Dealing with Important Issues as a Board

Managing collections, violations, and member complaints are just some of the duties that require the immediate attention of the board, so it’s understandable why the majority of a board’s time is spent on day-to-day operations. However, one of the drawbacks of being focused on managing the day-to-day operations of the community is that strategic planning for the future of the community often doesn’t get attention it needs.

At ICRG we believe communities benefit from having a strategic plan approach that demonstrates fiscal responsibility as an important duty of the directors, as well as an opportunity to demonstrate the due diligence that goes into common element capital reserve planning. By adopting an improved strategic approach, your neighbors will see first-hand that the board has implemented a clear, well-researched strategy, for protecting and enhancing property values, and that these decisions are making the community a better place to live.

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Why Boards Should Think and Plan with Strategically

An effective board will have a clear understanding of the financial health of the association, as well as a snapshot of its future project funding needs.

It’s inevitable that common elements will deteriorate over time. Even the most experienced board, one that is taking steps to predict these failures, still face difficultly when estimates are not on target. When dealing with incorrect estimates, boards are faced with three difficult options:

Pass Special Assessments

To no surprise, assessments often catch members off guard. They are frequently met with frustration and concern of improper planning. And can place the board in an unfavorable light, even when the deteriorations are unforeseeable.

Obtain A Bank Loan

Every homeowner association should have responsibility for its assets as well as its operations in accordance with the standards adopted in the bi-laws. There is reasonable expectation that the reserve funds will be managed and grown over time, and therefore borrowing money from a bank should not be necessary. While loans may be necessary for major replacement projects, too often loans make future replacements costlier for everyone.

Spend Down Capital Reserves

Properly allocating funds for both anticipated and unexpected future capital improvements is a part of the board’s fiduciary responsibility. Showing proper planning and good management of the neighborhoods common goals is what the board should be working towards. Although it’s hard to predict every expense years ahead of time, having a properly funded reserve account that keeps up with rising replacement costs is the most sound financial positions to be in.

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