Posted on July 23, 2018 8:00 AM by HOA Sites
An HOA board is normally run by volunteers who are homeowners in the association. In most cases, these volunteers are not experts in financial or management matters. As such, one or more board members might take advantage of their position to embezzle funds or manipulate matters that are of personal interest to them. Use the following advice as a guide if you suspect fraudulent activity is taking place in the homeowners association.
The most common form of fraud committed by dishonest board members is embezzlement. Typically, they take funds that belong to the association or acquire HOA property using deceptive tactics. To help them steal from the association without getting caught, they may lie about financial matters or exaggerate the figures when recording transactions. Others usually make up fake records of transactions or delete existing entries for their benefit.
Rigging the elections is another way fraud is committed in HOA’s. Some board members might band together to rig the election results so that a person who was unlikely to win will gain a particular seat. Then, they use this position to embezzle funds or utilize it in some way to benefit from the HOA.
Dealing With Fraud
If you suspect that a board member is taking part in deceitful activities, gather as much evidence as you can such as audio recordings and incriminating documents. Also, ask for financial statements, tax returns, budgets, audits, vendor approvals, and other documents that would confirm any wrongdoing. Once you have adequate evidence, use the HOA website to call a special meeting and discuss your claims before the homeowners.
In case no corrective measures are taken, contact an attorney to talk about what action you should take against the board. To prevent board members from committing fraud, consider hiring a professional to handle sensitive matters like auditing and recording financial statements. Through the HOA website, ensure all homeowners are educated on financial matters as it benefits them and the association.
Posted on July 9, 2018 8:00 AM by HOA Sites
Have you ever been at an HOA board meeting and what seemed like a minor issue ended up taking most of the meeting because members failed to reach an agreement? That was probably due to a lack of standard procedures for conducting business during meetings.
Standard procedures can be extremely helpful when starting motions and getting the board to vote on an issue in question. With firm procedures in place, members are less likely to waste time going back and forth on matters. When comments are kept to a minimum, meetings go smoother and usually become more productive.
Starting A Motion
As a board member who follows the rules, you need to wait until other members have finished talking about an issue before presenting your own motion. Then, start the motion by addressing the board with, “I move that our community”, then go on and state your motion.
As soon as you have mentioned the motion, another member should second your motion in order for all members to begin discussing it. If no one else seconds the motion, it won’t be considered. On the other hand, if another member seconds the motion, the board should officially discuss the matter before members and later call for a vote.
Maintain Accurate Minutes
Minutes are the official record of the proceedings at an HOA meeting and associations are required to maintain these records. When you start a motion, the secretary should be granted adequate time to write the specifics of the motion. These minutes can then be placed on the homeowner association website where all members may review them.
When meetings are carried out according to standard procedures, there will undoubtedly be increased effectiveness and more members might voice their opinions. Furthermore, the minutes become clearer and nearly all members will understand them when they’re placed on the homeowner association website!
Posted on June 29, 2018 8:00 AM by HOA Sites
Collecting for reserves routinely is a typical part of what HOA’s do as it reduces the possibility of homeowners having to shoulder an unforeseen financial burden. For instance, when a major common asset like a swimming pool needs repaired, homeowners don’t need to cover the expensive costs unexpectedly if the HOA collects for the reserves monthly. All homeowners associations should make it a priority to collect for the reserves regularly so homeowners never face a financial dilemma.
Major Projects Are Covered
Common assets such as roads and the main gate deteriorate over time and they eventually need to be repaired or replaced. Collecting funds monthly spreads the costs of a project over a long duration; homeowners make small contributions on a regular basis rather than paying all at once.
Imagine the board forcing members to make massive contributions to finance an urgent project because the HOA failed to routinely collect funds. There might be belligerent posts on the community website or even a lawsuit against the board as members feel there was a mismanagement of funds.
Minimize Borrowing & Special Assessments
Loans and special assessments are two more reasons why you tend to see so much uproar during an annual meeting and on the community website. No homeowner is pleased to hear about a special assessment of any amount. Regularly collecting funds for reserves not only minimizes the need for getting a loan but it also reduces a special assessment.
Improved Resale Value
In some states, HOA’s are required to disclose the status of the reserves and this can have a substantial effect on the value of HOA properties. More importantly, real estate agents usually take the reserve funds into consideration when estimating what a home is worth. Collecting for the reserves throughout the year is a professional, fiduciary, and often legal requirement so every association should make it a priority.
Posted on June 20, 2018 8:00 AM by HOA Sites
After going through the lengthy and expensive process of getting a new HOA board, some members start a discussion on the homeowners association website. Quickly, various members dispute the election and threaten to bring a civil action if the board is not removed and the election results voided. Often, their reason for doing this solely revolves around the homeowners association not having election rules. Ensure this never happens to your HOA and use the following as a guide.
The Issue With No Election Rules
Even after following the CC&R’s and other governing documents, election results can indeed be voided if the HOA’s rules regarding elections aren’t in line with the Civil Code. This issue particularly affects votes involving the removal or selection of directors, special assessments, changes in the bylaws, and more. The situation can be especially chaotic if the new board’s actions are nullified.
Is It Possible For The Board To Draft The Rules?
The election rules are typically drafted by lawyers, but perhaps you feel that your HOA won’t be able to afford one. The problem is the draft must comply with government legislation on this matter, failure to do so means it will be regarded as invalid. The qualifications of directors, secret balloting, and the procedures of nomination are some of the issues that should be covered in the document.
No matter how small or new the HOA may be, never hold elections without having election rules in place that are aligned with the law. Otherwise, one member might rebel and use the homeowners association website to get others to help them call for the board to be removed.
When drafting the election rules, always contact an attorney beforehand and ask for help on the matter. If funds are limited, try to come up with a way to pay for legal services because the cost might end up being too high should you hold elections without the proper election rules in place.
Posted on June 7, 2018 8:00 AM by HOA Sites
Do you know the last time your HOA did a reserve study? Maybe the homeowners association is new and the reserves need to be financed, or the HOA has been around a long time and an update is all that’s needed. Without a neighborhood website, you might be wondering how many years the reserve study should cover.
First, the size and age of the homeowners association should be considered, as well as the value of the capital assets. Then, ensure that the expenses you include should actually be listed on the reserves. Keep in mind that reserve funds are meant for the repair, replacement, and maintenance of capital assets.
Duration Of The Study
If your HOA is small, assets such as simple playground tools are likely only good up to 10 years. In that case, the reserve study should last around ten years. On the other hand, if the HOA is large, there will be more complex items with a longer useful life of up to 20 or 30 years. This means the reserve study should cover a longer time up to 30 years and complex items usually cost more.
Rules On What To Include
Obviously, your HOA should own the item, and privately owned assets like swimming pools or other structures belonging to homeowners are not eligible. Also, assets need to have a limited useful life that is predictable, for instance, an HOA van may have a limited life of 25 years.
The replacement costs of the capital asset that you intend to include in the reserve study should be above a minimum, like over 0.5% of the annual budget. The operating budget should cover any replacement cost that is below the pre-defined minimum. Consider using the neighborhood website to explain the reserve fund to homeowners so they don’t wonder why the HOA is setting aside such a large sum of money!
Posted on May 29, 2018 8:00 AM by HOA Sites
Social media has become a major part of everyday life for many people as it has tremendously changed the way we communicate. For businesses, social networks are either a great source of growth or a letdown. If your homeowners association recognizes the advantages and disadvantages associated with these platforms, it can profit rather than lose from using them. What positives and negatives should your HOA be familiar with?
Speed & Cost Efficiency
Previously, HOA boards designed newsletters which involved having them printed and distributed to their communities. A process that was not only costly but also time wasting as several people never took the time to read them. But now, with social networks and the HOA website, you can design newsletters and post them for free within seconds.
Convenient Access To Information
When you publish a post, you could include links to HOA laws, annual reports, and other data that homeowners might find helpful. If you discover any errors or need to make changes, the corrections can be made easily and quickly through a phone or computer.
Sensitive Data May Be Compromised
You have probably heard of the Facebook scandal where many users’ data was stolen and misused. For that reason, you cannot rely on social media to disperse sensitive data that only HOA members should have access to. Always keep this issue in mind and only use social media for general, unrestricted information and the HOA website for relaying confidential data.
Misuse By Members
Social channels are meant for positive outreach, but some members use them in a negative way against the board and fellow homeowners. In order to avoid this issue, make sure your accounts are managed so inappropriate content is blocked promptly. Your HOA will definitely benefit from social media if you utilize it properly to inform, influence, and engage members. Consider hiring a professional to be in charge of your social accounts to take your association to the next level.
Posted on May 15, 2018 8:00 AM by HOA Sites
Special circumstances might face your homeowners association even when management is excellent and everything is running smoothly. Improvement projects, large-scale repairs, and other unforeseen situations may occur which put the reserves at risk. For many HOA’s, special assessments offer the best way out. But, what if homeowners fail to pay the special assessment?
What Is A Special Assessment?
A special assessment refers to the funds that homeowners are required to pay when the board decides not to use the reserves to cover emergency expenses, repairs, and maintenance costs. Assessments are important as they prevent the reserve funds from being diminished or drained.
If homeowners are complaining on the homeowner association website and vowing not to pay the special assessment, there may be a problem with communication between them and the board. Here are ways in which you can ease their frustration and encourage them to pay without having to resort to legal action.
Transparency Is Key
Often, all homeowners want is for you to keep them updated with regard to the HOA’s financial matters. One way of doing so would be to encourage them to attend HOA meetings. Aside from that, consider keeping them informed about major projects that impact the budget of the HOA using the homeowner association website.
When a homeowner is irritated, the first option should be to try and reason the situation out. Make an attempt to show them the importance of special assessments so they understand that using the reserves could place the association at risk of financial stress in the future.
It’s almost certain that reasonable homeowners will understand why the special assessment is necessary, but you can always take legal action if reasoning the situation out doesn’t work. In some states, an unpaid special assessment is considered personal debt, and the HOA board is given the right to take possession of the property or hold it until the debt is settled.
Posted on May 7, 2018 8:00 AM by HOA Sites
As a board member, one responsibility is to review your HOA’s reserve study and interpret it so you can make proper financial decisions regarding the collection, adjustment, and allocation of reserve funds. Unfortunately, reviewing the reserve study isn’t much fun and many think it’s not easy to understand either.
Outlined below are a few ways in which you can interpret the HOA reserve study and apply it appropriately for the benefit of your association. Consider using the community website to share what you learn here so other board members may be informed.
Understand Your Reserve Study
HOA reserve studies are normally comprised of common areas in the community such as street lights, gates, basketball courts, and pools. Additionally, estimates are included on the costs needed for the repairs, maintenance, and replacement over time. They also involve estimations on the current monetary value of these common assets.
It’s recommended that your HOA conducts an annual review of the roofs, paint, electrical panels, and other major parts of common amenities. In order to get an accurate, comprehensive report, have experts in finance and engineering study these areas so the interpretation part is simple.
Make Long-Term Plans
Homeowners associations that neglect to plan for the future are destined to drain their reserve funds. If a gate needs to be replaced in 20 years, the board should divide the cost by 20 and set aside that amount each year. For instance, the gate might cost $20,000 so the HOA needs to set aside $1,000 every year. By the 20th year, the board will have the amount they need and not face a financial crisis.
As you interpret the reserve study and plan for the future, you should account for an inflation rate of at least 3% per year. Use the community website to notify HOA members about the outcome of the reserve study so they fully understand the importance of having sufficient funds!
Posted on April 20, 2018 8:00 AM by HOA Sites
Aside from keeping the homeowners association website up-to-date, a vital duty of the HOA board is to maintain precise financial records and reports. Through those, members are able to see an overview of how the community is utilizing the funds and how financial projections are being achieved.
The board is in charge of making many financial decisions which includes setting fees, determining assessments, and figuring out how the money should be allocated. As a contributor to HOA funds, you have a right to know how the money is being utilized and the following questions will help you in the future.
Who Is In Charge Of Accounting?
In many cases, a management firm is in charge of the accounting and financial reports, though there are some associations that prefer to handle these tasks internally. First, determine who’s responsible for these duties so you know where to address your concerns. The way accounting is managed varies from one association to the next so keep this question in mind.
Can I Get A Copy Of The HOA Dues For The Past Decade?
When you see the history of how the HOA has been collecting fees over an extended period of time, you will get an idea of how efficient the funds are being managed. For instance, if a large sum has been collected; that should reflect in the HOA’s development projects unless there have been costly expenses.
How Frequently Are The Financial Reports Analyzed?
A board that analyzes financial reports regularly shows they are serious about keeping the community in a good financial state. The three most critical statements you should ask about are the income and expense statement, the cash flow statement, and the balance sheet.
Most of the time, efficient HOA boards have commonly asked questions regarding financial management posted to the homeowners association website. For that reason, homeowners are encouraged to go to the website first since many questions have already been addressed there.
Posted on April 9, 2018 8:00 AM by HOA Sites
When considering HOA security, there’s a question that usually comes up and perhaps you’ve come across it on the neighborhood website. Is it the board’s obligation to provide adequate security measures like cameras for protecting homes in the community? And, is the board responsible for security breaches?
It’s common for HOA boards to contract with the county government or even hire private patrol officers to ensure homeowners are safe. But, in case of a breach, who will be held accountable? Have you thought about what you can do to contribute to safety in the HOA? The following advice will keep you on track when it comes to security in your association.
The HOA Is Normally Not Fully Responsible
A majority of homeowners associations do their best to keep you safe but more often than not, the board is not liable for security related issues. Of course, it may be accountable for not taking timely and proper action in resolving general safety problems that causes harm to members or damage to their property.
Some of the HOA’s responsibilities include having adequate lighting in common areas and installing durable security gates. If you don’t know what your association covers, ask for a copy of the governing documents or contact the HOA board through the neighborhood website.
As a homeowner, you shouldn’t fully depend on the HOA to keep you safe. Instead, be pro-active when it comes to protecting your home and yourself by implementing your own security measures. For instance, you could install security cameras in your home and make it a habit to always lock the doors.
If the governing documents are vague about which party is liable for security issues, it may be best to check with an attorney for guidance. Another option to consider is to bring up the topic in a meeting or open it up for discussion on the neighborhood website so other homeowners get informed and voice their concerns.
- What Elements Should Be Included In The Homeowners Association Budget?
- Are Neighbors The Best Form Of Security In Your HOA?
- How To Tell If The HOA Has Been Properly Maintained
- The Significance Of Setting Up A Maintenance Plan For The Homeowners Association
- Can The Board Use Reserve Funds For Items Not Listed In The Reserve Study?
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