A homeowners association is the cornerstone of a planned community. When run properly, it brings continuity, preserves architectural integrity, maintains common areas, protects property values, and promotes the concept of “community.” Every association should be responsible for its assets and operation in accordance with state laws and the community’s governing documents.
To be effective, an association should have a strong board of directors whose members know the responsibilities that come with their volunteer positions, including the need to govern uniformly and fairly, and have a clear understanding of the association’s strengths and weaknesses, its history, and what needs to be accomplished. The board’s authority includes all of the powers and duties contained in state statutes, as long as these are consistent with the provisions of the governing documents.

Among the many considerations for an association, when adding amenities to their community, is the Liability exposure and making sure that the association is properly covered should there be an injury or lawsuit.
Amenities will require both property and liability insurance coverage. Property insurance protects the equipment owned by the association and covers replacement cost of those items due to a covered peril. Liability insurance will cover bodily injury and property damage claims that are brought by a third party due to use of the amenities. A slip and fall on the pickleball and Tennis courts, an injury while using gym equipment or even a dog bite at the dog park may have legal ramifications.
When seeking property insurance for an amenity, you must provide your agent with accurate replacement values of each added piece of equipment. Determining these values can be achieved in a number of ways.  A receipt if the equipment has been recently purchased, an appraisal done on existing equipment or this information can sometimes be found on a reserve study. Many carriers are requesting the Associations Reserve Study In order to ensure they are adequately covering their insured. ​

Receivables

Receivables are an asset which is generally presented just below cash on the balance sheet. It represents amounts the association has the right to receive.

Receivables are amounts due from other people or entities.  For associations, the largest and most common receivable is for unpaid assessments.  Most associations bill owners for assessments each month.  If an owner has not paid their monthly assessment by the due date, the assessment is considered a receivable from the owner.

Recording assessments revenues on the accrual basis without considering the effect of delinquent accounts receivable can mislead readers of an association’s statement of revenues and expenses.  Assessments are recorded when billed under the accrual method.  Should there be an accumulation of delinquent accounts, the statement of revenues and expenses will continue to present results assuming 100% collection of outstanding assessments.  Readers should always refer to an aging report to assess the status of assessments receivable. 

​By:  Jeremy Newman CPA, Newman Certified Public Accountant PC

​We introduced you to balance sheets in our last blog, which was the first in our Reading Financial Statements Series © 
In this and following blogs we will explore some typical association balance sheet accounts in more detail.
CASH!
Everyone likes cash!   Associations are no different.  Without enough cash, association management and community property can become neglected, often leading to future major repairs requiring loans and special assessments. Understanding what activities have the most impact on cash balances is vital to the future success of an association’s operations.  As managers and board leaders, it is so important to review cash activity and balances continuously.  Be proactive in a timely manner.  Not reactive two years down the road.

This blog is to introduce you to balance sheets. This is the first in our Reading Financial Statements Series ©
 
What is a balance sheet?
Balance sheets present the financial position of your association as of a certain date, usually the month or year end.
 
What are the classifications of accounts on my association’s balance sheet?

• Assets
• Liabilities
• Equity or Funds

 
Assets
What the association owns or owns the rights to, including:

• Cash
• Assessments and other receivables
• Prepaid expenses
• Deposits

 
Liabilities
What the association owes or is obligated to pay, including:

• Accounts payable (unpaid vendor invoices)
• Accrued expenses
• Prepaid assessments
• Deferred revenues

 
Equity or fund balances
The association’s net worth.
Generally, represents the cumulative revenues minus expenses over the life of the association since its inception.
 
Basis of Accounting
One of my favorite topics is “What basis of accounting is used to present your association’s financial statements?”
Some balance sheet accounts will not be presented on financial statements if your association presents its financial statements using the cash basis of accounting. Being aware of what you are reading, as well as what may be missing from the balance sheet you are reviewing is important to your understanding of the association’s financial position each month.
 
We will dive deeper into the individual accounts like cash and receivables in future blogs.  A short example of what to look forward to:
Cash – Do you know what your bank accounts are used for? Do you verify balances? Are you pursuing returns over security?
Receivables – Are you expecting to collect everything that is owed to the association? Did you bill for all services?
Payables -How much does the association owe to vendors?
 
 Prepaid assessments – Are you shoring up today’s cash balances with money collected for future expenses?
 
Operating Fund (Equity) – Does the association have excess funds, has it been over-spending? 

​The manta in the cyber world is:  It’s not a question of IF an association will suffer some kind of data breach- but WHEN.
Cyber criminals are not looking for a huge payout – they want an easy target.  Community Associations have two things they want: 1) personal homeowner information and 2) money.  Associations are even more attractive because most lack security measures that larger corporations utilize.
Consider a few different possibilities:

• The treasurer of an association receives an email that appears to be from a vendor requesting funds be transferred for work performed. The treasurer transfers the funds as requested. Later it is discovered a thief was impersonating the vendor and the funds were transferred to the thief’s account.
• A board member or manager loses their laptop, which contains association bank account numbers and passwords.
• A cyber-thief hacks obtains access to an association’s records and obtains personal information about homeowners.
• Online payment options
• Have a website or utilize social media

Are community associations at risk of a cyber-attack? The short answer is yes, but let me list out all the main reasons why:
 

• Community associations typically have a large amount of operating and reserve funds
• Community associations are overseen by people that are usually not cyber security experts
• Community associations keep lots of sensitive data on computer software programs

 
Those reasons are enough of a motive for a criminal to target a community association for a cyber-attack. If a 21-year-old was able to use an unprotected router to hack one of the largest wireless carriers in the United States, then it is clearly possible for a community association to get hacked as well. The criminal who stole data on 50 million wireless customers said, “their security is awful.” Many of us may have likely had our personal information compromised through cyber-attacks and data breaches, but what would that look like for a community association? Imagine staff computers not working because they have been hacked. Bookkeepers who cannot log into online banking because their passwords have already been changed. Wire transfers showing HOA reserve funds that have already left the bank. Homeowner names, addresses, and bank account numbers all for sale on the dark web. I want to intentionally paint a scary picture because a cyber-attack is a scary situation, and if it can happen to one community association then it can happen to a lot more. It is nearly impossible to be 100% bullet proof from a cyber-attack, but my goal is to make you a smaller target through these strategies.

​The year of 2020 will forever be known as “The Year of Covid” and we have seen many changes as a result. One positive change has been the level of remote participation and the gaining popularity of virtual meetings for board meetings, annual meetings, elections, and special membership meetings. As the technical comfort level of owners, board members, and managers has grown, with it has been the understanding that greater participation from owners via remote means is a good thing.
 
Many states that had enabled temporary allowances for electronic voting due to Covid restrictions have now made them permanent. This can make implementing online voting as simple as passing a board resolution or adding online voting to your election or voting process. Many of these changes were just enacted effective July 1, 2021, so be sure to check your state statutes for the guidelines.
 
If online voting is permitted by your state statute it is very easy to incorporate this into your HOA (or condominium or co-op) election process and offer owners another option for having their vote count. Start by having the board adopt a resolution to add electronic voting as a method to accept ballots.

By: Franz Witte  Franz Witte

​How to Water
 
Deep water in the early morning when the air is cool. Deep watering allows water soak into the ground through the soil profile where roots reside. Keep in mind that Idaho has lots of clay in its soil profile. Clay soils are slow to absorb and give up water, meaning this type of soil can stay wet for a long period of time, but it also takes a long time for water to move down into the roots.
 
Newly planted trees and shrubs need consistent and frequent water. 

• Temperature, wind, soil type, grade, humidity, plant type, and plant age all contribute to watering needs. 
• General rule of thumb:
  • 1-2 weeks after planting: Water daily 
  • 3-12 weeks after planting: Water every 2 to 3 days 
  • After 12 weeks: Water once a week until plant is established 
• Apply water directly over the root ball.
• The first 2-3 months after your plants have been installed are the most critical.
• Until they establish, new plants get all their moisture from a very small number of roots.
• Check soil moisture in the root ball and the immediate surrounding area.
• Soil probes are great tools used to measure how much water is in the soil.
• You can also touch the soil with your hand by digging close to the root ball--at least 6 inches deep.
• Gather a handful of soil and squeeze. If the soil forms a loose ball in your hand, the plant is adequately watered. If the soil falls with no shape and lots of fine dust particles disperse, then it is time to water. 

 
How Much Water?
 

• Water enough to saturate the entire root zone and surrounding soil to promote root development
• Creating a basin around the root ball of your plant makes a reservoir. Use a slow trickle of water to fill the reservoir. This promotes slow and deep watering which allows the water to infiltrate the entire root ball.
• As root systems establish and develop while the plant matures, watering becomes less critical. 
• Watering will always be the most important aspect of care. 

 
Mulch
A 2-3” layer of mulch conserves soil moisture and prevents evaporation on hot days. Mulch also limits temperature fluctuations in the soil. When Idaho hits those hundred-degree temperatures, the last thing you want is to leave your plants ill prepared for survival. Take the extra step to spread a layer of bark mulch in your garden beds, it’s not only worth the aid in water retention, but it gives the landscape a nice facelift.