1. Mgmt Contracts 2. Can Boards Control Costs?

1. LWV
March 06, 2008
Residents Voice
03/06/08 Residents Voice 1

2. “Following the Money”
3/06/2008
Tonight’s Subjects !
• “Review of our Management
Contracts?”
•“Can the Boards Control Our
Assessments?”
03/06/08 Residents Voice 2

3. Management Contracts
C. Grundke
03/06/08 Residents Voice 3

4. Management Agreement!
• Each Mutual, 3 housing mutuals and GRF,
has a unique Management Agreement.
They are all different in such areas as the
Incentive Plan.
• At this time, only the Third Housing Mutual
has committed to renegotiate the contract
with PCM.
03/06/08 Residents Voice 4

5. % Increase for 2002-2007
74%
60%
53.33%
50%
40%
30% % Inc
20%
10% 5.26%
2.83% 1.83% 2.70% 1.63%
0.00% 0.00%
0%
2001 2002 2003 2004 2005 2006 2007 2008
03/06/08 Residents Voice 5

6. Total $ per Year
$200,000 increase 2006-2007
$600 562 572
$550
$500
$450
$400 348 367
K Dollars
324 324 333 339
$350
$300 K $ Total
$250 -
$200
$150
$100
$50
$0
2001 2002 2003 2004 2005 2006 2007 2008
year
03/06/08 Residents Voice 6

7. $/M/Mo
$4.00 $3.68 $3.74
$3.50
$3.00
$2.40
$2.50 $2.12 $2.12 $2.18 $2.22 $2.28
$2.00 $/M/Mo
$1.50
$1.00
$0.50
$0.00
2001 2002 2003 2004 2005 2006 2007 2008
03/06/08 Residents Voice 7

8. What Should We Look For?
• Controls:
– Duration of Contract:
• Yearly rather than 5 years.
– Justification for increased Management Fee.
– Yearly review of Managing Agent
performance.
– Incorporate employee perks in Management
Fee.
– Common controls across all Mutuals.
03/06/08 Residents Voice 8

9. What Should We Look For?
• Removal of limitations:
– Boards should be able to do the work of agent
in a reasonable manner:
• No direct control of employees by Owners.
• Review and justification of performance and
service levels should be within the scope of the
Resident/Owners/Directors.
• Review of Financial Records should be made
available to the Resident/Owners.
03/06/08 Residents Voice 9

10. What Should We Look For?
• Available Information:
– “Red Book” (is now available when asked for)
– Complete “Yearly Ledger” data in common
digital form.
– “Lag Time” report published in digital form.
03/06/08 Residents Voice 10

11. Can Boards Control Costs
C. Grundke
03/06/08 Residents Voice 11

12. Can Boards Control Costs?
• Only if they are aware of the costs;
– Current Budget Process is not adequate.
– PCM must open the books.
– Directors, Board Representatives and Owners
must scrutinize the complete ledger.
03/06/08 Residents Voice 12

13. What costs are we talking about;
• Credit Cards,
• Employee Reimbursements,
• Employee Incentives,
• Broadband,
• Nursery,
• Gate Appearance,
• Development Planning,
• Clubhouse #2,
03/06/08 Residents Voice 13

14. THE END
03/06/08 Residents Voice 14