A key part of ensuring trust in a planned community is financial transparency, since its members all contribute through assessments. If residents encounter an HOA that does not provide financial records, disputes may arise, and the association’s integrity may be questioned. But what can your HOA board do to avoid this?
What are HOA Financial Records?
Your association’s financial records are documents that reflect how your HOA handles its money, from collection to spending or saving funds. These documents allow the board to track and oversee the association’s financial status and provide homeowners with a way to see how the regular and special assessments they pay are being used for the community.
The types of financial documents your association needs to keep and disclose will depend on state laws and your governing documents.
Beyond ensuring your HOA complies with disclosure requirements, having these documents ready and organized would make it easier for the association board to understand the financial situation. It makes decision-making related to the community’s financial conditions much easier.
What Documents Can I Request From My HOA?
Homeowners often wonder which documents they’re allowed to see. This also depends mostly on state legislation and the governing documents.
For example, in California, the Civil Code provides inspection rights for certain HOA records. State laws also outline the specific time periods during which HOAs must keep certain records available for residents to inspect.
Meanwhile, section 720.303 of the Florida Statutes requires HOAs to maintain financial and accounting records that comply with sound accounting practices. Additionally, the said law requires associations to retain those records for at least seven years.
Some of the financial documents residents are commonly allowed to inspect include the following:
- Annual budgets
- Financial statements
- Income and expense reports
- Tax returns
- Accounting records
- Invoices and receipts
- Bank records
- Records of association expenditures
While the association has a duty to provide residents with HOA records, homeowners should remember that not all documents in the HOA’s possession must be disclosed.
Why is the HOA Not Giving Financial Records?
There are several reasons why an HOA may fail to provide financial information. Some scenarios may have legitimate reasons, while others can involve bad record-keeping and missing documents. In other cases, the board members may have failed to understand their legal obligation to record and produce financial records for homeowners to check.
Here are some common reasons why your HOA may not be providing financial records:
Homeowner Didn’t Submit a Proper Request
In some states, legislation and HOA policies may require homeowners to submit a written document request before they can access the records. Verbal requests directed to a board member don’t usually elicit the same response as a formal request that identifies the specific record the resident wants to see.
To make this easier, HOA boards must provide members with clear, consistent instructions for submitting a document request. Having a default process also helps your association document the request that it received and whether the HOA responded.
Records Not Covered by Disclosure Rules
The HOA holds many documents and records, but not all are available for residents to see or inspect. Some of them contain information that is legally protected or is under statutory exemptions.
However, HOA boards shouldn’t use these exemptions to automatically withhold an entire document when the protected information can lawfully be redacted in a copy. For this, the association will need to determine which statute applies and permits the HOA to disclose only certain portions of a document.
Poor Recordkeeping Practices
Some HOAs withhold financial records unintentionally. There are times when you encounter an HOA that won’t provide financial records because they’re not organized. One set of documents may be kept by one board member, while another is kept elsewhere. Other records may be physical copies, while others are only digital.
Having poor document organization doesn’t excuse the association from its legal responsibilities. To avoid this, HOAs will need to establish where and how documents are stored. They must ensure the documents are overseen and controlled by the HOA, even if you have property managers helping you out.
How to Request HOA Financial Statements
Requests for HOA financial statements should be made formally.
Here are some steps you can take:
Review the Rules
A resident needs to follow the procedures set by either state law or HOA policies. To start the request process, first check any applicable legislation or policies that outline procedures. These sources can easily explain the requirements and how to submit your request. These usually also let you check which documents are allowed for inspection and which aren’t.
Submit a Written Request
After confirming that the document you’re looking for is viewable, you need to formally request it from the HOA. Usually, you will have to put this request in writing. In your submission, you need to clearly identify which financial documents and records you would want to inspect. You should also include the document’s specifics, such as the fiscal year it covers.
Check the Response Deadline
In every request process, the HOA usually has a specific time frame for a response. These answer periods may differ per state. For example, in Florida, associations should provide access to financial records within 10 business days of receiving a written request. Meanwhile, California would have different timelines depending on when the HOA’s records are prepared.
When Can an HOA Refuse to Provide Financial Records?
Is your HOA withholding financial records?
Many residents may wonder whether there are circumstances in which an HOA can refuse to provide financial records. While few, there are some situations when the HOA can withhold these documents. Usually, this happens when the record is not covered by statutory inspection rights or when it contains private or confidential information specifically protected from being disclosed.
Some of these restrictions may involve legal communications and other confidential materials as defined by state law.
If the HOA decides not to provide the documents, it will need a specific legal basis for doing so rather than issuing a general denial.
Ensuring Financial Transparency
An HOA that does not provide financial records may be a red flag for concerned residents. It affects the residents’ opinion of the HOA. To avoid this, both the HOA and homeowners need to know the state laws and applicable policies governing how documents are handled. Doing so lets the HOA build trust and transparency while ensuring compliance with the law.
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