Board members have to wear many different hats while serving on the Board of Directors of a community association. Usually the positions change every year.
This means if you have not served as the Treasurer yet, your turn is coming. While each board member has a fiduciary duty, this is especially true of the Treasurer. It is the Treasurer’s job to thoroughly review the financial statements each month and to ensure the association is financially secure. This can be a daunting task.
We have seen many board members place their names on the ballot and tell homeowners if elected, they will keep the assessments where they are currently or maybe even lower them. While we all like the notion of paying lower assessments, this misguided intention can lead to serious financial consequences.
A key aspect of an association’s financial health is a long term replacement program through the implementation of a reserve fund. This fund offsets the repair and replacement of those assets that wear out during the life of the community. The Board of Directors, along with their community manager, must determine an appropriate level of income to allocate to the reserve fund. Rather than assigning an arbitrary number to the reserve fund, we strongly encourage boards to obtain a professional reserve study from an independent reserve study company. A reserve study identifies the major assets of the common areas that need regular repair and calculates an annual contribution to the reserve fund to pay for the repair when they come to the end of their useful life.
To get the process started, a reserve study company will perform a physical inspection of the community and also complete a thorough financial analysis. Once the inspection and analysis are finalized, the reserve study company will provide a detailed list of maintenance requirements and a schedule with the anticipated yearly expenses. Having this tool is very helpful when preparing the coming year’s budget. Your community manager will utilize the reserve study to ensure the reserves are sufficiently funded and to also prepare an appropriate maintenance plan. Having a reserve study completed results in a healthy bottom line for the community along with well-maintained common areas and higher property values.
If your community is in need of assistance in developing a maintenance plan, we have the expertise to guide you through the process. Click here for a proposal or contact us at (602) 358-0220.