Comparison of budget 2020 vs. 2019 shows that current management plans to spend 33% more on Legal fees, 90% more on Payroll; 31% more on Insurance in 2020; spend 38% less on Maintenance -contracted services, 36% less on General Maintenance, contribute 50% less to Reserve.
The current board has stated that membership due in 2020 will remain $163.50. We all know about the budget deficit of $175K as of 11/30/2019, i.e. we don’t have money in the operating account to pay for the $175K bills.
Let’s examine the Y2020 budget to see what adjustments the current management have in plan to make ends meet next year.
Please note all the figures in the budget are on a monthly basis. Click here to view the PDF file of Y2020 budget.
#1. Legal - 33% budget increase First of all, we want to point out that the person who prepared the budget is completely unqualified to prepare a budget, should not be allowed to be anywhere close to the LLHOA financial from now on. As shown in the spreadsheet, Legal general counsel, i.e. attorney fees, averages $10,861 per month as of 10/29/2019, while the budget for this item was ZERO in 2019, and continues to be ZERO in year 2020, does this even make sense? We all know we pay an exorbitant amount in attorney fees for being dragged into 22 lawsuits (click here to view the 22 lawsuits list), and the budget for the attorney fees is ZERO? As of 11/30/2019, the actual expenses of Legal general counsel was $146,621, monthly average was $13,329. This gives us an idea how off the Y2020 budget is.
Let us examine the line item Legal/liens/Collection costs, the 2019 monthly average is $1,138, the Y2020 budget allocates $9000/month for it, almost 8 time as high, amounting to $108,000 a year, does this make any sense?
Let us examine the line item Legal-Forensic Audit, monthly average for year 2018 and 2019 were both zero, while Y2020 allocates $1,000 per month, $12,000 a year for an expense that was not incurred in the past two years, does this make any sense?
According to the altered August 2019 open meeting minutes, “FY20 Budget – Being prepared by CEO & for review with Board of Directors” (on page 1 of the altered minutes, click here to view), it was the CEO who prepared the budget.
Is Mr. CEO trying to hide the attorney fees under the disguise of Legal/liens/Collection Costs & Legal- Forensic Audit? If so, sorry, Mr. CEO, we see right through it. Numbers don’t lie, they speak for themselves.
So we will combine all the three items under Legal as one item, Legal fees, let us examine the numbers. In year 2019, budget for legal was $7500/month($2,500+$5,000=$7,500), budget increases to $10k per month for Y2020 ($9,000+ $1,000=$10,000), a 33% increase. It is worth noting that even with the increased budget of $10K/month, it is not enough to cover the current legal bills, which averaged $13,329/month through Nov. 2019. Not to mention with the insurance company suing LLHOA to be released from the obligations of defending us in the GPL lawsuit (click to view related post), it is impossible to predict how much higher the legal fees will be in Y2020.
#2. Payroll - 90% budget increase
Payroll budget increases from $20k/month in 2019 to $38K/month in 2020, a 90% increase, almost doubled! Is LLHOA hiring more employees? Are the employees getting a pay raise next year? How many employees does LLHOA have? What is the salary for each position?
The monthly income of membership due is $75,947, with $38K allocated for payroll, that is 50% of the membership due spent on payroll, 13% ($10,000 / $75,947 = 13%) budgeted for legal, 9.3% budgeted for insurance (explained below), how much do we have left to spend on what really matters, the LLHOA properties? (click here to see the photos of run down LLHOA properties.)
#3. Insurance - 31% budget increase
Budget for insurance has increased from $5,350/month in 2019 to $7,035/month in 2020, a 31% increase. While the actual insurance costs averaged $7,370/month through Oct. 2019, averaged $8,656 through Nov. 2019.
Furthermore, one of the insurance premiums has gone from $75,000/year to $125,000/year effective Dec, 2019, a $50,000 increase, which was not recorded in the book when the budget was printed.
- Continued in next post, click here to view. -
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Ah! Gotcha Marti. Thought I’d missed something. I learned the answer too. So thanks for the question.
NoGPL1, It does not have anything to do with this specific post, I just could not figure out where to place the question. Anyway someone did respond and provided more info. Thanks.
Harriet,
You raise a very good point. Some members and one board member has repeatedly stated that this board “needs more time”.
In some instances, a difficult problem does require more time to solve. However, it requires the right people to solve the problem.
In the LLHOA instance, the people tasked with solving the problem have created more problems (legal actions); disharmony in the community (pitting members against other members); are inept at administrating within rules and common protocols (don’t know or follow LLHOA governing documents or CA Law), and have bungled our finances as a result of disproportionate spending in all of the wrong areas (spend on legal fees versus infrastructure; wasted salary on management who spends time in…
Marti
It is the obligation of the HOA board to conduct and pay for any recall lawfully petitioned by members. In 2018, the previous board conducted and paid for the recall election that replaced it. In Nov. 2019, the current board conducted and paid for the failed recall of a single board member led by directors and their wives.
But when the current board was presented the petition to recall the entire board, the majority of the Board, Umann DiNapoli and Bromley, refused to conduct and pay for this recall. In the absence of the board performing its legally required duty, members stepped up to conduct and pay for this recall election out of their own pockets.
Umann DiNapoli and…
Hey Marti,
I don’t have the answer to your question. However, let’s say the HOA does pay for the recall. (Seems plausible since it is a process outlined in governing documents. So maybe it is a cost the association takes on. I dunno.)
So if the association pays for the recall, how does that affect the topic of this post which is that the focus of the Umann, et al board’s budget sets out a plan to spend more on legal fees, more on payroll and less on maintenance and reserves?
What am I missing? I don’t get what correlation there is between whether the HOA pays for the recall or not and the priorities the Umann, et al board…