A homeowner’s association is a business that is run by its board of directors with the assistance of committee members, officers, management personnel, and the providers of professional services such as attorneys, accountants, and reserve specialists. Ironically, like other big businesses, an association can have millions of dollars of revenue and expenses to deal with every year, but unlike other big businesses that are controlled by highly paid, experienced people who have knowledge of their industry and years of involvement with their company, a homeowner’s association is controlled by inexperienced volunteer members of the association whose background experience varies and who serve for very limited periods of time. As a result, it is a commonplace for the members of a homeowner’s association’s board of directors to take on the responsibility of a director of the association without fully understanding the duties and responsibilities of a director, or the process of how directors are required to conduct the Association’s business.
As previously stated, the purpose of the Board of Directors is to govern the business of the Association to the best of their ability. In order to do this, each Board Member must be familiar with and understand the State Laws that govern Associations and their Board of Directors. They also must be familiar with the Governing Documents of the Association. The State Laws combined with the Association Governing Documents guide the Board as they conduct the business of the Association.
As with a business Corporation, the Association is further governed by Officers that have been elected by the Board of Directors. These Officers typically hold the office of President, Secretary, and Treasurer. In some cases, a Vice-President may be elected to assist and support the President and act in his/her stead in his/her absence.
The Board Officers are charged with the duty of leading the Board and reporting in each area of their responsibility. Because Boards and their officers are not typically experienced in the management, legal and accounting functions of an association, they should seek the assistance and advice of a professional management company, an experienced association attorney and a CPA with knowledge and experience with association audits and tax returns. As important as these partners are, it is imperative that every association periodically engage the services of a Reserve Specialist. A Reserve Specialist not only inspects every aspect of the property and identifies the remaining useful life of its components and replacement cost but most importantly he identifies the reserve needs to accommodate continuing replacement of the components. We will get into greater detail when we discuss the Willow Creek III Reserve Study.
The President of the Board
The President of the Board is the leader and Board manager, the association spokesperson, the organizer, establishes the goals and priorities for the association, and presides over meetings. The President needs to know the Law, know, and understand the Declaration, Bylaws, and Rules and Regulations of the Association in order to govern and make necessary determinations and decisions that are brought to his attention.
There is much more to being an association President than showing up for meetings. One specific function is to determine the association reserves. Many boards believe that keeping the dues low will keep the owners happy. It also will keep the heat off the president until the property deteriorates and property values fall. Then the President is faced with the implementation of substantial Special Assessments in order to bring the property back to an acceptable level. To avoid this, the President should implement a reserve study and follow the recommendations of the Reserve Study over the years so Special Assessments may be avoided in the future.
First Commercial recommends that the President read the brief pamphlet titled “THE BOARD PRESIDENT, Roles and Responsibilities in Community Associations available from CAI.
The Secretary of the Board
The Board Secretary wears three hats. The Secretary is the Corporate Secretary of the Association, the Recording Secretary, and keeper of Correspondence and Maintains the Records of the Association.
As the Corporate Secretary, he/she maintains the Membership List, prepares Meeting Notices, manages the Proxy process, and maintains meeting documents.
As the Recording Secretary, he/she prepares the Meeting Agendas, Takes Minutes of the Meetings, writes Board Resolutions, gets Minutes approved and distributed.
As the Correspondence and Records Maintainer, he/she manages mailings, assists Committees, writes letters on behalf of the Board, maintains Association records, establishes the filing system, prepares, and purges files.
While a good professional management company will prepare, provide, and maintain most if not all the documents and duties of the Secretary, he/she should be familiar with all the documents, process, and procedures to be able to report at any time it may be necessary.
First Commercial would highly recommend that the Secretary read the pamphlet provided and named ‘THE BOARD SECRETARY, Roles and Responsibilities in Community Associations available from CAI.
The Board Treasurer
The Board Treasurer is the financial voice of the Board and the Community. He/she is the liaison to the associations CPA/Auditor. The Treasurer implements a reserve program based on the Reserve Study. He/she directs and monitors the annual audit/financial review and the annual tax return preparation by the CPA.
The Treasurer, in conjunction with management staff, should prepare and implement the annual association budget. The Treasurer should review the financial documents prepared by management and question any unusual expenditures. He/she is responsible for all collections and work in conjunction with management and legal to insure the highest possible collections. The Treasurer is responsible for monitoring all financial accounts and review the need and process of any borrowing from financial institutions.
First Commercial would highly recommend that the Secretary read the pamphlet provided and named ‘THE BOARD TREASURER, Roles and Responsibilities in Community Associations available from CAI.
The Reserve Study
As stated above, one major responsibility of the Board of Directors and each of the Officers is to maintain the reserves necessary, based on the Reserve Study, in order to maintain the health of the Association, the condition of the assets, and the greatest value of the individual units for the benefit of the Owners.
Look for our next Blog where we will discuss the Reserve Study in-depth and the importance to every association.
