Did you know that when it comes to fears greater than crossing into the great beyond, dealing with numbers is high up on the list as well? Its ok, you can nod, because you are not alone!
Nothing can cause anxiety attacks in a homeowner association board room full of volunteers more quickly than trying to nail down the financials for a community. Deciphering all the accounting terms.
Understanding cash flows. Credits? Debits? Income projections? It can feel like a CPA is pulling a cruel trick by keeping the general public confused!
Having the right property management company as part of your team can alleviate a lot, if not all, of these fears. The HOA property manager (PM) acts as the HOA board’s fiduciary agent, and will have an ethical responsibility to the HOA board, and the community members.
This fiduciary responsibility means that the PM has an obligation to act in good faith on behalf of the HOA’s monies, and at all times exercise trust and good judgment on behalf of the HOA as a whole (By the way, if a PM has no input on the finances, then that PM is acting in a functionary, and not a fiduciary role).
The PM, preferably acting as your fiduciary, will assist or handle much of the day to day finances. This involves invoicing homeowners, collecting assessments, handling the bookkeeping as well as any collections procedures. Management will have the duty to produce financial documents, help draft budget policy and also prepare annual tax forms and tax payments. When necessary, the PM will refer to the board CPA’s, tax attorneys or other professional advisors, as needed.
Much of the work the PM will do will be for the year to year finances of the HOA. Part of the PM’s role should also be in helping to paint a bigger picture for the community members by also reviewing with them the HOA’s reserve study and future forecast. People want to know where their money is going, and informing them where those funds are being banked for long term future repairs can help alleviate community misunderstandings. “Where do my dues go?” is a question every PM is very familiar with!
So that’s the good news. It’s all good news all the time, right? Ok, well, not always! Unfortunately, life isn’t so perfect, and when it comes to poorly run HOA’s, a lack of fiscal oversight can wreak havoc in an HOA.
It can sometimes be due to a PM who is unqualified or fails to proactively guide the community, or it may be due to a short-sighted board that fails to plan for the future. Whether the board is to blame, or the PM, or a combination of both, the fact is that the PM should be obligated to always act in the best interest of the HOA.
The fiscal duties of a homeowners association property manager should not be overlooked. Hiring the right property management firm with a strong background in handling the finances for your HOA can be beneficial to your community, and will probably help you sleep better at night as well! Now, if we could only find someone to do your public speaking.
If you value your time, hiring the right HOA property manager can be the best time management/investment any HOA board can make on behalf of the owners. It gives piece of mind knowing you have pros watching over and guiding you along the way!
Since 1997, real estate investor and broker Christopher Benedict has been involved in all phases of realty investment and property management. From agent, to broker and business owner, he now focuses on growing his base of investor clientele.