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

  • How condo maintenance fees are calculated and spent (ON) February 21, 2017 There are more than 2,500 registered condominium corporations in the City of Toronto. While those condominiums may range from skyscrapers made up of apartment-style units to blocks of townhouses, one thing that every condominium corporation has in common is the obligation for unit owners to pay common expenses.  Maintenance fees will often be several hundred dollars per month or more, so unit owners want to know how are they’re calculated and how they’re spent.    Read the article………….
  • 6 Ways to Use Your Budget as a Catalyst for Change February 2, 2017 In today’s chaotic world, we are all searching for more meaning – whether it’s in our personal or professional lives, or both. Relevancy is important, and our impact is the measurement of that relevancy.  While I could give you plenty of advice on how to take a vision quest to find personal fulfillment, in this space, we’ll stick to property management. And in that case, the question to ask is: How can we create a greater impact for the communities ...
  • Why Are HOA Fees Important? January 30, 2017 In Part 3 of this series, we discussed the HOA rules – where they come from and what happens when homeowners don’t obey the rules. If polled, more likely than not, few homeowners could recite a majority of their HOA’s rules. One rule, however, would likely be recognized by all. That is, you have to pay your HOA fees.  Many homeowners don’t really understand the ins and outs of HOA fees – for example, why the fees are paid, how ...
  • How to Implement Your Community Association Budget January 11, 2017 You’ve done all the homework. Crunched the numbers. Your reserve study is complete, your vendor agreements have been checked and your budget is done!  Now what?  There’s an entire process to creating the budget, followed by implementing it, and Mary Signorella, account executive for FirstService Residential, said that clear communication to homeowners, through every step of the process, is the best way to avoid problems.   Read the article………….
  • Uncollected Assessments: HOA Budgeting for Bad Debt December 28, 2016 For the past 35 years, Lake Superior State University publishes a list of “banished” words and phrases. The annual list includes words and phrases that are misused, overused, and generally useless. The 2010 list includes such gems as “sexting”, “tweet”, “app”, and “too big to fail”. Also included on the 2010 list is probably the most overused phrase in recent memory: “In these economic times”. It’s everywhere.   Read the article…………

Budget Archives

Collections

  • Yes, HOA Can Sell Property for Delinquent Fees (CA) February 8, 2017 Howard Rich purchased a single-family residence at an execution sale. The execution sale was conducted to satisfy a judgment against Yung-Shen Steven Lee. Rich was a third-party purchaser. The plaintiff and judgement creditor was Spyglass Hill Community Association, the HOA which managed the residence where Lee lived. After the sale, the trial court granted Lee’s motion to vacate the judgement on the ground it had been obtained by the HOA through fraud. The court also granted Lee’s motion for restitution ...
  • 9th Cir. Limits Scope of FDCPA ‘Enforcement of Security Interest’ Exception February 6, 2017 The U.S. Court of Appeals for the Ninth Circuit recently held that a notice regarding overdue homeowners association (HOA) assessments contained language that overshadowed and conflicted with the homeowner’s federal Fair Debt Collection Practices Act debt validation rights.  Limiting the scope of its ruling in Ho v. ReconTrust Co., NA, 840 F.3d 618, 620 (9th Cir. 2016), the Court rejected the debt collector’s argument that in sending the notice regarding overdue HOA assessments, it merely sought to perfect a security ...
  • The Super-Priority Saga Continues – Nevada Supreme Court Holds That NRS 116’s Notice Provisions Are Constitutional (NV) January 28, 2017 The Ninth Circuit sent shockwaves through the mortgage industry when it held that NRS 116—the statute allowing an HOA to impose a nominal super-priority lien that can extinguish a senior deed of trust when foreclosed—was facially unconstitutional under the Due Process Clause in Bourne Valley Court Trust v. Wells Fargo Bank, N.A. In Bourne Valley (see our previous blog posts on this decision here and here), the Ninth Circuit held that NRS 116’s notice scheme did not mandate that mortgagees ...
  • Letter Warning of Lien Recordation Subject to FDCPA, Ninth Circuit Holds January 26, 2017 A law firm’s letter, warning that a lien would be recorded against a woman’s home if she failed to pay her annual homeowners association fees, is not exempt from the Fair Debt Collection Practices Act (FDCPA) as an attempt to perfect a security interest, the Ninth Circuit has held in Mashiri v. Epsten, Grinnell & Howell.  The defendant law firm sent a collection letter to the plaintiff seeking payment of her annual association fee, as well as related late fees, ...
  • Nevada Supreme Court ruling upholds nonjudicial foreclosure process January 26, 2017 The Nevada Supreme Court ruled Thursday that a nonjudicial foreclosure process used by investors and speculators to acquire HOA properties at bargain basement prices during the great recession does not violate the constitutional protections of original mortgage holders.  The court found that the process does not violate the Takings Clauses of the U.S. and Nevada constitutions. It also found that due process rights were not violated because the foreclosure process does not constitute a state action.  The ruling is significant ...

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)

  • 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 Funding for On-Site Managed Communities January 24, 2017 Increasingly reserve funding has become more and more important in validating the community association operations and their management. All on-site managed communities whether they are Luxury Condominiums, Large-Scale On-site Managed Communities or Active Adult communities should have reserve funds with suitable reserve studies backing the funding levels. On-site managers are trained to be aware of reserve needs for the associations they manage. The managers typically will have the most up to date information regarding the reserve needs and will keep ...
  • A primer on condo association reserves January 17, 2017 Q: Our community association just announced that our monthly assessment fee increased as of January. The reason is that we do not have enough reserves in our budget. What are reserves, and why does our association need them?   Read the Q&A…………..
  • Should We Invest Our HOA Reserve Fund? January 17, 2017 Many signs are pointing to a US economy on the upswing – consumer confidence is up, unemployment rates are down, and the stock market is approaching record territory. Companies are investing in growth, so shouldn’t your HOA or community association invest as well? There’s a big reserve account just sitting there gathering dust waiting for the next capital expense. As a board member, is this a good time to take advantage of the market improvement and invest some or all ...

Reserve Archives

Banking & Lending

  • 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…………..
  • Be Prepared: How to Avoid the Super-Priority Trap June 28, 2016 Benjamin Franklin once said, “By failing to prepare, you prepare to fail.” Servicers can face significant obstacles in preservation of their rights vis a vis assessments by homeowners’ associations and condo associations (a “property association”). The most important action servicers can take in addressing this issue, not surprisingly, is foresight and preparation by putting procedures and guidelines in place to address if and when assessments should be paid before the property association foreclosure process begins.      Read the article……………

Banking & Lending Archives

Taxes

  • 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 ...
  • It’s Tax Time for Your Association January 6, 2017 As evidenced by the increase in advertisements from H&R Block, Turbo Tax and your friendly, local accountant, it’s clear that we have entered “refund season” – AKA time to file your personal taxes.   But, don’t forget that it’s also tax time for your association.  Your community association is considered a business, and, while you are a Not-For-Profit, you still need to file taxes as any other corporation would. Being a nonprofit is different than being tax-exempt, and IRS Form ...

Taxes Archives

General Financial

  • 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…………
  • Will Your Community Association be Sponsored by Advertisers Someday? December 28, 2016 I read recently that some of our national parks in the U.S. are going to permit advertising in certain locations within the parks. The reason for this move is ostensibly due to the appeal of millions of annual park visitors who spend many hours or days enjoying the natural beauty of these venues. Corporate America knows that a large captive audience provides the best opportunity to have a branding message resonate. Despite the logic, to me some things should be ...
  • 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…………..
  • Effective HOA Financial Management – Six Magic Tips to Success August 30, 2016 Armed with 15 years of experience working with HOAs and community associations, I’m finally about to publish my first white paper on effective HOA financial management. As we were poring through 75 blog posts and a pile of CAI magazine articles that I’ve written on the topic, I was thinking about all the written (articles and audits) and verbal (seminars and phone calls) advice I’ve given to boards and property managers over the years.   Read the article………….

General Financial Archives

Fraud & Embezzlement

  • 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……….
  • ITD manager accused of HOA embezzling (ID) February 11, 2017 Idaho Transportation Department business manager Scott Fellom is facing felony grand theft and forgery charges.  According to court documents, Fellom, an employee of ITD’s District I bureau in Coeur d’Alene, is accused of embezzling $13,363.85 in forged checks from the Sunset Ridge Homeowners Association.   Fellom was the treasurer of the Post Falls-based group, which overlooks Columbine Court and Yarrow Court near Chase Road and Poleline Avenue.      Read the article……………
  • Ex-property manager indicted in theft of $8k from Cobb HOA (GA) February 7, 2017 A former property manager was recently indicted after police say she stole more than $8,000 from a Kennesaw homeowners association.  A grand jury handed down the decision Thursday for Wendy Teresa Robinson’s pair of theft charges.    Read the article……….
  • State fails to protect condo owners from board fraud, grand jury finds (FL) February 7, 2017 The Florida state agency that regulates condominium associations does not work to protect the tens of thousands who live in condos, resulting in extensive fraud, mismanagement and conflicts of interest among the boards and management companies that govern them, according to a Miami-Dade grand jury report issued Monday. “Unfortunately, the seems ill-suited to resolve, correct or prevent many of the recurring problems that have been brought to their attention,” the grand jury report ...
  • Embezzlement suspect receives probation sentence (MI) February 2, 2017 A Gwinn woman accused of embezzling $19,000 from The Pines at Red Fox Woods Condominium Association was sentenced Thursday morning in Marquette County District Court.  Tracy Spruitenburg, 44, received 12 months probation plus court fines and costs. Spruitenburg was arrested by the Forsyth Township Police Department in October for embezzling $19,000 from the association.    Read he article…………

Fraud & Embezzlement Archives

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