If you have ever been put in charge of running an HOA, you likely know there are a lot of moving pieces. From working with residents in the community and collecting dues to finding the right service providers for the community, it’s a job that takes a lot of time. And while not every HOA board member is an accountant or bookkeeper by trade, they are well aware of a community’s finances.
Why Financials Are Important to An HOA
An HOA collects funds from residents in the community via monthly payments. Anytime you have looked at real estate and seen that a property comes with an “HOA fee”, this is the extra amount owed to the community. This collected money goes toward hiring professionals to maintain the community and keep up its appearance. These professionals may perform landscaping duties for the neighborhood, can shovel snow and clear roadways during the winter, and will make positive changes to enhance the appearance of the neighborhood.
Because the collected money is distributed to various individuals to cover these services, it’s critical for an HOA to have someone familiar with bookkeeping and accounting to keep proper records of these transactions. Any business, HOA or other, never wants to charge someone and not have a receipt of the goods purchased. In this case, it’s a service that residents pay for and receipts should be readily available for the residents in the community. Failure to keep books updated could result in removal from the board or even legal action. At the very least, you could end up with unhappy residents.
Who Is In Charge of The Financials
A common question from people just moving into an HOA-ran community is about who is in charge of their funds. If an HOA is asking $150+ in fees every month, it’s reasonable for a resident to want to know exactly where that money is going and who is managing it. For this reason, community associations have a treasurer who is responsible for funds and financial decision-making.
To support proper accounting principles and standards, it’s critical for the treasurer to keep clean books and receipts of everything. If the community feels their treasurer is not doing a good job with the accounting, they may choose to elect a new person to the position during the next vote. Most HOAs provide an annual vote where residents can choose new officials for the community or simply re-elect the existing board members. In some states like California, a third-party HOA election service is required by law to administer this voting process to avoid biased decisions.
What to Start Doing Now
If you find yourself managing an HOA, be sure to have monthly meetings with your treasurer to know the financial standing of the community. You should expect that a resident will want to see financial proof of services at any time, so be prepared with the information. If you’re electing a new treasurer to the board, prepare them with all of the information they need to be successful. They should abide by accounting best practices and try to be as transparent as possible.