110 | HOA Board Financials (Finding the Numbers That Matter Most) - HOA Insights: Common Sense for Common Areas

Episode Transcript
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Russell Munz (00:00):
And some cases, I find boards that don't have

(00:04):
financial reports for 236,months, even a year, you're
trying to operate anorganization, and you have no
information on how to do that,that loses trust with the
homeowners, and then thehomeowners then are upset with
the board, so that causes a lotof and lost energy and
aggravation and negativity. Itbecomes a whole, whole thing,

(00:27):
and the whole time it could havebeen resolved by being more
transparent and following betteryou know, accounting practices

Announcer (00:36):
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that car (00:38):
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Insurance Services. You'll findlinks to their websites and
social media in the show notes.

Robert Nordlund (00:51):
Welcome back to Hoa Insights, common sense, for
common areas. I'm RobertNordlund, and I'm here today for
episode number 110 forconversation with Russell Muns
from community financials, oneof our sponsors, Russell, is in
the enviable position of seeingthe Community Association
industry as an insider helpingassociations all across the
country monitor their cash andtheir cash flow. Last week's

(01:14):
episode number 109, was anotherconversation with regular co
host Julie adamen, providinginsights how the characters and
passions and priorities of thoseindividual board members are
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missed that episode or any otherprior episode, take a moment
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this episode was prompted by oneof those questions. It's Tyler
from Cleveland who asked wereview our monthly financial
report, but I'm not really surewhat it's telling me, what

(03:05):
decisions I should be makingbased on it. To me, they're just
numbers. Please help. We haveRussell here today with us. So
Russell, let's get right to it.
Welcome to the program. And howwould you respond to Tyler?

Thank you, Robert, and great to be here. And I hear
questions like Tyler's all thetime, how do you bring the
numbers to life where it meanssomething, where the board can
then take action? So that getsinto, you know, the Board may
get a stack of a report, if youprinted it out, would be a, you
know, half an inch thick orsomething, or an inch thick, and

(03:38):
it's filled with all of thesetiny numbers, and it can be
perplexing, especially if youget it, you know, a day or two
before the meeting, and you gota busy life, and you then you're
kind of scrambling on, whatshould I be looking at? Yeah,
what

do you mean if you've got a busy life? We're
talking board members here. Theyalready have a life, and they're

that even assurance that you've got the
financial reports. You know, yougot financial reports to look at
in the first place, and theyweren't handed to you at the
meeting. Yeah. So a bestpractice is to review the
financial reports, if you can,in advance the meeting, and then
have a dialog about thefinancial reports at your board
meeting. That could be thetreasurer going over certain

(04:20):
items and bringing it topeople's attention. But I'll key
in a couple of items that Tylerand other board members should
be looking at. One is, you wantto look and see on there's a
report called the balance sheetthat shows the assets and
liabilities of the community.
And the main thing you want tosee there is, are your assets,
so the money in the bank accountgoing up. So you want to see,

(04:41):
you know, if you're saving for acapital improvement item, maybe
you have that listed separatelyas an item in a, you know, one
of your bank accounts,specifically, maybe you break it
out like you have 50,000 savedfor the roof and. 20,000 saved
for siding, and that is part ofwhat's in the bank account for,

(05:04):
you know, bank XYZ. Want to seeif that went up over a period of
time, so that maybe your moneythat you're putting aside and to
fund your your savings orreserves are going up, or if
they're going down, you know, ifyou notice that it went down,
you know, an amount, you can aska question, well, how come it

(05:25):
went down? Did we pay thisvendor out of that account or
whatnot? Hey,

question, because when I've seen them,
they're the monthly financialit's the monthly balance sheet.
And so it's January or March, orJune, or April, or May, or
whatever the month is, and youlook at it and you say, by
golly, it's $54,000 217

so you're looking at it for just a point in time,
but you're getting these reportson a monthly basis. And if you
do get it ahead of time, you cantake a look at the prior month
and your current month and thensee if it's going in the right
direction. Or if you remember,from looking at it, 30 days ago,
you had 100,000 and now you have110,000

well, then that's going in the right
direction. Is there anysoftware, or is it appropriate
for the board member to keeptheir own, you know, piece of
scratch paper. So that inJanuary, it was $51,000 in
February, it was $59,000 inMarch, it was $48,000 keep their
own kind of track record, ordoes anything plot it?

(06:27):
Oftentimes,

treasurers who want to get into that level of
detail or provide that to theirboard may track the numbers over
time of the bank balance, andmaybe I've seen some where they
do a Treasurer's Report, andthey add a graph or something to
show that the balance is goingup. So that's something that
could be done after you get thenumbers, then you just plug in

(06:48):
the, you know, the balances, andkind of do that sort of thing.
The first place I would look atthat's usually the first report
in the financial report packetis the balance sheet, which is a
snapshot in time, usually theend of the month for you know
your your assets and yourliabilities, then I would switch
next from there to your incomeand expense report. Hopefully

(07:13):
you have a report that compares.
It shows you for the month, itshows you the actual income and
expenses versus the budgetedincome and expenses, and then a
variance, so you can see if youwere over budget for the month.
Also, right next to that,there's a year to date column.
So you have a couple of columnson this financial report, and

(07:35):
the year to date column showsyear to date, what the bud, you
know, what the actual is, whatthe budget is, and any variance.
And so what you're looking forhere, Tyler, is you're looking
to see if there was a largevariance. You know, you may have
a variance in one month, becausemaybe you paid, you know, you
paid a bill for something and itspikes, but you had a budget

(07:59):
item for 12 months, but in onemonth you paid the bill, so it
spikes in that one month. Butfor the year to date, it looks
like you're on budget, so you'rein good shape. I get this a lot,
where people complain that theygot unexpected surprise because
their water bill doubled ortripled or quadrupled, because,
you know, nobody was seeing thison a regular basis. And there

(08:24):
was somebody ran over the a pipein the yard when they were doing
tree trimming or something. Andnow there's a water leak that
nobody can see, just as anexample. And so that is
something that the board canthen use and say, I think we
need to look into this because,you know, we're double our
budget on the water bill, andwhy is that? Do we have toilets

(08:45):
that are, you know, are wepaying for water and there's
toilets? Do we have an outdoorspigot that's on that somebody's
using to run, you know, to dothings? Do we have a broken pipe
somewhere? So then you can kindof use the numbers as a way of
starting the conversation. Soyou look down these areas where
there's variances, and that isreally what the board wants to

(09:08):
focus on, so that at the end ofthe year, you stay on budget.
You're staying on budget bymaking these little adjustments
and course correctionsthroughout the year, by looking
at this report in particular.

Yeah. Yeah, okay. So visually, I'm thinking,
we have many board members herelistening. Who are they're
visual. They may not be. Numbersmay not speak to them. So this
is going to be report that has alot of vertical columns. And
like you said, the monthlybudget, monthly actual, and then
the year to date, budget, yearto date, actual, and as the year

(09:44):
rolls through, and let's talkabout December, 31 type property
in January, they're all thesame. In February, the year to
date starts to have moreinformation. And then by the
time you get to November andDecember, you've got a lot of
information. But what I hear.
Are you saying is that, look atthose variances, you'll see,
maybe in one month, that you wayoverspent your monthly budget on

(10:06):
tree trimming. But the answer tothat is, well, we trim our trees
once a year, in June, and inJune, you have 12 months worth
of expenses, and it looks likeyou've really shot the budget.
But you can tell yourself, Oh,that's okay, because it's going
to resolve itself by the time weget to the end of the year,
because there will be no treetrimming. This

one report has six columns, and you're looking at
the variance. And if you still,you know, you Yes, the monthly
variance helps to is where youfirst kind of ask the question,
and then you look at one, youknow, a couple row columns over,
you've got the annual variance.
If there's an annual variance,then there's, why are we really
over budget here? Maybe there'ssomething we need to dig into as

(10:50):
a board, I would say this reportis, you know, when I was a
property manager, was the bestreport. I use to operate a
community and stay on budget.
And so sometimes boards may notget this comparative that shows

(11:11):
the actual versus budget and a Pand L, profit and loss or income
expense that just has one columnand shows numbers that that is
you can see that that's tellingyou, giving you less insight
into you know how you're doingversus budget and how to dig in
and find things that should riseup to your attention, right?

Okay, good. I think, I think we got that. So
you're focusing on variances,the monthly variances, and the
year to date variances, andhopefully you have a good
understanding and goodexplanations for what's what? If
the water bill spikes, and youdon't have a good reason, then
you call the plumber, you havesomething double checking, and

(11:52):
you that's how you capture aleak. If it's tree trimming,
it's an easy explanation,because you do your annual tree
trimming in June, and no bigdeal. We get it. Okay. What
else? What are we looking for?
The next

one is, you know, the delinquency report, and this
is for the Board to take a lookand see which owners haven't
paid. And this report is goingto drive what follow up
activities that the board willuse, whether it's sending late
notices, whether it's workingwith a collections agency or

(12:27):
attorney to and following theircollection policy. So the age
delinquency report is going toshow you what owners owe, how
much they owe, how old the itemsare, and it helps bring up the
discussion for what shouldhappen next in delinquency, you
know, in collections, actions,got

it okay. So that helps. You know that Mrs.
Smith in unit number 13, whojust lost her husband, yeah,
she's late, but she's probablygive her a little grace. Her
life has just changed. Andthat's very different from
somebody who is six monthsbehind. Is on your can we say

(13:10):
this deadbeat list?

Yeah, could be.
And then also, so in the firstreport, where I was talking
about income and expenses, andyou can see if you're over
budget on an expense. So thenyou're, you're you're going,
you're blowing your budget byspending too much. This one is
you're blowing your budget bynot collecting the money because
the association is on a fixedbudget. And if you have some
owners that don't pay, that putsa real hole in your bucket. And

(13:36):
if you have many owners thataren't paying, this can lead to
where you have to decide whichbills to pay and what things you
need to put off. And so it be,it can become a problem. And
then the longer these go on for,in some cases, they become less
and less collectible. And sothere's a couple of things,

(13:58):
current cash flow to pay currentbills and obligations for
services for the entirecommunity. And then if you know,
some states have a prioritylien, which they kind of have,
like a locked in amount of moneythat is protected. But once you
go outside of that six month ornine month priority lien, then
there, you know, you're openingyour spouse self up to maybe not

(14:21):
collecting all of the money fromthe homeowner. And you can talk
to your attorney about this, butthis report, the delinquency
report, is where you want tofocus some time and talking
about it. And this should be aconversation amongst board
members, not with otherhomeowners there at a board
meeting, because that'sprotected

information.
Yeah, you don't want to betalking about who's the deadbeat
and who's not. Yeah,

you need, though, that needs to be kept private,
or it opens the board up toliability suits, which

is a really big expense line item that you
haven't budgeted for. That'sright, okay, so we're talking
about protecting the budget.
That the income expense reportlargely helps you track
expenditures and the agedelinquencies helps you track to
make sure your income is comingin as you expect. Is there a
magic line? Well, two thingscome to mind. Sounds like you
really do need a collectionpolicy to guide your thinking on

(15:16):
this matter, and something thatyou work through with your
attorney or accountant, or whohelps you develop that

oftentimes, the the board will do it with in
coordination with whether it'san accounting firm, their
attorney, collection agencymanager, it's all you know. It
depends how what they're using,as far as professionals that are
supporting the community, butyes, all of them are working

(15:47):
together based on the way thatselecting money is set up from
a, you know, from a processstandpoint, and then also
legally, what needs to happen inthe state?

Good, okay, and if you have that policy, the
collection policy that helps youto have equal enforcement so
you're not well, you can, youcan avoid claims you're being
friendly and hard.

Yes, you can open yourself up to again, legal
liability as a board if you'renot enforcing the rules
uniformly, and that includescollections.

Yeah, okay, a follow up to that is, is there a
magic line where it turns fromminor to serious, like, if
you're 15 days late, obviouslyyou need to collect that, but
maybe that's a simple thing, aphone call or a email. When does
it become big deal? Is it 30days? Is it 60 days? Is it 90?

(16:49):
Is it 120 or is that differentwith every Association? It's

I would say it can be a little different than
Different states have differentthings. You know, Florida, for
example, you need a notice oflate assessment at 30 days.
Sometimes it's at 60 days, someother action is being taken. But
you know, alarm bells reallyshould be going off if it's 60

(17:14):
or 90 days older be becausethere should be a process in
place to move that along andhave it be collected in a timely
way.

I'm liking that 60 day number because you also
said, if you let it go too long,it becomes uncollectible. So the
more you, in some cases, it canit can be, yes, yeah, the more
you ignore it, the more itbecomes old history, and the
more it seems like you don'tcare, and you want to make it
clear that you care, this is theincome that our association

(17:47):
survives on, and we needeveryone to be paying their fair
share. So you need to beguarding the income, but having
that balance of what truth andgrace, and I'm hoping that you
all have collection policiesthat start to really ramp things
up at the 60 day point. Yes,

I'd also add to that, Robert is when an
association needs to go for aloan because they haven't saved
enough for a capital improvementproject, if their association
shows that they have a largenumber of owners with large
amounts of money that have beenstanding outstanding for a large
amount of time, they're going tofind it difficult to get a loan.

(18:25):
Yeah,

the bank's going to say, Well, why are you
asking for money from me and notthe Johnsons in unit number 27

Well, the banks get repaid off of the funds that
the the owners pay to theassociation, and if you have a
block of those owners thataren't paying that that's
troublesome. That makes the banknervous. The next one I would
take a look at is, and this is,might not be at the top of list
for many, but it's, it's thebank reconciliation report. So

(18:54):
you can give financialstatements, but you need to
reconcile them, meaning that youneed to go through and make sure
that it matches, that what is onthe financial reports, in a way,
is is reality is true, and sothe bank reconciliation report
will show you whether those lineup and match, or if there's some

(19:17):
sort of difference in Between.
I'll give you real life examplethat is a nightmare, but
basically, there was acompetitor of mine when I was
running a management companythat the person who worked there
stole funds and they did notprovide bank statements and they
did not provide a bankreconciliation report. So they

(19:39):
were manufactured financialreports with no basis in
reality, nothing proving that itwasn't real, and that's how it
was doctored so that the personcould steal money. And I'm not
saying this happens everywhere,but it is something that could
happen. And. We hope that itdoesn't happen to any of the

(20:00):
boards that are listening tothis, but it is one of those
reports that often go unnoticedand unlock, you know,
unrecognized, but you want totake a look at that, and that's
a way, if you're working, youknow, if you're doing this in a
professional way, you want tomake sure that the bank
statements are reconciled,because that means that they're,
they're the most accurate,

right? Yeah, well, Russell, I got a grin on
my face because you're remindingme of a car I had in college.
Didn't have a lot of money atthat point in time, and the fuel
gage on that car was absolutelybroken, just didn't run. And I
bought the car used. The personwho sold it to me said, no
worries, just track your tripodometer, and when you get to a

(20:45):
couple 100 miles, fill up tank.
And that always made me nervous,because I never really knew how
much fuel I had in the car. Andthat sounds like what you're
talking about here. You've gotthese reports, and they're
making you pretty comfortablethat things are okay. But you
haven't seen the bank statementto say, actually, do you really
have $52,000 in the bank or not?

Yeah, and the reconci bank reconciliation,
that is your fuel gage, thatit's, you know, it's matching
up, and everything looks likeit's good, right? Your quality
control? Yeah. Well,

this is, this is fun stuff. Well, I'm looking
at the clock, and I realizedthat we need to take a quick
break here to hear from one ofour generous sponsors, and we'll
be back right after that withmore from Russell to hear common
sense for common areas.

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we're back.
Well, during the break Russelland I were talking about some
more stories about what we'veseen in the past. But let's
start with Russell. How do youknow you can really trust these
numbers, are there someindications that make you feel
good about what you're seeing,or what makes them trustworthy
or untrustworthy? Well,

tying it back to what we were talking about
previously, you're looking atthe bank reconciliation report,
and you want to see that there'snot a lot of you know
unaccounted for money on thatreport. Also as a backup to
this, you're we're going to get,want to have bank statements for
the board, usually part of thefinancial report packet, so
you'll see the bank balance andcheck images and transactions.

(22:52):
Be able to see it that way.

Let me stop you there. Would it be appropriate
to have the bank email it to youas board members? Or do you wait
for that to go through themanager's hands? Usually

it gets added to the financial report packet and
it's included there. And if thefinancial report packet has the
bank reconciliation report,everything is tied together.
Also, I would say that typicallyin modern accounting systems,
the account balance transactionsand check images are also going
to be kind of brought into thisboard portal, where it's the

(23:25):
same access to information thatthe both the staff uses to and
the the board members get accessto view. So every everything is
transparent for for all parties.

Got it? Okay? I like that. Transparent, open,
clear. What about timing?
Whether the other indications,if you hear that Mrs. Smith in
unit 92 says that they're alwaysmissing my payments, or
something like that, is, arethose big deals or little deals?

Well, the board is going to get these, you know,
the tea leaves, so to speak, ofwhere they're getting
information from differentowners, and the board will be
able to kind of put together alittle bit of a picture of
what's happening. Plus the boardis also going to get information
from vendors, or they're goingto talk to each other. So

(24:17):
there's going to be all of thisinformation. And let's go into
why boards change the way thatthey're doing things. It's
because of two main reasons. Oneis whoever they're working with
is not responsive, and they'renot getting back to them. And
the second reason is they'velost trust in the accounting.

(24:41):
They don't get financial reportson time. There's inaccuracies.
Bills aren't getting paid tovendors. So that's the vendor
complaining homeowners, youknow, their check isn't being
cashed or whatnot. It's notshowing up on their account that
the payment was received. So youget all of these different
items. So. These kind of worktogether, where, if you lose

(25:03):
trust, right, and you haveinaccuracy on inaccuracies on
financial reports, so you're notgetting financial reports
monthly, or they're coming intwo, three months late, and when
you have questions or want tocorrect the inaccuracies, the no
one's getting back to you. Thoseare the times when you know,

(25:23):
those are the flags that comeup, where you feel maybe they're
not being 100% truthful with me.
Maybe they don't. They eitherdon't know what they're doing
and they're incompetent. Maybethere's something else where you
know, that's where it gets tobe, where people feel like maybe
some shenanigans are happening,and that would be probably a
much smaller percentage. I wouldsay the great percentage is, you

(25:46):
know, whoever they're workingwith isn't familiar with
accounting best practices,doesn't have good systems,
doesn't have enough staff, andthen all of this financial
information, and the delivery offinancial information, the
delivery of these, you know,paying bills, and accepting and
depositing money just starts to,you know, fall apart a little

(26:09):
bit. And that's, that's when youstart getting more and more
chatter from vendors, fromhomeowners, and so the board has
to make a hard decision on whatthey're going to do next.

Yeah. Well, I think of it like driving a car.
If my steering wheel would everget sloppy, I'm pulling over
because I need to be able toknow where I'm going to feel
like I have control of thesituation. And if you lose trust
in the numbers being accurate,getting it on time, how am I
you're driving blind into thefuture, that would be red flags.

(26:43):
And I'm going to give managementcompanies the benefit of the
doubt that maybe somebody inaccounting moved to a different
job and they're scrambling toreplace that staff position. It
could be as simple as that. Itcould be that you've got a new
manager, and the managerthemselves doesn't know even
like the conversation we've hadtoday, to them, it may just be

(27:03):
papers or reports and they don'thave any meaning to it, so maybe
they don't understand. But as aboard member, yes, you need your
hands on this information so youcan make decisions to guide your
association forward. You don'twant to get sloppy behind on why
something is over, thevariances, the variance reports

(27:26):
make sure things match. Boy,being a board member is hard
enough without trying to do itblind,

yeah. And also, it could be, you know, if they have
a health issue or somethingcomes up in their professional
life that takes them away fromdoing this. And then it becomes,
you know, we're waiting on thisinformation. And some cases, I
find boards that don't havefinancial reports for 236,
months, even a year or more,that is crazy, because you're,

(27:56):
you're trying to operate anorganization, and you have no
information on how to do that,and so that loses trust with the
homeowners, and then thehomeowners then are upset with
the board, so that causes a lotof and lost energy and
aggravation and negativity. Soboard members are either going
to resign or they're going toget voted off at the next

(28:19):
meeting, because you've got thisinfighting, and, you know, some
homeowners take the socialmedia, it becomes a whole, whole
thing, and the whole time itcould have been resolved by
being more transparent andfollowing better, you know,
accounting practices. That is ahuge disruption for the
association when it could befocused on taking care of the

(28:39):
leaky roof or or, you know,other issues that are more
important? Yeah,

no, I get that you don't want to be in hot
water for something thatsomebody else did. If someone
else isn't feeding you theinformation to be able to run
the association, then you needto make a change and to get that
but I want to follow up on thathomeowners are always going to
be suspicious. Whatever yourassessments are, the homeowners
are generally going to thinkthey're too high. And so how do

(29:06):
you maximize transparency so thehomeowners get an understanding
that, yeah, you're running atight budget, you're running a
tight ship here at theassociation, and that there is
no skimming, there is nokickbacks. How you proactively

(29:26):
make it clear that off? Yeah.

So there's a there's a couple of things here.
One is most modern accountingand software, or management
software for this industry, isgoing to have what a homeowner's
portal, where the owner can seetheir account balance, see the
history of their charges, seethe history of their payments,
and download or print a ledgerfor their account. So there's

(29:52):
complete transparency there. Ithink that helps with a lot of
this too, to see that theirmoney is being accounted for
properly. Yeah, it's the, youknow, the reality and the
perception that so you work witha system that has something like
that, secondarily, when theowners have questions about
their payments or theiraccounts, you know, whether they
feel like there's charges thatthey should have, that they

(30:15):
paid, that there's a responsethat happens in a timely way,
because then they feel likethey're getting serviced and
there's nothing being hidden,right? The next part, someone's
on the ball. They're actuallysomeone. Someone's Yeah, yeah.
And if it takes you two or threeweeks for whether it's a
volunteer board member, amanager or management company,
accounting company, to get backto that owner, that's you know,

(30:38):
that that only builds themistrust, which we talked about
before, right? The next part isbesides the owner's own, you
know, financial kind of accountand their ledger, then it would
be sharing with the owners somebasic financial information. And
this would be financial reportsthat have been reconciled to the

(30:59):
bank statements, like I talkedabout before, where, you know,
they line up with each other,and so those are you should be
getting on a monthly basis, andyou're not sharing the entire
financial report packet with thehomeowners, because that, again,
is sharing. You don't want toshare some of that information,
like homeowner, you know, indelinquency. The next thing I

(31:22):
would say is that is typicallydone in some I have some
customers that do thisquarterly, some semi annually,
some annually, you know, some,some could be more than that,
but they will take the balancesheet, which shows the assets
and liabilities of theassociation, so how much is in
the bank accounts, and they'llhave the comparative income and

(31:42):
expense report that shows howthey're doing versus, you know,
budget for the month and year todate, like we spoke about
earlier, those two reports areshared with homeowners. They can
see that they've got money inthe bank, that their money is
safe, that's there. They canalso see that they're on budget,
and they see that the board,that or and who is in charge of

(32:04):
their community, are goodstewards of their community.

Yeah, I like that, showing that having
openness, yeah. And you use, Ithink you use the word
transparency, yes, quarterlymeetings, whatever it is. So
people could come in and askquestions and say, Gee, our
assessments are high. I talkedto someone down the street
that's assessments are less. Andyou can say, well, we just got
our insurance bill, and welooked around, we shopped

(32:30):
around, and these costs are whatthey are. The landscaper, you
notice the new plants out in thefront, those cost money, but
it's the good things that we'vebeen done doing to take care of
the association, so you can beresponsive to that, and then, so
I, I like that

there can be a narrative around that, because
then you can have a discussion.
And you can welcome the ownersto come out, to the to the to
the meetings, to ask theirquestions. You can encourage
owners if, if they have, youknow, interest in some acumen,
to be on a finance committee. Ifthat's something that you're
doing at your communities, thatthey're involved, you can also
encourage them to run for theboard if they want more

(33:06):
information. And if you'reproviding some basic baseline
information, which I would saythe majority of communities are
not, they're not providing thatto their owners, right? It's
sort of a little bit of a blackbox. And that's also what kind
of creates, you know, the somesome mistrust and the chatter
amongst the grapevine, right?

(33:27):
And so you want to get ahead ofthat by just being open and
transparent. There's nothing tohide. But again, you need some
good systems. You need financialreports that are timely in order
to do that. That

may be the key don't operate in vacuum. Nature
abhors a vacuum, and the rumormill loves a vacuum. Yeah. Okay,
last question mid year here, doyou have any insights for what
boards should be thinking orstarting to communicate to their
homeowners about assessmentincreases for next year? It

really made me laugh a little bit because of
the name the homeowner that saysthe community and so and so has
lower rates than we do. Lowercommon charges are the first one
that's going to get theassociation in trouble is if
they are not complying with allof the recommendations of the
insurance carriers. And so ifyou're not complying with those

(34:22):
things, one, your insurance isgoing to go up. Two, it might be
canceled, and you have to go toexcess lines, which means you
have to pay 234, times what thenormal rates are. And so your
board may have filed claimsright in the last couple of
years. So your insurance isgoing up, versus the neighbors
across the street have beendoing preventative maintenance,
and they haven't had theseclaims, or their documents are

(34:45):
written differently, and thehomeowners have liability for
leaky hot water heaters orwhatnot. So anyway, you can't
really tell so much just by anumber. There's a lot more
there. So insurance is stillgoing to be an issue where
things are going to go up. Isay. Your insurance, you know,
typically you're going to havebudgets go up, you know, maybe
five or 7% but your yourinsurance could go up more than

(35:08):
that. And then, if you'reworking on capital improvement
projects, you know, those areprobably going to be going up,
whether, if it's tariff related,there could be some increased
costs. I'm doing a I'm replacinga HVAC unit at my house. They
said as of May 1 2025 the priceof the equipment and
everything's going up 12% so ifyou can take that for like a

(35:32):
community association, you cansee that that's going up. And
maybe 12% is not the number.
Maybe in your area, it's 20% butit could be additional costs
that you then have to kind ofadjust for, and maybe that's
your capital improvementprojects are going to be higher.
And in some cases, maybe youhave to adjust your budget mid
year. Maybe there's a specialassessment to make up the

(35:54):
difference between what youbudgeted for and you're
collecting now versus what theactual costs are going to be,
and you do it while these thingsare ongoing. Thank

you for that preview. We have a lot of board
members here. They're trying tomake smart decisions, but I
think you've clarified a wholelot for them today. So Russell,
thank you very much. It wasgreat talking with you and
having you on the program. Anyclosing thoughts to add at this
time? Appreciate

the opportunity Robert and I hope that boards,
you know, if they if they needhelp and assist, you know if
they're not getting goodnumbers, that they ask questions
and they try and get goodnumbers, because it's the only
way that you're going to be ableto do a good job as a board
member with your Fiat fiduciaryresponsibility. There's a lot of

(36:40):
good information out there. Ifthey're tuned into this podcast,
they're already kind of gettinggetting into that. But you they
don't have to suffer with badfinancial information. You know
lack of financial information,poor systems. You know that lack
of transparency. There are lotsof resources available for them
to have a better experience forboth the board and make their

(37:03):
jobs easier as board members.
Also help them attract boardmembers onto the board by making
the board's role easier and beable to fend, you know, reduce
the amount of questions thathomeowners have, which makes the
board's job easier by doingthings in a transparent way,
using systems. I know thatthey'll, they'll, they'll be
able to make a do a better jobmaking a better circumstance for

(37:25):
their their homeowners.

Yeah, I like that. Tom, if you don't have
good financials, you have twoproblems. You have financial
problems and you will havepolitical problems. So stay on
top of that. So I just want toclose by saying, if you'd like
to get in touch with Russell,you can visit their company's
website at communityfinancials.com and just as a
reminder, Russell, you serveassociations all across the

(37:49):
country, right? Yes, that'sright, fantastic. Well, we hope
you learned some HOA insightsfrom our discussion today that
helps you bring common sense toyour common areas. We look
forward to having you join usfor another great episode next
week,

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110 | HOA Board Financials (Finding the Numbers That Matter Most)

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