Finance Articles from the Web

Finance & Reserve Videos

 

Accounting

  • Condominium audits uncover four common issues February 14, 2017 With few exceptions, the Condominium Act of Ontario (the act) requires an independent auditor to perform an annual audit of the financial statements of a condominium corporation. Sections 60 and 71 underline the rights and responsibilities of an independent auditor.  It’s important for unit owners to understand that an independent auditor does not prepare the financial statements, nor is he or she responsible for the daily bookkeeping and management activities. These activities are the responsibility of management and the board. ...
  • New HOA Board Members – Get up to Speed on Your Community Finances October 28, 2016 Congratulations, and thank you for stepping up to serve your community on the board of directors! As an HOA or community association board member, you get to run a business and make key decisions that will impact your community now and in the future. While you may feel a little overwhelmed at the moment, serving on your community association board can be a very rewarding experience, and a great way to meet neighbors.       Read the article………….
  • HOA Funds Transparency August 12, 2016 Just about any situation can deteriorate when there is no transparency. This is true in any business setting, including an HOA. With good transparency, homeowners know exactly the direction in which their neighborhood is heading, which leads to less problems.   Read the article……………..
  • The Doctrine of Accord and Satisfaction May 9, 2016 Should you or should you not accept a payment for less that the full amount owed when it is indicated to be for full payment? It is always best to not accept a check for less that the full amount owed if there is any chance that it can be interpreted as being accepted as settlement in full. However, if you do, it may not mean that the debt is indeed settled in full by acceptance of the check.   ...
  • The “Rep” Letter: the Biggest Little Three-Letter Word in Your Annual Audit February 26, 2016 Before the accountant completes the annual audit of your co-op’s or condo’s financial records, the board and the managing agent will be asked to sign a letter acknowledging that they, not the accountant, have primary responsibility for the financial statements and that to the best of their knowledge the statements are correct.   Read the article………….

Accounting Archives

Audits

  • Condominium audits uncover four common issues February 14, 2017 With few exceptions, the Condominium Act of Ontario (the act) requires an independent auditor to perform an annual audit of the financial statements of a condominium corporation. Sections 60 and 71 underline the rights and responsibilities of an independent auditor.  It’s important for unit owners to understand that an independent auditor does not prepare the financial statements, nor is he or she responsible for the daily bookkeeping and management activities. These activities are the responsibility of management and the board. ...
  • Community Associations Countdown to Year-End! December 5, 2016 The end of the year is approaching and before long we will be setting New Year’s resolutions for 2017. But before that new beginning, we need to wrap up 2016. For those associations whose year-end is December 31st there are financial and tax items that need to be addressed by the board and/or management. Let’s count down the top 10:    Read the article…………..
  • 4 Things Every CAM Manager Should Know About Auditing June 3, 2016 A good audit can help identify and prevent fraudulent activity. It can prevent small mistakes from becoming big ones. It can provide peace of mind to the association members that their community’s financial security is in good hands.    Read the article…………
  • The “Rep” Letter: the Biggest Little Three-Letter Word in Your Annual Audit February 26, 2016 Before the accountant completes the annual audit of your co-op’s or condo’s financial records, the board and the managing agent will be asked to sign a letter acknowledging that they, not the accountant, have primary responsibility for the financial statements and that to the best of their knowledge the statements are correct.   Read the article………….

Audit Archives

Budget

  • Making Special Assessments Work: Fixed Incomes, Low Incomes, & Hard Times March 22, 2017 For residents on fixed incomes, or those who are already struggling to make ends meet because of a job loss, illness or divorce, any hit to their already-stretched-to-the-max budget can be devastating. So when a board levels an assessment on the residents of a co-op, condo, or HOA because of an emergency repair, an unforeseen tax bill, or some other outlay not otherwise budgeted for, it can spell financial ruin for those who can’t afford to pay their share of ...
  • How climate change could affect maintenance fees March 14, 2017 Summer 2016 was one of the hottest on record in the Greater Toronto Area, with experts predicting summer temperatures could soar to 44 degrees Celsius by 2050. In this rapidly changing climate, the city’s high-rise buildings are also feeling the heat, with the provincial government tightening up the Ontario Building Code to meet new global imperatives.  Increasingly erratic weather has a direct impact on Ontario’s residential building stock. Condo maintenance fees are based on predictable historic norms, stable benchmarks and ...
  • Follow the Money: Explaining to Residents How Their Funds Are Spent March 14, 2017 One of the most common questions homeowners ask board members and community managers alike is, “What are you doing with our money?” Understanding how to answer that question is important for all board members.    Read the article……………
  • Why No One Wants To Talk About HOA Fees February 28, 2017 The dreaded topic…HOA Fees….  Board members have to determine them, enforce and collect them, and decide when to raise them (the undoubtedly unpopular decision). And homeowners generally don’t like paying them. A recent article by Joe Ducey on abc15.com sites one of the biggest complaints of Valley HOA residents is that residents don’t really know where the fees go.  AH HA! Light bulb moment HOA board members! No one wants to talk about it because they may feel “ripped off” ...
  • 3 Tips for Improved Revenue Growth February 22, 2017 Your HOA is like any other business, and to succeed, you need to see revenue growth. However, it can be a little hard to figure out how exactly to increase your revenue. For help with more money in your HOA, check out these three tips.     Read the article……………

Budget Archives

Collections

  • Associations Need to Seek Ejectment Rather Than Eviction for Some “Tenants” (FL) March 17, 2017 When the Condominium Act was amended several years ago to allow associations to demand and collect rent directly from the tenants of unit owners who were delinquent in the payment of their monthly fees, community associations thought it was an answer to their prayers. Associations were struggling to recover from the foreclosure crisis, and many homeowners made the decision to rent their units to make some money but, unfortunately, they also chose not to pay their associations.    Read the ...
  • Don’t forget your Declaration: Appeals Court confirms necessity of the Declaration and Covenants in collection actions March 16, 2017 The First District Appellate Court confirmed that Associations must be careful to enter their Declaration and Covenants regarding Assessment default into the record in a lawsuit to collect Assessments. In Blackstone Condominium Association v. Speights-Carnegie, (Feb. 3, 2017), the Appellate Court reviewed a judgment for unpaid Assessments where an Association sought to recover from an Owner based on a breach of contract theory.      Read the article…………….
  • Two’s Company, but Three’s a Crowd: A Third Parties Right to Intervene in a Foreclosure Lawsuit March 16, 2017 Are subsequent title holders who obtain an interest in real property during the pendency of a foreclosure lawsuit where a lis pendens has been properly recorded (referred to as a “Purchaser Pendente Lite”), entitled to join in the lawsuit to protect that interest? In Bonafide Properties v. Wells Fargo Bank, N.A., 198 So.3d 694 (2d DCA 2016) the Second District Court of Appeal says no and affirms the long standing doctrine of generally barring the intervention of a purchaser pendente ...
  • What NOT to Do When Collecting HOA Fees March 10, 2017 If just a few homeowners aren’t paying their HOA fees it can be felt very quickly in an association’s budget. It can also cause a ripple effect. If too many homeowners fail to pay their HOA fees, lenders might start to be unwilling to finance mortgages in the association. This could lead to a decrease in property values.   Read the article…………..
  • Illinois Supreme Court Agrees to Decide Whether Third Party Buyer is Liable for Delinquent Assessments to Mortgagee’s Subsidiary March 9, 2017 According to Section 9(g)(4) of the Illinois Condominium Property Act, any purchaser of a condominium unit who acquires a property either at a foreclosure sale or by post-foreclosure purchase from the mortgagee must pay the last six months’ worth of delinquent assessments on the unit. 765 ILCS 605/9(g)(4).  So where the wholly-owned subsidiary of the original mortgagee buys the property at the foreclosure sale and subsequently sells to a third party, is that subsidiary a “mortgagee” under the statute, triggering ...

Collections Archives

Reserves

(Association Reserves has a list of state laws regarding reserves at this location;  Capital Reserve Analysts has an interactive map regarding state reserve requirements)

  • Association Deficits Don’t Excuse Developer From Funding HOA Reserves (FL) March 17, 2017 For the developer of the Sullivan Ranch community in Mount Dora north of Orlando, it appears that its decision to stop funding reserves after it established the account and began funding it in 2007 has significantly backfired. The Fifth District Court of Appeal recently overturned a lower court’s summary judgment, which concluded that the developer was excused from funding reserves while it remained in control of the association and was funding deficits in its operating expenses.    Read the article……………
  • Ensuring You Don’t Over Plan Condo Association Major Projects March 16, 2017 Planning for a major project in a Condo Association is a big deal. You have to bid out projects, work with vendors, educate Owners, and execute. You want the project to go as smoothly as possible, of course. And an ounce of prevention is worth a pound of cure. However, there is such a thing as going too far when you are preparing. If you spend hours and hours trying to plan every possible permutation of every possible problem, you’re ...
  • Best practices for condo boards to plan for future building repairs February 22, 2017 Q: We live in a condo building of 56 units. We have a reserve fund marked for separate items like the elevator, roof, parking lot, painting, etc. If we didn’t have enough money to replace the elevator, can we use some of the money from the roof reserve fund?    Read the Q&A…………..
  • Funding Reserves For the Common Good February 15, 2017 Subdivisions, planned community, and condominium owners are different types of community and offer different types of amenities and surrounding. However, there is one common denominator that people living inside these communities are obliged to conform with to ensure the common good of everybody while accessing or using the amenities of the community, and that is paying dues to the homeowner’s association’s reserve fund.   Read the article……………..
  • Appeals court decides Centex must pay into HOA reserve (FL) February 8, 2017 The 5th District Court of Appeal recently decided in favor of a pair of homeowners representing themselves in a case against their homeowner association at Sullivan Ranch.  According to a report by the Orlando Sentinel, Sara MacKenzie, who had only practiced law for a short time after successfully earning her law degree in the 1980s, and her husband, Ralph, hoped for “a declaration that Centex failed to meet its obligation to make capital contributions to the HOA’s reserve accounts when ...

Reserve Archives

Banking & Lending

  • Are condo & HOA bank deposits fully insured by Uncle Sam? March 20, 2017 Condominium and homeowners associations (HOAs) currently have an estimated $50 billion on deposit nationwide in banks to stash operating account and reserve funds, experts say.  Is it possible that hundreds of millions of dollars on deposit by the estimated 50,000 condo associations and HOAs in Illinois could be at risk if these accounts are not protected by Uncle Sam – the Federal Deposit Insurance Corporation?  “My homeowners association bank accounts are titled in the name of the management company and ...
  • Need a loan? Show lenders your association is a worthy investment February 21, 2017 As spring weather approaches, big-ticket construction and repairs are coming up at many community associations. So is taking out a loan to pay for them. If associations qualify, that is.  Associations will be denied if their finances are in disarray. Until they rectify the situation, the roofs will keep leaking and the sidewalks will keep crumbling.  Here’s how to show lenders your association is a worthy investment:    Read the article…………..
  • Should condo association borrow money for new roof or use reserves? November 26, 2016 Q: We are a 35-unit condo building. Our reserves are nearly enough for a new roof. The board is having a heated discussion on whether we should have a special assessment for the remainder of the roof or take out a loan. What is your take on this situation? Does either option indicate a financially weak association?   Read the Q&A…………..
  • Condos Must Reserve To Preserve — And Get Loans October 27, 2016 The recent front page Washington Post article on the financial problems condominiums are facing prompted me to write this column about the absolute necessity of maintaining adequate reserves. And it is especially timely since associations are starting to prepare next year’s budget.  Every community association should have money set aside “in reserve” to cover the cost of emergency or major repairs. Reserves are — or should be — an essential part of every community association.     Read the article…………..

Banking & Lending Archives

Taxes

  • Taxes and Your HOA Community – To File or Not March 4, 2017 If you live in a planned community, there is a good chance questions have come up about taxes and if your community needs to file them. We’ve heard many people admit that they didn’t realize their community needed to file tax returns. Even though it isn’t an uncommon problem for self-managed associations, depending on how your community is legally organized, it can lead to problems with the IRS. We know no one wants problems with the IRS, so we’ve put ...
  • IRS Revenue Ruling 70-604 and MCL 450.2541(2)(b): The Value of Expert Advice February 16, 2017 Many individuals and corporations, including community associations, are currently preparing their tax returns. For associations with excess revenue this process most likely involves a determination of whether to exercise an election under IRS Revenue Ruling 70-604. A proper election under Revenue Ruling 70-604 can be used to reduce an association’s taxable income by deducting from taxable income any excess assessments refunded to members or carried over to the next year’s assessments. In making such an election, however, an association should ...
  • What to Do When It’s Tax Time for Your Association February 7, 2017 It’s that time of year again. Tax time. And your Not-For-Profit Organization is no exception. Not-For-Profit organizations are considered a business and therefore obligated to file taxes like any other corporation. You can contact a Certified Public Accountant (CPA) or do it yourself. The process is simple and takes a little time if you’ve kept good records of your finances.  Read the article…………….
  • Can HOA Fees Be Claimed on Your Taxes? February 6, 2017 Tax season is here and we all want to deduct every last penny we can find. If you’re a member of a homeowners association, have you ever considered whether or not the HOA fees you pay are tax deductible? Every HOA is different, so you’ll want to find out what applies to your specific Association.  In general, members of an HOA commit to paying HOA fees or dues. These fees usually pay for the maintenance of shared amenities such as ...

Taxes Archives

General Financial

  • Making Special Assessments Work: Fixed Incomes, Low Incomes, & Hard Times March 22, 2017 For residents on fixed incomes, or those who are already struggling to make ends meet because of a job loss, illness or divorce, any hit to their already-stretched-to-the-max budget can be devastating. So when a board levels an assessment on the residents of a co-op, condo, or HOA because of an emergency repair, an unforeseen tax bill, or some other outlay not otherwise budgeted for, it can spell financial ruin for those who can’t afford to pay their share of ...
  • Keep Track of the Money: Finance and Condos Part 2 March 9, 2017 This blog is part 2 of “Keep track of the money: Finance and Condos.” Financial policies are the topic of this post. Part 1 covers reviewing financial statements and condo fees, and Part 2 provides insights into the art of overseeing expenditures. Directors make lots of decisions that involve money. Having policies in place for reviewing expenditures helps the board provide appropriate oversight.   Read the article………….
  • Keep track of the money: Finance and Condos February 22, 2017 Be sure to check out my post on governance policies for condo boards, and an earlier post on best practices for condo board communication. Financial policies are the topic of this post. I have divided into two parts. Part 1 covers reviewing financial statements and condo fees, and Part 2 provides insights into the art of overseeing expenditures.    Read the article…………
  • Back From the Brink: Financial Ruin — and Recovery January 9, 2017 happens infrequently, but when it does, it can be an enormous challenge: a co-op corporation or condo development has a long-running squabble with the building sponsor/developer, falls victim to long-term mishandling of funds — or outright fraud — by the board, or has to undertake a major unexpected or ill-prepared-for repair project. All of a sudden, they’ve got no money in the reserve fund, they can’t borrow against the property to make vital repairs, and residents are beginning to think ...
  • The Importance Of Protecting Your Association’s Money January 3, 2017 One of the most important responsibilities of a property or condominium association board of directors is protecting the association’s funds. In doing so, it is important for the board of directors and management company (if you are professionally managed) to understand the necessary internal controls and available insurance coverages to properly protect the association in the event of embezzlement or misappropriation of funds from a board member, officer, committee member or management company.   Read the article…………

General Financial Archives

Fraud & Embezzlement

  • Homeowners’ association treasurer gets 3 years for stealing $122,779 (FL) March 17, 2017 The 60-year-old former treasurer of Cimarron Homeowners Association near Medulla was sentenced to three years in prison Friday for stealing $122,779 from the group over an 11-year span.  Martha Beard, who still lives in the 72-home community, told Circuit Judge Wayne Durden during Friday’s hearing that she had intended to pay the money back, but the debt became too great.  “This was a major error in judgment on my part,” she said, “and I take full responsibility.”  Her son, 33-year-old ...
  • Spotting and Stopping Fraud and Embezzlement in Your HOA March 15, 2017 Fraud and embezzlement can cause a homeowners’ association’s (“HOA”) board of directors a lot of time, money, and energy. So how can the board prevent potential fraud or embezzlement before it occurs? The solutions are simple but often overlooked. The board needs to understand its role in fraud prevention and the two key components of fraud: motivation and opportunity. In almost all cases, both of these factors must be present for fraud to occur. Motivation is a factor completely outside ...
  • Former ITD official resigns (ID) February 26, 2017 Facing felony theft and fraud charges, Idaho Transportation Department business manager Scott Fellom has resigned.  Fellom is accused of embezzling $13,363.85 in forged checks from the Sunset Ridge Homeowners Association in Post Falls. He was the treasurer of Sun Ridge, which overlooks Columbine Court and Yarrow Court near Chase Road and Poleline Avenue.    Read the article………….
  • Grand Jury Calls for Criminal Charges to Rein in ‘Wild West’ of Condo Boards February 17, 2017 The question isn’t whether there’s fraud and abuse among some of the boards, according to the grand jury report, which cites thousands of annual reports of alleged wrongdoing to Florida’s Department of Business and Professional Regulation. The question is how to police it and shore up a regulator described as a toothless tiger.    Read the article…………….
  • Trial for an alleged HOA embezzler delayed (CA) February 11, 2017 The trial was delayed Friday for a man accused of being a co-conspirator in an embezzlement case involving nearly $2.8 million from a San Mateo homeowners association, according to the San Mateo County District Attorney’s Office.    Read the article……….

Fraud & Embezzlement Archives

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