Tips to Maintain Your Minnesota HOA Finances
Keeping the finances of your Minnesota community homeowner’s associations in check is quite similar to keeping your body healthy: make smart decisions, don’t overindulge, and exercise your best judgment.
Need four quick tips on how to keep your finances looking their best? We have you covered.
1. Practice Make Perfect.
First, maintaining your finances will be different if you are a self-managed HOA or partnered with a professional HOA management company. When you are self-managed, making a habit of recording payment receipts and making deposits are essential when beginning to implement good practices, and it avoids financial misappropriation. When partnered, this should already be the approach taken.
2. Look toward the future.
Designate clear rules that determine how your reserve funds can and will be invested. Usually, a rule of thumb is to invest and spend the association’s funds in places other than corporate or municipal bonds, as well as stocks because these are seen as high-risk investments. Go through the governing documents and any applicable laws because there may be limitations regarding what the HOA can invest in overall.
3. Protect the Association.
Because your association will have to protect itself from liability across the board, you will have to look into and purchase many types of insurance policies. Along with the standard property or casualty coverage, associations should also look for policies that provide them with an umbrella or excess liability coverage. This will be a huge safety net for the future if there are ever any cases where the association has a lawsuit case against it. To protect your association in the event of theft, look into fidelity insurance. It is always important to have directors and officer’s liability insurance (D&O) so that board members can be protected individually for any actions they make take while carrying out their duties.
4. Audit your finances.
Always have another set of eyes go over your finances. In this case, hiring a more experienced professional such as a chartered professional accountant (CPA) to analyze all documents and records, including the financial statements, is the right approach to ensuring all protocol has been followed and everything falls where it needs to. If there are only minor finances that need to be looked over, the association can have their audit done by an accountant instead.
While these tips are helpful and a great start to maintaining HOA finances, remember that having an excellent association management company by your side will help develop the right strategies in both the long and short-term.
To find out more, contact FirstService Residential, North America’s leading residential property management company.