Thought Leadership & Board Center of Excellence (bCoE)
“The legislative, economic & investment markets are in flux – and with it - HOA boards’ responsibilities.
mcMills Duffy is responding to these changes not only through technological, audit-specific, and domain-related expertise, but also through its approach to On-going Board Support.”
Megatrends
“Global megatrends increasingly influence local real estate markets. This concerns social trends such as urbanization and internationalization, Rent v. Buy, sustainability and energy costs - all of which impact boards’ decisioning on HOA issues. ”
Are Your HOA Reserves Getting The Yields They Deserve?
With US Treasury yields trending higher due to softened global demand (when bond prices go down, yields go up; this occurs because the price paid for a bond (over or under “par” $1000), directly impacts the yield or return of that bond. When bond prices paid are under par, the discount or delta in the lower price translates into a return of par when the bond matures - adding to the interest paid - which becomes the yield - or total return of the bond. (Analogous to a total return on a stock - the dividend paid plus any capital appreciation of a stock’s price gain.) HOAs can take advantage of higher yields in this market climate due to higher treasury bond yields. US Treasury money market funds are prudent vehicles to get the safety, daily liquidity without withdrawal penalties (money market funds are always priced at $1.00 - and are structured to not fluctuate in share price), and yields that other locked in investment vehicles (like CDs) cannot achieve. Although CDs are typically insured, they carry bank and investment risk - the risk that the bank issuing the CD can fail; and risk of underlying investments - which can lack the transparency HOAs should have into how reserves are being invested.
Issue: Project Rationalization
Problem: Board was a victim of “scope creep” - when inflated scopes of work for capital projects on the property ultimately resulted in the issuance of a special assessment - and HOA dues being raised by 18% - both of which could have been avoided had the Board been competently advised.
Solution: The project rationalization model employed by McMills Duffy Consulting would have saved the HOA approximately $1.5M in unnecessary project costs, not to mention a special assessment and a significant dues increase for homeowners. McMills Duffy achieved a future cost avoidance of approximately 27% of HOA operating budget for 2025 FY.
De-Risking The Board & HOA
Extensive research uncovers risks.
In conducting due diligence, we rely on stringent and comprehensive background research based on publicly accessible sources, databases and social media. We investigate whether there are indications of property-related or reputational-operational risks, or any other board activities that imply risk.
Issue: HOA Financial Hygiene
Problem: BOD was facing an HOA with hundreds of thousands of dollars in inflated project fees and deferred property maintenance issues - costing individual homeowners thousands of dollars in special assessments and double-digit YOY dues increases.
Solution: McMills Duffy Consulting Group scrutinized HOA balance sheets, vetting vendors and verifying legitimacy of capital expenditures (projects). In a period of 30 days, the action plan that McMills Duffy provided the Board called to reduce annual operating expenses by 49%, and identified cost avoidance of over $1M+. Major capital expenditure financial modeling was done to allocate capital to avoid future homeowner special assessment(s).
Issue: Vendor Utilization
Problem: There was a significant gap between what an HOA’s vendors were contractually obligated to provide, and services actually being delivered, resulting in myriad unnecessary line items add-ons (consultants, additional vendors) bloating the HOA’s balance sheet.
Solution: McMills Duffy reconciled vendor SLAs (service level agreements) and SLOs (service level objectives) to align and reduce unnecessary line item costs, saving the HOA $150,000+ per year.
Issue: HOA Litigation Avoidance & Board Governance
Problem: Board was inexperienced, and unintentionally entered into mediation with a litigious homeowner over damages that were not HOA responsibility - potentially costing the HOA almost $1M in settlement fees.
Solution: McMills Duffy Consulting performed forensic research of the issues and their genesis - collaborating with HOA legal counsel to educate and present the Board with a holistic legal approach, and a governance framework.