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Moving funds is not considered an expense at any point and should not be recorded as such. The CPA will also conduct an inspection of your HOA’s minutes and contracts for errors. This report comes with a “positive assurance.” The CPA expressly guarantees that all financial statements correctly identify the financial position and health of your homeowners association and all of its operations. Approximately 70% of HOAs utilize cloud-based accounting software, streamlining hoa’s financial statements and processes, improving accessibility, and enhancing transparency for board members. While understanding basic accounting principles is essential for every HOA board member, managing complex financial transactions may require professional expertise. An income statement is essential for budgeting and planning future expenditures.

When using the Cash Basis for your HOA accounting standards, you only report revenues once actual cash has come in. Similarly, you only report expenses once money actually leaves the association. This leaves no room for Accounts Receivables Assessments Receivable, Prepaid Assessments, and Accounts Payables. If an Accounts Payable Report tracks your association’s debts, an Accounts Delinquency Report tracks amounts owed to the association. Let’s be honest — collecting monthly fees and assessments from homeowners can be tough. However, it can be twice as difficult when you have no records of their debts.

Can a homeowners association fine you?

HOA means homeowners association and is an organization that manages a community. This could be a housing unit development, a subdivision, a condominium, or a townhouse that a board of directors will oversee. These are residents of the community that the other homeowners have elected. From time to time, homeowners in an HOA may also need to pay special assessments.

• If your home is your primary residence, HOA fees are not tax-deductible.
• Failure to follow the rules can have potentially severe consequences.
• If your HOA has a large number of units or complex financial transactions, hiring a professional management company could be a wise decision.
• When you consider purchasing a property within a homeowners association, you need to consider the difference in price between homes within the association and those outside.
• Proper accounting surrounding all aspects of an HOA’s finances matters for several key reasons.

While HOAs have the power to enforce these rules within their community, they are also bound by local and federal laws, including the Fair Housing Act, to ensure fair and equitable treatment of all residents. Enforcing the rules of an HOA community is a significant responsibility of the board, and while all HOAs have rules, some are far more restrictive than others. For example, many will require you to get prior approval for home renovations, and others might prohibit you from renting out your home. Some HOAs may restrict the number of plants you can have in your front yard, the color you are allowed to paint your home’s exterior or the height of your mailbox. While we adhere to strict
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Direct Access to Accounting Software

Because expenses follow a cash basis, monthly reports may mislead associations. As an example, if the board approves a $50,000 roofing contract, it will not hoa accounting show up on monthly reports until the check is written. The board may think it has extra money because the $50,000 is an obligation not yet on the books.

Our management services are flexible and tailored to meet the needs and challenges of each community we manage. We use property management software specializing in full accounting services for communities through secure cloud based technology. HOA fees can range a couple hundred dollars to $2,500 or more per year. The amount HOA homeowners must pay depends on the amenities offered by the community. Neighborhoods with extensive amenities or luxury facilities usually charge considerably more than those that just enforce rules and restrictions.

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These areas can include swimming pools, fitness centers and parking facilities, as well as communal lawn maintenance, snow clearing (where applicable) and landscaping. Common mistakes like failing to reconcile bank statements regularly, neglecting to plan for long-term expenses, and not keeping a reserve fund can have serious implications for the HOA’s financial health. The average collection rate for HOA dues is around 90% to 95%, emphasizing the effectiveness of proper accounting practices in ensuring a steady income stream for community maintenance and improvements. The annual audit process for an HOA usually takes around 60 to 90 days, ensuring a thorough examination of financial records and compliance with generally accepted accounting principles and standards. For any HOA board, managing community finances is one of the most critical responsibilities. We often find boards mismanaging money simply because they don’t have a firm grasp on basic accounting principles.

• Let’s be honest — collecting monthly fees and assessments from homeowners can be tough.
• This type of accounting is usually considered superior because it offers the most complete overview of the HOA’s financial status compared to the modified accrual or cash methods.
• Homeowners will be expected to maintain a certain standard of their homes.
• Hiring Condo & HOA self-management support services will reduce the time required to be a Board member.
• For this reason, you can only adopt this technique for interim or unofficial reporting.

An HOA’s board of directors is ultimately responsible for managing the association’s finances. So, it is wise for board members to be familiar with the various methods of accounting, financial documents, and budgeting techniques HOAs use. Here, we’ll provide a brief overview of these HOA accounting basics. If you find it too much of a struggle trying to manage your homeowners association’s finances on your own, it may be time to outsource those services. Nothing beats the convenience and expertise you have access to when you trust your HOA’s or condo’s bookkeeping/accounting to Community Financials.