Financial accountability is one of the primary responsibilities for homeowner association Board members. Your actions can make or break your community, so fiduciary responsibility is a duty to take seriously. Financial understanding, objective thinking and honesty comprise the basics, but there’s a lot more to HOA fiduciary responsibility than these few items. Here are some tips on how to improve your HOA fiduciary responsibility.
Understand of financial basics
While everyone isn’t a financial whiz, every board member can improve his or her understanding of HOA financial basics. A solid understanding of reports and basic financial terminology helps Board members spot signs that indicate a change in the overall health of the association.
Ask financial questions
- Are we adhering to our association’s governing documents?
- Do we have a sufficient reserve fund?
- Are our assessments keeping track with expenses?
- Have we evaluated our annual and one-time expenses?
- Is our HOA budget balanced?
- Do we have checks and balances in place to prevent errors and fraud?
Implement key financial indicators and controls
Have you set up the indicators to judge the association’s financial health? These are important to keep check on progress and to make solid financial decisions for the community. While you are looking at indicators, establish some financial control procedures for approving expenses and signing checks to help prevent fraud. Regular audits or reviews are needed to pinpoint potential issues and gaps. If you don’t have indicators and controls in place, a CPA or HOA property management company can help you establish the right ones for your association.
Develop a budget and manage legal responsibilities
Creating a budget and comparing expenditures to projections helps keep the association on the right financial track. In addition, you must also manage all state and federal filing and tax obligations. Ask questions and delve deeper if you encounter major variances between your budget and expenditures. Identifying the root cause can help you “fix” your budget and estimate finances more accurately in the future.
Wise Property Solutions is a property management company serving East Tennessee with offices in Knoxville, TN and the Tri-Cities, TN-VA. Specializing in Condominium Association Management, Home Owners Association Management, HOA Management and Gated Community Association Management. The firm is East Tennessee’s only Accredited Association Management Company (AAMC®).
Knoxville, TN: 865-643-8989
Tri-Cities, TN: 423-926-7373