HOA Information Center
The finances are very important to the health of the overall HOA and the community. An Association's financial health consists of annual budgeting using two different kinds of assessments, The first is the operational budget, These expenditures are common expenses expected to operate and maintain the Association on an annual basis. Examples of typical Common Expenses include Association property landscaping (mowing, feeding, trimming, tree trimming etc.), insurance, utilities, management fees, attorney and accounting fees, and a list of other expenses expected in a typical year. These Common Expenses will be itemized in the budget according to our COA (Chart of accounts), which outlines the budget into various categories.
The second type of assessment that are levied by the budget is referred to as reserve funding or reserve assessments. These are larger expenses which do not come due every year, but which must be funded in part on an annual basis in anticipation of when the time comes for replacing each reserve component which, depending on the reserve component, can have anywhere from a 2 to a 50 year asset life. Examples of reserve components which need replacement in the coming years are private roadways, docks, swimming pool deck and surface, clubhouse painting and clubhouse roof, etc. The Board of Directors adjusts the reserve needs related to reserve components on an annual basis by considering the projected remaining asset life and anticipated cost of replacement. If an unusual situation occurs, such as having excess funding in the reserve account, then the board may vote to reduce reserve assessments the next fiscal year as annual adjustments are permitted. These reserve expenses are identified in the Association’s Reserve Study which is performed regularly, and which identifies the amount of prorated reserve funding required each year. These reserve assessments are paid alongside of the regular operating assessments, but are deposited into a separate reserve account for future funding needs. Florida law requires that the Board of Directors must fully fund 100% of the Association’s reserve requirements each year unless there is a vote by the board of directors to reduce or waive the upcoming year’s reserve assessment amounts. In this unusual event, the membership during a special meeting, will conduct a vote to accept or reject the reduced funding risk with a quorum majority. If passed, then the law permits this type of short-fall funding because the membership voted to accept the risk of not fully funding in the coming year. As noted in Section 720.306 Florida Statutes, underfunding now will likely result in a special assessment(s) in the future.
Once the budget is finalized by the Board, then the upcoming years’ assessments are adopted or levied, resulting in your Annual Assessments which is composed of both an operational expenses and reserve expenses. Payments are either annual or quarterly, and are easily set up in the HOA management companies web site. This is the fastest, and most efficient method for payment.
From the by-laws:
6.1 Budget. The Board of Directors shall from time to time and at least annually, prepare a budget for the Association, determine the amount of Assessments payable by the Members to meet the Common Expenses of the Association, and allocate and assess such expenses among the Members in accordance with the provisions of the Declaration. In addition to annual operating expenses, the budget shall include reserve accounts for capital expenditures and deferred maintenance. The purposes of such accounts shall include, but not be limited to, periodic maintenance, repair, improvements to and replacement of the Common Property and all other property which the Association is obligated to maintain. The budget shall be adopted upon a majority vote of the Directors present at a meeting of the Board at which a quorum is attained. Each Member will be provided with a copy of the budget or notice that the budget is available upon request at no charge.
Records management is also very important to a well run HOA. This includes the requirements from Florida Statute 720 which identifies the types of records that are required along with how long they are stored, vendor contracts, bylaws, covenants, and other documents that provide continuity within the community. There is a specific process to request these records, which is part of Florida Statute 720. There are also standardized forms for processes that are available online.
Behavior standards for the Board and Homeowners outlines the responsibilities from each party to engage in constructive dialogs, activities, and objectives for the entire community.
The Communications plan outlines the goals, methods, and objectives for communications within the community. Some of these are legally driven, and some are best HOA practices to provide a path for neighbors to raise issues, concerns, or news items for all of the neighborhoods in our community.