Finance Committee Minutes

June 15, 2010

The Finance Committee of the Falls Run Homeowners’ Association met this afternoon in the Center.

Personnel in Attendance: John Frisch, Bill Barnes, Dan Owen, Don Horan, Tom Whalen, Debbie Sutton, and Casey Naatjes.

Audit 2009

Don Horan reviewed the revised, draft audit for the committee. He reported that the audit firm had responded favorably to our requested changes. Don observed that we had not requested the deletion of "comparisons" to 2008 audited data. Accordingly, the revision met with our specifications

A motion was made, seconded and carried that our recommendation to the Board was acceptance of this report. Upon final Board approval at the next meeting, this action will be complete.

Budget Formulation

We noted that the President of the Board had issued a budget call, in accordance with our request, that committees submit budget forms by July 15. Furthermore, we noted that the Finance Committee would submit a baseline budget to the Board by September 15th. It was further noted that a new budget line would be required for cable television for the Center in the new budget. Though not at this meeting, Ann Jones was informed that she should ask Denzil Willis and Dan Augustine to prepare an estimate for this expense.

Budget Execution

In discussion, the committee endorsed the idea of mid-year budget reviews. It was further noted that there were (already) at least two budget items that needed to be watched.

We had budgeted $20,000 for snow removal, but we had already spent $45,000 in the first quarter due to unusually large snow falls. Furthermore, there was general agreement that at least one more snowfall was highly likely in the 4th quarter. Accordingly, a shortfall in excess of $25,000 (and up) is highly likely.

We also noted that we had budgeted $210,000 for the Cox Contract and that we were terminating that contract at the end of October. This indicates a budget overage of at least 1/6 of that sum ($35,000). This figure could be moderately higher except that we must anticipate that the Center will be billed for two months of cable television service in 2010.

" He Giveth and He Taketh". The committee observed that the HOA monthly fee of $157 will not be reduced in 2010 even though the HOA will not be providing basic cable service for the last two months of 2010. Many residents would be of the mind that the HOA owed them $21 per month for two months (or $42) for cable service not provided in 2010. Put another way, the baseline rate for 2011 should be reduced by $21 per month plus 1/12 of $42 ($3.50). This would compute to $157 minus $24.50 or $132.50. Notwithstanding this reduction, the committee also noted that there may be pressures for other budget changes (up and down). In no sense then, should we be promising that the new HOA rate for 2011 would be $132.50. Instead, we needed to "keep score", fully recognizing that the cancellation (in isolation) would have yielded this result. However, after taking account of inflationary pressures and the unusual snow fall in 2010, the final HOA Rate would settle in at some amount that was different from $132.50. In summary, the committee felt that it was important to "keep score" on the downward and upward impacts as a way to keep all residents informed.

Finally, there was time to determine how, and to what extent, we needed to concern ourselves with the snow removal budget shortfall that is virtually offset by the cable television contract cancellation. The committee fully realized that the Board may also decide to cover this shortfall from Retained Earnings.

Asphalt Maintenance and Renewal

Debbie Sutton reported that she had received several proposals for work in this area as well as different scopes of work. At least one contractor proposed a renewal methodology with a bid of $64,000. The contract claim was that this would extend the life of the roads. The committee noted that this proposal was beyond the scope of work anticipated at the start of the year. Our Reserve Requirements Study foresaw the need to repair cracks and repaint lines. We note that risk Pool R.1.6 has a 2010 program balance of $11,105 for asphalt. Debbie also reported that she had proposals for this scope of work in the amounts of $7,818, $8,380, and $11,215.

The Finance Committee, in the absence of the opinions and judgments of an expert advocate for renewal, recommends the Board accept the most responsive bid from the three proposals listed above. It was further noted that an advocate would have to make an economic case for discounted cost savings in the range of $55,000 ($64,000 minus $11,000) to sway the Board from our recommendation. Thus far, no advocate has surfaced. From a timing perspective Board should complete this work before November to avoid cold weather.

Adjournment: 3:45 pm.

Casey Naatjes

Chair