Return for Thanksgiving

Well, it's good to be back in the area for the holiday. We each have a lot to be thankful for.   I'm not only thankful for the present but also for the future. I've been busy planning and preparing and creating that future.  Hopefully, I'll live long enough to experience it.

So on Monday I returned to this area to spend the Holiday with some of our local relatives and to complete some things.

O'hare was bustling and it was a pleasant airline trip. Left on time, arrived on time and best of all I completely missed that 8" snowfall.

We Need to Live in the Present, But History is Important

While the board was discussing the budget for 2016, I made several remarks and one of the board members countered "But that was history!"

History is an interesting phenomenon. In fact, considering the age of this planet and the lifespans of human beings, what most of us do will generally have little impact upon the future. Therefore it is most important to live in the present, have as much impact as we can in the present, and avoid screwing the future. In a HOA that means making rules, maintenance, project and financial decisions that allow future owners to live unfettered from bad decisions, debt and the consequences of poor rules decisions.

Budgets are always difficult to prepare. It is unfortunate that boards are frequently so uninformed or unwilling to bone up on history. "History" can teach us important lessons and "history" can allow us to avoid serious financial pitfalls. The new board of 2008 was particularly uniformed about the history of this HOA and they fell into a financial trap set by previous boards. Today this HOA continues to pay for new roofs because of historical decisions made by the boards of 2001-2008. This HOA also experienced road failures about 15-25 years earlier than expected. But some boards don't want to know about history or use it.

I do use history as a guide because it is such a great teacher. It can guide us to avoid the pitfalls of the past and avoid the mistakes made by previous boards. Not everyone agrees with this approach and I suspect personal agendas do play a part in HOAs. Promoting a personal agenda and a legacy can really screw things up.

It is somewhat ironic that back in 2008-2010 when things looked really bad at BLMH that I was singled out for personal attacks because the word being promoted was "Elect Norm and he will raise your fees."

Nothing has been further from the truth. In fact, I've been the foremost champion in this HOA for fiscal responsibility, proper maintenance and the lowest possible and realistic fees.

I'm the one who championed the fee decrease for 2015 and it was based on solid research. In 2015 I again spent the many, many hours to come up with the basis for a budget for this HOA for 2016 with the two most junior members of the HOA who agreed to be on the "budget committee." Yet, I again find myself with them under personal attack. Why? Because we did the research which indicated that a 1.5% fee increase for 2016 would me more than adequate. Meanwhile, some board members argue for 3% to 5% annual increases. Based on what?

There is absolutely nothing in the three most recent reserve studies that indicates this is a requirement. Each of these studies have been imperfect, yet have been discussed and rebutted by boards thanks to the hundreds of hours I have put in to do this. That includes getting proposals for some of the issues raised in these studies. The advantage of physical surveys and obtaining proposals is they provide real substance to the issues of replacement costs, in real time.  This work was done with the participation of management which is the proper way to do this.

I've also done solid work on methods to alleviate possible concerns about some possible infrastructure issues 30 to 40 years hence. I've discussed this with management and presented it to the boards since 2013 not once, but annually.

We've shifted from a reactive approach to water main problems to a preventative maintenance position. We have replaced our "minefield" Lakecliffe Blvd with a solid, properly engineered and installed road. We are way, way ahead of the curve at this point, I've personally reinvigorated the maintenance of this HOA and we are doing a damn better job than the boards of 1990-2008 did.

Yet I again find myself under personal attack, and this time it is from within the board. Some old dogs cannot and will not learn new tricks, I guess, except undermining ones.

It is ironic. I'm the one who puts in the hundreds of hours in this HOA to do the work which ultimately defends the owners. I have no personal agenda, I do solid research and yet I am the one attacked.  It reminds me of that old expression "No good deed goes unpunished."

Fortunately, I don't have to live here. I can sell or rent my unit at any time. In other words, I don't have to spend all of that time dealing with this bullshit. I do really have better things to do and I can provide my services where they will really make a difference. I have learned the lessons of history. Too bad some have a personal agenda and will throw others, including this entire HOA "under the bus" in order to achieve it. But some will never learn from history.

I have warned owners about the pitfalls of not paying attention and participating in their HOA.

Reserves of $86,321- Assessments and Budgeting

This is another post in a continuing series on HOA budgeting.

"In 2014 the reserve contributions were 312.4% higher than they were in 2001. The Operations & Maintenance (O&M) budget in 2014 was 14.9% higher than it was in 2001."

In other words, in 2014 the average monthly owner fee for the O&M budget at BLMH was $28.56 greater than it was in the 2001 budget. In 2014 the average monthly owner fee for the reserve budget at BLMH was $83.68 greater than it was in the 2001 budget.

The above is why I pay so much attention to reserves at our HOA and why you should at your HOA. Our reserve contributions climbed nearly four times that of the O&M budgets.

".....we need to live in the present."

"I have made a general statement that I think it is a mistake for a HOA to move forward with 0% annual fee increases. However, the actual budget each year should be based upon the actual finances and not some general theory or knee jerk, emotional reaction. The problems at BLMH can all be traced to the condition of reserves. In recent years boards have dramatically changed the approach to this very significant component of fees at BLMH.  This change has had a profound impact upon our HOA finances."

In February 2010 I sent an email with five links to the Architectural Director of the Board of BLMH. These had to do with fees and budgeting at our HOA. Four of these links are contained in this post.

As I have stated elsewhere in this blog, I had been doing my own research about the finances of the HOA since considering a purchase in 2001. All I had at that time was the information provided by the various boards to each of the owners and the most recent newsletter; that information (excepting the 2001 newsletters) is adequate and included published budgets and balance sheets.  Some of my research had been completed prior to purchase, but there really isn't a lot of time to delve deeply into this prior to making a purchase commitment. Of course, back then it was a seller's market. Today it might be easier to take one's time to do sufficient research. I had legitimate concerns about reserves and fees.

The first budget I was given was the 2002. It showed a reserve contribution of $108,000 for the year 2001 and a 2002 budget with a $148,108 contribution for reserves.  However, I later discovered that the total reserves at BLMH in 1998 were $86,321. The average annual fee increase had been 2.59% over a period of 10 years. This changed when a new management firm came on board in December 1998. Commencing in 1999 there were large annual fee increases of 11%, 11%, 9% and so on. Owners had become accustomed to very low annual fee increases in prior years. But those budgets were inadequate.

At BLMH the Operating & Maintenance budgets (O&M) were not separated from Reserve requirements in the percent changes to fees provided in the "Welcome Packet." Nor were reserve fund balances provided year by year. I suspect that a few owners might have become alarmed had that information been provided in that form. But it was in the "Balance Sheets" for the HOA and not flagged. But then, as is the case today, owners are largely uninvolved in the affairs of managing this HOA. Today, most owners prefer to let another owner in a board position do the work. When things are not to their liking a few of the "owners' will show up to express their displeasure and make demands upon the board of volunteers. Boards will frequently be inclined to acquiesce. That's the way it was, and that is the way it is today in our "entitlement" society.

Returning to my financial concerns in 2001. This information was available in the prior balance sheets. This HOA had less than $100,000 in reserves in 1998 and yet would begin a multi million dollar roofing project in about four years, and a complete street replacement in four years. Simple arithmetic would indicate that there would be insufficient reserve funds to do these projects unless drastic action was taken.  Boards had no choice and so fees increased at an average annual rate of 7.41% during the period 1999 to 2008. Projects were delayed to allow the accumulation of funds to do the work. A significant amount of the money collected for these capital projects was spent as soon as it was collected.

But no one at this HOA read about this in any letter and any newsletter. So most of the owners were blindsided. They didn't know that the boards prior to 2008 had thrown us under the bus, spent money on a defective street project and, with about $250,000 had embarked upon a $2 million dollar roofing project commending with the building which housed the president of the association.

This history is why so many boards have struggled for nearly 20 years with annual budgets at BLMH. This history may also be why some board members have been so averse to 0% fee increases in recent years. They may remember the pain and the owner angst and they want to avoid it.

But as 2016 approaches it is important to realize that this HOA is not operating or being managed the way it was in the 1980s and 1990s. I am of the opinion each and every owner is better for it. Anyone who disagrees needs to state their case rather than simply gripe, or make derisive remarks under their breath during HOA meetings. A few probably prefer the "good old days" when we either didn't know what was going on, or we were fed "pap" with articles about architecture in England. Either way, ignorance may be bliss until reality sets in.  In HOAs the blissful hope they sell their unit before the reality sets in.

I do recall the newsletters of 2002. Back then the "big deal" was the winter tips. Reading those newsletters, one would assume the board had everything under control and we were in great shape. It was a sham and nothing could have been further from the truth. But one of the favorite expressions of the leader of the board back then was about "throwing people under the bus." And so they did. But for as long as possible boards and the board presidents of this HOA did what they could to keep up the facade. Reality intervened then as it does now. But today it is a different reality. The newsletter is no longer a facade or a "feel good" piece of paper. We do have reserves and we do know what they really intended to accomplish. The HOA is aging, but it is no longer falling off of a cliff.

I cannot go back in time and fix the past. We can and do address identified issues in the present, while planning a 30 year future. That is not the way it was, and those who participated in those years should take responsibility for their actions. That includes owners and former board members.

We today have owners who have lived here for 30 years and remember "the good old days" when annual fee increases averaged 2.59% and for many years the fee increases were 0%.  We also have one current board member who was on the board back in "the good old days" and experienced it all.

However, we need to live in the present.

I have made a general statement that I think it is a mistake for a HOA to move forward with 0% annual fee increases. However, the actual increases each year should be based upon the actual finances and not some general theory or knee jerk, emotional reaction. The problems at BLMH can all be traced to the condition of reserves and several projects began in 2002, including an incredibly costly roofing project.

In recent years boards have dramatically changed the approach to this very significant component of fees at BLMH. This change has had a profound impact on our HOA finances. These changes began slowly in 1999 but became more sophisticated by 2011. But until the roofing project is completed and the redo of the streets a lot of money will continue to be spent. Unfortunately our streets began less than 10 years after they were replaced in 2002 or 2003.

In 2014 the reserve contributions were 412.4% higher than they were in 2001. The Operations & Maintenance (O&M) budget in 2014 was 14.9% higher than it was in 2001.

The percentage of fees for reserve items has increased from about 0% in the 1980s and 1990s to about 31% or more in recent years. Reserve contributions via fees peaked at 33.9% with the 2012 budget. In 2011 there was a 7% increase in assessments to owners. All of it went to contributions for reserves. In fact, the budget for O&M items actually decreased that year by 1.1%. In 2012 the budget called for an approximate 3% fee increase. Of that increase nearly half went to reserves.

In recent years the boards temporarily shifted to a multi-tiered approach for reserves and very closely monitored requirements for the 10 year future period while also considering 20 and 30 year requirements. Had this been done from 1985 to 1998 there would have been no need for me to do the work to create the information contained in the links later in this post. I also probably wouldn't be providing about 450 to 700 hours of free services to the HOA each and every year.

The earlier approaches of low fees with minimal reserve contributions created the financial problems of the 2000s. The grandiose or poorly executed projects which began in 2002 sealed the fate of this HOA for the next two decades. It was the available funds that probably dictated the approach used for the street replacement project in 2002. That is understandable if a HOA lacks the funds to do it right. Understandable, but not excusable. However, for a time the HOA owners did get the low fees they wanted. This could not continue and owners from 1999 to 2008 paid for this and got average annual fee increases of 7.41%. That's 3 times the fee increases each and every year as compared to the earlier period 1982 to 1998. Most of the money for the annual increases after 1998 went into reserves and to pay for immediate capital projects including the 2003 street replacement and that $2 million roofing project.

It is only since 2010 that this HOA made the huge leap to more sophisticated and realistic reserve requirements. This has not been smooth, either. But boards are getting better at this. A lot of time has been spent by a minority of boards members since 2011 looking into reserve requirements and implications for finances. This was necessary because of the condition of Lakecliffe and other streets, which were not predicted for retopping until the 2020s. Instead we found we had to completely replace Lakecliffe Blvd. Other projects and surveys which had been delayed are finally being addressed. 2014 and 2015 have been very different years as compared to the preceding ones. This needs to be considered when preparing HOA budgets at BLMH.

Here are the links I mentioned at the beginning of this post. Yes, we can plan and prepare. Yet, it is true that some can't, some won't learn from the past, and a few expect a totally different outcome no matter what they do. Yet, boards are supposed to muddle through. History can be a great teacher if we are willing to learn the lessons it provides. The reader may not agree with all of the following, but it does include some eye opening information:

September 2008 - Assessment History


November 2008 - Where Our Fees Will Go in 2009


March 2009 - A Method for Arriving at Assessments


June 2009 - Unit Owner Budget

Budget Meeting 2015 - Part II

"The fees collected for reserves at BLMH have increased by nearly 8.75% each and every year for the period 2001-2015.   The O&M expenses actually increased by less than 1.5% each year." 

The above statement is the result of my ongoing cost/fee analysis at my HOA. This is precisely why I have put so much effort into scrutinizing the reserves here at BLMH. Because reserves are nearly one-third of our owners fees, any moderation in reserve requirements will have a very large, and disproportionate effect on annual budget requirements and on our owners fees. Conversely, if reserve requirements go upwards, that too will have a very large effect on fees, and it has, for 15 years.

Not everyone understands this. Boards at BLMH have historically focused on the O&M expenses. In doing so they miss the elephant in the room. This is not news. It began decades ago when boards focused on meeting annual expenses and darn near ignored capital expenses and replacement costs. Some boards operated on automatic which is why there is resistance to fees determined by actual budgetary requirements. It is easier to do an O&M budget and then increase fees by 2 or 3 percent. Any income excess can be allocated to reserves, ignoring actual requirements.

It could be worse. In some HOAs the boards simply go with low annual fee increases, or none, and then pass special assessments to deal with budget issues. But in recent years our HOA has declared that we want a steady approach. I agree because I think that is best for our owner/shareholders. That sounds simple. Getting there is not and doing the work falls on a few of the board.  In other words, making these grand statements is easy. Doing the work to make it happen is not. Which is why I put in 450 to 700 hours each year as a "volunteer" on a HOA board. What a bad deal!

Last year this HOA had a 0% fee increase. For some board members, you would have thought that was sacrilege. However, if one realizes that reserve contributions have increased nearly six times faster for 15 years than have O&M costs, then this is not really so difficult to comprehend.

I'll say it again. Reserve contributions have increased six times faster than O&M contributions for 15 years. So where would you put your talent if you want to deal with HOA budgets? I decided some years ago that the reserves were the Achilles heel of BLMH. Therefore they must be monitored more closely and scrutinized.

How do you think we did water main replacements and street replacements decades ahead of what was planned? It wasn't fun, and there have been consequences. For example, all of the drainage improvements would be done today if our streets hadn't failed. That is a fact. But that is another issue. For budgets, long term situations can have serious consequences.

Budgeting Overview
A short time ago I posted about the annual budget meeting, which is the first task a new board is faced with. At BLMH this occurs immediately after the election and assignment of officers.

As I am fond of saying "We need to hit the ground running." Not that I think that's the way it should be, but that is the way it is, each and every year. Is it any wonder a new board might struggle?

Budgeting should be straightforward. In a HOA it might not be. This and subsequent posts will provide some insights into the budgeting process and why it may be difficult. It also provides some history and emphasizes why it really is so important to get the budgets right. However, this is 2015, not 2000. A lot has changed since then. Some of our owners can't comprehend this.

In my blogs, it is important to understand that board members are also owners. So I may use the terms interchangeable. A "board member" is also an owner. When I describe owners, it is to be realized that what I am saying also applies to board members because they too are owners.

We are each either a part of the solution, or part of the problem
Budgets are a necessary part of any business. But many HOA owners don't run their personal lives like a business, and so a few don't expect their HOA to be run as a business, either. Some of these owners become board members. Owners bring their practical experience with them. Also their personal judgements, opinions and beliefs.

Nevertheless, the annual budgets are serious business, with long term consequences. Nothing more and nothing less.

The October 9 post delved into the some of the discussion items for the budgeting process. I have a link at the end of this post. That meeting was long because the budgeting is not a simple task and boards sometimes make it more difficult than necessary. We also have other things to do during the meeting. This is a full meeting and there are the usual agenda items, including the Homeowner's forum.

We're taking a closer look at some of the underlying assumptions and so the budget remains unresolved.  One of the problems to be solved is determining the projections for the Operations & Maintenance portion of the budget. We have information about how the money was spent for the first 9 months of the year, but our budget ends on December 31. Management prepares a "projection" for the remaining three months and that provides the board with the anticipated expenditures as of December 31.  There is obviously some guesswork involved.

It is done this way because "This is the way it has always been done." I suggested an alternative approach a couple of years ago with a long time board member and they were inflexible. As I pointed out at the time, this puts any new board member at a serious disadvantage and can create pitfalls for boards, both old and new.

So we continue to do our budgets with a certain amount of guesswork. The sole reason is so owner fees can be adjusted on January 1 of the year. I am of the opinion that is an artificial date imposed by boards and have stated so.

Budget Issues
I have not been completely satisfied with the budgets amd the methods used to arrive at budget projections. For example, are they straight line approximations? Should they be otherwise? I am of the opinion that the budgeting could be improved, and should be. In recent years it has been, but this is a slow process and it occurs incrementally. Change can be difficult. In my experience there may be resistance. Remember the expression "The best defense is a good offense?" Call into question how people do things and that's what one may get. It's called "push back."

I am of the opinion that with an entirely new board it could be easier; no methods or turfs to defend. On the other hand an entirely new board would have to get up to speed in less than 30 days. Won't happen and entrenched boards may have a lot of automaticity. As in, for example "We always did it that way."

Additional Scrutiny
This year, I've provided additional scrutiny to some aspects of the budget and I asked a few more questions. The purpose is to arrive at a better budget.

Each year boards literally agonize over some of the budget decisions. Boards need to meet O&M budget requirements plus reserves and then set fees. Sounds straightforward. However, if a board overspends the total O&M budget, then the HOA must make up those funds. If we use more maintenance hours than were allocated, then we may have to "borrow" hours from the next year. This of course, reduces the hours available in that following year. "Robbing Peter to pay Paul" is not a good method. It also places additional pressure on the new board. There is nothing worse than starting the year with a deficit. 

If the opposite occurs and if we are under budget, then we collected more via fees from our owners than was absolutely necessary to run the HOA for the year. If this is a moderate amount, it is acceptable. To be 1% under the O&M budget could spare owners from larger, future fee increases. If we are within 1% for O&M then we are actually within about 0.7% for the entire budget because O&M is about 70% of the annual budget.

Trying to hit that bulls eye is difficult. In a household budget of $50,000 that would mean we are within $350 of such a budget, or within $175 of a $25,000 budget. I would guess that most of us aren't able to manage our household annual budgets this well. Yet, owners demand and expect that boards get it right.

Boards simply do the best they can. I suppose if we worked on the budget for the entire year, we might do better. But the reality in any HOA is some board members come to the meeting and may not be fully prepared. We have been discussing reserves for several months. But not everyone participates in the details of the planning.

How Much is 1%?
When budgeting it is really important to separate O&M requirements from reserve requirements. Why?  For example, let's assume that our HOA is attempting to get our O&M budget to within 1% of the actual. That's an attempt  to get the O&M budget to within $2.32 per owner per month. I'm using the average owner. What the board is attempting to do is project the costs of the future utilities, snow removal, printing, postage, legal, tree repairs, grounds maintenance, miscellaneous repairs and all other unknowns of 2016. It cannot be done with absolute precision, or if it is, it is part luck and part planning. 

Owners expect and a few demand that boards walk these tight ropes and get it right. I understand the expectation and I think that's acceptable. However, for those who make demands of the board, I guess that's all a part of their desire for apartment living, where some one else is supposed to make things work.

A few years ago I brought a crystal ball to the annual meeting as a tongue in cheek symbol of the problems all boards face. If we get it right, our budgets balance. If we don't, then we either under collect the fees (overspend) or over collect fees (underspend). The only way I know to do this is to identify all known costs, and also identify the unknowns. Add them up and that's the budget.

I think everyone would agree that HOA boards should not collect money simply because they are concerned about the future possible shortfalls. Fear is not a good business plan. We need to do the numbers and then base our decisions upon them. Nor should HOA boards spend money simply because it is in the budget.

Avoiding Debt
HOAs have financial limitations and most don't want to go into debt. In a household, when people overspend and run out of cash, it may be handled by making purchases with a credit card, which can be paid off in a few months or years. HOAs don't have access to this type of quick credit, which is probably a good thing. It is my understanding that the average household owes $7,529 on their credit cards. If our HOA did this, we would have $2,529,744 in credit card debt.

With no credit card available, boards work hard to get this right, and they have been doing so for about 40 years at BLMH. If boards get it wrong, they either collect too much from owners or collect too little. It is a fact that it is impossible to get this absolutely right and have the budgets balance to within the penny.

It is obvious that a few of our owners have experienced this in their personal lives. That's why in HOAs there are delinquencies and foreclosures. 

Avoiding the Short-Cut

Because we know we won't get it absolutely right some boards may take a simplistic approach. Add up what we think we know about the future budget, increase by 2 or 3 percent and then collect the necessary fees to match. It is my understanding that this is to avoid larger fee increases in the future and avoid a budget shortfall while dealing with inflation. This may not work as planned because:

1. Budget surpluses don't remain in O&M accounts and so each year stands alone.
2. Historically, the largest budget shortfalls at BLMH came from capital projects and reserves.
3. Reserves can and do accumulate and that's essential to have the funds available for projects such as roofs and streets. But these funds can't be used for O&M.
4. Reserves can and should be determined by long term planning, but some boards have problems doing this. 

If boards do want to take the easy route, then I am of the opinion that two budgets must be closely scrutinized each year. These are the previous year and the coming year. For the previous year's budget, what we are interested is identifying:

1. How well the crystal ball worked. Did we make good decisions? If not, why not? 
2. To identify those areas that may have experienced significant budget changes.
3. To avoid runaway escalation of fees. 
4. To avoid nasty budget surprises. 
5. To learn from our mistakes.

As with all things budgeting, a board must be willing and able to do the necessary research and ask responsible questions. 

Annual 3% budget increases might not sound like a lot, but over time these small amounts add up. Fees will double every 25 years.  

Long Term Versus Short Term Trends

Now, over long term periods it is true that the cost of maintaining a HOA does increase. These costs may vary each year as water rates change, or we receive more or less snowfall, or roofs need repairs, or ice dams form, etc. 

That's one of the pitfalls of taking, for example, the budget for expenses in 2001 and comparing it to the budget for expenses in 2015. Of course, total expenses have increased since 2001. But those increases don't occur in smooth and steady increments each year. For example, in 2001 this HOA spent $19,000 in roof repairs. In 2015 it spent $0. If we simply added 2.5% to this number each year, it would be expected that this HOA would have budgeted and spent about $27,000 in 2015 on roof repairs, but we didn't.  Costs for utilities (electric and water) have increased since 2001 and by about 3% per year. However, overall the costs of O&M at BLMH have increased by less than 1.5% per year. But you wouldn't know that unless you 1) did the research and 2) separated reserves from the total amounts of fees.

But some boards do like to use generalities. It is my opinion that isn't good budgeting. Trends may be useful for identifying anomalies. This is useful for detecting changes or errors. 

The Elephant in the Room

Now, there are those at BLMH who might look at historical changes to fees for guidance. But to do this properly, one must separate reserve contributions from O&M contributions. The information on fee increases is contained in the HOA welcome packet, but the percentage of fees allocated each year to reserves was not tracked in that manner. For decades, boards were concerned about total budget and the O&M accounts, but overlooked the elephant in the room.  

In fact, the fees collected for reserves at BLMH have increased by nearly 8.75% each and every year for the period 2001-2015.  The O&M expenses actually increased by less than 1.5% each year. 

Here is the change in fees collected for reserves over the past 15 years:

2001 percent fees for reserves = 12.27%

2015 percent fees for reserves = 28.6%

2001 amount of monthly fees to reserves, average owner = $26.79

2015 amount of monthly fees to reserves, average owner = $93.27

Change in monthly amount of fees, average owner, since 2001 = $107.40

Boards are Comprised of Owners

Let's look at it this way. Boards are comprised of normal human beings. How many households in the US have viable 30 year financial plans? How many have a retirement financial plan? How many households live debt free? That's what a HOA board is expected to construct for the association. If this were so easy, most of our households would be debt free. But they aren't.

Yet, these owners as board members are the very people who create our long term budgets. I think it is fair to say that owners bring the burden of their personal finances with them when they become board members. They also bring their skills and knowledge. 

Why Are My Fees What They Are?

That's one of the labels for this post. I wish that owners became more engaged in the budgeting process. By that, I wish they would observe and listen. A few will do this. Others will come to a meeting and then will complain. Some show up thinking they will figure it all out in 20 minutes. Most really don't know why their fees are what they are, and a few prefer to throw blame at someone else. Ah, the joys of apartment living where some one else is supposed to take responsibility for my well-being! But HOAs aren't apartments!

Earlier Post on Budgeting 2015:

http://briarcliffelakes.blogspot.com/2015/10/budget-meeting-2015.html

HOA Newsletters - Some Changes

I hope boards continue to make the newsletter a priority for communications. This truly is an essential group effort.

The newsletters are one of those chores that board members may choose to avoid. The newsletters have changed at BLMH as time has passed and boards have come and gone. I'm sure there will be changes in the future. Preparing newsletter articles has been among the more unpopular board tasks. As a consequence the newsletter is what it is. Some of this could be technology issues. There is no requirement for a board member to use email, or have a personal computer. There is no requirement to have a telephone either.

If asked I will tell anyone who listens that low owner involvement is unhealthy for a HOA. That's my opinion. However, purchasing and living in a HOA is voluntary. The only people who have a duty beyond paying fees and keeping the rules are the board. That's a fact. HOA boards in Illinois did not write the Illinois Condominium Act. The legislature did. "It is what it is."

As a consequence, preparing the newsletter and other forms of communications is a board responsibility. Owners may choose not to read it. They are under absolutely no obligation to do so. However, if they don't they have no excuse for complaining about "I didn't know" or "How could this happen?" Similarly, if owners choose not to attend HOA meetings, they should have no complaints about being unawares of what's going on. It is unfortunate that owners cannot be held to higher standards, but the legislature assured that when the made the Illinois Condominium Act.

I am inclined to scoff at any owner who complains about "a lack of transparency." I can only do so because of what is published in the newsletters and the various mailings. In fact, the newsletter is mailed to all offsite owners. Some board members don't get it and based on their positions about communications I am certain they never will.

We are making progress. The newsletters are now prepared and published by two board members. However, there have been other changes. Some may be more apparent in the coming months.

Anyone in our HOA should have noticed that the newsletters are usually published at the end of the publishing period. They usually contain factual articles about what occurred during that time period. We do six per year, so for example the January-February newsletter may not be published until late in February. That "six times per year" approach will probably be the minimum number of newsletters per year unless the board decides otherwise.

I have had the opinion that there are two "must" articles each month. One is by management and the other by the president. That takes up the front page. Two interior pages are reserved for the other articles on finance, landscaping, maintenance, projects & architecture, rules and welcoming. That's three articles per page. However, with the changes on the board this may no longer be the desire of the board.

In a good issue there are three or four board members as authors. With the split of Architecture & Projects from Maintenance there are now two board members actively involved in these areas and that also splits the load for these articles. Recent newsletters have had regular articles by the President. Architecture & Project, Maintenance and Treasurer. Added to that is whatever other board members feel is prudent and necessary for owners to know.

An owner might assume that no article means there is nothing important or going on by a director. That's a reasonable assumption, but it might be an inaccurate one.

For years, getting this done has been like "pulling teeth." In fact, I can state that I have spent substantial time from 2011 to 2015 hounding board members to write articles. In fact, I spent less time for the other tasks of  writing my own articles and composing, editing and sending the complete newsletter to the printer. At times it bordered on the comedic. I recall one board member argued repeatedly that "They (the owners) already know that" when we discussed the need for an article on a specific subject. Of course, we get one or more new owners every month. That same individual would also argue "It's in the rules" or "It's in the bylaws." Sure it is. That same individual would also complain "No one reads the rules or the bylaws." Okay, so where do these types of circular arguments lead one? I guess it is all about "I don't want to write an article."

The newsletter was one of the reasons I found myself spending from 450 to 700 hours "working" for this HOA. But of course, I'm not a paid employee. I'm a volunteer. I've concluded that this is what owners and some board members expected and demanded of me. But there are limits to the amount of time that can be spent in a year. That is precisely why some things didn't get done. It would be foolish to assume that more will be accomplished in 2016 with fewer on the board. It won't happen unless everyone "bellies up." Considering the history of this HOA, that is not going to happen.

At times the newsletter contained articles by as few as two or three board members. In the past, this was not obvious. One mistake I made early on was to function as a ghost writer. I thought that might "jump start" some articles. I took photos and put them in the newsletter and asked board members to "please write something." In fact, that approach never got us to the next level and so I no longer do that unless specifically asked to do so and with a really good reason. Why? Because I shouldn't  make statements for another board member. We were each elected or appointed and we each need to state what we are doing and what we will do on the board in our own words.  Making these statements is a part of being accountable and should be among the duties of a board member, shouldn't it? That's also why I suspended editing what is provided by a board member, unless I am specifically asked to do so. In the past I tweaked grammar, spelling and even addressed what I thought were factual errors. I then returned the articles to the author with my request that my changes be reviewed. Some of these things also made a difficult task more difficult and would delay the printing. Prior to printing I had an educated professional read the articles to see if they were comprehensible and made sense. But no longer.

Of course, with two preparing the newsletter we now have two sets of eyes to look for glaring issues. I think this will work fine.

These changes are only possible because the newsletter duties for some months now have been taken on by another board member. Partnership is a wonderful thing. It worked for developing the delinquency spreadsheet and it is working here. Because I take hundreds of photos of the association each month, I continue to provide the masthead photo, which is cropped and resized to keep file sizes reasonable.  I write articles and I help. My commitment to the newsletter remains unchanged, but I'm no longer the main event. We work together well and I do what I am asked to do, including editing and review.  Similarly, my articles are reviewed and we discuss them.

I will continue to pursue board members when I think their articles are critical. For example, with a hundred scars on the property, landscaping has a lot to do in the next few years. A lot of money will be spent. Owners need to know what the board is really up to in this area. But in fact, what area is not important? Landscaping, Maintenance, Architecture, Projects, Finance, Rules, and Welcoming are all important aspects of the HOA. If that were not so, why have a board position for them?

Some board members provide articles as Microsoft Word documents, some are hand written and others are text embedded in an email. It all must be formatted and fitted into the available space. That also increases the time required to do this. One never knows who will write in any given month, nor do we know the length of the article that they will provide. .

In the past, I took the position that whatever a board member wrote was what they thought was important. I was of the opinion that it was best to use what they provided verbatim. So articles were seldom if ever edited for length. I wrote articles which were formatted for the remaining available space. These are intended to be factual and educational. How does this HOA work? What are we doing? What are the priorities? What are our plans? What are the issues we face? and so on. It has been my opinion that the shareholders need to really know what is going on. In that, there has been some real disagreement among various boards and board members. I know we are all busy and I do understand that in any given month there may be no interest in preparing an article. But all it takes is about 150 words per month. How difficult can that be?

We certainly have sufficient material and ample subject matter for newsletters in an HOA as large as this one. Each HOA meeting provides additional information. All I have to do is go through my meeting notes, or owner questions during the HOA meeting or whatever else has occurred in the previous 45-60 days. I pick the most important or what I think might answer the burning questions posed by owners during HOA meetings, or explain something that has occurred.

As more board members wrote articles or lengthier ones, I trimmed mine to fit what was left. Sometimes I added more photos and at other times there were none. With the 2015 change and someone else doing most of the work of assembling and distributing the newsletter, I now provide several articles each month, in MS Word documents. These can be selected as relevant, copied and pasted into the newsletter and the others discarded or saved for a future newsletter, space permitting. They may also be edited. Some editing is always required to fit all of the other articles into the available space.

At one time I provided articles to the communications director which were of a specific word length. That is a good approach if everyone complies. But I also decided that I wanted board members to have sufficient freedom to state their piece in their own words. Of course, there are real space limitations. When the day comes and six board members write 1000 word articles, it will be a real problem. It could happen. When it does authors should expect to be asked to reduce their articles to a specific word length.

Why go through this newsletter effort? Owners should be optimistic because they are provided with facts and position statements in the newsletter. No one likes unpleasant surprises. Owners should not be blindsided by board decisions that are not published and repeated to all owners. Of course, sensitive or lengthy material can and should be mailed. A lot has been published in newsletters, but there are also glaring omissions, One thing to keep in mind is the newsletters are all published on the internet. There are some things that should be only for the shareholders who own a unit and "have skin in the game" or for residents.  The newsletters are not intended to be entertainment, or part of a social club.

I find it easy to determine what is of concern to owners. I simply listen to them. Then I respond with an article or articles. Some board members have dismissed owners and owner concerns. I get it. Writing newsletter articles requires:

1. Doing research, developing plans, making decisions and then publishing them. 
2. Making a committed statements to owners.
3. Treating owners as the shareholders they are.
4. Doing work; writing accurate and factual articles is not a simple task.
5. Being held accountable for our actions. Yes, owners may some day come to the meetings and say "You said this in the newsletter; why didn't it happen?" 
6. Taking the time to do so. 

HLC Report Excerpts - (Community) College of DuPage

The Higher Learning Commission found COD non-compliant in the area of institutional integrity and in the area of effectiveness of administration and governance. This could result in the college being placed on probation. It also found problems with the Suburban Law Enforcement Academy at the college. I've had the opportunity to read the 45 pages of the report (a link to the report was published in an earlier post dated October 20, 2015.)

It's been apparent that recent board and administration have had functional difficulties. The report makes quite a few observations and recommendations. Here are a sampling and anyone who thinks this is going to be cleaned up quickly is kidding themselves.  The report states that one of these problems was apparent during an earlier visit in 2007. Eight years have passed and it seems things are worse today. But the college has successfully spent several $hundreds of millions of taxpayer money on a sparkling campus upgrade complete with many new buildings and roads, fountains and large ponds that were once wetlands, lots of parking lots, storm sewers and thousands of trees and shrubs.

From the HLC Report, last paragraph on page 23 which continues to page 24:
“The College of DuPage Foundation is a separate legal entity from the College of DuPage and operates under its own governing board and policies. The Foundation and College operate under a Memorandum of Understanding (MOU) dated June 22, 2009. Over the last number of years, the College entered into a number of competitive and non-competitive bids with vendors whose owners (or persons who work for the vendors) also serve on the COD Foundation Board. Questions have arisen around whether or not such activity, especially with respect to the awarding of noncompetitive bids to such vendors, was proper or permitted. There is also the question of whether the awarding of such contracts avoided potential conflicts of interest or even the appearance of such conflicts of interest. Investigations by some external entities and by attorneys retained by the College are ongoing. In addition, the College itself identified one particular contract as being improper. During an interview with the internal auditor, the team was advised that a contract with Herricane Graphics was entered into after the contract deadline. According to the internal auditor, this contract was therefore invalid. Yet, despite knowledge of this clear violation, the contract was still accepted by the College.”

Page 18: "........fissures in the linkages among the stakeholders of this academic community are visible. The most poignant of these observations was a quote from a COD student, recently elected by the student body as the student representative on the Board of Trustees, 'Many times the discussion progresses and falls into a political or financial debate accompanied by bickering that focuses on the past and rarely the future.'"

Page 21: "The COD Board of Trustees would benefit from an enriched professional development program focusing on governance within higher education, duties of board members, and communication both during and outside of Board meetings. The lack of appropriate training and ongoing strife that exists among the Board members serves to impede the Board’s ability to serve the public good. Further, the role of operations should be delegated to the President and College staff. Therefore, the team finds that the evidence demonstrates that further organizational attention and Commission follow-up are required."

Page 43: "As a whole, faculty held a generally unfavorable review of the Division of Continuing Studies." "....the College has not permitted the faculty to participate substantially in the development and implementation of curriculum. "

"Finally, during the team’s interview with the Board, it was reported to the team that the Board felt faculty relations between the College and the faculty were good. However, the faculty asserted that even with the President on administrative leave, the “next level down in the hierarchy” have not addressed concerns faculty raised in the vote of no confidence (dicsussed (sic) earlier in this report). In fact, the faculty complained that practices involving “bullying and corruption” continued. During the open faculty interview, the faculty as a whole felt they were the “B-team.” This particular issue was noted by a visiting team in 2007. Yet, it does not appear that circumstances have improved since that time. In fact, the vote of “no confidence” indicates that matters involving the faculty continued to deteriorate. This is consistent with faculty comments regarding the lack of a true shared governance structure."

Pages 42-43: "......during an interview, criminal justice faculty complained they were not consulted about the recent change in the number of credits for the SLEA program. These faculty members provided a history of the awarding of nine criminal justice credits as the work of administrators and one former criminal justice faculty member in 1994. At that time, the faculty disagreed with the awarding of the original nine criminal justice credits.

Moreover, SLEA instructors indicated they, too, were not involved in the recent decision to increase the criminal justice credits awarded saying they “know nothing about it.” SLEA instructors said they have not seen the criminal justice objectives or the crosswalk completed by administrators. In fact, they teach the ILETSB curriculum (discussed above in connection with Core Component 3.A.).

The Vice President for Academic Affairs stated during an interview that faculty should be involved whenever there is a change in credits such as a change from “3 to 4 credits for a course.” When asked if the faculty was involved in the decision to change the number of credits awarded from 13 to 22, she replied that they were not. When asked why she approved the change in credits, she replied that she thought the faculty were involved since the Associate Dean for Social and Behavioral Sciences brought it to her for approval.

From a broader perspective, fifty-four faculty members attended the open session with faculty. Without a dissenting voice, faculty members indicated they were upset that the administration had increased the number of criminal justice credits awarded to SLEA cadets without faculty involvement. They expressed concern that administration would repeat this action in other programs citing the Carpenter’s Apprenticeship  Program, Pharmacy Technician, Real Estate, and Massage Therapy as potential examples. Faculty also asserted the College’s alternative credit peer review or Prior Learning Assessment is distorted. Administration and faculty agreed in separate interviews that COD had no consistent format for evaluating prior learning. For example, SLEA and the carpenter’s union credit program were handled in different ways by College faculty and staff. Faculty also felt that a “crossover” program was going to be increased to turn more non-credit courses into awards for credit. At this point, the College maintains that only two above-referenced programs exist of this kind.

As a whole, faculty held a generally unfavorable review of the Division of Continuing Studies. Individual faculty felt that Continuing Studies were naming their non-credit programs similar to credit, accredited program in order to “confuse” students that appears to have an effect of driving down enrollments within Academic Affairs. Faculty cited examples that include medical assisting, pharmacy tech, and medical coding classes which appear in the Ed2Go portion of their catalog."

Suburban Law Enforcement Academy (SLEA)  
Pages 12 and 13 of the report: "As discussed later in this report, the amount of credit awarded, as well as the process in which the credit hours were determined, raises concerns in connection with several Criteria and Core Components."

Excerpts from Pages 34 to 39: “.........there is the potential for these “students” to receive federal and state financial aid for 22 credits in violation of the federal credit hour definition. The federal definition of credit hour is the standard for all of higher education. COD’s practice of awarding this number of credits for SLEA participation is not appropriate to higher education.” “The College’s Vice President for Academic Affairs (Jean Kartje) likewise referred to it as Prior Learning Program credit. The College, however, does not have a Prior Learning Program policy even though some individual areas grant credit for prior learning.”

"In sum, College of DuPage is giving 22 college credits for the non-credit SLEA program by simultaneously enrolling students in college courses and in the non-credit program. The crosswalk between SLEA instruction units and the objectives of the three recently added criminal justice courses does not show that adequate attention is given to the criminal justice courses’ objectives. In addition, the institution made a concomitant change in credit hours without an increase in the hours of instruction and was not able to justify the number of credit hours. Likewise, the clock hours allocated to the SLEA curriculum and the credits awarded do not follow the federal definition of a credit hour."