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Financial Controls
HOA Cash Management Programs
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Cash Management Programs for Community Associations
Board members have the fiduciary responsibility not only to monitor the income and expenses of their association but also to utilize processes that provide both safety for assessments collected from homeowners and control of costs. If your community association or management company has not recently reviewed your payment processing and cash management systems, you may be unaware of innovations that can make your staff more efficient, save money and help to increase your investment earnings.
Understanding Your HOA Finances
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Understanding Your Community’s Financial Position in a Tough Economy
While it is always important to know where your community stands financially, it is especially important to understand the community’s financial status in an economy riddled with increasing expenses, higher delinquencies, and more bad debt write-offs. Following are several recommendations and standards for analyzing a community’s financial health:
Recommendation A: 2-3 months of expenses in your operating account(s) (liquid funds) at all times.
For example, if your community has a budget of $20,000 per month for operating expenses, we would recommend that you have between $40,000 and $60,000 in an operating fund savings account. Doing so helps to ensure that the association can cover monthly expenses plus any unbudgeted expense that may arise, even factoring in assessments that are delinquent and not received. Boards should keep this in mind when considering investment opportunities. Only funds in excess of two – three months of operating expenses should be considered for longer-term investments that commit the funds for months or years.
9 Steps to avoid HOA Embezzlement
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How to Recognize HOA Embezzlement--and 9 Steps to Minimize Your Risk
"Creative accounting" or "cooking the books" has been on the rise in HOAs the past few years. Headlines are unfortunately full of cautionary tales. Consider these two recent cases:
- A former treasurer of the Woodbridge Townhomes Homeowners Association in Nevada City, Calif., recently entered a guilty plea to embezzling more than $100,000 from the association.
- HOAs that contracted with Kroger Management Group claim the Fairfax, Virg., firm stole more than $2 million from client associations.
Embezzlement is also perennially under-reported. Many cases are simply settled quietly because the victims—the HOAs—don't want to face the bad publicity of announcing the theft.
Preventing Fraud and Embezzlement
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What is Fraud? Deceit, trickery; intentional perversion of the truth in order to induce another to part with something of value or to surrender a legal right.
What is Embezzlement? To appropriate (as property entrusted to one’s care) to one’s own use.
HOA Foreclosing to Rent Units?
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The takeover of foreclosed units by condominium and homeowners associations to rent them out and recoup delinquent fees has been one of the fastest-growing solutions to the rise in foreclosures. But it's not without cost.
Here we explain what your HOA board needs to know about the risk when acquiring a unit for rental and the expense involved in foreclosing on a property to rent it out.
The Pros and Cons of Foreclosing to Rent
There's no easy answer when it comes to deciding whether your HOA should foreclose on units with the intent to rent them out because lenders are slow-walking the foreclosure process.
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