The HOA Treasurer is tasked with many administrative duties, including collecting dues, paying bills, distributing statements, managing the HOA’s bank account, and keeping financial records. Choosing the right treasurer ensures that all members of the association have confidence in the HOAs financial decisions. A successful HOA Treasurer is the backbone of an HOA. A good treasurer will help your association stay financially healthy and avoid problems. The most important role of a HOA Treasurer is financial management. They should also have an excellent financial and accounting system that is user-friendly and easy to use like RunHOA.
HOA Treasurer does not have to be an accountant, but it means understanding some of the terms.
Assets and Liabilities
HOA accounts are divided into assets and liabilities. An asset is an item the HOA owns and has a cash value. Cash, Bank Balances, and investments are examples of HOA assets. Liabilities are dollar amounts a HOA owes to vendors Examples of liabilities include money owed to vendors for snow removal, common area maintainence, insurance payments etc.
Income and Expenses
HOA Income is mostly from dues collection, late fees or interest on investments.. The HOA dues is the money that is paid to the HOA by the residents. This is the most important income for an HOA.
Expenses are all the money that is spent to run the HOA. Typical HOA expenses are:
- 1. Management fees
- 3. Professional fees
- 4. Insurance
- 5. Taxes
- 6. Maintenance fees (Lawn Maintainence, Snow Removal etc)
- 7. Utilities
- 8. Reserves
Here are some of the few responsibilities of a HOA Treasurer
1. Collection of HOA Dues
The first task of the HOA Treasurer is to collect monthly dues from owners. The Treasurer must be on the lookout for delinquent dues and ensure that they’re collected promptly and properly. Payment notifications must be sent and dues must be collected on time whether by online payments or by checks. All checks must be dated and postmarked by the end of the previous month. Once checks are collected, dues must be deposited into the HOA’s bank account or if they are collected into a payment services account like Stripe, it must be set to automatically transfer money to the HOA’s bank.
2. Issue payments when necessary.
The HOA Treasurer is responsible for ensuring all payments for vendors and contractors are made on time, in accordance with the bylaws.
3. Maintain a record of all payments in the accounting system.
When a payment is made, the HOA Treasurer should give a receipt to the person who paid. The receipt should include the date, amount, and the name of the person who paid the fee. The HOA Treasurer should also keep a record of the payment in the accounting system.
4. Create a Budget for the Year. (Annual Budget)
An association’s operating budget is set every year before the annual meeting. The purpose of the annual budget is to cover the monthly expenses that HOAs incur. Monthly expenses include landscaping costs, common area maintenance, snow removal, management fees etc. HOA fees are considered as expected income in the budget. If an expense goes over the budget, it is considered a deficit. The HOA treasurer has to make sure to keep the budget in line with regular expenses and also has to make sure that they have enough cash on hand for unexpected expenses.
5. Provide Financial Statements to the Board
The two financial statements (Income Statement and Balance Sheet) are a picture of your HOA’s financial health. The Income Statement shows total income, total expenses and the net profit or loss of the business. It is comprised monthly and annually, but can be completely quarterly as well. The balance sheet shows the balances for all the business’ accounts and represents the formula Assets = Liabilities + Owner’s Equity. These statements need to be provided to the HOAs board of directors monthly so they are aware of the financial health of the HOA
6. Maintain Insurance for the HOA
The HOA Treasurer is also responsible for ensuring that the HOA has a current and valid insurance policy that meets the requirements of the HOA’s governing documents. Your HOA should have proper insurance to cover any damage that may occur to the common area. Proper insurance can be expensive, though, which is why it’s important that the HOA Treasurer be responsible for making the insurance premium payments. To do this, the HOA Treasurer should review the HOA’s current insurance policy each year. The HOA should also have a procedure for its HOA Treasurer to follow when filing an insurance claim.
7. Send 1099-MISC Forms to Vendors
A Form 1099 is a United States federal tax form that is used to report payments to independent contractors and freelancers. It is used for reporting things like payments for professional services or payments for goods or services provided.
The most common Form 1099 is the Form 1099-MISC, which is used to report payments of $600 or more to independent contractors. Form 1099s are not issued for payments of $600 or more to corporations. Instead, they are issued for payments of $600 or more to individuals. (The $600 threshold is called the ‘de minimis’ amount.)
In order to file the 1099-MISC, you will need the recipient’s Tax ID number or Social Security number, as well as their name and business address. Also, be sure to keep proper documentation of all transactions, i.e., invoices, receipts, and check stubs.
Sending the 1099 forms minimizes tax liability by documenting your expenses, thereby offsetting any profits that would otherwise be taxable. This allows your HOA to keep as much money as possible in its accounts in order to run and manage your community properly.
8. Prepare the Tax Form for the Year
Most HOA exempt from income tax under section 501 are still required to file 1120h, if they qualify, which discloses your nonprofit’s revenues, expenses and changes to net assets to the public.
9. Annual Auditing of HOA Accounts
HOA Auditing is a process to ensure that the HOA’s financial records are kept in order. The HOA’s accountant will review the financial records and provide a report that the HOA board can use to make financial decisions.
The HOA Treasurer is typically the HOA’s accountant as well, but they can also be a third party that the HOA pays to review their records. The Treasurer is responsible for ensuring that the HOA’s financial records are accurate.
The HOA Treasurer’s duties are fairly straightforward: collecting monthly dues from property owners, processing payments, distributing funds to the appropriate parties, and maintaining all receipts and records. Your HOA Treasurer will help you guide your homeowners association board to a bright future. While everyone has a super power, remember that HOA treasurers are the glue holding it all together. So no matter how you envision yourself, do your best to support them in their journey within both the association and in life.
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