- October 14, 2020
- Posted by: Mike Madson
- Category: Article, associations, Business plans, communities, Community, Economics, Finance & accounting, Franchising, Funding trends, HOA, homeowner association

Before your Idaho HOA Board crunches next year’s numbers, have you given consideration into using a professional association management service to determine your budget? Management companies provide a varying array of financial services that are specific to HOAs, but more importantly, they are unbiased and do not have a vested interest in your community, which makes them ideally unbiased.
Because HOAs are membership-based, all homeowners have an equal say and a vested, sometimes an emotionally charged, interest in every decision of their community. Hiring a third party service, especially to handle the books, decreases an organization’s risk of exposure.
If you live in an HOA, all homeowners and their Board, share in the potential for liability which may include substantial assessments to the entire community. A specialized management company brings expertise that will stretch your association’s financial dollars and build a more financially-stable association.
HOAs that fail financially are the result of one Board member who is allowed to independently handle the financial decisions for the entire association. Their personal motivation draws those with a limited understanding of cost projections and who are unable to access resources that cater to an association’s vision. In many cases, these individuals volunteered their time to gain control over others and force an agenda. This misplaced motivation increases the liability for every member of the association and opens the entire HOA up to law suits or unnecessary assessments.
Wouldn’t you sleep better at night knowing your association’s financial records are being run by an insured, third party and qualified business?
Here are some basic approaches that Michael Madson, President of MGM Association Management, and who has run a Meridian-based HOA management company for the past 20 years suggests:
- Use last year’s numbers
“That’s called historical-based budgeting. It’s easy and fast “HOA Boards should do the research to justify how much money they’ll need for the upcoming fiscal year. It’s a process known as Historical-based budgeting,” he said. Historical-based budgeting is the more conservative approach and actively involves the attention of each Board member.
The other method is called zero-based budgeting. Starting at Zero in every category and building the budget from the ground up.
- Build a relationship with your contracts
If you keep a good relationship with your vendors they can adjust the cost of their services to keep your business knowing you are a good client and understanding your needs.
For example, Landscapers who have a good relationship will bring to the table ways they can cut your costs, or in the event that your expectations increase, they can help you understand what your options are.
When it comes to insurance policies, Madson says, ”I recommended getting insurance bids at least every three years,”. Coverage and cost may change, and it is a god way to be sure reviews have been done by your provider.
- A Board should have vision
“Self-managed boards are often unaware of these budgeting options, because they lack the correct lens to see the needs of their HOA,” says Madson. He suggests looking for association managers who are members of the Community Association Institute (CAI), a national HOA organization that requires competency in financial budgeting, training and education. He said that these affiliations can guide associations toward a better community vision and financial stability.
Furthermore, Mike states that, “a professional management company can offer a menu of services, not just financial oversight. Boards can pick and choose specific duties such as managing a project, like landscape maintenance, or community inspections, providing immediate access to their financial statements or paying dues online.”
If you are interested in learning more about the Community Association Institute (CAI) or financial services specific to HOAs, contact MGM Association Management at (208) 846-9189, or visit their website at www.gomgm.com.