An HOA cannot operate without adequate funds. It requires finances for repairs, renovations, upgrades, routine maintenance, long-term projects, and daily expenses. Misappropriation of finances and resources can impede an HOA from achieving its goals. As such, checking the financial health of an HOA is essential for all community members.
This guide explains how to check the fiscal status of your HOA.
Tips for Checking the Financial Health of Your HOA
HOAs often collect funds from residents in monthly or annual fees and fines. The board is responsible for managing collected funds and resources. However, most members aren’t usually privy to the financial status of their HOA. They don’t know how to check or where to start. Here’s how to check the financial health of an HOA.
1. Assess the Maintenance of Common Areas
You can tell a well-run HOA based on how it maintains the landscaping and common areas. The entrance, pavements, lawns, playing fields, and recreational areas should be meticulously clean and well-maintained. After all, it is your money that goes into maintaining these areas. Unkempt spaces, uncollected garbage, unplanned shrubs, and unrepaired outdoor fixtures are signs of misappropriation of funds.
2. Check the Facilities and Amenities
Assessing the outdoor areas is not enough. Make a point to visit common facilities and amenities, such as clubhouses and swimming pools, to know where your HOA stands financially. If your HOA is fiscally sound, these areas should not have any pending repairs or upgrades. The association should have adequate funds to schedule repairs and maintenance tasks.
3. Evaluate Your HOA’s Accounts
Most HOAs have bank accounts where they keep collected funds. You can check an HOA’s financial health by requesting to evaluate these accounts. You don’t have to visit the bank to assess your HOA’s financial records. The association should prepare and provide the necessary documents and statements upon request.
4. Assess the HOA’s Reserve Funds
A financially healthy HOA will have reserve funds for future expenses and long-term projects. Reserve funds are usually in a segregated account, separate from operating funds. A healthy reserve account should cover 70-100% of future expenses.
5. Consult a CPA Firm To Review Your HOA’s Financial Health
A qualified accountant can help by performing an HOA financial health review. This step may involve evaluating expenditures, preparing budgets, reviewing maintenance contracts, and calculating cost projections.
Need Further Assistance?
You don’t have to be a financial expert to check the fiscal status of your HOA. However, some tasks require the input of a qualified accountant. A reliable HOA accounting service can help your association maintain a healthy financial status. Contact Abel Accountants to help your HOA achieve financial stability.
