Published August 2020
Florida Community Association Professionals’ (FCAP) training is offered on two levels. Level one consists of courses meeting Florida’s continuing education requirements for CAMs, and level two is the Florida Advanced CAM Studies (FACS) course. For further information about the more than 38 online continuing education classes available or to pursue the Certified Florida Community Association Manager (CFCAM) designation, please visit www.fcapgroup.com/managers.
Recent CFCAM-certification recipient Brian Pelkie joined the community association management field in 2019, bringing a wealth of experience in various disciplines. Raised in upstate New York, he attended a local community college and remarks, “I intended to be a surgeon, but the only class I passed towards that was illegible writing, so I changed over to computer science.”
After finishing his computer science degree, Pelkie went to work in the era when computers and the wonders and pervasiveness thereof were just being introduced. “I was hired as a dispatcher for a regional food service distributor in charge of installing computer systems into their truck fleet. Now, imagine a fleet of truckers who have been free-wheeling down the road for years all of the sudden having Big Brother sitting in their cab with them! And I had to train them and convince them that a ‘computer buddy’ would be good for them—it sort of plays into training people that the governing documents have to be adhered to.”
After years of corporate computer/telecommunications work, Pelkie launched his own business in the data/telecom industry. Climbing up ladders and crawling under desks eventually took their toll, so when his wife was considering association management at the suggestion of a neighbor, Pelkie considered the merits of a less-physical job. “I thought about it and asked if I could pursue that career, also, so together we took the training courses and tests and obtained our Florida CAM licenses.”
Pelkie shares, “My wife was hired with a management company and serves as a portfolio manager. I was hired at my current location as an on-site manager.”
Pelkie has managed Oak Forrest Condominium Association, a 272-unit, 55+ community in Port Charlotte, since January 2019. That has been a successful tenure, as he was a top nominee for the local CAI 2019 Manager of the Year. The Oak Forrest board president, Mary Polivka, comments, “Brian is every association’s dream. He transitioned Oak Forrest to a first-class, customized, client-based operation. His years of managerial expertise, leadership, and superb computer skills have propelled our association into compliance with Florida laws and statutes.”
Pelkie says, “We are just coming up on roofing replacements now and have started that research. Painting is coming in a few years along with resealing the parking areas. Our budget is stable, and reserves are doing well. And here in 2020 we are all dealing with the COVID–19 issues. I am trying to convince people to look to the future and consider long-term planning to incorporate new technology implementations. We are thinking of carports with solar panels on top that could incorporate electric vehicle charging stations.”
While Pelkie brought a useful background of technology, management, and other skills, he has been adding other proficiencies beneficial to association management. “In my free time, I am constantly studying to achieve new goals,” he explains. “I’ve attained my Registered Parliamentarian and am working towards my Professional Registered Parliamentarian goal. I serve on the local and Florida State levels on the education committees for parliamentarians. Now that I have attained the CFCAM designation, I plan to go on and add CMCA to my credentials. I still maintain my required studies for my other FL licenses, also—limi-ted energy electrician and registered pharmacy technician.”
According to Pelkie, “There is a lot of new information always in the pipeline for CAMs, and we should all keep learning as we go. And right here, the CFCAM program can help you gain that extra knowledge and insight you may need to assist in your daily duties as a CAM. I’m proud to have attained this certification and appreciate the FCAP team in helping me accomplish this goal.”
What procedure should be followed as regards choosing and signing contracts for an HOA? Does the manager bring contract suggestions to the board of directors (BOD), and does the board discuss the issue, vote to approve the contract, and authorize the president to sign the contract? Or, can the manager and president decide to hire a contractor—for, say, resurfacing the tennis courts—and the president then signs the contract without consulting or informing the rest of the directors? We have a president and manager who are approving contracts without board input and then refusing to provide or show a copy of the contract to the rest of the directors. It is very frustrating. I have found nothing specific about what procedure should legally be used.
Thanks for any information you can give me.
Good best business practices and the way most corporations operate are that the board votes on contracts and authorizes the president to sign any necessary documents. This action should be a motion and a vote in the minutes with a copy of the contract attached to the minutes.
The whole point of having a corporate board of directors to oversee the operation and management of the association is to make collective decisions.
How those contracts or the need for services gets brought to the board for their consideration will be different from community to community and/or based on the management contract or employment agreement.
Boards of directors often delegate some area of oversight for a certain area of operation or maintenance to a board member but limit that board member’s ability to obligate the association contractually without a board vote.
Contracts for services or maintenance that are more than 10 percent of the HOA budget (including reserves) must have more than one bid. Associations are not required to take the lowest bid.
All contracts are official records of the association and are available for inspection and copying within 10 business days of a written request (F.S. Section 720.303(4) and (5)).
If someone is signing a contract on behalf of the association without a board vote and approval noted in the minutes, an attorney should be consulted to see if that individual could be person-ally liable for the payments due under that contract.
I would think the manager would be afraid of the personal liability he may have in signing contracts on behalf of the association without board approval that is documented in the minutes. He is the one who should be worried.
The board of directors should stop this practice and approve any and all contracts, document that approval in the minutes, and have the president or other officer sign the contract.
Some of our co-op directors use the terms “recusal” and “abstention” interchangeably. I thought I read an explanation in your Boardmanship manual but can’t find it. Is there a difference, and if so, can you explain what it is?
The statute doesn’t mention recusal, and I would consider the word/practice inappropriate. A board member has a fiduciary duty to vote and is presumed to have voted in the affirmative unless he or she votes “no” or abstains. Abstentions are for known, asserted conflicts of interest. Abstentions are not on “general principle.” There has to be a known conflict of interest with the person, vendor, or owner being discussed. That conflict is written into the minutes and is disclosed before the discussion of that agenda item. That board member then may not engage in discussion of that agenda item and may even temporarily leave the board table and return when they move to the next item.
A board member should not be allowed to abstain if there is not a conflict of interest. If they try to use the word “abstain” at the end of the discussion instead of voting, she should be told she may not abstain since there is no conflict of interest; and her vote will be recorded as a “yes” unless she votes “no” (F. S. Section 719.104(8)(b)) in a specified time—say, three seconds. Then tell the secretary to “please record her vote as a yes.”
I don’t use the word recusal in any of my courses. To my knowledge, the statute does not use the word. The only thing we address and that the statute addresses is a director being required to abstain when there is a conflict of interest in the action taken. The statute is clear. The abstention (specific reason for) is written into the minutes. Otherwise, unless the director votes “no,” his/her vote is presumed to be a “yes.”
Because of a board member’s fiduciary duty, he/she should not abstain on general principle or to chicken out of a vote.
Editor’s Note: This is part two of an article on budget essentials. Part one was published in the July issue and can be read at www.fcapgroup.com/flcaj/flcaj-articles/fcap-community-july-2020/.
In addition to looking at prior expenses and patterns when developing a budget, managers need to consider creative ways to save money and evaluate if changes need to be made. Conservation, energy efficiency, and cost-cutting measures need to be evaluated. Boards and managers must keep in mind the difference between discretionary and non-discretionary expenses. This is an opportunity to take a closer look at some past repairs and determine whether they could be better addressed in-house, or whether they require outsourcing. It is also management’s job to make recommendations as regards prioritizing and freeing up and maximizing cash flow.
First and foremost, the board should consider prudent investment decisions that incur no risk and strong return. Next, board members should consider the deposit limits ($250K) that are insured by the federal government. The risk to association funds can be limited by spreading the bank accounts out so that no one account has excess exposure. CDARS, money market, and ICS accounts are worthwhile accounts to consider.
The community should establish separate accounts for operating and reserve investments. There are several institutions that specialize in serving associations and provide associations with various options. Most associations collect monthly assessments, and the operating cash should be liquid (readily available) and usually kept at a level necessary to cover monthly expenses, plus a cushion. Good best practices are to have two months of operating expenses on hand. Reserves and operating expenses may not be commingled.
On the other hand, reserve funds are usually maintained with less liquidity in mind and generally have higher average balances in the accounts. Reserves should be set aside for roof replacement, pavement resurfacing, building painting, and any other item of association responsibility with a replacement cost or deferred maintenance expense of $10,000 or more. These funds cannot be used for something other than what was outlined in the reserve schedule, with details depending on whether the association has established the straight-line method or pooled method in calculating reserves. A reserve study will assist in calculating the useful life and necessary amount to fund these items. You should always seek the advice of the association CPA tax professionals before making investment decisions. Setting aside adequate reserve funds will reduce the need for special assessments and benefit the association.
In addition, the cost for unscheduled repairs should use previous repairs and replacements as a gauge to project estimated costs. Older buildings project recurring repairs, such as plumbing and electrical repairs, in order to be prepared for these unplanned but inevitable expenses.
If the property has been well maintained and a preventive maintenance plan is in place, discretionary expenses foregoing cosmetic-aesthetic projects need to be considered. Contingencies and miscellaneous expenses also need to be projected. Discuss the need for new computers, software, and technology. Will the association consider pay increases and/or bonus incentives? Many look to their CPAs for consultations and recommendations.
Items and services such as 24/7 valet, security, fresh flowers in the lobby, the number of times annuals are changed out, landscape extras, office expenses, training, software, equipment purchases, holiday decorations, and the number of personnel required need to be reviewed.
Many owners on a fixed income are affected by the state of the economy and may find it much more challenging to pay their maintenance fees in a recession if special assessments have been levied. The increase in delinquencies and age of the association can have a significant impact on the budget process. Many properties have included a bad debt line item expense; however, trying to estimate and calculate bad debt can be challenging.
Several communities have found that they were required to raise their fees to cover the negligence of others and that prior boards had failed to increase maintenance fees or collect reserves in the past. Chapters 718 and 720 of the Florida Statutes both require the funding of reserves in the association’s annual budget (with specific waiver provisions for condominium and homeowners associations). Some have waived collecting reserves or opted to partially fund reserves.
Many associations have explored ways to improve and increase revenue. Some have installed ATM machines, cell phone towers, and vending machines. Other communities rent space, install and rent storage lockers, impose late fees and processing fees, charge for guests’ valet, etc. Evaluating the level of services and amenities of the association requires the board and management to be practical and vigilant. It is recommended to consult with legal counsel and the association CPA prior to making any changes.
Management must negotiate with vendors and evaluate current contracts and services. The manager may make his or her recommendations for the association’s budget, but ultimately it is the board that must review, ask questions, perform its due diligence, and make the final decision in drafting a realistic budget as part of its fiduciary duty to the association. The association may wish to include others in the budget process by forming a finance committee. The committee can offer some assistance in handling the key financial concerns facing the association for the upcoming year. The finance committee should be encouraged to provide the groundwork required during this process and formulate their recommendations for the board and treasurer.
Drafting a realistic budget is not an easy task. Managers and board members must ultimately create a fiscally sound annual budget in order to provide stability and operate the association effectively. It is important that all work together as a team to have a solid financial plan in place in order to operate the association in a business-like manner. The board has statutory responsibilities to maintain the association. As such, they have the duty to budget and assess members for the required expenses. The members elect the board members to fulfill the duties and responsibilities for the operations of the association for the best interest of all. Looking at future needs, examining past expenditures, and planning for cost-of-living increases provides a basic, common-sense approach that will assist and benefit all in the development of a comprehensive, realistic budget.
Castle Group, Florida’s choice for community association management, has promoted Jordan Goldman to Executive Vice President. The new position took effect June 1, 2020, and was created as part of Castle’s strategy to adjust its organizational chart to reflect its current business as well as plans for future strategic growth.
Jordan is described by his team as an inspirational leader possessing a combination of brilliant creativity and strong business acumen. The recommendations left on his LinkedIn profile by numerous peers, direct reports, and industry partners further showcase the influence he has had on those around him.
“I am very excited and proud to announce Jordan Goldman’s promotion to Executive Vice President,” states James Donnelly, Castle’s Founder & CEO. “Since Jordan joined the company, we have experienced record year-over-year growth in revenue, market share, and brand recognition. Much of this success can be attributed to Jordan’s execution of our long-term growth initiatives and the incredible team he has built,” Donnelly continues.
Jordan holds a bachelor’s degree in business from the University of Central Florida and is a licensed community association manager. He has more than 20 years of real estate development, construction, and property management experience. Prior to joining Castle, Jordan held several leadership positions for one of the nation’s largest homebuilders, leading its Florida team to several first-place J.D. Power award finishes. Jordan currently sits on the Families First of Palm Beach County Foundation Board as an officer.
Castle Group (www.castlegroup.com) is the premier choice for property management, specializing in serving the finest residential communities. The company’s philosophy is an unwavering focus on the resident experience; at Castle it is called Royal Service®. Castle is owned by CPAs that oversee a powerful combination of incredible people, streamlined systems, and advanced technology. Since no two properties are identical, Castle has created a menu of services that allows customers to create a solution that fits their needs. Castle does not manage an exceptional number of communities, just a number of exceptional ones.