Condo Association Management Blog

It probably isn't illegal, just inadvisable.  
 
The fact is that your documents, like many condominium documents, state that the board must establish a budget and assessments. They probably have the ability to additionally assess if the income is not adequate to cover expenses. There may be many reasons that the income is not adequate enough.  
 
The board is going to run into problems with FHA if they are additionally assessing to cover expenses, which will make obtaining loans with less than 20% down increasingly difficult. The board may not wish to raise assessments in these times, and it is understandable. However, they aren't fooling anyone with the special or additional assessments. They either need to raise the fees, cut cots or both.  
 
The answer is that it is not illegal, but it is not in the best interest of the Association.

in georgia they can hit you for $200 every year without your approval. your ass. probably has money problems. they either already spent too much and need more or if you are lucky they just dont want to raise the dues or borrow money. i hope you are lucky.

These special assessments are the symptom, not the disease. The disease is that no one has taken ownership of spending to ensure that money is being used wisely. 
 
 
 
If your average owner pays a monthly fee of $500, that equates to $350,000 per month or $4.2 million annually. You are running a substantial business, and you need to manage accordingly. With spending corresponding to revenue (remember, you are not trying to make a profit here), a budget of this size greatly enhances the risk that money is slipping through the cracks. I would suggest the following: 
 
 
 
--identify owners who have a financial or accounting background that are willing to dig into your expenses. You should be able to find the major causes of your cash "leaks." 
 
 
 
--review all of your contracts (landscaping, snow removal, janitorial, etc.) to ensure that you are obtaining competitive pricing for these services. 
 
 
 
--have someone dig into "the little stuff" such as postage, office supplies, copy paper, etc. Is your consupmtion of these items reasonable for your HOA? These items easily "walk away" because everyone can use them and the dollar amounts are small.  
 
 
 
--review your 2011 budget in painful detail. Challenge any planned expenditure that is questionable. 
 
 
 
Good luck!

Good advise from Larry. 
 
We are a small HOA but any size absolutlely need to be run as a business. I account for every penny! I have the reverse problem - I have a business and accounting background - but get voted down. Most owners can't even read the financial statement I provide - I designed it to be very simple - even color coded. They only want the bank statement and just see money and want to spend it very unwisely. You need an audit to find out where the money is going and question unusual expenses. Less honest people have a tendendy to take advantage of owners ignorance or apathy and funds can easily be re-routed for someones personal profit. 
 
I've been appraoched to do the same and declined.

It sounds like you need a different board.  
 
The board should be prepearing an operating budget that has a line expense for all of the items that you spend money on each year. You also need to have a reseves spending budget for the items such as rooof replacements and buildings painting that are done every few years (a reserves schedule)that you need to be putting money aside for(a reserves fund).  
 
'Special assessments' are usually needed to pay for the unexpected costs that are outside of/ in excess of good budgets and planned savings and cannot wait for the next budget to be dealt with.

With regard to Sue's comment about engaging an auditor, remember that the purpose of an audit conducted by a CPA is to ensure that your financial statements are presented in accordance with generally accepted accounting principles ("GAAP"). The testing conducted by an auditor in preparing his/her report are NOT designed to detect fraud or operating inefficiencies, and his/her engagement letter with your HOA will state that point clearly. If you are concerned about fraud and waste, you need to engage a fraud auditor.  
 
 
 
Here is an example: your property manager engages a landscaping company at a fee of $3,000 per month. Unknown to anyone, he is receving a $500 kickback each month from the contractor. An auditor will, as part of his/her audit procedures, examine the contract, then test cash disbursements to ensure that there were 12 payments of $3,000 each during the year. If so, your financial statements "present fairly" your results of operations. The auditor is under no obligation to investigate whether there might be a kickback, whether another contractor can provide the same service for less money, or whether the service has even been performed as agreed. Thus, your HOA "got an audit," but a significant problem was never uncovered.

Great responses. Just by reading, this seems to be the condo complex I live in which is 766 units. I wrote in asking what to do if the condo board doesn't abide by their own by-laws. Just to make a statement, if this the complex I live in our Board follows the leadership of the property manager, not the other way around. It seems every time you ask a question they look to her for an answer. As for the emergency assessments, yes we have one every year and yet our Board cuts back on nothing, takes out loans, refinances loans, etc., the list goes on and on. From what I understand, we no longer have FHA approval. People are losing their homes, or walking away because the values have decreased so drastically. It's a very sad state of affairs. I can't even attempt to sell my house not only because of the market value in general but why would anyone pay top dollar for my home when they can buy one for thousands less. I can go on and on