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The Self-Managed Association Look Ahead by Looking Back: Get Organized for 2022 by Assessing 2021
from Echo Journal – Issue 5 2021
by Echo
One of the most underrated best practices for effective HOA governance is objectively assessing the board’s and community’s performance against their governing goals and objectives. This “look back” assessment is critical for fine-tuning the board’s governance effectiveness. The HOA’s governing documents charge the board of directors with managing the affairs of the association. Although homeowners associations vary greatly in size, type, and complexity, the responsibility of the board to manage (govern) the HOA’s affairs boils down to some common oversight and leadership activities. There’s no better way to prepare for a successful 2022 than to examine, discuss, and assess 2021’s governance activities. Set aside some board meeting time in the next couple of months and review these five critical governance activities for a successful 2022.
BOARD MEETING EFFECTIVENESS.
The most critical component of HOA success is the board’s effectiveness in its meetings. Board meetings are the format by which board members are informed, discuss, and make decisions affecting the interests and quality of life of HOA members. With rare exceptions (executive sessions and emergency sessions), the board of directors conducts the business of the HOA in the open; HOA members have the right to attend board meetings, observe deliberations and board decision making, and monitor the board’s performance. How did 2021’s board meetings go? Are board meetings held regularly, calendared, and in compliance with the HOA’s governing documents and California state statutes? Are members noticed and provided a clear meeting agenda? Is the homeowner forum orderly and timed? Does the board stick to the agenda and refrain from going off-topic or on tangents that disrupt and derail meeting effectiveness? Are board members prepared for meetings, are they
LOOK AHEAD BY LOOKING BACK
Get Organized for 2022 by Assessing 2021
encouraged to participate in discussions, and do they feel free to convey a dissenting opinion? When the board makes decisions, is the process consistent and understood? Do board members in the minority feel valued and appreciated? Are board decisions second-guessed or does the board speak with one voice? Finally, are board meeting minutes clear, well written, commemorative of the board’s decisions, and consistent with the public agenda?
LEADERSHIP. Governance is not management; governance is leadership. Boards of directors govern; therefore, boards of directors lead. What grade would the HOA board receive on leadership in 2021? Did the
LOOK AHEAD BY LOOKING BACK
Get Organized for 2022 by Assessing 2021
board have clear goals and objectives? Did the board communicate its goals and objective to members, management, and key service providers? Did the board encourage member feedback, comments, and impressions? Are board policies consistent with the board’s goals and objectives? Are policies reviewed and implemented fairly and equally? Does the board proactively encourage member engagement and participation on committees? Are members exposed to the HOA’s financial condition, budget performance, and reserve obligations? Does the board use tools such as annual operating and governance calendars to monitor HOA governance, financial and maintenance activities, and objectives?
OVERSIGHT. A key component of the board’s effectiveness is its oversight of the management of the HOA. In the context of board governance, oversight of management includes board oversight of the managing agent, manager, or management company, whether they provide full-service community management, administrative services, or financial management services, and other vendors that provide regular service to the HOA, such as landscape maintenance, pool and janitorial services, and CPA, legal, and insurance services. For board oversight to be effective, the board must have a scope of work and an executed service agreement with vendors that define the board’s service level expectations, performance measurements, and vendor review and evaluation schedule. Looking back at 2021, how has the board done in its duty of oversight? Do all regular service providers have up-to-date contracts with a clear scope of work and expectations? Does the board ensure that all vendors have licenses as required and current certificates of insurance listing the HOA as an endorsed additional insured? Do vendors have workers’ compensation insurance in place? Do vendors that render opinions or provide compliance work (election inspectors) to the board have professional liability insurance? Is the board scheduling annual vendor contract reviews and evaluations at least thirty days before contracts auto-renew or expire? Does the board include its critical vendors in its planning for common area maintenance and reserve expenditures?
PLANNING AND BUDGETING. Highly
effective boards of directors spend most of their time on planning and budgeting activities. Planning and budgeting are two sides of the same coin. Careful and diligent planning informs the budget. While it is true that most
The Self-Managed HOA Continued from page 21 HOA boards concentrate on planning and budgeting activities in the last three or four months of the fiscal year, the data and groundwork for the planning and budgeting process should happen throughout the year. Looking back on 2021, does the board have a schedule and process for regularly reviewing (and understanding) the monthly financial reports? If the board meets less than monthly, does it have a policy and process to ensure that financial reports are being reviewed monthly? How does the budget reflect the board’s strategic plan and objectives for the HOA? Is the board reaching out to the members to assess their preferences and expectations for common area care, maintenance, rules, and priorities? Is the board communicating with the members, engaging them, and keeping them informed of the HOA’s progress, projects, and financial condition against its goals and objectives? Is the budget reasonable and does it take into account increases in goods and services, utilities, and insurance premiums? Are the HOA’s reserves adequately funded, and is the board authorizing reserve projects as scheduled, or are projects being deferred? If the board is deferring projects, is it disclosing the deferrals to members and making adjustments to the reserves? In the planning and budgeting process, is the board meeting its standard of care for both current and future owners?
RISK MANAGEMENT AND COMPLIANCE. Boards
of directors bear the primary responsibility for the assessment and mitigation of potential risks and liability for the HOA and ensuring the board and HOA’s compliance with federal, state, and local laws affecting the operation of California homeowners associations. This responsibility is not to be taken lightly and can have serious financial consequences for unprepared HOAs. For 2021, did the board schedule time to meet with its attorney, CPA, and insurance agent to discuss trends and new laws and to assess current and future risks? Is the HOA adequately insured? Has the board budgeted for insurance deductibles? Does the board have processes and policies in place to ensure that the board and HOA are operating in compliance with federal, state, and local laws? Is the board aware of laws that will go into effect in 2022 that may require new policies and procedures? Does the board have a process to review and inspect critical common area components that may pose a risk of liability or injury? Has the board confirmed that all required federal and state filings are up to date and completed?
LOOKING AHEAD TO
2022. By all accounts, 2022 looks to be “normal.” Boards will resume in-person and open board meetings, pools and spas will be open, and members will reacquaint themselves with the common areas and amenities of their homeowner associations. Effective boards will take some time to look back, assess, critique themselves, and put into place policies, processes, and procedures to ensure governance success in 2022 and beyond.
John Cligny, AMS, PCAM, CCAMHR, is a veteran portfolio manager and community association management executive. As co-founder of Association Consulting Group, John is a trusted advisor primarily focused on educating and advising community association board members on effective governance to promote a positive public opinion of homeowner associations and community management. John is a frequent speaker and panelist on a wide range of community association topics and issues.
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