What are the common HOA accounting and financial management challenges?

Here are some common examples: collection management, bank reconciliation, duplicate bills, compliance with state law, filing IRS forms, potential fraud, and budgeting.

How to transition HOA from developer?

To transition HOA governance from developer, the community can follow these simple guidelines: form a task force, create a plan, hire the pros, establish communication channels, compile essential records, audit contracts and documents, evaluate the community, set transition meetings, execute maintenance items, and transition financial control.

What should you look for in condo association management companies?

When selecting a condo association management company, an association should consider the following qualities: experience and expertise, range of services, communication skills, and technology and tools.

Why should we hire an HOA management company?

If you remain unconvinced, here are the benefits of hiring an HOA management company: expertise and experience, compliance with regulations, fair rule enforcement, well-versed in financial management, streamlined collections, prompt maintenance and repairs, neutral third-party, access to network of contacts, use of modern technology, and best for board members.

admin, Author at Freedom Community Management

The Challenges Of HOA Accounting And Financial Management

admin on July 8, 2024

HOA accounting is one of the most challenging parts of community management. It’s easy to make a mistake, especially if the management team and accountant are inexperienced when it comes to accounting for homeowners associations. However, most of the challenges can be overcome and mistakes can be avoided with good practices.

HOA Accounting and Financial Management Challenges

Most HOA financial management and accounting challenges can be circumvented. It takes ample preparation, good financial practices, and a team of seasoned professionals. What are the challenges to watch out for regarding your HOA accounting method and financial management practices? Here are some common examples.

1. Collection Management

HOA fees are the main source of income for most homeowners associations. These funds keep the community alive by paying for maintenance, supplies, and reserve funds. They keep the community from falling apart and ensure it remains a good place to live.

However, unpaid dues and multiple late fees can imbalance the association’s finances. Without timely collections, the HOA won’t have enough funds for management and upkeep. Create a schedule homeowners can follow to stay on top of monthly collections.

In addition, it may be wise to hire a collection agency or attorney to help the community manage delinquencies. HOAs should give grace to homeowners who have trouble keeping up with the expense. Nonetheless, it cannot be too lenient as it can lead to significant losses for the HOA. Everyone else will have to shoulder the cost of unpaid dues.

If possible, HOAs can use technology to speed up the process. Offering an online payment platform makes the process more convenient for both the homeowners and the HOA board. Plus, an online platform can be connected to several payment methods, such as ACHs, eChecks, and credit cards.

2. Bank Reconciliation

The HOA’s accountant might record the community’s financial activity in the books, but the records should align with the association’s bank accounts. A discrepancy could mean mismanaged funds, unrecorded transactions, or even fraud.

Unfortunately, bank reconciliation can be difficult for homeowners associations without prior experience. Most communities use Excel sheets to reconcile accounts, but this is not always a practical solution for large associations with hundreds of monthly transactions.

HOAs can mitigate potential problems with bank reconciliation by using technology. Reliable HOA management software has comprehensive accounting features that can handle bank reconciliation. If you have room in the budget, consider purchasing one for the community.

Alternatively, some HOA management companies offer bank reconciliation as part of their homeowners association accounting services. Many also have comprehensive accounting software, eliminating the need for your community to purchase your own.

3. Duplicate Bills

Duplicate bills and payments are surprisingly common. Some vendors send invoices more than once to follow up on an unpaid bill. Other times, they simply need to remember they have already billed the HOA. It’s easy to make a mistake when this happens, as HOA financial managers might not constantly check and pay the bill twice.

Fortunately, HOAs can mitigate the risk of duplicate payments by utilizing HOA management software. These tools simplify the process and reduce the possibility of human errors. Alternatively, HOAs can delegate the task to a reliable HOA management company that can process payments more thoroughly.

4. Compliance With State Law

Homeowners associations must be familiar with state laws to remain compliant while doing accounting. However, most board members need help memorizing every single piece of legislation that affects HOA accounting.

Hiring a professional HOA accountant familiar with local laws related to HOAs and financial management is essential. They can help the community remain compliant and use the correct formats when preparing HOA financial statements.

5. Filing IRS Forms

It may seem surprising to some but homeowners associations do pay taxes. If they do not qualify for exemptions, they need to file their year-end tax forms with the IRS just like other organizations.

Unfortunately, taxes are particularly confusing for homeowners associations. They’re also time-consuming and complex so it’s easy to make a mistake. This could lead to devastating consequences as failing to pay the right taxes or missing a deadline could mean penalties.

A good solution would be to utilize automation to eliminate human errors. HOA software can streamline the process and automatically generate forms and supporting documents. Plus, they’re more accurate and guarantee homeowner transparency.

If you need a little extra help, a dedicated accountant and financial manager with experience in HOA tax filing can also be beneficial. You can also ask an HOA management company to take care of the tax for you.

6. Potential Fraud

Just like other organizations, homeowners associations are subject to fraud. The best way to avoid this is to adopt internal controls when it comes to accounting, fund management, and HOA financial reporting.

Make sure that no single person has complete control over HOA finances. The person who writes the HOA’s checks should not be the same person who manages collections or invoices. Moreover, payments should all be made directly to the HOA’s bank account instead of an association officer.

In addition, we recommend assigning one person to review all deposits, invoices, and bank statements. An audit every few years is also a good idea to find any cracks in the HOA’s finances. The board must protect the community and ensure its funds are properly utilized.

7. Budgeting

The budget can make or break an association’s finances. A well-made budget can make all the difference between being in debt or having leftover funds for rainy days. Thus, each association should pay attention to the budgeting process and prepare the following year’s budget months in advance.

Consider forming a dedicated budget committee to assess the community’s financial status. They can survey vendors, research rate increases, and forecast potential expenses to create a realistic budget for the coming fiscal year.

Hire a Professional

HOA accounting and financial management are some of the most difficult parts of community governance. Without the right background or expertise, you may end up in the red and put the community in financial trouble. If nothing else, make sure to pay special attention to financial management.

Homeowners associations often need help with HOA accounting and financial management. That’s where Freedom Community Management can come in. We offer expert financial management and accounting services to associations across Florida. Call us now at 904-490-8191 or contact us online for professional HOA financial services in Florida!

How Can The HOA Transition From Developer Without Any Problems

admin on July 8, 2024

Every homeowners association will undergo an HOA transition from developer. But, how exactly does this process work? When should the transition happen and how long can developers remain in control? Let’s answer all of these questions in the sections below.

What is HOA Developer Turnover?

Homeowners associations are typically formed by a developer that plans the community. Once most of the community is built and sold, the developer can turn over governance to the community members. From then on, the homeowners are in charge of rule enforcement and common area management.

This shift in authority gives communities more control over how the neighborhood is run. The residents elect a new, non-developer-controlled board of directors who set the direction for the rest of the community. Board members and community residents can work together to decide which rules to keep or amend and how to manage operations.

When Should You Transition HOA From Developer?

How long can a developer control an HOA? Should a developer control the community for only a set period? Or can they control the HOA as long as the residents do not want to take over community governance?

Both state law and the governing documents provide guidelines for when the developer should start turning over community control. In Florida, the Florida Homeowners Association Act Section 720.307(a) states that transition must happen three months after 90% of all units have been conveyed to non-developer members. However, it also states that communities should follow the date, percentage, or event set by the governing documents, if any.

The community’s governing documents may also contain provisions about turnover. In many cases, the developer must sell the community after a certain time passes or a specific number of units have been sold.

However, the HOA transition from developer usually starts even before the deadline. Developers must make gradual changes at least one year before the official turnover date. This allows the community to adjust to the increased involvement and new responsibilities.

HOA Transition from Developer: How to Do It

The community can follow these simple guidelines to transition HOA governance from the developer.

1. Form a Task Force

Homeowners associations must follow the timeframes and benchmarks in the governing documents. However, keeping track of all the tasks and deadlines can be challenging. Forming a dedicated turnover committee one year before the transition date is better.

Committee members should include one industry expert — potentially an HOA manager — and several homeowners. The transition committee can collaborate with the current board, homeowners, and developers to decide when the elections will be held and how to transition community governance.

2. Create a Plan

team discussion | hoa transition from developer

The committee should create a detailed transition plan with critical milestones. All important events and tasks, such as board elections and training, must be planned in advance. Moreover, the team should comply with all regulatory and legal requirements.

3. Hire the Pros

HOAs need a network of professionals like engineers, community managers, accountants, and attorneys to handle the community. These individuals can help with financial management, address legal questions, manage the common elements, and handle any concern that requires a professional’s insight and expertise.

4. Establish Communication Channels

HOAs should create open and accessible communication channels with the board, homeowners, and developers during the transition. Everyone involved should be kept in the loop about how things are progressing. Poor communication can lead to misunderstandings and conflicts that could have been avoided.

In addition, frequent communication encourages involvement — something homeowners will need to adjust to once they begin managing the community. Establishing transparency is also key to a successful community in the long term.

5. Compile Essential Records

The developer must give the board all essential community documents during the transition. This includes, but is not limited to, the following records:

Original and certified Declaration of Covenants, Conditions, and Restrictions (CC&Rs)
Articles of Incorporation
Bylaws and Meeting Minutes
Rules and Regulations
Comprehensive Homeowner List and Contact Information Sheet
Tangible Property
Association Funds
Insurance Policies
Financial Records
Contractor, Subcontractor, Manufacturer, and Supplier Warranties
Service and Employment Contracts

6. Audit Contracts and Documents

The developer often executes contracts on behalf of the community during development. These include contracts with vendors, insurance providers, and staff. It’s a good idea to conduct an audit of every agreement to understand the terms between the HOA and its third parties.

The new board should ensure every agreement is reasonable. Otherwise, the HOA may choose to opt out through the termination clause. An HOA attorney can also help navigate the complexities of termination and contract reviews.

7. Evaluate the Community

The transition committee can work with an engineer to inspect all the common areas. They can help the residents uncover any defects and examine alleged imperfections in the construction. This keeps the developers accountable for their mistakes so the community residents won’t have to suffer the consequences in the future.

In addition, the residents should assess the reserve study and get a financial audit to have a complete picture of the community’s current state. Make sure to also verify whether the association has enough insurance coverage in case of emergencies.

8. Set Transition Meetings

The developer can formalize the turnover by setting a transition meeting. During the meeting, they can relinquish control to the newly elected board. They might also discuss financial issues, transfer documents, and ongoing projects.

9. Execute Maintenance Items

The developer should guide the newly elected board in executing maintenance items. This process will teach them to handle maintenance tasks, so they know what to do even after the developer is out of the picture.

10. Transition Financial Control

a calculator | hoa transition from developer

The new board should check the developer’s accounting statements and records to ensure everything is in order. This can also help the community better understand the HOA’s financial health.

Apart from this, the board should slowly be able to get the community’s finances under their control. Consider working with a CPA to conduct financial audits and ensure all the funds have been handled well.

Ensuring a Smooth Transition

When it’s time to transition the HOA from the developer, there are many things to consider. The developer and community must work together to create a good transition plan to prepare for the future. This way, the community can easily handle itself when the developer finally needs to exit.
Does your HOA need help with developer turnover? A professional management company like Freedom Community Management can help. We provide excellent HOA management services across Florida. Call us now at 904-490-8191 or contact us online to learn more!

What Is Condo Association Management?

admin on July 8, 2024

Condo association management helps ensure curb appeal and protect property values. Condominiums would benefit from hiring a professional company that specializes in this service. In doing so, they can facilitate smooth operations and preserve the community’s financial health.

What is Condo Association Management?

Condominium management is the practice of overseeing the day-to-day operations of a condo association. This includes managing typical areas, maintenance and repairs, enforcing community rules, and managing finances.

While the condo board—consisting of volunteer unit owners—is primarily responsible for condo property management, many communities hire a professional management company for the job. A condo association management company helps the board carry out its duties and acts as an intermediary between the unit owners and the board.

Condo association management ensures that all aspects of the community run smoothly. From administrative tasks such as record-keeping and meeting coordination to more hands-on duties like property maintenance and emergency response, the management company plays a critical role in the condominium’s overall functioning.

Condo Association vs HOA: What’s the Difference?

While condo associations and homeowners associations manage residential communities, the two have critical differences.

Condo associations typically manage multi-unit buildings where residents own their individual units. However, these residents share ownership of common areas like hallways, lobbies, and amenities. They can also share ownership elements such as balconies, interior walls, and roofs.

HOAs, on the other hand, usually manage single-family home communities where residents own their homes and lots outright. However, these residents share ownership of community amenities like parks and swimming pools. They don’t typically share the walls and roofs of individual homes, too.

Condo associations often have more responsibilities due to the shared nature of building infrastructure and facilities. This makes condo association management more complex and specialized than HOA management.

What Are the Responsibilities of a Condo Management Company?

The exact responsibilities of a condo management company depend on the services it offers and the agreement it enters with a condo community. Some communities only require bare minimum services, while others seek full-service management services.

That said, condo management companies typically have the following responsibilities:

1. Maintenance and Repairs

out of service elevator | condo association management

One of the primary responsibilities of a condo management company is overseeing maintenance and repairs. This involves regular inspections of common areas and building infrastructure to ensure they are in good condition. The management company coordinates maintenance requests from residents and hires the appropriate contractors to complete the job.

2. Accounting and Financial Reporting

Financial management is a critical aspect of condo association management. While specific financial services can vary from one company to another, they usually include the following:

Budget preparation and management
Bank reconciliation
Upkeep accounting records
Financial statement preparation
Reserve fund management

3. Fee Collection

Condo fees are the lifeblood of any condo association. As such, it is important to collect them in a timely manner. A condo management company can also help with this.

Condo management companies send owners invoices and offer them flexible payment options. They also work to minimize delinquencies within the community by enforcing strict collection policies. This includes sending reminders, setting up payment plans, and, if necessary, initiating legal actions to recover unpaid dues.

4. Rule Enforcement

Another responsibility of a condo management company is to enforce community rules and regulations consistently and fairly. This involves tracking violations, notifying residents of infractions, and following up to ensure compliance.

Violation penalties can change from one community to another. These can include fines and the temporary suspension of privileges. In Florida, though, a condo association must provide notice and allow the owner to appear at a hearing before it can take disciplinary action (Section 718.303(3) of the Florida Condominium Act).

5. Dispute Resolution

Condominium associations are no strangers to conflicts within the community. While the condo board can attempt to resolve the dispute, such situations usually call for third-party neutrals. A condo management company can exercise internal dispute resolution and even employ mediation or arbitration strategies to avoid litigation.

6. Board Assistance and Education

Effective communication between the management company and the board of directors is vital for the smooth operation of the community. The management company regularly updates community operations, financial status, and any issues that need board attention. They also assist in organizing and facilitating board meetings, ensuring that all necessary information is available for informed decision-making.

In addition, a condo management company often provides training and education for board members. This helps them understand their roles and implement the best practices in community management.

7. Resident Communication

cheerful woman | condo association management

Another responsibility of a condo management company is resident communication. This includes providing residents with a way to give feedback or make complaints, sending them timely notices, and keeping them in the loop on important issues.

8. Legal Assistance

A condo management company is well-versed in federal, state, and local laws that can affect condominiums. It can advise the condo board on legal matters, ensure compliance with the law, and help in amending the governing documents, among other things.

How Much Are Condo Association Management Fees?

The cost of condo association management services can vary widely based on several factors. These include the size of the community, the level of services required, the nature of the facilities, and the location.

Typically, condo management companies structure their fees as a flat monthly rate per unit or a percentage of the association’s monthly budget. This equates to $20 to $50 per unit per month or 5% to 10% of the budget. Board members should review the management contract carefully to understand the fee structure.

What to Look for in Condo Association Management Companies

When selecting a condo association management company, an association should consider the following qualities:

Experience and Expertise. The board should look for a company with a proven track record in managing condominiums and a deep understanding of the unique challenges.
Range of Services. The board should ensure the company offers comprehensive services that meet the community’s needs.
Communication Skills. Effective communication is crucial. As such, it is best to hire a company that prioritizes clear, consistent, and transparent communication with the board and residents.
Technology and Tools. A modern management company should offer online tools for maintenance requests, payment processing, and access to essential documents.

The Final Word

Condo association management is essential for the successful operation of condominium communities. In understanding the responsibilities involved and what to look for in a management company, condo associations can ensure they choose the right partner.

This is where Freedom Community Management comes in. Call us today at 904-490-8191 or contact us online to learn more about what we can do for you!

Top Reasons To Hire A HOA Management Company

admin on July 8, 2024

When you hire a HOA management company, you unlock several benefits of professional management. Although hiring a management company isn’t free, the fees are well worth the services you get in exchange.

What is a HOA Management Company?

An HOA management company professionally manages homeowners associations, condominiums, and other communities. This company offers its services for a management fee, which can be a fixed overall rate or a per-door price.

The responsibilities of an HOA management company can vary depending on the association’s agreement with the firm. However, they typically include site management, collections, administrative work, and homeowner communication. A management company can alleviate the burden of the HOA board by helping with day-to-day operations and offering valuable advice.

Why You Should Hire a HOA Management Company

Hiring an HOA management company is one of the best decisions an HOA board can make for its community. This is especially true for larger communities, where managing hundreds of homes and complex facilities can be pretty tricky for a few board members.

If you are still deciding, here are the benefits of hiring an HOA management company.

1. Expertise and Experience

An HOA management company has a staff of capable professionals with ample experience in the industry. Professional managers undergo specialized training, even earning certifications, to become well-versed in the field. Compared to volunteer homeowners, managers are more equipped to handle the challenges of HOA management.

2. Compliance With Regulations

An HOA management company knows federal, state, and local laws affecting community associations. The company can ensure your association complies with all regulations, minimizing the risk of liability and potential damages.

An HOA management company also has the time and resources to remain current on legislative changes. Laws can be amended and repealed, while new laws are constantly introduced. With professional management, you don’t have to worry about keeping up with these changes.

While it can help to have a lawyer on the HOA board, nothing compares to a staff of trained legal experts. Not all communities are fortunate enough to have someone on the board with legal experience, and there is no guarantee that they will stay on the board forever.

3. Fair Rule Enforcement

Selective enforcement can put both the HOA and the board members at liability risk. This is always a real possibility in a community without professional management. Board members are, after all, volunteer homeowners. They may have biases and judgments. They can also let their personal relationships with neighbors affect their decision-making.

In contrast, professional managers act as neutral third parties. This gives them the unique position of being able to enforce the rules consistently. Fair rule enforcement builds trust among homeowners and adds credibility to the HOA board.

4. Well-versed in Financial Management

One of the benefits of hiring an HOA management company is accurate and timely financial management. Accounting and financial management are two areas in which most HOA boards struggle the most. After all, not everyone can handle the intricacies of the subject matter.

Fortunately, an HOA management company can help with this, too. Most companies have a team of accountants and financial advisors on retainer. They can help maintain accounting books, prepare financial statements, reconcile bank statements, and prepare annual budgets. They can also give prudent advice on all things related to HOA finances.

5. Streamlined Collections

The HOA board must collect homeowner dues. However, this usually proves difficult when the association’s ways are stuck in the past.

An HOA management company typically offers flexible payment options with convenient online payments, ACH, credit cards, and more. They can also accommodate elderly residents who prefer to mail their check payments.

Most management companies use state-of-the-art software, too. This makes collections a breeze. Homeowners can set up recurring payments, ensuring they never miss a deadline. Companies can also send invoices, manage billing, and keep track of delinquencies using this software.

Speaking of delinquencies, an HOA management company is more experienced in collecting past-due fees. They can employ various collection methods, including referring the account to the legal department.

6. Prompt Maintenance and Repairs

One of the most common HOA management company responsibilities is maintenance and repairs management. This services sees the company conducting frequent inspections, performing routine maintenance, and making necessary repairs. Some management companies employ in-house maintenance personnel, while others outsource the job to a maintenance company.

Additionally, homeowners can report maintenance issues and submit work orders. The management company will then sort through these reports, prioritize them based on urgency, and dispatch the proper personnel to take care of the job. With prompt maintenance and repairs, your HOA community can preserve curb appeal, ensure functionality, and preserve property values.

7. Neutral Third-Party

An HOA management company serves as the perfect third-party neutral when it comes to dispute resolution. Board members may find it difficult to remain unbiased or emotionally detached when resolving conflicts within the community. With a management company, though, internal resolution procedures, mediation, and even arbitration can go more smoothly, allowing parties to reach a mutual agreement.

8. Access to Network of Contacts

Another reason to hire an HOA management company is that you get access to its wide network of contacts. Management companies, especially ones that have been in the business for a long time, typically have many connections—from contractors and vendors to insurance agencies and law firms. Plus, these contacts usually come pre-vetted.

9. Use of Modern Technology

Most HOA management companies don’t rely on manual methods; instead, they leverage modern technology. By hiring an HOA management company, you can look forward to streamlined processes, automated solutions, and 24/7 access to information.

10. Best for Board Members

gear together | hire a hoa management company

Board members are volunteer homeowners. And while volunteers are expected to fulfill their duties just the same, they don’t always have the benefit of time and expertise.

With an HOA management company, board members can delegate the day-to-day operational and administrative work to staff members. This gives them more bandwidth to focus on making important decisions for the community’s future.

The Right Match

There are many reasons to hire a HOA management company. Finding the right one, though, is often an uphill battle. You want a company that meets your expectations, tailors their solutions to your needs, delivers quality results, and offers competitive rates.

This is where Freedom Community Management comes in. Call us today at 904-490-8191 or contact us online to learn more about what we can do for you!