6 Common Expectations of an HOA Board

The biggest failure for HOAs originates from the lack of meeting basic responsibilities and expectations. If your association is experiencing issues, such as people who don’t pay their dues or seem to always violate basic rules, then it is common to look upward at your Board’s leadership. These concerns, if not addressed, may expose all homeowners to higher assessments or the possibility of a lawsuit. And, chances are an HOA’s failure is the result of a Board member’s inexperience, ignorance or failure to use resources or a personal agenda that made them run to be on the Board.

1. The expectation of collecting dues from all homeowners.

Collecting association dues can be a daunting task, especially if some homeowners are reluctant to pay them. As a Board member, it is their duty to collect fees in a timely and professional manner, without fear or favor. This can potentially become contentious when the Board has to confront a long-time neighbor. High delinquency rates can impact your association’s cash flow and hinder your HOA.

2. The expectation to review and share the HOA’s financial records.

There is an expectation of Board members to closely watch their association’s spending and to demonstrate fiduciary responsibility with their association.  Far too often, associations experience fraud in some way or another.  In order to prevent this, accounting for every dollar spent helps to assure homeowners that their money is going towards their best interest and prevents fraud amongst your association. To avoid the risk of financial mismanagement, a third party service is recommended and used as an unbiased service to meet financial expectations.

3. The expectation to file tax returns.

Board members are expected to file important legal documents each year. Every homeowner’s association is required to file a federal tax return (IRS Form 1120-H). Many Board members think that the association is not required to file anything because it doesn’t pay taxes. This is not true. HOAs are still required to file. Failure to do so can put your association at risk of losing its non-profit status and will result in penalties and interest that will need to be paid to the IRS.  These payment penalties will be distributed to all homeowners in the form of higher dues or assessments.

4. The expectation to file appropriate Secretary of State documents.  

Another common expectation is for Board members to file their annual reports with the Secretary of State.  Failure to file the required documents can result in dissolution of the association which can cause potential legal and financial issues.  It can easily be remedied by contacting the Secretary of State office to file the necessary forms and pay any applicable penalties.

5. The expectation to maintain insurance coverage. 

HOA Boards need to take special care to review insurance policies; understand lapse dates and renewals; and review coverage amounts. If a claim occurs during a time when insurance has lapsed, it can cause major problems. An unplanned assessment may be required because your Board forgot to renew your association’s insurance.

6. The expectation to ask for professional help.

There is absolutely nothing wrong in seeking help, especially when it comes to HOA accounting and money management.  Let a professional management service provide insight and help you with these matters to ensure your association is functioning at its greatest potential.

A good example of an professional management company in Idaho is MGM Association Management. MGM is a member of the Community Association Institute (CAI) and their focus is to assist Board members, avoid exposure to risks, and to guide the HOA to become financially solvent. MGM provides a D-I-Y accounting program for those HOAs who want to remain independent to full management service for those HOAs that a need professional foundation. For more information, call (208) 846-9189 or visit www.gomgm.com.