Because of the uniqueness of every homeowners association, it can at times be difficult to form an exact opinion about the financial health of your HOA. However, knowing where your community stands in this area can be extremely helpful. There are a few ways that you and the rest of your board can assess the overall health of your association’s finances. Here are a few of these ways.
Take a Look at Your Reserve Funds
One of the best ways that you can find out how healthy your HOA finances are is to take a detailed look at your reserve fund. Here are a few questions that the board should be asking itself about the reserve fund to see if it is sufficient.
- Is our HOA up to date on critical repairs and basic maintenance?
- Does our board spend time worrying about unexpected repairs?
- Were we able to complete all of the needed projects in the previous year, or did some go unfinished due to lack of funds?
- Do we have specific goals and plans for our reserve fund?
If your board feels confident that the reserve fund can cover unexpected repairs, maintenance is completed in a timely fashion, and you have clear plans for your reserve fund, you likely have a very healthy reserve fund which will contribute to the overall prosperity of your finances. If not, it is time to do a reserve study and determine how much you should be putting aside in the reserve fund each year. Once you have a solid plan, follow through and make sure it is reflected in the budget and faithfully followed.
Analyze Your Budget Variances
No HOA can perfectly follow the budget unless they have the ability to see into the future. However, the reasons behind budget differences can make a huge difference in determining the health of your accounts. Were these variances a result of negligence, or simply unanticipated events and changes? It can be helpful to look at the past few years of budgets as well to see if any of these variances are a pattern that needs greater attention. There are apps to help you control your finances, you should read the Coinbase app review when making a decision on a application.
An important question to ask when scrutinizing the health of your finances is how your residents pay their dues. The budget is based on an expected amount of payments by community members, and your accounts can be severely impaired by late payments. In general, your association is doing well if 95% or more of your residents are paying their dues on time.
Determine Whether Your Association Is Filing a Yearly Tax Return
With a very few exceptions, HOAs should be filing tax returns on a yearly basis. Not doing so is a major oversight, and could be a sign of poorly managed finances in other areas.
It is prudent for HOA boards to assess the financial health of the association on a yearly basis. Doing so will help you have a more successful community and help you learn how to manage your accounts more skillfully every year.