that your annual budget can get back on track.