As we approach 2011, it’s the perfect time for boards of community associations to take a look at the approaches they are using to govern their associations and address big picture issues. Here are some New Year Resolutions boards may want to consider:
● Consult and Implement Provisions of Your Association’s Governing Documents. Every director should: (1) have a copy of the most recent version of the governing documents of the association; (2) bring them to every meeting; (3) consult them when making decisions; and (4) act consistently with provisions of the documents. Simply put, it is the duty of directors to comply with provisions of the governing documents of their association. Okay – enough said.
● Review the Fiscal Health of Your Association. In these tough economic times, there’s no question that fiscal issues are front and center in most associations. The last thing directors want to do is increase assessments or levy a special assessment. However, as difficult as it may be, directors have the responsibility to address the fiscal health of the associations they serve. Here are some questions for directors to ask to help assess the fiscal status of their associations:
1. What is the assessment delinquency rate in your association?
2. How aggressive is your association in collecting delinquent assessments?
3. Does the budget of your association reasonably reflect the expected operating expenses of the association?
4. Does your association have a history of deferring maintenance on common elements?
5. Does your association have a history of “borrowing” from reserves to cover routine operating expenses?
6. What affect have cost-cutting measures had on your association?
7. Does your association need to consider a different approach to financial matters in 2011?
● Review the Reserves of Your Association. As directors have attempted to sort out the fiscal challenges facing their associations, addressing the funding of reserves has been a tough hurdle for some to overcome. Having a plan in place to deal with reserves is essential to ensure your associations are able to comply with the responsibility of providing for the major repair or replacement of common elements. Here are questions for directors to ask to determine whether their associations are adequately addressing reserves:
1. Has your association adopted a reserve policy as required under Colorado law?
2. Has your association had a reserve study conducted?
3. When was the last time your reserve study was updated?
4. Does your association have a plan in place for funding reserves or ensuring that funding will be available when major repairs or the replacement of common elements are required?
5. Is your association making routine contributions to reserves?
6. Is your association utilizing reserve funds for other purposes?
7. Does your association need to consider a different approach to addressing reserves in 2011?
While there’s no question that adopting the New Year Resolutions relating to the fiscal health of your association and reserves may seem daunting – we promise that taking these steps now will lay the foundation for a healthy and vibrant community.
All of us at Winzenburg, Leff, Purvis & Payne wish you a Happy New Year and look forward to partnering with you in 2011!