Over the years I have managed some very large budgets into the seven figures. In my corporate life I had some great administrative help to track every penny that was spent. Corporate budgets alternate between spend it, lose it or cut 25% from your budget. The one principle that always worked for me was to spend the company’s money like it was my own and never spend more than we had.

I also ran my own business for over a decade but I am the first to admit that while I can do spreadsheet with the best of them, I am not an accountant. I never expected to be doing budget tracking on a spreadsheet on my own, but you do what you have to do especially when it comes to HOAs.

When I was first elected to our neighborhood HOA Board in 2013, one of my great concerns was the money the HOA was spending on big parties. I had no idea that was only the tip of the iceberg. Our HOA had a management company with a secretary that handled all our finances including writing the checks and collecting the dues. It was effectively a wall between the board and the HOA finances.

There was a fair amount of frustration on the first board that I joined because even the president admitted that he had no clue where our money was going. We met at least every other month in open meetings but most of the conversations had little to do with the finances of the community with the exception of how much money we would devote to three annual parties. Our first year we managed to cut a lot of party money but we still got to the annual meeting not really having a handle on money because the budget was given to us by the management company. The management company’s secretary had a common refrain when we asked if we had money? She would always say “Yes” after a discrete amount of paper rustling.

My second year on the board, other board members agreed to allow me to try to track expenses by getting copies of checks that were being written. I was not the treasurer. I was able to find a few discrepancies between accounts but it was pretty difficult to see the big picture. As we neared the annual meeting two things happened, the secretary who had handled our accounts since the HOA’s inception was diagnosed with cancer. Less than a month before the annual meeting, it was clear that our longtime secretary was dying and understandably was unable to put together a budget. We tried to meet with the upper level folks at the management company and they told us that they were terminating our contract. We didn’t even have a copy of the contract (to know that they had to give us more notice than that) since the management company had all our records and all of our money.

With no money it was easy to not spend any money before the annual meeting. In fact our insurance broker paid one of our insurance bills to keep our coverage from lapsing since we didn’t have any money. I took the partial information that I collected and put together a tentative budget to present at the annual meeting. I had to give an estimated end of year result since we were unable to get the complete receivables information before the annual meeting. However, even with the limited information that I had gathered it was easy to say that we had spent more money than we collected and were headed in the wrong direction financially. I agreed to become treasurer and my wife the secretary.

We took some immediate steps to get things under control. The first was to hire an accountant and to dictate that expenses would be tracked at the board level and reconciled monthly with the accountant’s records.

I managed to get control of our money, transfer it to a new bank and set up access so that only the president, myself and the accountant had access to it. We began a process where we entered every bill that we received in a spreadsheet at my desk before we took it to the accountant who generated the checks and then gave them back to us to mail and record as paid in our spreadsheet. We also managed to get HOA Dues invoices generated and mailed. As dues’ checks started coming back they were recorded taken to the accountant to be recorded and then picked up by us to be deposited and recorded as deposited. Every transaction incoming or outgoing was recorded in our spreadsheet.

As monthly expenses came in, I started building a truly complete expense spreadsheet to accurately forecast monthly expenses and eventually annual expenses. There were surprises along the way, like the shared septic system for 14 homes that was being carried by the whole subdivision instead of the people using it. We made a strong effort to get timely payment of dues and collect back dues. We were much more successful than the management company.

It wasn’t a good year to accomplish much other than stand up our organization and pay bills since some of things we uncovered in taking over the HOA caused a lot of agitation from the community.

As spring approached and we had an understanding of how much money we had, how much we were spending and how close we were to being on budget, we decided to spend a $2200 on cleaning up trees that were making our boat yard less usable and take down a very large dangerous dead tree. We also got quotes on electrical repairs, painting the interior of the clubhouse, and fixing some of the flower beds. Before we could execute any of those projects except the tree and boatyard, our gate broke and the over $2,100 to repair it put an end to any thought of new further projects. We switched from doing a permanent solution of safe access to the west side of our pool to me buying $38 of pea gravel at Lowes to make a temporary path.

We finished the year very close to budget in spite of a number of surprise expenses which were expenses outside our budget year. That included paying an extra month of mowing, electricity and two extra months of pool maintenance, some unforeseen legal expenses and gate repairs which all totalled over $10,000. Our somewhat skyhook estimate of expenses had been $53,294. We came in at expenses of $61,837 which included prepaying some expenses for the next board and even trying a new management company. We added $9,949 to the reserve which ended up totaling almost $64,000 May 5, 2016.

The biggest change was that our cash flow was positive. We collected $63,793 and spent $63,460. When we left there were $6,276 dues in arrears. We collected 18% more dues than the previous year when the management company was handling it.

Once we got control of the money from the management company, we had started with a beginning balance in all accounts of $53,415.94 on June 5, 2015.

When we handed over control of the board in May of 2016. The board had a total of $66,795.27 less a few of their bills that we had prepaid. It was much better than the $53,415 we started with when we took over. Minus what we declared as reserve ($63,817.86) and outstanding checks they had $2,226.94 in the bank. Also my numbers ended up matching the accountant's numbers to the penny.

With bills that we had prepaid, there was plenty of money to handle minor expenses until money started coming in from annual dues.

That is the way we turned around the finances of our HOA.