Tag Archives: hoa management

Audit the Associations Books?


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 http://www.riversidepropertymgt.com.

Have an Attorney Attend a Board Meeting


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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

On the Fence


Fences provide privacy, boost safety and security and can add just the right aesthetic touch to the landscape.  But they also require maintenance, repair and replacement.

Fencing can be an ongoing problem for all associations, especially as communities and their features begin to age. Associations must budget for the care of these integral structures. Deciding when and how to repair your fencing, replace worn down or rotting parts or hire someone to handle maintenance can mean the difference between meeting or exceeding your annual budget. Fence

When faced with aging fencing and the high costs of replacement, community associations have to form a strategic plan of action to ensure a cost effective use of operating funds, while at the same time employing an effective use of reserve funds. The case study that follows demonstrates how investigation into a current maintenance process can result in better service for residents, cost savings, improved budget forecasting and an increase in reserve funding levels.

FINDING A FIX

A community of approximately 700 single-family homes located in North San Diego, Calif, was recently faced with the challenge of developing a long-term strategy for managing its fences. Like many communities, this association had been allocating resources for fencing only through reserve funds, and solely on the basis of major component replacement and repair.  The existing wrought iron fence was installed in 1990, and originally was painted with two-part epoxy paint that lasted about nine years. Subsequently, the fence was painted in 1999 with Frazee Am-Plate paint, which did not last as long and is currently deteriorating.

In reviewing its procedures, the association sought to find a long-term, sustainable process for managing its fence maintenance and repair budget. With the assistance of its management company, the association conducted a study and analysis to review the fencing asset and refurbishing project.

The association had been using a deferred maintenance-only approach for the community’s 28,000 linear feet of fencing, which comprises approximately 2,600 four-by-four wooden posts and nearly 3,200 iron panels. The fence was being repaired only when there was noticeable damage or paint erosion, which is often costly and inefficient.

Under the deferred maintenance and replacement approach, which was dictated by a previous reserve study, fencing was broken into four categories: phases one, two and three and pool fencing.  All fencing components had a remaining life of two to seven years with a total replacement cost of more than $1.6 million. All the wrought iron fencing was slated for painting costs of $180,000 every five years using reserve funds. Until recently, the association did not incorporate into the operating budget a proactive annual maintenance component to coincide with strategic designations of reserve capital.

There’s a better way to maintain fences. You wouldn’t repair your car only once every seven years; you perform ongoing maintenance. The same logic can be applied to repairing and maintaining the association’s fencing.

The other issue for the association had been response time. Previously, when a homeowner submitted a request for fence repairs near or around his or her home, the process from initial review of the request to completion usually took two months or more. To begin to resolve the inherent problems in that approach, the association needed to investigate the costs related to a broader scope offence overhaul and repairs.

The association collected three bids to bring the fence to like-new condition using reserve capital and then funds from the operating account for ongoing maintenance. The association’s reserve study analysts deemed the funding strategy acceptable upon the premise that the maintenance program would be reviewed on an annual basis.

PROBLEM SOLVED

Beginning this year, the association started using an immediate portion of reserve funding-approximately 25 percent of the $1.6 million estimated for complete replacement-to update its fences. The association allocated enough reserve funds to add a buffer to all of the contractor bids, which were substantially below the allotted amount. It wanted to allow enough room in case there were rising costs. In addition to the earmarked funds to replace the fencing, all of the bids included quotes to maintain the fencing in a like-new condition for an indefinite period of time. The maintenance includes 40 hours per month, allocating $1,600 in labor costs and $600 per month for materials. This monthly maintenance strategy allows the association to implement ongoing, proactive fence maintenance rather than the reactive, deferred maintenance-replacement approach that was so problematic.

In addition, the association allotted $100,000 every eight years in reserve funds as a strategic designation of capital that allows for catastrophic fence failure or other needs. In total, the association will designate approximately $1.6 million for fence repairs over the next 30 years. This new program shares the cost between reserve funds and the operating budget. It’s the most cost effective and desirable way to maintain the fence for the life of the homeowners association. The association will put out a secondary bidding process in the future to account for up-to-date considerations and cost changes.

The new fence maintenance program addresses several major issues that the association had been facing. First, the program allows for improved service to residents by greatly reducing the need for delayed emergency repairs. Next, the program will save the association more than $500,000 in maintenance costs over 30 years. Finally, by allocating fence repair and maintenance costs to both operating and reserve funds, rather than the previous reserve funded-only “major component and repair” line item, this approach has raised the association’s reserve funding level more than 30 percent.