It is Spring which can only mean: spring forward, spring cleaning, spring training, March madness and annual meetings!

by Kyle Tibbs | Mar 1, 2023 | Banking & Lending, Blog, Chapter Happenings Sponsor, Common Interest Communities, Community Associations, Financial: Money, Banking, Insurance, Wealth Management

[ Blog/News ]

It is Spring which can only mean: spring forward, spring cleaning, spring training, March madness and annual meetings!

If it is March, it must be Annual Meeting time. Chances are you are thick in preparation for one of the most important meetings of the year. The chance to bring the owners of the community together to not only review last year but also elect officers and plan the year ahead. This is also a perfect time to review your banking relationship.

Some Areas To Consider Include:

Review signing authority. When was the last time the Board checked who has signing authority on the Association’s bank accounts? The election of officers at the annual meeting is the perfect time to document authorized signers. The minutes should include who is authorized to sign on the Associations behalf and the removal of any current signers no longer on the Board. Be sure and sign and date the minutes and send to your Relationship Officer at the Bank.

Do balances exceed FDIC insurance levels? If reserve balances are over $250,000, reach out to your Relationship Officer and discuss solutions on how to obtain FDIC insurance on total balances without needing to open accounts at multiple banks.

Where is the money? Download your Bank’s mobile app and sign up for alerts.

Review your major expenses. Is the Association on track to meet its capital maintenance obligations? If there are major expenses looming that may exceed reserves, reach out to your Relationship Officer and start the discussion now on potential loan options.

First Published: March 1, 2023

By Jill Jones

Senior Vice President, HOA Lending Officer

jonesj@columbiabank.com 425-691-5025
Tana Davis, Assistant Relationship Banking Officer, HOA Banking
tdavis@columbiabank.com 253-281-2177
Columbia Bank/Umpqua Bank

Your local HOA Bank – working in your community, for your community. Effective March 1, Columbia Bank has merged with Umpqua Bank. Together to serve our community association community better than ever. “Better Together”

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Year End Accounting: Loose Ends

by Tara Matthews | Jan 10, 2023 | Accounting, Auditing & Bookkeeping, Blog, Chapter Happenings Sponsor, Common Interest Communities, Community Associations, Financial: Money, Banking, Insurance

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Year End Accounting: Loose Ends

For most associations, their fiscal year ends on December 31. If an association does not obtain an independent audit by a Certified Public Accountant, it is perhaps more imperative that boards of directors pay close attention to the year-end financial reports.

Some Areas To Consider Include:

Cash

Ensure all bank accounts have been reconciled. Obtain a copy of reconciliations and bank statements and compare, paying attention to unusual or large reconciling items.

Assessments Receivable

Review the aged receivables report. Understand the reasons for delinquent accounts and ensure that a collection plan is in place to maximize recovery of delinquencies.

Accrued Expenses

Most associations account for expenses only when invoices are paid. Boards should ensure they account for all expenses incurred during the year, regardless of when vendors are paid. Remember, you set a budget for the year. It is easy to overlook a late invoice for this year that may be recorded as an expense in the next year.

Special Assessments

Sometimes special assessment programs last more than one year. Often, special assessments are levied to repay a commercial loan. If accounting for special assessments billed, collected, outstanding or delinquent is inaccurate, a board of directors may not be able to determine if the remaining funds to be collected are sufficient to repay a related loan.

Ensure there is a report showing special assessment billing to and receipts from homeowners. Compare the aggregate of special assessment bank account balances plus amounts to be billed and collected less any outstanding special assessment expenditures to the loan repayment requirements, both principal and interest. Early determination of a potential deficit will provide boards with the opportunity to develop a contingency plan.

Loans

Ensure the correct loan balance is presented on your financial statements. Compare to the loan statement provided by lenders.

Income

Review assessments and other income accounts to ensure all income appears to have been recorded. You will need to know if the financials are prepared on accrual or cash basis. Under the accrual basis, assessment income should match budget.

Expenses

Compare actuals to budget. Inquire about unexpected variances. Ensure all current year expenses have been recorded.

First Published: January 27, 2021

By Jeremy Newman CPA

Newman Certified Public Accountant, PC • Chapter Happenings Sponsor

Newman CPA simplifies the HOA CPA process. Our streamlined process enables us to complete your work accurately, efficiently and on time. We understand your need for reliable communication and on-time reporting. We believe that you deserve hassle-free audit & tax services. Have confidence knowing we are your responsive partner here to make your life easier.

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Remove Mold At The Source

by wscai-admin | Feb 17, 2021 | Article, Blog, Chapter Happenings Sponsor, Disaster Restoration, Industrial Hygiene & Mold Remediation, Repair, Restoration & Recovery, Restoration & Insurance Repair

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Remove Mold At The Source

Mold is ubiquitous to our environment, and if trapped moisture is involved in an enclosed space, it can create an unpleasant odor issue. The best way to mitigate? Remove it at the source.

A recent COIT client complained of a mysterious smell emanating from a restroom. Using an infrared camera and non-penetrating meters, moisture was discovered in the finished surfaces. Further penetrative investigation revealed that the structural steel inside the wall was encased with Monokote, a highly absorbent fire proofing material.

The source of the odor? The waste line inside the wall, which had been slowly leaking over a period of time. In addition, the Monokote was absorbing the excess free liquid, leaving a humid and odiferous interstitial space. The liquid had also wicked up the building material, allowing mold growth on the gypsum wallboard (GWB) paper inside the wall.

To start, the bathroom was shut down and proper engineering controls were installed by COIT technicians to maintain negative air pressure and limit public access. Fixtures were also removed from walls, protected, wrapped, and put aside; wall tile and GWB were removed in all the affected areas.

The COIT experts then climbed into the interstitial space and scraped off the Monokote, roughly 2’ on all the structural steel, and used wire brushes to remove the built-up corrosion.

Expert removing/remediating mold in a hazmat suit and safety mask.

They then used High Efficiency Particulate Air (HEPA) vacuums to clean each surface within the work area several times. Finally, the COIT techs used an EPA-registered disinfectant to damp-wipe the remaining building materials in the wall cavity and finish surfaces of the bathroom.

After remediation was completed, dehumidification was used, and when the Industrial Hygienist (IH) ran his air samples and used the “sniff” test, he confirmed no residual odors remained. By using source removal methods, the space passed IH exit evaluation and air sampling.

If you suspect a potential microbial issue, be sure to seek out not only a reputable Indoor Environmental Professional (IEP), but also expertly trained remediation technicians who use only published and approved industry standards and practices in order to assure the best possible resolution of your issue.

By Superior Cleaning & Restoration

Chapter Happenings Sponsor, February & December 2021

Phone: (800) 992-5326
Website: www.coit.com/superior-cleaning-restoration

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Special Assessment Accounting. Aware. Diligent. Timely. Accurate. Complete.

by wscai-admin | Feb 17, 2021 | Accounting, Auditing & Bookkeeping, Blog, Chapter Happenings Sponsor, Common Interest Communities, Community Associations, Financial: Money, Banking, Insurance

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Special Assessment Accounting. Aware. Diligent. Timely. Accurate. Complete.

Record keeping and accounting for special assessments should not be as challenging as it often is. Often, as auditors we find the accounting for special assessments is incomplete due primarily to changes of management companies, inadequate tracking of owners’ accounts and payments, accounting for special assessment receipts in the wrong fund, and/or special assessment forecasts are inadequate to determine if there will be sufficient funds to pay for all repairs or pay off a loan.

Assessment Records

We recommend a permanent file of special assessment documents, including:

Special Assessment notices to owners
Board minutes including documentation of special assessments:

Initial levy and approval by members
Monthly status

Amounts assessed to owners
Review owner special assessment amortization schedules
Amounts spent for the special assessment purpose
Financial status

Special assessment cash held
Special assessments receivable (billed but not received)
Remaining amounts to assess
Amounts spent to date
Projected remaining expenditure
Projected remaining debt service: principal and interest
Projected surplus or deficit

Conclusion regarding financial status

The information and data recommended above are critical. However, only accurate and complete record-keeping and accounting will provide a board with the data needed to understand the status of a special assessment project and the projected financial picture.

Accounting and Banking

Associations should account for special assessment activity in a separate fund from operating and reserves. A separate bank account and specific account codes should be used. An amortization schedule should be maintained for all owners who are making monthly special assessment payments. Special assessment billing and expenditures should be processed using the special assessment bank account and accounting fund. Any amounts received or paid by other funds should be reconciled and repaid to the other funds at least monthly.

Board Meeting Review

At every board meeting, boards should review the vital data systematically. We recommend that board members review special assessment reports and supporting documents and ask questions before meetings. Keep your eyes on the goals: Collection of all assessments, control over expenditures including debt service, and determining the projected surplus or deficit. Boards need to formulate a plan should there be a projected shortfall. Another special assessment? Increase the loan? Hold off on expenditures?

Boards need to actively participate in the management and accounting for all special assessments.

By Newman CPA

Chapter Happenings Sponsor, February 2021

By: Jeremy Newman CPA, Newman Certified Public Accountant PC

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The Best 4 Financial Reports For HOAs & Condo Communities

by wscai-admin | Apr 23, 2019 | Accounting, Auditing & Bookkeeping, Article, Banking & Lending, Blog, Community Associations, Financial: Money, Banking, Insurance

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The Best 4 Financial Reports For HOAs & Condo Communities

I hear it all the time, the board gets a stack of paper reports but doesn’t look at them. The reason why? I suspect information overload and not knowing what to look for in each report. It can be overwhelming for a community board member that isn’t used to looking at financial reports.

So how about if you only needed a handful of reports to look at – it would make it simpler and take less time to get a picture of your association’s financial health. The following are my top four financial reports for HOAs and condo communities.

Board members have a fiduciary responsibility to exercise due care and diligence when overseeing the community and its funds. These 4 reports are vital tools for protection of association assets, control and planning:

Best 4 Financial Reports

Aged Delinquency Report
Comparative Income & Expense Report
Balance Sheet
Bank Reconciliation Report

[1] Aged Delinquency Report

This aged delinquency report/aged owner balance report shows who is behind in their assessments. Different reports can also break out the delinquency by type of charge owed (assessment, late fees, etc). The board needs to review this at every board meeting to see what action needs to be taken at certain late dates (30, 60 days) like sending a demand letter or turning the account over to a collection attorney or agency.

If you get behind in collections it can cause a problem with services at your community and worse, you may not be able to collect the entire past due amount depending on your state laws and how long it took you to commence a legal action. Some states only guarantee collection of 9 months past due assessments and it takes a few months for the action to work itself through the courts so if you are owed a year you may only get 9 months – ouch!

[2] Comparative Income & Expense Report

This is my favorite report to run for the association. The Income Statement is meant to inform how the association is doing compared to budget. It shows the current period actual expense, budgeted expense and any variance between the two. It also shows the same thing for the year to date.

When you see a variance it is a warning flag to ask why and dig deeper. It can also allow you to make up any shortfall quickly so you don’t cripple your community’s cash flow and vendor payments. For example if you are spending more on snow removal than budgeted due to an extreme winter you can do a special assessment right away to cover the shortfall while it is still cold and owners are more understanding.

[3] Balance Sheet

A balance sheet is an important part of the financial package. It tells where the association stands with their asset, liability and reserves at a particular point in time. There are three key accounts on a balance sheet that association officials should pay special attention to:

Cash in the Operating Checking Account – shows ability to meet current operating expenses.
Accounts Payable – shows how much is owed to vendors and service providers.
Capital Reserves – shows how much is available for major capital repair and replacement projects in the near and distant future.

[4] Bank Reconciliation Report

The Bank Reconciliation report is used to “prove” that the cash assets shown on the association’s books and balance sheet agree with what the bank statement shows. The reconciliation takes into account outstanding checks that have not been processed by the bank as well as deposits of cash that have not been processed by the bank. There should not be any difference it should be $0 but if there is a difference it is a flag for you to look into something further.

Additional Reports to Consider:

Bank Statements

Bank statements are another tool to ensure you are not a victim of theft. Plus, you can easily see how much money you have in the bank. Bank statements are easier to understand than the balance sheet since we’re all used to looking at them and they show the current amount of money in the bank account(s), recent deposits and withdrawals.

Current Capital Reserve Plan

You don’t need a fancy report, but you should have something that shows how much money you have set aside and the anticipated cost for replacements and larger capital projects. This report is far superior than looking at a capital/ reserve bank account which can be deceiving. You may think you have a lot of money saved but if you had a big roofing or paving project it could be wiped out with no funds for other projects.

As a volunteer board member, you only have so much time to dedicate to operating your community. There are emergencies to deal with, vendors, projects and of course financial and administrative tasks. A large part of your responsibility is your fiduciary responsibility to the community. Overseeing that the community funds are safe and being spent properly is of high importance.

This article first appeared in the Jan/Feb Issue of Community Associations Journal.

By Russell Munz, CMCA

Russell Munz, CMCA is the founder of Community Financials which provides stress-free financial management to self-managed communities and managers nationwide. Previously, Russell grew a successful 41-person full-service management company over 16 years; he now provides big company systems and processes to a new audience.

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