As members of a Condominium Association board, maintaining financial responsibilities is crucial to securing the building’s financial health.
While each condo association operates differently, adhering to general best practices is essential to ensure the building’s finances are well-managed and reserves adequately funded.
From keeping records and making budgets to planning for the future and collecting payments on time, each part is crucial for maintaining the association’s finances healthy in the long run.
Financial Responsibilities of Condominium Association Board Members
Keep Accurate Financial Records
Maintaining accurate financial records is vital for any condo association. Board members must diligently monitor all the association’s income and expenses, such as assessment fees and maintenance costs.
They also must record any savings or reserve funds. This transparency ensures everyone knows where the money is going and promotes fairness and clarity.
Prepare a Budget
Creating a comprehensive budget is a fundamental task for the condo association. It serves as a roadmap for financial planning.
HOA budgeting aims to establish and maintain the association’s reserve fund, essentially a savings account for unforeseen expenses, such as property damage caused by severe weather, unexpected legal fees, or major equipment breakdowns.
Typically, 25% to 40% of resident fees should be allocated to this fund, but adjustments may be made based on financial circumstances. Budgeting enables the board to evaluate the reserve fund’s status and allocate funds accordingly.
Budgeting also assists the condo association in managing regular maintenance and upkeep expenses, which the general operating fund covers. These include services like landscaping, waste disposal, security, utilities, and common area repairs.
Diligent budgeting ensures that the condo association can adequately allocate resources to meet both immediate needs and long-term goals, fostering financial stability.
Be Transparent
Transparency plays a pivotal role in fostering trust within the condo community. When the condo association openly shares its financial health or status, it not only demonstrates honesty but also builds residents’ confidence in the financial management of the community.
Board members should make financial statements easily accessible to residents through online postings, newsletters, or community meetings. Financial statements are comprehensive reports that provide an overview of the association’s financial activities, including income, expenses, assets, and liabilities.
Plan Reserves
Planning reserves is not just a financial task, but a strategic move to handle unexpected expenses and save for future projects. It is like having a safety net for emergencies and significant improvements.
Board members must create a clear plan outlining how much money should be saved in reserves and how to save it. This plan should include goals for funding reserves and strategies for building and maintaining those savings over time.
Understand Special Assessments
A special assessment is an additional fee that everyone in the condo may need to pay to address necessary maintenance or repairs.
It is like a one-time charge that is added to owners’ standard expense fees to cover a specific, unexpected expense that the regular budget cannot handle.
Board members should be aware of when and how special assessments can be utilized and openly discuss with residents why they might be required.
This ensures everyone comprehends the need for extra funds and facilitates collective agreement on covering essential expenses, such as unforeseen events like costly litigation, through one-time charges added to owners’ standard expense fees.
Simplify Payment Collection
Making it easy to pay HOA fees is vital for keeping everything running smoothly. When it is simple for residents to pay, it helps the HOA manage its money better and reduces the number of late payments.
Manage Delinquent Payments
Handling late payments is crucial for keeping the condo association’s finances stable.
Board members need to have clear rules for handling late payments, including charging late fees, setting up payment plans, and, if necessary, taking legal action.
By having these procedures in place, the association can ensure everyone pays what they owe on time, helping keep the community’s finances in good shape.
Ensure Proper Association Financial Management with Hales
For condo associations seeking professional management services, partnering with reputable companies like Hales Property Management can streamline financial management processes and ensure compliance with industry standards.
From budgeting and accounting to vendor management and reserve planning, Hales offers comprehensive association management services tailored to each community’s unique needs.
Request a Proposal today for more information.
