Strategies to Maintain Your HOA's Financial Health

Ensuring the financial stability of your homeowner association (HOA) is akin to maintaining physical fitness: avoid overindulgence and make wise decisions. Fortunately, achieving this only requires the exercise of sound judgment. Here are some strategies to help you on this path.

Start with good internal controls

Implementing robust internal controls is crucial. By separating responsibilities such as recording financial receipts and making deposits, your association can be safeguarded against financial misconduct. A reputable property management company can also provide essential protection against such risks.

Institute regular audits

It's important to have regular audits performed. Engaging a CPA to thoroughly examine your financial documents and records is advisable. For smaller associations, an accountant-conducted review might suffice and offer a less intensive but still effective evaluation.

Invest wisely

Develop a clear investment policy for your reserve funds. Safety and liquidity of your investments should be priorities. Avoid high-risk options like corporate bonds, municipal bonds, and stocks, and instead focus on safer choices like certificates of deposit (CDs). Always ensure investment decisions comply with your association's governing documents and relevant laws.

Insurance protection

A variety of insurance types are essential for your association. Beyond property or casualty insurance, consider liability insurance to safeguard against potential lawsuits. Umbrella or excess liability coverage, as well as directors & officers liability insurance, are important for protecting board members individually. Additionally, fidelity insurance is crucial to cover theft-related claims.

These four strategies offer a solid foundation for maintaining your HOA or community association's financial health. Remember, this is just the beginning. Collaborating with an outstanding property management company can aid in developing additional plans for both immediate and long-term financial health.