Besides the financial report, the HOA annual report is one of the essential documents that your HOA needs to prepare at the end of the year. It’s the responsibility of the HOA boards, but some of them tend to forget about this vital document.
As a non-profit organization, the HOA must file an annual report with the Secretary of State. However, if they didn’t submit their annual report last year, the label for them is overdue. Yet, there are some ways to regain your Secretary of State status.
What is an HOA Annual Report?
An HOA annual report is a compilation of the community’s activities for the whole year. It’s a great way to show the members of the homeowner’s association how the group is doing financially.
Members need to have transparency since they pay their dues. Also, it’s an assurance that the HOA uses its dues for proper things.
Moreover, annual reports serve as a prevention of fraudulent activities within the association. The HOA is at risk of embezzlement, except if the activities are being supervised by a property management company.
Moreover, it sums up what your HOA has done. And if there are people who aren’t sure about your HOA, the annual report can show them that the board did its job.
Is it Mandatory?
Aside from filling the annual report with the Secretary of State, the board must also prepare the annual report for the Homeowners association members.
HOA laws are different from one state to another. Like in New York City, They must keep track of all the money that is spent and earned on the land. The association also needs to write up a summary of all the records and give it to the people in the HOA.
However, in other states, the law doesn’t require the HOA to provide an annual report to its members.
These reports are commonly filed with the Secretary of State yearly. But some states require to file it every other year.
So, your HOA should pay attention to the laws in your state. They should get help from a lawyer or management company so that they don’t get into trouble or break the law later on.
Purpose of Filing the HOA Annual Report
HOA annual report is one way of showing transparency with the community. And aside from keeping the members informed about the finances, it also shows the HOA board’s achievements.
The goal of this report is to update state files on HOAs:
- Name of the association’s officers.
- Payment of taxes and fees.
- Good Standing with the Secretary of State.
The HOA secretary must prepare and submit the yearly report. However, the boards must guarantee the yearly report is accurate.
Failed to Submit The Annual Report
If your HOA fails to file this report with the Secretary of State, it will face serious consequences, such as:
- Fines, tax liens, and penalties
- Loss of “Service of Process” privilege
- Loss of naming rights
- Loss of funding
If you want to get your HOA back into good standing with the Secretary of State, the boards need to send in a new report and pay the fines again.
What Should The HOA Annual Report Contain?
An annual report primarily supplies the HOA members with the details of the association’s finances. Thus, it should include all relevant financial information.
However, state laws can change what is in the homeowners association annual report. You must check this first. In general, it must include the following things:
- Balance sheet
- Income statement
- Approved capital expenditures
- Total reserve funds
- Total outstanding dues
- Summary of the association’s insurance
- Summary of pending litigation/lawsuits
The report must also include the board’s significant achievements, such as:
- Community improvements
- Events
It’s also a good idea for the HOA to be careful about what information they put in the annual report. Confidentiality should also be kept in mind, even though it needs a summary of finances and achievements. Not everything has to be in the report.
As per general guidelines, the HOA secretary should not include sensitive information regarding HOA and its members, like pending lawsuits.
HOA President’s Report?
HOA president’s report has a similar function to an annual report. It’s not as comprehensive as the annual report, but it can also show transparency.
It contains notable actions that the board accomplished and other updates about the entire community. It was usually presented during the annual meeting by the board’s president.
Most annual meetings of HOA have higher attendance rather than board meetings, therefore it’s the perfect time to present this report.
But keep in mind that the annual report is a way for the board to communicate with the members of the HOA and show them how well they accomplish.
Final Thoughts
The HOA annual report is an essential part of the association. And keeps the HOA member aware of the financial status of the association and the accomplishment that has been made by the board.
Making an annual report is still a good idea in your HOA, even if it’s not required in your state. This will keep your HOA transparent and protect the board from liability.
If the board has a lot on its mind, it can be hard to write or make an annual report. Furthermore, it’s hard to keep the HOA’s money in order, and it’s even more difficult to write a report about the money.
There are a lot of things the HOA has to do, and they aren’t all easy! It took a long time and effort, but it paid off.
Why do HOA’s hire property management companies to help them with things like report writing?
Therefore, if you’re looking for a property management company, why not consider Pro Realty.
