Four Ways to Maintain Your HOA’s Financial Fitness
Keeping your homeowner association (HOA) or community association’s finances healthy works the same way as staying physically fit: don’t overindulge and make smart choices. And the upside is that the only thing you’ll have to exercise is good judgment. Here are some tips to help you do just that.
1. Start with good internal controls.Separating duties like recording receipts and making deposits will help protect your association from financial misappropriation. The best property management company can help you guard against malfeasance.
2. Institute regular audits.Hire a CPA to analyze your documents and records. A less intensive process, called a review, can be carried out by an accountant and may be appropriate for smaller associations.
3. Invest wisely.Set forth a policy that dictates how your reserve funds can be invested. The key aspects are the safety and liquidity of the funds. Corporate bonds, municipal bonds and stocks are too risky, so stick to safer investments like CDs. It is important to recognize that investment options may be limited by both your documents and applicable law.
4. Insurance protection.Your association will need to purchase multiple types of insurance, in addition to property or casualty coverage, including liability insurance to protect the association against lawsuits umbrella or excess liability coverage, directors & officers liability insurance so individual board members are personally protected for actions taken in the course and scope of their duty, and fidelity insurance, which covers claims related to theft.
There you have it – four quick ways to help ensure you’re keeping your HOA or community association financially fit. Remember, this is just a start. An excellent property management company will be your partner in developing further strategies for both the long- and short-term.