|
|  |
|
|
How Well Do You Know Your Association?
To find out, try taking this quiz which was designed by CAI homeowner members, attorneys, and accountants. All questions are ones that the contributors feel each board member should be able to answer. No fair asking your manager, attorney, accountant or other board members.
ASSOCIATION QUIZ
Finances
1. What are the sources of your association’s income?
2. How does the association manage its cash (checking, money market and long-term investments)? Who is the designated person(s) to carry out these tasks?
3. Who on the Board reviews all income and expenses each month?
4. How and who develops the budget? Is documentation provided for each check and who reviews the documentation?
5. How many and whose signatures are required on your checks? Are there any limits associated with this?
6. Who reconciles the bank accounts each month?
7. How often do you have an audit by a CPA? What do your documents require? Is the audit designed to uncover fraud?
8. Is your CPA hired by the association or by the management company?
9. Is your association required to file federal and state tax returns each year?
Assessments
10. What are your total annual assessments?
11. What is your collection policy?(How many notices, time periods, late charges, etc.)
12. Can the Board raise assessments without a vote by the homeowners?
13. Can assessments be raised at any time or just annually? What is the process that must be followed to raise assessments?
14. Can the board approve special assessments without a vote of the owners? If not, what percentage vote is required?
Reserves
15. What is your association’s process for determining its reserve needs?
16. How much is currently in your reserve account?
17. What items are covered by your reserve funds?
18. Where are the reserve funds invested?
Legal/Insurance
19. Do you know the name of the law firm which represents your association? Do they also perform collections for your association?
20. Does your attorney represent the board or the association?
21. Do board members have any fiduciary responsibilities? If so, what are they?
22. Does the architectural committee have the power to operate independently of the board and make decisions?
23. What types and amounts of liability and property insurance coverage does the association have?
24. Does the association have a Directors and Officers liability insurance policy? What does it cover? What are the major exclusions? What company(ies) insure your association?
25. Does the association have fidelity insurance? In what amount?
26. What type of protection do you have, as a board member, if you are sued personally because of a board decision?
27. Does the association indemnify board members? If so, under what circumstance?
Rule/Covenants/Documents
28. When did you last read the Rules, Declaration, Bylaws, and Articles of Incorporation of your association?
29. What is the order of priority in case of conflict between Rules/Regulations, the Declaration, Bylaws, Articles of Incorporation and State Laws?
30. Would you be ready, when an issue arises, to look up the pertinent authority that should govern the board’s position or action on the issue?
31. Do you have a current set of policies or rules and regulations to implement the Declaration and Bylaws?
32. Do you have a due process procedure to provide for enforcement of your covenants and rules? What is it?
Operations
33. What services does your management company provide to the association pursuant to their contract? What services do they not provide?
34. What are the guidelines for contract bidding, selection, and performance for contractors who perform work for the association?
35. Does the board contract with relatives or business related to board members/association members? If so, must this be disclosed to all board members?
36. If the association has a management agent, how does the board evaluate the performance of that individual or organization? How often do they do this?
37. Should the budget determine the maintenance to be accomplished or should maintenance needs determine the budget?
38. How many units are included in your association?
39. Do you know what the association and individual unit owners are responsible for maintaining and repairing? Replacing? Insuring?
40. Do you have a place where all resolutions are kept?
41. Does the board have a policy for dealing with conflicts of interest?
42. How often are annual meetings held? (just checking to see if you’re still awake)
Did you pass the test?
An educated and informed board member should know the answers to 90% or more of the questions in the Quiz. There are several reasons why this is important.
This is why they elected you! The purpose of a board is to establish association policies and procedures and to oversee the operation and governance of the community. These are jobs that simply can’t be done by all of the association members acting as a committee of the whole. These jobs only can be accomplished by a small group, operating with good professional support, and with an adequate knowledge and information base. Without a firm grasp of the governing documents, financial, operational, legal and insurance matters outlined in the Quiz, a board member does not have the knowledge required to do an effective (or competent) job and fulfill his/her fiduciary duties. You cannot make the good decisions the community expects if you do not know the context in which you are operating.
You owe it to the community. If you devote the time and energy required to serve on the board, you might as well do it right. A board member wants to make a contribution on the improvement of the community. You can do this only by learning how things work (or don’t work) and by learning the legal, practical and financial limits that apply. Only with this knowledge can a board chart a course for improvement. Otherwise, nothing will ever get better.
An ill-informed board WILL get into trouble. It’s inevitable. Decisions based on insufficient facts (or the wrong facts) sooner or later will get the association in: a) legal trouble with owners; b) legal trouble with contractors; c) legal trouble with the county/city; d) dire financial straits; e) criminal court; f) factional warfare in the community, and on and on. One consequence is that the board will lose the faith, trust and respect of the owners, and will no longer have a mandate to lead the community. Another consequence is that the community will get a reputation and will become less desirable in the marketplace, causing property values to decline.
If for no other reason, you need to be well informed for your own protection. Each director has a duty to exercise reasonable care in the performance of his/her responsibilities on the board. This duty is sometimes referred to as an aspect of the board member’s fiduciary duty, but it is also something separate.
A board member who participates in board votes and discussions without being property informed is not acting with reasonable care. When a board member fails to act with reasonable care, that board member is being negligent. In addition, if a board member is not well informed about the scope of board authority, he/she may do something that is clearly outside of a board member’s authority. There have been cases where board members have been held personally liable for their acts and omissions. You should have directors and officers liability insurance (D&O), and the association may have some obligation to indemnify directors, but these protections have their limits. There are situations where board members are not protected by the association and its insurance policies. If you do not have the requisite knowledge to do your job as a director, you are much more likely to face personal liability for something you did (or failed to do).
If your score on the Quiz was not great, do not despair. By taking the time to test yourself, you have taken that important first step. You have found out what you don’t know. Once you accomplish that, the rest of the learning process should be easy. Almost all of these topics are covered in varying degree in the four Boot Camps Orten & Hindman offers at no charge to board members and managers. A complete schedule of boot camps can be found at www.ortenhindman.com. If you scored well on the Quiz - congratulations! Just remember, however, that the process of becoming educated and informed never ends. There is always more to learn for the benefit of the board members, and of the community, too.
[PRINTER FRIENDLY VERSION]
|
|
| |
|
|
|
Orten & Hindman, P.C.
|
We do one thing and we do it well...Community Association Law
To learn more about O&H's services, visit our website at www.ortenhindman.com
|
|
|
Educational Events
|
|
Click here to register
July Lunch Forum (Wheat Ridge Office): Annual Legislative and Caselaw Update July 10
July Breakfast Forum (Fort Collins Office): Annual Legislative and Caselaw Update July 11
August Lunch Forum (Wheat Ridge Office): Does an Association Have a Duty to Act in Owner vs. Owner Disputes? August 7
August Breakfast Forum (Fort Collins Office): Does an Association Have a Duty to Act in Owner vs. Owner Disputes? August 8
|
|
|
Suggestions
|
If there's a topic you'd like to see covered in an upcoming issue, email us at Orten & Hindman
|
|
|
Community Associations Institute
|
The Community Associations Institute (CAI) is a nonprofit organization that provides education and resources to community associations. To find out more about CAI visit www.caionline.org
|
|
|
Unsubscribe
|
Orten & Hindman respects the Web and the privacy of those who use it. To unsubscribe to Community E-ssentials, click here
|
|
|
