HOA record keeping is more than just filing documents into a folder and stuffing it in a desk drawer to gather dust. It requires meticulous organization and an intricate system to carry out correctly. Unfortunately, not all HOAs have a good method for keeping records.
HOA Record Keeping Done Right
Sorting through a stack of miscellaneous receipts, contracts, and other documents can be tedious at best. Having no organizational system in place to make that search any easier is inconvenient. Ideally, every HOA board should take time to analyze their current record-keeping habits and consider ways to improve them. Otherwise, board members will spend more time looking for a document than fulfilling their responsibilities.
Color-coding and labeling are all well and good, but there are many other aspects that should be taken into account. Here are eight tips for superior HOA record keeping.
Create a System for Record Keeping for HOA
Record keeping relies on a reliable organizational system, but that’s a blanket solution. In order to truly create a system that works for your association, you need to address your association’s specific needs. That means answering a few questions first.
1. What Is Considered a Record?
Is every document that gets written considered a record? Or is it only documents that get discussed during meetings?
It’s essential for board members to contemplate what they should refer to as a “record” and what is simply a passing memo. Typically, if something was discussed during a meeting, it would then be considered a record.
In cases where separate documents refer to the same thing, you might only consider one as a record worth keeping. For example, there are two documents referring to an ice cream party the board held at their last meeting: a flyer that was posted around the neighborhood and a receipt from the vendor. You might then consider the receipt a more formal record of the event versus the flyer.
2. What Records Should You Keep?
Of course, there are some records that are automatically considered important and, therefore, must be filed. These include financial records, insurance records, and legal records. Any warranties and contracts should go into the system as well. If you have an architectural policy, make sure those records make it into filing, too. Additionally, a copy of all meeting minutes must be kept. You don’t have to keep multiple copies; one should suffice.
3. Where Will You Keep the Records?
A physical record keeping system for HOAs — that is, one that exists in the real world — is considerably outdated. Yet, some associations find that they do the majority of their storage in filing cabinets.
The digital age has allowed many associations to store their records in online databases. This also makes for easier access and distribution. Some physical documents will still need to be kept regardless of a digital system, though.
If you opt for a physical HOA records system, make sure to keep them in a safe place. Usually, that means setting aside a storage closet for all your records. Other than being secure, the area must be dry and fireproof.
4. How Should You Keep Records?
When it comes to the storage of HOA records, go for boxes that are consistent in size. It is a good idea to number these boxes, too, so you can store them in order. Apart from that, make sure to have a community archive for HOA docs. Create a list of the HOA documents you have in storage, as well as which box number you will find them in. That way, you can refer to the list when you’re looking for a particular record without having to sift through all the boxes.
5. Who Has Permission to Access the Records?
Some documents should be for the eyes of board members only, while others should be made available to homeowners. That means you will need to determine which documents are which, and then figure out a way to restrict or give access to the right people.
Having a good system in place will also allow for faster recovery times when a homeowner requests a document. Assign a homeowners record keeper among the board to stay on top of all documents. Delegating the task of producing records to a single person could be a method of efficiency by eliminating confusion.
6. What About Third Parties?
Many associations utilize the expertise and resources of a remote management company. Such a company will handle many of the back-office, collection, and financial services of an association. These duties will require access to the record-keeping system. The BOD should take into account any third-party companies so that its system can run efficiently.
7. How Long Should You Keep Records?
One question that often pops into the minds of HOA board members is, “How long should financial records be kept?” Just as not every document should be considered a record, not every record will need to be kept for the same duration.
Each record has a shelf-life and some may need to be kept for as long as the association exists. Records that are higher up the document hierarchy will likely need to be stored for much longer than those at a lower tier. Board members can check with their local governing authorities to determine which relevant records need to be kept and for how long. For instance, the IRS requires organizations to keep tax returns for at least 3 years.
Other records that aren’t regulated by a higher authority might have to be retained for up to 10 years or more, depending on your association bylaws. Even if the length of retention for certain records isn’t clearly stated in the bylaws, it will still need to be determined by the board members.
Legal records, meeting minutes, bylaws, CC&Rs, and other important records should most likely be kept indefinitely. Warranties, for instance, may only need to be kept for the duration of the warranty itself. The same rule applies to various contracts and policies. Meeting agendas and monthly financial statements, on the other hand, may require just one year of storage.
8. How Should You Dispose of Records?
What happens when you no longer need to hold on to a record? Should you shred it? Burn it? Whatever your method of destroying irrelevant records, the board should be unanimous on it. More importantly, they should all follow through with it. When you keep records that are no longer relevant, you will end up with a cluttered storage cabinet.
Just as a method of organization is imperative to HOA record keeping, so is a method of destruction. A good rule of thumb is to collect all outdated records at the end of the year. Revise your list to include the date you destroyed the record. Then, sort out your documents once again.
Stay on Top of Your HOA Records
HOA record keeping is an essential function of any association and ensures operating efficiency. You can often resolve problems by referring to past records. But, if these records don’t exist or were prematurely destroyed, it can lead to an even bigger mess. If you don’t want to lose important documents, creating an organized filing system is a surefire way to do it.
Running an HOA is a tough job, which is why most boards outsource various services to remote HOA management companies. If you wish to do the same, don’t hesitate to give us a call.
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