Tips for reviewing your Association’s monthly financial statements.
Comparison Variance Report
1. The month-to-date and year-to-date budget comparison variance report is a great place to start your financial report review. This report is designed to provide board members with explanations of variance that go beyond the information supplied by dollar figures in a standard income and expense report. Your Community Manager can explain valuable operating and reserve activity details that cannot be captured in standard accounting reports. Also, it will assist you with questions you may have about the financial performance of your community. It may also answer many questions before board meetings so meeting time can be allocated as efficiently as possible.
Balance Sheet
2. A review of the balance sheet will provide the Board with a snapshot of the Association’s assets, liabilities, and equity as of the end of each month. Operating and reserve cash balances are listed separately so the Board can make informed cash flow decisions. AAM’s accounting staff members reconcile each operating and reserve bank account every month. The full financial package provides Bank reconciliations and statements to ensure financial transparency. As part of the reconciliation process, our accountants ensure total account balances do not exceed FDIC limits at each financial institution. They also assist in setting up new money markets and certificate of deposit accounts.
General Ledger
3. The General Ledger is the source of all accounting data used to build the monthly financial reports. Reviewing this activity provides detailed debit and credit information for each transaction processed during the monthly reporting period. Digesting this information may be a challenge, but once you are familiar with the report format, you can find many of the answers you might be searching for. It provides transaction dates, code descriptions, memos, debits, credits, and dollar figures.
Transparency
4. At least one designated Board member (generally the Board Treasurer) receives an additional monthly PDF file by email containing images of all paid invoices. This information is available to provide financial peace of mind and full transparency.
These are just a few quick tips for reviewing the monthly financial reports. Please feel free to contact your Community Manager as a starting point for any questions related to the financials. Additionally, we have an experienced and dedicated accounting support team ready to assist your Community Manager and Board of Directors at all times.
When utilizing cash flow budgets, it is critical that closing projections are as accurate as possible. When a community is operating in a shortfall/subsidy mode, the timing of closings can greatly impact the flow of assessment income, working capital fees, and/or reserve contributions. If the closing projections are too aggressive, the budget may project a lower shortfall/subsidy than is actually needed. This can sometimes result in our clients needing to write a check. One of the best budgeting tips is to maintain accuracy in closing projections.
Suppose the closing projections are not aggressive enough. In that case, the shortfall/subsidy may be greatly reduced (always a good thing!), but the timing to start transition committees and/or schedule a transition meeting may be off.
We encourage these items to be considered when providing us with your lot/unit closing projections. Another key budgeting tip is to be realistic in your projections.
2. Landscape and Amenity Turnover Projections
In all new communities, the landscape and amenities will eventually be turned over to the HOA for maintenance. The turnover process is finalized once an inspection is completed, at which time the Association will become responsible for the utilities, maintenance, and vendor contracts. Our Developer Services Team will project these expenses in the cash flow budget. If the timing of the turnover is not accurate, it can cause substantial budgeting discrepancies. In this case, being less aggressive is advisable than being too aggressive. If we plan for a community center in March but don’t take it over until May, we will not have the money that was budgeted and will not have the funds necessary to pay these expenses. Including turnover projections is one of the essential budgeting tips for new communities.
Reversely, an additional unbudgeted subsidy may be necessary if it is taken on sooner than budgeted.
3. Review Staffing
If your community plans to include employing staff, it is important to consider the need to add additional staffing as the community grows. If closings are happening faster than projected, you may need to hire additional staffing sooner than originally forecasted. Additionally, if the community has seasonal residents, it may be helpful to be flexible with staffing so that in peak months, there is staff to cover the needs of the community by utilizing seasonal and part-time employees. Flexibility in staffing is another excellent budgeting tip that can help manage unforeseen changes.
4. Review the Reserve Budget and Funding Level
With all communities, we will create a Reserve Budget each year along with the Operating Budget. If the community has a reserve study, we prefer to use the study’s recommendation for the annual contribution and the expenditures. We may also suggest a reduction in the recommended contribution if the Reserve Account is growing faster than projected. This often happens when Reserve Fund Fees are collected with each home closing and closings are exceeding projections. In this case, we may reduce the contribution from the Operating Budget, which in turn reduces shortfall/subsidy. The main goal is to provide a well-funded community to the homeowner Board at the time of Board transition.
5. Set Realistic Assessments and Have a Plan to Reach It
We understand the importance of creating a cash flow to Build-Out budget that puts a realistic plan in place so the community can gradually reach the Built-Out Assessment amount. By providing the information requested above each year, we can provide our clients with tools that can be adjusted as may be needed throughout the year. We share a common goal with our clients, which is to minimize subsidies and reduce the impact of an assessment increase on the homeowners at the time of Board turnover. Setting realistic assessments is one of the key budgeting tips that ensure financial stability.
Board Meeting Basics for HOAs provide a foundation for running effective and efficient meetings that support community management and homeowner engagement. From understanding quorum requirements to following proper notice protocols, these meetings are essential for making decisions, discussing key issues, and ensuring compliance with governing documents. By mastering the basics, HOA Boards can foster transparency, collaboration, and accountability in their communities.
A quorum is a very important issue related to board meetings. The term “quorum” refers to the minimum number of members participating to conduct business. If there are not enough members to make up the quorum, the meeting can’t be held, and actions can’t be taken. Quorum requirements are defined in your Bylaws.
Notice for Regular Board Meetings
Unless otherwise provided in the documents, the Arizona State Statute requires all Board Meetings to be noticed at least 48 hours before the meeting via conspicuous posting, newsletter, or any other reasonable means as determined by the Board of Directors. However, the notice provision only applies AFTER the termination of declarant control of the association. Check your Bylaws for other possible notice provisions.
It is also important to remember:
The notice must contain the time and place of the meeting.
Notice is not required for Emergency Meetings if action must be taken before notice can be provided.
The minutes of the Emergency Meeting shall state the reason necessitating the Emergency Meeting. The minutes of the Emergency Meeting shall be read and approved at the next regularly scheduled meeting of the Board.
Additionally, it is required by statute that most topics be discussed in Open Board Meetings, such as:
Annual Budget
Assessment Increases
Contract Negotiations
Changes in Rules & Regulations
Financial Decisions
Improvements to Association Property
Notice for Executive Session
The membership notice requirements of an Executive Session is a new statutory requirement from 2017. Per Section C. of A.R.S. §33-1248, before entering into any closed portion of a meeting of the Board of Directors, or on notice of a closed meeting, the Board shall identify the paragraph under subsection A. of A.R.S. §33-1248 that authorizes the Board to close the meeting.
Section A items include:
Legal advice from an attorney for the Board or the Association.
Pending or contemplated litigation.
Personal, health, and financial information about an individual member of the association, an individual employee of the association, or an individual employee of a contractor for the association.
Matters relating to job performance, compensation, health records, or specific complaints against an individual employee of the association or an employee of a contractor of the association who works under the direction of the association.
Discussion of a unit owner’s appeal of any violation cited or penalty imposed by the association except on request of the affected unit owner that the meeting be held in an open session.
Meeting Minutes
Meeting Minutes are used to record the Board’s actions, show why the association took a particular action, and preserve the Director’s voting records. It is not necessary to record word-for-word.
Meeting Minutes Should NOT Include Proceedings of a committee Summary of guest commentsSecretary’s opinion Debate relative to a motion.
Meeting Minutes Should NOT Include Proceedings of a Committee Summary of guest commentsSecretary’s opinion Debate relative to a motion.
Agenda
An agenda is critical to an efficient and organized meeting. It should have enough information to serve as a helpful guide but not be so overly detailed as to be unwieldy or distracting. Also, it is a statutory requirement to provide copies of the agenda to the members at the meeting.
The president typically sets and reviews the agenda prior to distribution.
Time the meeting for the greatest efficiency and ensure the Board’s copy of the agenda refers to numbered pages within the Board packet.
Post the agenda on the website or in another format to encourage community involvement.
Template for the meeting minutes.
Parliamentary Procedure
Parliamentary procedures should be used to run effective meetings. This helps the minute-taker record the actions of the meeting and protects the right of the majority to decide the rights of the minority.
One question at a time, one speaker at a time.
Personal remarks are always out of order.
Motions
Board members use motions to introduce business.
Main motions require a second.
The secretary should repeat the motion for accuracy.
Modify a motion before the Chair states it.
Amend the motion after the Chair states it.
Withdraw a motion anytime before the Chair states it
Consider a motion once it has both a first and a second.
Must give homeowners in attendance the opportunity to speak to an agenda item prior to the Board vote.
The motion must be made and seconded before the discussion is conducted by the Board prior to the Board vote.
Use a Simplified Roberts Rules of Order.
In most cases, the President of the Board only votes in the event of a tie.
Here’s a simplified example of how this process might work:
The President calls for a motion on an agenda item, and a Board Member indicates they make a motion.
Example: “I make a motion to accept the bid from XYZ Landscaping to replace granite in tract C of the common areas at a cost of $5,000.00”
A second Board member will second the motion
The President will restate the motion and then call for a discussion
President will call for a vote: “All in favor say aye, opposed nay.”
The Board President will announce the results of the motion, for example, “Motion carries unanimously.” Or, “Motion fails with a vote of 2 ayes, 3 nays.”
Tips for Running Effective Meetings
Be prepared – review your Board packet prior to the meeting and ask questions in advance to the Manager to be better prepared for the meeting. Board packets should be made available 3 to 5 days prior to the meeting.
Request the Manager to paginate Board packets.
Set the tone of the meeting during “Orders of the Day.”
Bring your Board book.
Provide an open forum.
Establish time limits (1 to 2 minutes per homeowner) for members who wish to speak.
Use “Request to Address the Board” forms for the open forum.
Limit the number of questions.
Use a timed agenda.
The Role of the Board and Its Members’ Relationship to Each Other
It is critical that the Board provide a unified front. With regard to discussions, it is essential for the individual Board members to present different views on a given subject.
This may, at times, involve having heated or passionate discussions and debates. However, once the vote is taken and the majority rules, you should attempt to put personal differences aside and move forward. Most importantly, always be respectful of fellow Board members and those in attendance at the meeting.
Dealing with Conflicts during Meetings
To eliminate or minimize conflicts during meetings, be proactive. Set the ground rules for the meeting early on, such as that a speaker must be recognized by the chair of the meeting before speaking, the chair may limit the amount of time of those wishing to speak, the number of times they may speak, etc. Put those ground rules in writing and distribute/review them at the beginning of the meeting.
Call any attempt to provide unsolicited input “Out of Order.” It may take several meetings to educate the members; however, remaining on task and sticking to the agenda is critical to efficient and effective Board Meetings.
There is great assurance and value in having a professional HOA management company manage your association. These professionals bring a lot to the table, for example:
Access to necessary forms (architectural submissions, etc…)
Aid in communication between Board members and homeowners
Access to customer service and emergency numbers to help with questions and issues that may arise
Access to vendors
An expert who will watch over projects and manage their completion
A guiding force who will be there to answer questions and move the Board and Association in the right direction
With an AAMs professional hoa management expertly managing your community, we aim to give you total peace of mind in knowing that your neighborhood is well cared for and simply a great place to call home.
