Monday, June 22, 2009

Where Does Our Money Go?

Two weeks ago we posted an overview of the FVCSA 2009 Operating Budget. In this post we provide a breakdown of a budget category called "administrative expense." This is the second largest category in our expense budget — only "grounds & landscaping" is larger. FVCSA expects to spend $733,401 for this category. The chart above shows where this money goes. You can click on the arrows at the bottom of the image to see the breakdown in a table of percentages.

Slightly more than 60% of that amount goes to Signature Property Group to pay for our Smith House office staff and for offsite managerial and financial services. Fees paid to Signature are significantly less than the projected fees FVCSA would have been paying if we had not replaced the previous management company. The Board of Directors is currently discussing renewal of the Association's contract with Signature and hopes to avoid any significant increase for 2010. In the longer term, however, some increase in this cost may occur.

Insurance is the other big ticket item in the administrative expense category, taking slightly more than 27% of the category total. The Board recently terminated use of a paid insurance/risk management consulting firm and retained a new insurance broker who has substantial experience working with homeowner associations. Ending use of the insurance consultant brings immediate savings of $1500 per month, or about $18,000 per year. Most of our insurance expense is for premiums paid to our insurance carriers. Those can be difficult to control because they depend for the most part on market conditions and our own loss experience. However, the new brokerage relationship gives us the negotiating leverage of a broker who handles a large number of communities, and that may help us avoid significant premium increases for next year.

In the next post in this series, we'll look at the "grounds & landscaping" category. Look for that in the next few weeks.