WHO IS RESPONSIBLE TO APPROVE MONTHLY HOA FINANCIALS?

Good Morning.....I am back at the group for clarification on the approval of monthly HOA financials. To preface, my HOA board is not knowledgable and the PM only talks a good game. I am an adversary.

There are two things that I need to explain....Prior to the monthly board meetings, the BOD receives all data to be discussed in a format that I will call the BOARD packet. On the night of the meeting, the owners in attendance are given the meeting agenda, the prior meeting minutes and the prior meeting financial that I will call the OWNER packet

June 10, 2015, BOD meeting: OWNER packet should contain all May items named above .HOWEVER, there is apparently a statement made by the treasurer that the May financials are not available prior to the meeting(Per minutes). I did not hear this statement because I asked some financial questions based off the data contained in the owner packet financial (GL) statement.

The following day, I am working with the GL in the owner packet and discover that it is the APRIL GL, NOT the May GL. I now ask myself why would the PM bother to include what already has been approved and during the meeting when I began asking questions, why did no one on the BOD stop me and say your are looking at APRIL not MAY?

June 15, 2015 I am at the PM office for an appointment because I have done a record request for items on another issue. During this meeting, I point out to the PM that the APRIL GL is in the owner packet....and why? Her first comment was that you are the only one that noticed that. (What does that mean??) The PM goes onto explain that because the meeting date fell too early in the month, they did not receive all the invoices and could not do the financials. She pulls up some invoices that verified her statement I guess, but then so what......just don't make the entry in those particular categories right?

July, 2015.....I have one friend on the BOD and I ask him what month is in your July meeting packet and he tells me MAY. Makes sense because they never got them so that is what will be approved, but where is JUNE? How can they be running two months behind?

July 8, 2015 BOD meeting: Owner packet has June GL. The BOD approves the June GL. Because of other distractions, I do not catch that they have SKIPPED over approving the May GL that was missed last meeting.

I had no reason prior to the July meeting to go the portal to see the May GL because it was never approved but when I did go to retrieve the June GL, I see the May GL also. I immediately asked the PM when and how they May GL was approved and she tells me the treasurer did it on June 18(after the BOD meeting)! The PM states that the "financials were posted to the portal and the board given time to review them and the treasurer sent in the final approval."

Now, I know about unanimous consent.....but I do not know about this kind of protocol. HOW COULD THE BOD APPROVE THE JUNE GL IF THEY WERE NEVER IN THE PACKET? I might add that the June GL included in the owner packet was missing the final page of the 4 page document.

I emailed the PM and copied the entire BOD and asked what is going on and await a response. I know they want to shoot me. I have contacted my only friend on the board and he is going to check to see if he received any further GL but even he admits that this is highly suspect and is very apologetic that he is missing it. In his defense, he is not the treasurer and is involved in a myriad of other issues. I do not think anyone is stealing, but the negligence is overwhelming me.

Is it me or is this legit?

The Board of Directors

all else is (to quote Judge Judy) puffing

(done - end of case)



pun intended

I took accounting courses too. It took a minute to see how are financials worked. You have to keep in mind you are a NON PROFIT. The HOA is to spend as much as it collects each month. Although there can be some allotted toward savings/capital improvements.

This is NOT your home budget. You have to realize this is EVERYBODIES money. The board is responsible for managing it on an everyday basis. Which may or may not include having a PM. So expenses show up a little differently than expected until you get the feel of it. There is a separate collections report that has to be factored. Plus timing of the bills versus meeting times. Our meetings were the 2nd Thursday of the month. That was not always enough time to reflect late payments or checks not passed.

Contrary to someone's opinion, an HOA is not to spend as much as it takes in. An HOA is not a NON profit, for rather a NOT for profit. Association finances are different than the accounting classes you took in school. It takes longer than a minute to understand association finances especially if you deal with larger and more complex associations. I have worked with CPA's that don't have a clue about HOA finances. Look at your annual reviews and compare them to your monthly financials, night and day. Most larger associations work on a accrual or modified cash accrual basis. Generally, what the Board receives and what the membership sees are completely difference. Generally, the membership will see only a balance sheet and an income/expense statement.

Not sure about the laws in Arizona, but California ONLY has to REVIEW the financial records at least on a quarterly basis, thus the minimum number of meetings that have to be held is quarterly.

One of the most important documents that a Board needs to review is the bank statements for the various bank accounts at the various financial institutions they hold accounts in. Unfortunately, I have seen this requirement be ignored.

As far as how much a HOA takes in and spends, they should have an emergency fund of at least 1 1/2 to 2 times their monthly assessments. This would be for unexpected expenses unrelated to reserve expenditures.

Good Am Richard.....In my HOA, the only items that are not shared with the owners are the accounts of those who are delinquent and the actual check register and I don't think this board sees that. The prior PM shared the checking account register with the board also which I personally think is a good idea. I am concerned about the transparency of the PM who guides a board that is not too sharp (but yes, willing to serve). I also know for a fact that there is serious information that is not being shared with all the board members. How do I know? Because the board member asked me about the legality of something when he learned it in a round about way. This sound stupid and so immature when I actually put it on paper but that I what I am dealing with. My how has about $260 K in reserves and nice monthly inflows and I just want to know that someone is watching it and have little faith in the directors and no trust or faith in the PM. Much politics here too.
Joanne

Richard.....no doubt....this group was paying two vendors for the same service......one was fired and a new one hired and the stupid PM and treasurer did not cachet for 4 months.....$1800 that we were surely going to get back, and then it was small claims court and ended up the HOA ate it all. Tell me something if you would....the BOD made a settlement with some its owners. In the case that I worked on, the HOA recovered all their assessments but the owner did split on the cost of legal fees because the HOA was at fault in the first place. Were should the payback of the legal reimbursement show up on the general ledger? They have an income category for legal but they also have a separate category for legal expense. Right now, they are deducting the reimbursement under the expenses....for example....the year started with a minus under legal expense. Does that sound right to you? Why do they have a "legal income" category if they are not going to use it? I am a doubting Thomas....no question about it.
Joanne

AZ law probably says who is responsible to approve the financials and how often.

As Richard noted, in CA the Board must review them quarterly. We review ours monthly and vote to approve them "subject to the year end audit."

At our 7/28 open board meeting, we'll review our June financials, which I, as a director, will receive today.

Earlier this week, our Finance Committee review them and recommended that the Board approve them. Perhaps, Joanne, you can suggest to your board friend that they appoint a finance committee of you and two others who might be willing to serve.

I agree that many directors don't understand them and in our HOA, where we have three operating budgets and three reserves accounts, it gets pretty complicated. Most directors rely entirely on the MC to take care of them. Our financial package is usually about 100 pages long. Owners would be gable to request copies in CA, but not of any payment records, payment plans, delinquencies or vendors employees' individual wages.

I've just been reviewing our new "full" reserves study, well, three studies, of over 150 components.. I haven't done the math yet, but doesn't $9,500 to replace 217 GSF of tiles in two elevator vestibules sound weird?? I have far larger ones to check, but this one caught my eye!

Joanne,

As Kerry noted and depending on the size and complexity of your association, it would be a good idea to create a finance committee to oversee the finances of the community and maybe give the Board some guidance to the financial affairs of the association. Doesn't always work, as politics and feelings get in the way, but worth exploring.

As to the suggestion of a finance committee......this board is resistant to forming any ad hoc committees. I almost pleaded with them to form a committee when they were going to update all the governing documents. The president quit because I raised lots of concerns about how they were going about doing that without getting any owner input. That was me on the long thread about letters of engagement. The attorneys who gave them bids on doing the updates even suggested that they form a committee but they opted to let the board president be the point person. That did not turn out well.
Thanks
Joanne

Unfortunately, that is the history with HOA's.

Joanne

Being intimately involved in my HOA, it can take its toll, I can speak from personal experience.

I wouldn't live in another HOA, because my nature has always been to try and be involved.

I do though, enjoy teaching individuals how to best survive in one.
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Don't get involved, LOL

Joanne,

It seems you may be more knowledgeable on your HOA's financials operations than some of your Board Members and perhaps even the MC. Have you attempted to become a Member of the Board yourself so you can actually help make the decisions, educate other Board and HOA Members, share previous HOA experience, and dive deep into the financials with all the necessary info at your disposal?

You say you're an adversary. I don't mean this rudely, but you come across a little adversarial in your posts. If you communicate similarly with the Board and MC, then I can understand how your relationship with them may not be the best. You definitely seem to know what you're talking about. If presented in the right manner, the help and information you have to provide may be better received.

While I applaud your participation as a homeowner, perhaps you are going a little overboard with the questions to the Board and MC, attempts at involvement, scrutinizing of the financials, criticism of the selected courses of action, recommendations to the Board on how they should do things, and other HOA business that you're involved in. Maybe your Board isn't prepared for that much "help" which might explain them being withdrawn and not as transparent as you'd prefer.

If you wish to be that involved, then I think your time and effort would be better spent as an actual member of the Board rather than someone constantly questioning and recommending.

Bad example!

The hardest change you ever have to make is a Culture change. Which is what your facing. Changing an established culture to a different way of thinking is a constant struggle. With much experience in this area, it typically takes about 2 years to turn a HOA culture around. The 3rd year is a stabilizing period which things either go back to the way it was or it evolves into a better running machine. This isn't based on my own experience but others I've seen post here over time. Expect 2 years of extremely hard work and head banging. You can make it through and there is light at the end of the tunnel... Just make sure that light doesn't take 6 months to be changed out...

Joanne. I read your posts differently. I do not see you as adversarial, but rather you have a refreshing straight forward approach to resolving issues.

I've never heard of anyone approving financials.

Typically, a budget is approved (by the Board or the membership depending on language in governing documents and applicable laws).

Typically, an audit report is approved (accepted) by the Board.

However, financials are simply reported as part of the Treasurers report.
They are not approved or disapproved. They are simply recognized as part of the report and, if needed, questioned.

For our Association, the report is current as of the date it's printed (which is typically the day prior to the package being put together).

As for meeting packages.

Any members who attend are provided the same package as the Board receives. This, in VA, is what is required by the law under our open meeting requirements.

Alright.

Then please answer when the financials would be disapproved?

Numbers are numbers.
Reports can represent the numbers in various ways (and how the numbers are reported should be approved/disapproved. For example: what categories to include in the Income/Expense statement and what is within each category).

But I don't see why the report, once prepared and submitted would be approved or disapproved (vs. simply being accepted as part of the Treasurers report and included as an attachment to the minutes).

I understand that this is how you have been doing it.
I suppose the question is why have you been doing that way?

As for why we do it our way, simple presentation of the report, I offer the following:

Spotlight on You the Treasurer from the National Association of Parliamentarians

Approving the treasurer’s report is not advised - Only audited financial reports should be adopted by an organization. a 2013 article from Michigan State University

I suppose either way can be utilized.

I'm just trying to understand the reasoning for the way it's being done in your Association (perhaps in AZ).

Like I said it's different then what we do. Like you, I take no issue with it. I'm just trying to learn something that may or may not lead to a recommendation to the Board to change how we are doing it.

Tim

In my own association and in the many I managed, financial reports have been approved by Board. The times they were not were times, like minutes, where information was missing or expenditures were put into the wrong GL code. That was a common occurrence for us.

From personal experience, I put more faith in the monthly financials than the year end financial reviews done by CPA's.

Tim, Thanks for the explanation.....yes...printing is a thing of the past almost. My HOA has a code of conduct for the BOD, a charter for committee members and nothing for the PM and they need it most.
Joanne

What bad things exist? Please elaborate on this!!!

Yes, I agree with Allison, elaborate on the bad things you found or start another discussion with the list. I have a wonderful HOA but that doesn't mean they do everything right. I'd like to be as involved as Joanne, as she is raising the bar. What I've found from BODs is that they say they want community involvement, but that translates to help with re-painting street signs, not involvement in the books, and not by answering difficult questions. I've been hanging around the board for years, and they don't bother with me, but I see other members who attend get shunned, right through the entire community after asking difficult questions. It's always been apparent to me that even my lovely BODs do not want to answer any questions regarding financials.

Pam.....If you have legitimate concerns/questions, you have a right to ask. I am quit outspoken and passionate and that can be abrasive but it is who I am and hard for me to tone it down especially when I feel challenged. I will reference statute and quote our documents if I have to so that comes off as being a smart A. You will get farther than I do if you can be calm, cool informed and firm. I am sure your situation is better than mine. Go for it! I just did a post on another thread about a board changing their bylaws. I am sorry I am not that good at cut and paste but you might read what I wrote about the last board meeting and the BOD response to my friend who was there to help them.
Have a great day.

Joanne

Kerry, you are correct in all your observations.....I am all over the place because it is bad from top to bottom and all points in-between. There is no stomach for real change here believe it to not. I have tried to recruit others and they are not up for it. So I either back off or move out and the later is the choice but waiting on a couple of items that will determine where I relocate and to what state. Thanks for the suggestions.
Have a great one.
Joanne

Ok ... at the risk of Tim throwing me off this website (again), I will admit to not being Pam. Nor do I intend to reveal who I am except to say that I am more like Joanne than I admitted on this thread. I have filed a suit against my HOA. I am not going to small claims court, I'm heading to a big one, with big attorneys, from a big law firm. If I thought Tim wouldn't have me forcefully removed, I would share more. My hat is off to you Joanne, you are doing it right. It's not how you say it, it's that you SAY IT! I am working with State Legislators. They hear so many horror stories that they are becoming very good listeners. None have shouted me down or been combative like so many of the people on this website (and my board). To Joanne I say "you go girl!". I will either win or lose, but to be apathetic is criminal! If no one hears from me again, it will be because Tim had me banned. Go ahead Tim ... show us all how you have more control of the website than most know. Wield the big stick! all while pretending to be the good guy in the white hat.

When Tim comes back and says "oh, I don't do that, or I won't have you thrown off the website", I still won't talk. When the results are known maybe I'll write and let you know. Maybe I won't. Maybe you'll find my suit on the front page of this website. But I won't deal with the combative trolls on this website who think the only solution is to re-elect a new board or that the board is always right and the HO is always the problem. By the way, if I lose ... I can live with that, but my case looks good. This is a huge cost to the community, but some community needs to be the sacrificial lamb for HOA laws to begin to change.