Be vigilant about your HOA’s accounting practices. Be informed and demand transparency.
Referencing the Uniform Planned Community Act: under Section 5316(a) the Association must make its financial records available for each Unit Owner or their authorized agents to review. If the Association does not comply with these provisions of the UPCA, then you can file a complaint with the PA Bureau of Consumer Protection.
SUMMARY OF MAJOR ISSUE:**
The HOA brings legal action against residents because their patio exceeded size requirements set forth in ARC Committee Rules.
At the time the patio was built (2014) there was no Architectural Review Committee.
January 2016: the Board (still TOA-controlled) initiated the formation of an Architectural Review Committee (ARC).
At least 11 other patios in the community exceed the 16-foot limitation.***
Other residents whose additions were part of their contracts with TOA did not need ARC/Board approval and were permitted to install larger patios and other improvements that were not in compliance with the community’s governing documents.
*Source: Monthly Financial Statements
Board Meeting, October 10, 2019
**Source: Arbitration Documents
***Source: ARC Meeting Minutes, 2017-2019
ARC Variances/Requests for Modification, 2017-2019
Property managers are not "experts" especially in financial matters.
What professional certifications and licensing does the community manager possess that qualifies them to manage our community and finances?
...realize that the statements are not worth the paper they are written on, and unless a formal "audit" occurs, your HOA could be in desperate trouble and you would never know.
UPDATE 7/20/2018: The Board has finally decided to have an audit of 2017 financial statements.
Including unnecessary "updating" of governing documents - and/or spending money on litigation without providing written notice to the HOA members.
...and whether any such borrowing is done properly and lawfully by providing written notice to owners of any such borrowing and of plans to repay the money within the statutory time period.
all budgeted reserve funds to reserve accounts during the fiscal year.
...sign checks, or to transfer money into or out of reserve trust funds accounts. This is the cause of much financial loss in HOA's.
The board must have full and separate control over the association’s reserve account(s), including the signatory control of bank accounts.
Associations should require two board signatures on all reserve checks, redemptions, or fund transfer requests. One of these signatures should be from an appropriate board officer (e.g., treasurer).
For operating cash accounts, associations should consider requiring two signers for all checks above a certain amount.
Though obtaining a second signature for checks on operating cash can be an inconvenience, associations should weigh the extra control and protection this procedure provides against any delays it may cause.
Associations must insist that the manager and/or employees are sufficiently bonded to cover all association funds reasonably at risk.
Associations should require 60 days notice prior to cancellations or nonrenewals of the management agent’s or the association’s bonds.
The management company contract should specify that kickbacks are not allowed.
Associations should establish in writing that any benefits, credits, discounts, or free services provided by a financial institution, credit card company, membership-only warehouse (Costco, Sam's Club), contractor or others must benefit the association, not the management agent.
The board must ensure the safety of its financial systems and implement effective internal controls.
Protecting the finances of our association takes effort from board members and residents.
Mischaracterized expenses or income can skew your association's entire financial system.
Use the money from reserve fund contributions for common area projects and other large, unavoidable expenses. Don’t take from the operating fund, which is used for regular maintenance, vendor contracts, and similar expenses, unless you need to. If you do, it can unnecessarily enlarge assessments.
AUGUST 20, 2018, Update: Once we questioned this situation, one of the signatories on the HOA's bank accounts was changed. (We still don't know about the CD's.) The management company owner and the Board Treasurer are now the individuals who can sign checks and access HOA bank account(s).
Posted: August 6, 2018
It's simply not prudent to allow the management company full control of the Association's funds.
The HOA has two bank accounts with a local bank; one is designated Operating Fund, the other is Reserves Fund. The HOA also has two Certificates of Deposit with a local bank (totaling over $50,000) and the only signatories who had access in 2017 were the management company president and her son!
BEST PRACTICE: Reserve accounts should be in the association's name only. Only board members should be authorized to sign checks or transfer funds from those accounts.The board must have full and separate control over the association’s reserve account(s), including the signatory control of bank accounts. All transactions made by board designees should be reported and verified in writing. These transactions should be approved by the board, and approval should be documented in the board’s meeting minutes. The reserve cash funds should be administered differently than the operating cash account.
[More detailed information will be provided on the secured "SR Residents Only" page on this website. Click on the menu item above and you will be asked to provide your email address for access. If your email is on our approved list a link will be sent to you via your email. Or you can contact us to request access.]
UPDATE: 5/6/2019, Finance Committee has adopted another of our ideas regarding bank reconciliations (well, better late than never).
"Finance Committee Notes 4/26/2019: "Committee member obtaining copies of recent HOA bank reconciliations from CCM to review and verify and will review them quarterly in the future." (See note above dated 5/6/2019).
Yep, for the last two and half years the Board has allowed the management company to reconcile our bank statements (not a good practice).
Over a year (2017-2018) of HOA financial statements and accounting procedures were not being thoroughly reviewed, the Finance, Budget & Insurance Committee ("Committee") had no access to the HOA's online bank account, and they were not reconciling our monthly bank statements.
May 30, 2018 (PennLive.com) : A property management company manager is accused of stealing more than $77,000 from a Susquehanna Township homeowners' association.
Court records say that Davis provided fictitious monthly statements for a $35,000 CD he was supposed to have opened for the homeowners' fund in February 2016.
Click on the buttons below to read the entire articles. http://www.pennlive.com/news/2018/05/property_manager_accused_of_st.html
Non-board-member homeowners should ask tough questions. They are entitled to request records and to lobby for a financial audit.
Transparency should always be of utmost priority for board members, especially in areas related to finance. Any form of concealment begs suspicion.
Any board member, officer, or management company that conceals records and financial transactions should be suspect. Best practice would mandate association finances to be transparent to the homeowners at all times.
The monies belong to the homeowners as a whole.
Be vigilant about your HOA’s accounting practices. Be informed and demand transparency.
(Source: audit correspondence and the HOA Board's "Guest Speaker", September 20, 2018 Board Meeting)
*We're not kidding, this was actually said by an accountant regarding a $94,170 error.
"Massage Room: After consideration of HOA needs, the Board has elected to repurpose the Massage Room in the Clubhouse." Source: Board Briefs, March 9, 2017
"2.11 Documents and Records. Copies of the Declaration, Plats and Plans, Bylaws, Rules and Regulations, contracts to which the Association is a party and all books, records and financial statements of the Association, including the minutes of Executive Board and Association meetings, shall be available for inspection in the offices of the Association....."
**May we suggest a place in the Clubhouse be designated as a location for future financial document reviews by homeowners.**
1. May 23, 2019: The Management Company Search Committee receives a request (from a homeowner) to include Association office, on-site review of HOA documents in the RFP's sent to potential candidate companies.
2. June 19, 2019 The request mentioned above is referenced at the Board meeting.
3. July, 2019 The on-site Association office is now labeled a "Mechanical Room."
4. If there is no Association office in the Clubhouse -- homeowners will be required to travel to the management company to review HOA documents.
5. Why create obstructions and difficulties for homeowners?
6. By the way, WHEN WERE WE GOING TO BE TOLD ABOUT THE "REPURPOSING" OF THE ASSOCIATION OFFICE?
Source: Transaction by Vendor Report, Nov. 2019
* November 2019 financial statements have not been made available as of 1/3/2020.
* January 12, 2019 Board Meeting
THE BOARD ALSO SAYS THE REMOVAL OF ICE (AND ICE DAMS) FROM UNIT GUTTERS WILL BE THE RESPONSIBILITY OF THE HOMEOWNER.
Homeowners are losing another "amenity" (exterior maintenance) they were promised when purchasing their homes.**
However, some "lucky" homeowners received special consideration: There are ten months of Board-approved Property Reports that have recorded inspection, maintenance, and repair of gutters for "select" homeowners (at no charge). Why not provide the same maintenance and service to all homeowners?
$36 per year to have the HOA provide gutter/downspout maintenance. The Board Treasurer stated that $3 would need to be added to your monthly assessment fee if the HOA provides preventive maintenance of your gutters. This additional charge is unnecessary and a result of poor budget planning.
[The Board has decided to spend $4,000 to add a new sidewalk at the left side of the Clubhouse that a large number of residents do not think is necessary. Few homeowners will use the sidewalk; all homeowners have gutters that require maintenance.]
[Remember: You are paying for exterior maintenance that should be provided by the HOA.]
Maintenance is 70% of the community's 2019 expenses. Is that money being spent wisely or are homeowners' needs and welfare being ignored?
Create and implement a much-needed and overdue comprehensive, proactive and preventive inspection and maintenance plan to protect our homes, property values, and community property infrastructure.
The board must have a plan to honor their responsibilities to the homeowners and follow a schedule for performing various repair and maintenance tasks in an orderly and comprehensive manner.
Establish a “Checks & Balances” approach to improve oversight of the HOA’s finances:
Please start to closely examine the monthly financial statements provided by the management company to ensure accuracy of numbers, proper accounting and prudent funds management.
Produce accurate, detailed and complete monthly financial statements for homeowner review. Statements should be promptly posted on the HOA website by the 15th of the month.
Please conduct monthly reviews of expenses, accounting ledgers and bank statements and perform bank reconciliations independent of what the management company reports.
Conduct all regular board meetings as open meetings.
Ensure that meeting minutes are accurate, complete and distributed in a timely fashion.
Invite, acknowledge and thoughtfully consider homeowner suggestions and
comments in the development of the community’s “Rules & Regulations.”
Provide opportunities for residents to interact with the board through informal homeowner forums.
Discontinue selective enforcement of the Rules & Regulations and other community documents
Improve contract negotiations and perform detailed review and analysis of contracts BEFORE they are signed.
Monitor and supervise the performance of the management company and require their contract compliance.
Monitor the performance of all vendors to ensure contract compliance. We want to make sure we are getting what we’re paying for.
Establish a secure electronic document management system. Improve physical security of paper documents.
Organize. consolidate, and manage HOA documents to increase security and improve accessibility for homeowners.