What Property Managers Need to Know About Reporting to an HOA Board

Your HOA board plays a key role in both the short and long term planning within your property management business. In order to fulfill their responsibilities, board members must have access to certain information. In particular, they need details on company financials.

 

HOA boards can have notoriously high expectations of the reporting they expect, particularly when it comes to financial details.  Additionally, this information must be:

The Building Blocks

Every board meeting has an agenda that includes at least one item that  covers accounting and financial reporting. Specifically, board members regularly like to review the following documents:

• Income Statements – Detailing all relevant income and expenses for the specified period
• Balance Sheet – Demonstrates all assets and liabilities of the community
• Budget – Based on plans and approved annually by the board prior to the start of  each fiscal year

What to Include

Every board is different, and most boards will let you know what order and style they like their reports in. Generally speaking though, there are four aspects  reporting that are required by an HOA  board:

1. Compliance

The purpose of this reporting is to:

         - Provide verification and assurance of how resources are being used and ensure operational control and efficiency
        - Offer accountability to funders, partners and the public (when applicable) regarding the use of funds

To accomplish this, the board should be provided with:

         - Income statement in comparison to the budget
         - Balance sheet
         - Annual review of audit (if applicable)

Verification of accurate and timely filing of any tax or other required documents

2. Evaluation

Your board should seek to:

         - Evaluate the use of resources and effectiveness of activities
         - Review administrative systems and controls
         - Measure progress toward goals
         - Consider financial information in relation to the company’s mission

For this, the board should be provided with:

         - Comparisons of actual results to the existing budget and other strategies
        - Comparisons of financial benchmarks, such as customer levels, costs of services, financial ratios and reserve levels
      - Financial reports as they relate to operations and the needs of the business

3. Planning

The board should be involved in the planning process in order to:

Consider trends, changes and opportunities to project future needs

Develop assumptions for utilization in future plans

In order to accomplish this, the board will need:

         - Trend analysis of income and expenses for the past 1 to 3 years
         - Relevant details about the external environment and how it is impacting the company
         - Financial implications of new projects and management decisions
      - Several budget scenarios based on various options that are under consideration

4. Taking Action

The board may be required to take action in order to:

         - Respond to negative and positive changes
         - Fining frequent bylaw violations
         - React to developments in the external environment
         - Address issues with things like budget or cash flow
To do this, board members will need:

         - Income statement in comparison to plans and budget
         - List of bylaw violations
         - Analysis of the causes of variances
         - Several different scenarios based on the various options that are under consideration

Additional Reporting

In addition to all of the above documentation, there may be times when the board requires more information. This supplemental reporting may include:

         - Cash flow projections
         - Periodic budget updates
         - Forecasts
         - New budgets that require approval
         - Specialized budgets for major new initiatives

 

If you’re new to the world of HOA board, all of this may seem overwhelming. However, the best way to keep an HOA board happy is to make sure they feel like they’re a part of every decision. Maintaining meticulous records throughout the year guarantees they never feel like you’re hiding anything from them. By leveraging a property management software that keeps a thorough audit trail, and integrates directly with your report writer, you’ll save yourself time and stress when it comes to board meetings, no matter how demanding your board members may be.. For more information on how Netintegrity can help you plan and prepare for your next board meeting, click here.