Audits are Expensive and Should Be Done Selectively.

An audit is an extensive and methodical examination of all of the books, records and accounts that support the financial statements.  In most circumstances, they are costly and time consuming.  However, it is often prudent to audit the HOA books and records whenever a developer turns over a community to the homeowners to verify that the developer has fulfilled its obligations to the association, and won’t leave unit owners holding the bag for any unpaid fees.  Or an audit may be need if misappropriation of funds by an association or management company is suspected or a community is transtioning from self-management to a management company and experiencing extreme financial hardship.    In those case, a forensic audit must be performed to determine exactly where the money has been going.

A Review is a Less Expensive Alternative to an Audit.

A review is a report of limited assurance stating that the accountant is not aware of any material modifications that need to be made to the financial statements in order for them to conform with Generally Accepted Accounting Principles (GAAP). The accountant must perform sufficient inquiry and procedures to give a reasonable basis for that conclusion.  A review is a more affordable alternative for most associations and should be sufficient in most cases.

When governing documents talk about “audit,” it generally refers to some level of independent review of the books by a CPA.   Depending on the size and complexity of your HOA, an audit may be overkill and may not be warranted.   Rather than perform an annual audit, the Board may elect to perform an annual review.

Whether your HOA decides to do a review, a compilation, or a full blown audit,  we think it is a good idea to do on an annual basis.   Some HOA governing documents require it, others are silent on this point.

There are a variety of qualified CPA‘s in the Atlanta area that can do this work for your Atlanta HOA. Why is this a good idea? The easiest answer is a simple one: it’s smart, prudent policy. Even if you are confident in your Atlanta HOA management company, it is a good idea to do this as it shows the membership that you are being thorough in your desire to ensure the HOA’s funds are tended to in an appropriate manner. Regardless of whether you do an audit, make sure you review the financial reports you get from your property management company each month.

We are happy to provide financial report training to any of our clients. We’ll explain what the GAAP rules are and why we adhere to them in your financial reporting. We’ll also explain the rules of double entry and much more. If you are interested in getting more information on our financial report training webinars please contact us by going to our website at www.riversidepropertymgt.com.

Reblogged from Riverside Property Management Insider:

In this day and age, owning a vehicle is a necessity and it seems that every family owns a minimum of two vehicles. Due to this trend and the limited number of parking spaces available in many communities, many associations have adopted parking rules and restrictions. Unfortunately, it is not unusual for owners and their guests to violate these rules in any number of ways, including parking in spaces where parking is not permitted such as streets, fire lanes, or reserved parking spaces that belong to other …

Board meetings should be productive, efficient meetings where the board conducts business.  Are your board meetings productive and efficient? Does the board meet to conduct business or socialize? Are you getting the most out of your meetings?

Consider doing a few of these things:

Prepare a Realistic Agenda. Five page agendas with 50 objectives set out may be impressive but they are unrealistic and counter-productive.  You need to set a list of priorities for each meeting and focus on those issues.  If you have 50 issues you want to address, spread them out over the course of the year.  You will be more efficient and see better results if you are able to manage your agenda.

Set an end time to your meetings. Meetings should last no more than an hour.  Start the meeting when it is scheduled to begin and get straight to business. If you collectively have the focus to get done in an hour you’ll be amazed with how much you can accomplish. If you have no time limit, the meeting will typically drag on and a lot of time will be wasted. When time is wasted at a meeting then people are less likely to volunteer because they feel their time is wasted.  One hour meetings have a major impact on volunteers. Associations that hold focused, one hour meetings have more people volunteer. It’s also important to note that those volunteers stay active the in the community for much longer. Length of your board meetings may seem like a trivial matter, but it really does have a large impact on how the volunteers of the association view the organization and, in turn, how they view their role.

Be familiar with the Covenants and Bylaws. Key elements with which board members should familiarize themselves are the association’s governing documents that define the board’s authority. If you have a management company, they should provide guidance on your role as a board member, your fiduciary responsibility, specific board responsibilities from decision-making to administrative tasks, and how to conduct and participate in board meetings. Other vital information will include how to avoid personal liability, professional conduct at meetings, parliamentary procedures, the operating and reserve budgets, federal, state and local laws that impact your community, and appropriate insurance coverage.

Come prepared. Be familiar with the issues that will be addressed at the meeting.  If you have questions, ask them prior to the meeting so that your manager (if professionally managed) can have ample time to find the answers. This will help the meeting be more effective and brief. There is nothing more frustrating to those attending the meeting than for fellow board members to come unprepared and want to discuss issues at great length.

Make the meeting a time for action. Next, hold action oriented HOA board meetings.  Don’t just discuss issues, make decisions. Every item up for discussion should end in a vote to move forward in some way or table the issue with a clear understanding of why the item is being tabled and when it will be revisited. When taking action on an item make sure it is clear who will be responsible for getting that task completed. Ambiguity cripples a board.

Don’t be confrontational. Board members should recognize they are part of a team and not take a confrontational position with fellow board members or their management company. No one should have to work or conduct business in a hostile environment. Realize that at times you will not always agree, but take the position that even disagreement can bring compromise and consensus. Be concise with your opinion and thoughts and then be sure to listen to others. Always be respectful of your fellow board members and staff, as well as the homeowners. The tone of the board can set the tone of the community. So, if you want to have a healthy, vibrant and successful community, you should reflect that image as a board member.

Treat your Community Manager with Respect. Your community manager is your agent, not your employee. They act on behalf of the board and facilitate the decisions of the board.  Remember that they are professionals and should be treated as such. It can be detrimental to a board and its community to consistently be at odds with their management company. They are there to offer their expertise based on their experience, training and education to ensure that the board doesn’t compromise their fiduciary responsibility. A board should trust and rely on their management company’s vast experience and unlimited resources.  If your board has lost trust in the management company, have a frank discussion with the company’s CEO regarding whatever problems exist. Perhaps a different manager can restore your trust, eliminating the need to start all over with a new company.

Be a Team Player. If you recognize that, as a board member, you are part of a team of volunteers and management experts, you will be rewarded when you use those resources to make decisions that are based on sound business judgment. This, in turn, will inspire others to serve and build a team of future leaders who will want to emulate your leadership. By doing so, you will find serving on the board is not a burdensome chore, but a rewarding experience that you will value for years to come.

Be determined to have one of the best HOA’s in Atlanta by having an HOA management company that focuses on helping you have effective meetings.

HOA management companies often work under a contract for a monthly fee. But how is that the amount calculated? In general, it is based on the estimated time needed to perform the tasks outlined in the Management Contract. There is often a workload of tasks that are not considered routine.

So what goes into the monthly management fee? There are fixed costs such as rent, phones, copiers, computers, insurance, and the internet. The workforce is based on the estimated time needed to perform the prescribed work. Total fixed costs and labor plus profit margin are equal to the monthly management fee. It is common to divide this number by the total number of units / lots. (In Georgia, the average is between $ 10-25/door for condominiums.)  Size and staff required matters: HOA’s pay less per home.

Typically, an Owners Association will be assigned a manager, an accountant, a maintenance supervisor, and possibly an administrative assistant to the account. The administrator can manage 10-15 accounts.

Staff salary levels can have a major impact on management fees. If a Homeowners Association wants experienced professionals, there is a price to pay. A qualified HOA manager attends seminars, has credentials and professional designations and focuses exclusively on HOA management. The Homeowners Association will benefit from this training and experience so expect to pay accordingly.

Managers spend much of their time to prepare and monitor Board and Annual meetings. For a typical board meeting, the manager gathers information and prepares  reports, reviews the financial statements and relevant correspondence.  The Board puts together packages or emails messages to each member.

Most Board and Annual meetings are held in the evenings from Monday to Friday at the Homeowners Association so that the manager is not required to work weekends; which costs money to Homeowners Association, this is incorporated into the contract. After the meeting, the Community Association Manager has a long list to follow-up on which occupies most of the following week. A manager can spend many hours on business related to the meeting.

Another cost savings is in charge of managing insurance claims and damage reconstruction. Insurance inquiries can take many hours of a manager’s time. If the management contract specifically provides that the insurance claim work is an additional cost to the HOA, the management company can collect the insurance claim by the time it takes to manage a claim and the renovation work. A similar principle is the time spent on collections or legal action against a delinquent account. This time, management will be charged to the HOA.
Are disclosure statements provided to homeowners who are selling their homes and lenders to buyers? The management company  bills owners and buyers so that the Homeowners’ Association does not assume the costs.

These are just some ways that management costs can be cut. Be sensitive to the time of your manager and not pile on unnecessary tasks that ultimately increase the costs. While it is important to get what you pay for, it is equally important to pay extra for additional services. The best approach is to establish an alliance with the management company and adjust the time and workload demands.

HOA managers are dedicated and waiting to serve. Put them to work for your homeowners association and actually rejoice in the carefree lifestyle advertised in the brochure.

Reblogged from Great Estates with Glynis:

Technically speaking, April 15th is tax day. But for Americans who expect a refund – including many homeowners who want to cash in on real estate-related tax perks – filing sooner holds the promise of getting that check in hand, stat. If you count yourself in that number, here’s a handy guide for 9 pieces of paper you should be sure to round up as you prepare to file, in order to reap every penny of the tax rewards you’ve earned by virtue of owning a home. Mortgage Interest Statement – IRS Form 1098. …

A Homeowner Association is typically formed as a non-profit corporation initially created by a real estate developer to govern a planned community. Planned communities governed by HOAs can include residential subdivisions, condominiums, and town-home developments. They are initially set into place to give the developer control over the standards of quality in appearance established in the developer’s plans.

They not only give the developer control of the way the homes are built and the appearance of each lot, but they allow them to maintain a high standard for the common areas like the entrance, clubhouse, golf course, and property landscape. Establishing an HOA makes it much easier for that developer to effectively market and sell the lots and homes in the subdivision.

HOAs are run by a board with positions being filled by election or appointment and are bound by the bylaws. An Annual fee called a Homeowner Association Fee, is collected from all owners to continue the maintenance and upkeep of common areas, address legal and safety issues, and enforce restrictions that are applicable to that particular area. The HOA hold monthly meetings to provide residents with a platform to address common concerns within their community.

Real estate law is a branch of civil law governing rights to posses, use and enjoy land and the permanent man-made additions to it. This covers everything from relations between owners, relations between owners and the community, landlord and tenant relations, and the transfer of interests in real property. The purchase, sale and leases of real estate are governed by a wide body of federal and state laws that often vary from state to state.

It’s a really good idea to hire a lawyer to participate in your Homeowner Association meetings primarily for the purpose of translating the bylaws and real estate laws that often are not written in a clear and concise language that everyone understands.
A seasoned lawyer can provide the true meaning of each law and how they actually apply to the residents.

When hiring a lawyer for an HOA, remember there are many services they can provide for that community. It’s important that the board defines their needs before making this investment in order to keep legal fees within the allocated budget. The lawyer should provide a retention letter that spells out their responsibilities, turnaround time, and the attorney’s rate of pay.

When creating the list of responsibilities, give careful thought as to whether the attorney should attend every board meeting. It’s inevitable that legal issues will arise at meetings. Since the association is paying for the attorney’s time, you need to decide whether it’s better to have an immediate answer and a larger legal bill, or answers within a day or two and a smaller legal bill.

With over 23 million HOAs governing residents throughout the country today, there are numerous reports lawsuits that arise most of which are over simple misinterpretations of these laws. Many of these lawsuits could easily have been avoided if members had understood the rules clearly from the start. Lawyers understand all the nuances of the law and can effectively advise the board members and residents on the best legal course of action for resolving problems in their community.

For more information on getting your HOA back on track, contact Riverside today!  (678) 866-1436 or lmiles@riversidepropertymgt.com

Article Source: http://society.ezinemark.com/have-an-attorney-attend-your-hoa-meetings-16ff654e2b1.html

Atlanta at Night

On behalf of CAI’s Legislative Action Committee, I wanted to alert you about an important piece of legislation we are promoting in Georgia. The proposed bill (number not yet assigned) establishes that, at the time of a foreclosure sale on residential property, the new homeowner shall take title to the property subject up to six months worth of homeowners or condominium owners association fees, if any such fees are due at the time of foreclosure.

This legislation is vital to our HOA’s and COA’s, many of which are suffering significant losses because these debts remain unpaid at the time of foreclosure. When such dues remained unpaid, every member’s property value suffers! This bill is a reasonable compromise with lobbyists for the bankers and realtors, who rejected our prior proposal. However, both of these groups maintain that they will not support any legislation that holds the purchaser responsible for any outstanding homeowner’s association fees.

Our advocates at the Capitol have asked that we reach out to our legislators and ask for their support of this important bill. Please call and email the Chairmen of the House and Senate Judiciary Committees, whose information is provided below.

Please also reach out to your local Representative and Senator, whose contact information can be located by typing your zip code into this link – http://www.votesmart.org/. When you contact them, please identify yourself as a constituent and tell them you are in support of proposed legislation to protect a property owners association‘s right to collect fees due at the time of foreclosure.  Please contact them as soon as possible!

Thanks in advance for your support of this effort.

www.riversidepropertymgt.com  (678) 866-1436

Via Email from:

We are having a meeting where our homeowners’ association board is expected to ask for its third assessment in two years.

A group of residents sent letters to homeowners asking them to vote down the proposed new assessments and increased dues, and to get a new management company. What is the percentage of votes needed to stop the board from increasing our costs?

A: You always want to be careful when making statements that the management company has misappropriated funds from the association.

Such a statement needs to be made from actual facts that came be obtained from an audit. If the management company did misappropriate funds, an immediate complaint should be filed with the Nevada Real Estate Division.

Your board sets the priorities as to where the money will be spent and most of your funds are probably being used for insurance, utilities, annual financial report from a certified public accountant, management fees and maintenance contracts.

Condominium projects tend to have higher operating expenses because of the maintenance, repair and or replacement of the roofs, exterior painting and plumbing/mold/water leaks.

In addition, state law requires the association properly funds the reserve account. It would not surprise me if your association has a delinquency issue that is contributing to the financial deficit.

You need to make an intelligent decision to review a projected 2012 budget, 2011 year-to-date financial report, an accounting of the total dollars owed to the association and an estimate of how much of the debt is collectable, the reserve study – more specifically what is the projected ending balance for the reserves for 2011 and 2012 — plus the anticipated capital expenses for 2012 and monthly contractual expenses for the association for 2011 and projected 2012.

After reviewing these financial documents, you may discover that without an increase in assessments, you may have to cut services for the association to pay its regular operating expenses.

Assuming that an increase is not warranted, you would need a majority or more (look at your covenants) of members to reject the proposed budget, which calls for an increase, at a meeting in person or by proxy.

If the proposed budget is rejected, then the previous budget remains in place until a new budget is prepared by the board, to be either ratified or rejected by the membership.

If you do not have the percentage of owners to reject the budget at the ratification meeting, then by state law the budget is ratified.

Depending upon your governing documents, look at assessments and voting, you may need 51 percent or as high as 75 percent of the voting members to reject budget.

As to changing the management company, it is the authority of the board to select, hire and fire its contractors. You would need to either convince the board to make a change using membership pressure or elect new board members who would make the change.

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