HOA boards and management responsible for accurate financial reporting

Q: I really enjoyed reading your "Last-minute changes" article in the Review-Journal. While the Legislature loaded up on having property managers disclose financial and other relationships, how about having them fix some of the PM/homeowners association financial reporting and compliance issues?

With all of the home foreclosures taking place, I have not found a way to clearly identify what money the HOA recovered and what funds were distributed. I haven't even been able to link a foreclosure settlement to an operating account deposit. What, if anything, is an HOA entitled to if the property is a bankruptcy, not a foreclosure?

We switched property management firms (and a few board members). It didn't take long for me to realize that the PM or the new board wasn't doing the job. With all of the haggling and wrangling at the 2008/09 Legislature, I find that they completely overlooked the need for an HOA to receive timely and accurate financial results.

Over the past year we have received many financial statements that were incorrect and incomplete. In one recent case the community manager who signed off on our small HOAs federal tax filing submitted incorrect 1120H expense information. The financial statement was wrong for many months, even after I asked the manager to fix it. It showed our utility bills as our total annual expenses. Both the manager's accounting and the certified public accountant were at fault. The CPA first refused to acknowledge or correct the error, then admitted to the error but did not send a corrected 1120H. The CPA said our taxes were not affected, and to top it off billed us 220 percent more for the work than we had ever paid in the past seven years!

To put icing on the cake, late last year we switched our utilities to auto bill pay because it was next to impossible to get the manager to pay our bills on time. We paid penalties and lost a surety bond, plus our prior treasurer was also asleep at the switch.

Finally all went well for several months then, for no apparent reason, I kept getting water bill invoices marked paid (auto pay) but not paid from our bank accounts! Five months later and I'm still trying to find who's paying these bills!

A: Most associations use the service of a collection agency. The collection agency should be able to provide the association with the information that you have requested as part of the normal monthly financial reporting that a community management company provides to their boards. It is a separate report from the operating/savings/reserve financial reports that a community management company provides each month. Now, any funds that have been received by the association as a result of the sale of a foreclosed home or of a closed bankruptcy would show on the monthly financial report under assessments, late fees and or fines.

As of Oct. 1, with some exceptions to the law, associations will be able to collect the past nine months of assessments on foreclosed homes that have been sold or taken over by the bank. Any assessments owed past nine months will be lost revenues to the association, assuming that you do not file a small claims against the previous homeowner for the balance of the money.

As to bankruptcies, which are more complex, the association may want to discuss recovering claims with attorneys who specialize in bankruptcy collections, as there are different situations where the association can collect on funds owed by the homeowner. Most collection companies just monitor the bankruptcy for the association for a fee without taking any proactive measures to lift the bankruptcy or to collect funds.

As to the other issues that you have raise, there is already laws on the books found in NRS 116, NRS 116A and NAC 116 regulations. We don't need any more laws or regulations. We need boards and community managers to raise the bar as to their financial reporting procedures and policies.

If you believe that the ombudsman office should be made aware of some of the problems that you had with the previous management company and community manager, you certainly can report that information, but you will need to be able to substantiate your claims and also show that the financial issues violated laws and regulations.

The ombudsman does not regulate your CPA, so you may want to contact the state CPA professional organization for more reporting information.

Barbara Holland, certified property manager, is president and owner of H&L Realty and Management Co. To ask her a question, e-mail support@hlrealty.com.