Managing HOA finances is one of the most important responsibilities for board members—and often the most misunderstood. From budgets to tax filings, proper financial management ensures stability, compliance, and trust among residents.
HOA finances require specific handling to meet the HOA’s goals, meet compliance, and deliver transparent reporting for members. As a member of the board, possibly recently elected, you will need to play a part in these important decisions.
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What are HOA Finances?
HOA finances encompass all financial aspects of your HOA. The financial aspects of an HOA can be extensive, including: budgets, Reserve fund management, due collection, bill payment, Records management, Financial planning and Investments.
Your involvement with each aspect may vary based on your board. However, understanding all of these aspects can inform the choices you make. The finances underpin many of your board’s potential options.
In this article:
- Unique HOA’s Financial Situations
- What Do HOA Board Members Need to Know About the Finances?
- Comparative HOA Performance Benchmarks
- Options for Managing HOA Finances
- Summary
Unique HOA’s Financial Situations
Every HOA faces its own set of financial challenges—and many of them are more common than you think.
From irregular cash flow to complex reporting demands, board members must navigate a range of issues that can impact the association’s long-term stability.
Below are some of the most frequent situations we help clients manage, and how SSL Associates steps in to support each one.
Irregular Cash Flow
HOAs can experience irregular cash flow for a number of reasons, ranging from unexpected costs to inaccurate budgeting. While these situations can be forecasted through regular reserve studies and careful analysis of the current situation, that doesn’t mean that your board won’t have to address unique circumstances.
Case Study: A client faced sudden roof damage from a severe storm. Due to inadequate reserve planning, the board had to levy a special assessment. This incident underscored the importance of thorough reserve studies and maintaining adequate reserves. SSL now monitors their reserve fund monthly and provides advance warnings of potential shortfalls.
Reporting Requirements
HOAs have varying reporting requirements depending on your location. States often have minimum compliance requirements your board must meet, and you may have additional regulations to consider. On top of that, your charter may have additional reporting requirements your board must meet.
Case Study: We had a consultation where the HOA discovered they missed a state-mandated annual report due to oversight during board transitions. This oversight resulted in fines, highlighting the need for clear documentation and reporting calendars. SSL now manages and files all required state reports on behalf of the HOA, ensuring consistent compliance.
Strict Tax Compliance
Taxes can be complex for HOAs, and your board’s compliance is critical. Taxes for HOAs can present a complex situation requiring extensive documentation and understanding of the relevant tax codes. You may even need to address new tax regulations.
Case Study: We had a consultation where the HOA incorrectly categorized expenditures, resulting in an audit and penalty. Since then, SSL has provided ongoing tax guidance, backed by licensed CPAs, which has dramatically reduced errors and improved long-term planning.
Rotating, Often Volunteer-Based Board Membership
HOA boards are often made up of volunteers or a frequently rotating selection of members. You may have new board members or be one yourself. Having to onboard people constantly can impact how your board handles its finances.
Case Study: A client regularly struggled with handovers, causing missed deadlines and inaccuracies in financial reporting. SSL was hired as the financial consultant to ensure continuity, standardize key processes, and reduce transition-related errors.
What Do HOA Board Members Need to Know About the Finances?
Capital
Capital is part of the HOA finances that are allocated for a specific project or plan. You may need to handle capital for projects as part of your tenure on the board, so it’s critical to keep an eye on these targets. Capital may come from long-term investments, grants, or specific fee allotments from before your board service.
Budgets
Setting a budget will likely be part of your tenure, along with implementing any outstanding budget resolutions from previous years. Overseeing budgets is one of the principal HOA board member financial responsibilities, so you are likely to handle aspects of them at regular meetings.
Investments
Depending on how your HOA is set up, you may also need to know about long-term investments. These accounts and actions regarding their stewardship may be active points of discussion. Additionally, the investments are probably part of the reporting requirements you will need to follow.
Auditing
Audit reports are likely part of the information you receive as a board member. These reports are vital windows into the current finances of your HOA. However, unless they are clear, concise, and digestible, audits may not provide the data you need to make an informed decision as a board member.
Taxes and Reporting
Proper tax management is vital for your HOA. As a board member, even if tax compliance does not fall under your specific duties, it’s still a vital portion of HOA finances. Additionally, this component can dramatically impact your other duties as a board member, along with the legal compliance implications.
Comparative HOA Performance Benchmarks
- Benchmarking your HOA’s financial performance against similar associations provides valuable insights. Common benchmarks include:
- Assessment Collection Rate: This metric evaluates how effectively your HOA collects assessments from residents. A high collection rate indicates efficient management and strong resident compliance. Here are some numbers to help you orient yourself, but they vary by zip code and property type.
- Excellent: 95–100%
- Good: 90–94%
- Average: 80–89%
- Below Average: <80%
- Reserve Fund Health: It measures how well-funded your HOA’s reserves are compared to recommended funding levels. Strong reserve funds indicate proactive planning and financial stability.
- These benchmarks provide general guidelines. Individual HOA needs may vary based on age, property type, and future obligations, making customized reserve studies crucial.
When estimating your reserve fund needs, consider factors such as:
– Replacement costs of shared assets (e.g., roofs, elevators, pavement)/
– Upcoming major renovation projects
– Seasonal cost differences (e.g., snow removal, summer maintenance)
– Payroll or staffing needs (if applicable)
- Operating Expenses per Unit: They reflect the ongoing costs for maintenance, administration, and services. Lower expenses can indicate efficient management, but extremely low expenses could signal inadequate maintenance or underinvestment.
- Operating costs vary widely based on region, community amenities, service quality, and property age. Use these benchmarks comparatively within your local context, rather than as absolute standards.
- Low Cost Efficiency: $150–$200/unit
- Average Efficiency: $200–$300/unit
- High Cost Efficiency: <$300/unit
Options for Managing HOA Finances
Effectively managing HOA finances requires clear roles and careful consideration of resource allocation; here are several strategic options to help your board maintain financial continuity and efficiency.
- Dedicated Positions
Handling all of the HOA financial information and generating the necessary reports can be a challenging task. One option to prevent handover delays, misinterpretation, or other issues that could arise as the board positions change occupants, your board may opt to dedicate a position to the finances. This path can overcome some of the issues with rotating board seats.
While it’s important to put safeguards in place to detect positional abuse, this option can create continuity in how HOA finances are tracked. If your board uses someone in a dedicated position for the finances, you should also be able to create a good working relationship.
- Contracting Some HOA Financial Tasks
While having a dedicated person in-house to handle your board’s financial matters is an option, it’s not practical for many boards. For one, you may be a volunteer or taking on the position in addition to another job. An option is contracting out some of the financial tasks, such as report generation or auditing.
Most financial tasks can be contracted, depending on their sensitivity. If your board wants to outsource tasks, careful selection, and ironclad confidentiality are necessary. Additionally, choosing a contractor with the requisite licensure can save your board many headaches.
- HOA Financial Management
Outsourcing the management of all HOA finances can be a beneficial option, and there are entire firms dedicated to helping boards like yours. These companies provide a consistent, professional service that delivers exactly what you need to make decisions on the board with all the relevant financial information.
Choosing a financial management partner can be intimidating for a board, especially for cost-conscious boards. However, transparent finances and up-to-date data ensure your HOA can address any potential issues while planning for the future. In many cases, this investment protects your organization.
Feeling overwhelmed by your HOA’s finances?
Partner with SSL Associates to transform your financial reporting and build greater trust with donors, grantors, and stakeholders alike.
Looking for expert financial support for your HOA?
SSL Associates specializes in transparent, compliant financial management for homeowners associations.
Managing HOA finances can be challenging, whether you’re a new board member or you’ve volunteered for years. These are many components that affect the decisions your board will make, as well as informing you of any past situations that require remediation. Without this information, your board cannot make the best decisions possible.
Your board has several options for how to handle the HOA finances that do not involve passing around the responsibilities to various members. Whether you choose to dedicate a position, contract out some of the financial duties, or bring on a specialized HOA financial management company, these options can enhance the efficiency of your HOA board.
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