Always Be Conscious of your community association’s financial health!

With many schools now back in session, and our children learning everything they forgot over the summer, we thought it would be fun to prepare a primer with tips for good HOA and community association financial management. 

The vast majority of community associations are well-run and in reasonably good financial health. The property manager and board of directors work well together to plan, protect, spend, and save. Their keys to success include open and honest communication, as well as financial vigilance.

Here are some of my top community association financial tips that I love to share with property managers and board members. Whether you’re new to your role, or a seasoned veteran, I’m sure you’ll find something useful. 

A is for Audit. Whether or not it’s required by covenants or state statutes, a regular audit or other financial review will confirm financial health and identify potential risks. 

B is for Budget. Create a new budget each year, using at least the previous year’s budget as a guide. 

C is for Cash. Make sure you have at least 10-20% of your budget available as  operating cash to pay for planned (or unplanned) expenses. 

D is for Documentation. It’s important to document all major budget variances for adherence purposes this year, as well as for planning in future years.. 

E is for Education. At least one person on the board (like the Treasurer) should have financial experience. If not, consider contacting a CPA. 

F is for Fiduciary. It is your duty to place the community’s best interests above your own. When in doubt, talk it out! Communicate concerns with the board. 

G is for Goals. What are your goals as a board member or property manager? Sit down together to document them and ensure that everyone is aligned.  

H is for Hire. Bring in an experienced financial expert, like a CPA, when the board has financial concerns or when a formal financial review is needed.

I is for Insurance. Especially after the Surfside tragedy, review your community association insurance policies, especially Directors and Officers (D&O) coverage.

J is for Judicious. Fairly and equally apply covenants, bylaws, and rules to all residents, especially when it comes to major issues like delinquent dues. 

K is for Keep (your Reserve account funded). This is your savings account for future major repairs, replacements, and renovations. 

L is for Look. Each month, the Treasurer and property manager should review the balance sheet, income statement, bank reconciliation, and receivables. 

M is for Meeting. At the monthly board meeting, the Treasurer or property manager should present at least a brief financial summary.

N is for Neighbors. Dissension is okay, but remember that we’re all in this together. Be respectful of each other’s opinions. 

O is for Open. Be transparent with your community. Share financial updates each month, whether good or bad news. 

P is for Plan. Amenities and common areas require repairs and maintenance. Remember that these get more expensive as a community ages. 

Q is for Quit. Stop thinking about your community as a non-profit organization. Although most community associations are tax exempt, they still must file annual tax returns. 

R is for Raise. I know these are dirty words, but if there’s not enough money to operate the community, raise the dues now rather than kick the can down the road. 

S is for Save. Be on the lookout for ways to reduce expenses and increase cash flow, like rebidding major contracts and tightly monitoring delinquencies.  

Now that you know your ABCs, next time won’t you… file your tax return on time, fully fund your reserve account, and confirm that your balance sheet balances!

And Z is for Zeal!

Whether you’re a property manager or board member, thank you for serving your community in what can be an often exciting – but sometimes thankless – job. Please use us as a resource, and contact me if you have any questions or concerns related to your community association’s financial health. After years of experience working with community associations, we’ve seen it all, and would be glad to help.