HOA 101: The In’s and Out’s of HOA Financials

“The hardest thing in the world to understand is the income tax.”

That statement, attributed to Albert Einstein, is widely thought to be true. But we find that the financials of a community (or homeowners) association – most of which are nonprofits – can be just as confounding as those pages upon pages of personal tax forms! That’s especially true if boards are made up of leaders who, though qualified in many other important ways, do not have professional accounting or financial backgrounds.

Dawn Engel, CMCA, AMS, CAAM, is Planned Development Services’ (an Arizona based HOA Management and Accounting company) community manager, and adds that there are further complications to these financial issues in recent years. “In the past 20-plus years, community associations have provided the services that formerly were provided by municipal entities, such as maintaining common area landscape, streets, playgrounds, pools community clubhouses and golf courses within the community,” Engel says. “It is now up to an HOA to maintain, repair, and replace these common area amenities and components within a community association.”

With these things in mind, Planned Development Services (PDS) will hold one of our popular board-training workshops, designed to guide Arizona HOA boards through the essentials of community association financials. “The Ins and Outs and Ups and Downs of HOA Financials and Audits” will be held on Thursday, March 24th, in our Peoria office and conference center, and will cover everything from assessments to audits to balance sheets.

Just a few of the aspects of HOA financials that we’ll delve into:

• Assessments: Assessments are allocated to cover the cost of maintenance and repair of common area amenities and components such as (but not limited to!) landscape, pest control, utilities, lighting, playgrounds, basketball courts, and walls. Though intended for the good of the community, assessments often are not paid by homeowners in a timely manner.

• Budgets: The HOA budget is simply a plan that specifies how financial resources will be allocated during a particular period. Budgets, however, can be thrown off by a number of complications, like the aforementioned late assessment payments.

• Audits: Though audits, which are extremely thorough analyses of an HOA’s financials, can be costly and time-consuming, there are times – such as when a new board arrives or a new bank is taken on – that they may be necessary.

• Important Documents: From balance sheets to income statements, there are more financial documents than you can image – we’ll help you get to the bottom of understanding them. For more information, please visit www.pdsaz.com. Most importantly, mark your calendar for March 24th! Budgets, audits, and assessments don’t have to be a bad experience – we look forward to helping you navigate the sometimes-murky waters of HOA finances.