Blog

By Maria C. Kao & Matt Meadors  Note: This article first appeared in the Summer 2024 Edition of The Communicator Magazine.

EVERY DEVELOPMENT GOES through a transition where the original developers hand over the management and operations to the homeowners. Such a transition will include the finances of the association. Here, we focus on an association’s legal obligations, but also offer real-life advice from a professional manager experienced in turning over a community.

The finances should not be overlooked during the transition phase, and it is of utmost importance to make sure the basics are set up correctly. They should include assessment calculations, reserve studies, a thorough investigation into the operating budget and many, more discreet issues. Let’s synthesize the legal obligation information together with operational know-how for those interested in setting up the future of financial stability for a transitioning project.

OPERATING

Pursuant to the Department of Real Esta...

By Nicholas Nociforo

Whether we like it or not, money is the fuel that keeps the world going round. Managing money at any level can be challenging, but managing a collection of funds, as in the instance of an HOA, comes with even more complications. So many things need to get done to keep the community beautiful and property values appreciating. And with so many services done routinely like tree work, or sporadically like sidewalk repairs, spending the money needed to get it all done is hard to do. I am an arborist who sells tree care services to HOAs and other multi-family properties. I have been in the industry for eight years and have worked with all types of boards and property managers in California. I am also a new homeowner who is now faced with service providers and proposals for all the things I need to get done at my house. The purpose of this article is to help HOAs manage their money with inside secrets from service providers. I will be writing from the perspective of tree...

By D.W. Haney, CPA (Retired)

Most HOA disputes, dysfunctions, and disruptions are due to financial and standard of care stewardship issues. Who pays what, when, and why? And unfortunately, HOA financial statements produced today are misleading and fail to reflect the community’s economic reality.

In general, HOA directors, managers, and advisors do not have the skill sets necessary to understand, analyze, and respond to the financial statement stories contained in GAAP (Generally Accepted Accounting Principles) compliant financial statements. These statements are a foreign language to most, who oftentimes do not seek the advice of financial translators and guides to help them on this important piece of the HOA journey.

One big piece in this puzzle is the Statement of Financial Position (balance sheet). Here we will examine the three different methods to tell the financial strength story: cash basis, full accrual, equity designation. (There is a fourth method on the scene right now—c...

By Joe Garza, CPA

Today, a homeowner’s association’s (HOA) board of directors depends on technology to store contracts, banking information, and other confidential documents. Unfortunately, while digitization increases efficiency, it also intensifies the potential for fraud and theft of community funds. Even with checks and balances, like collective oversight of a community’s financials from board members and community managers, an association’s money can still be at risk.

Managing an association’s account manually and collectively elevates the opportunity for mistakes to happen, making it crucial to differentiate human error versus ill intent. While it’s a board’s fiduciary duty to protect the financial health of its HOA, board members must also remain respectful, objective, and observant. If you see something, do something. Here are steps for investigating suspicious financial activity that may be going on in your HOA and tips for protecting your association’s finances.

UNDERSTAND...