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budgeting & financial

L.A.’s Premier Source of Information for Community Associations

July/August 2021

ART CONTEST

The Art Contest is for all CAI-GLAC members interested in revealing their artistic talents through any medium of your choosing suitable for print. This contest is designed to encourage members to promote the 2021 CAI-GLAC theme, Rise Together. Using your gifts and getting your hands a little dirty, your artwork should inspire, engage our members, and provide a sense of community. Rules: 1. One submission per member and must be their original work. 2. A rtwork can be done in any medium—paintings, digital works, photography, and sculpture. And can be in any style to best articulate the theme—landscape, portrait, still life, abstract. 3. A rtwork must be sized within 8.75” x 11.25” (vertical, to fit the cover) 4. Using 100 words or less, please provide a description of your piece and how it represents the theme.

FOCUS MAGAZINE

ART CONTEST

Rise Together

let us see your artistic talent! www.cai-glac.org | July/August 2021

Submissions: Please submit artwork as a photo and saved as a JPG. Images must be 300 dpi minimum, and CMYK format. They must be photographed without distortion. Please submit to Joan Urbaniak, joan@cai-glac.org. Title email: ART CONTEST SUBMISSION with YOUR NAME. Prize: All submissions will be displayed in the September/ October issue and social media for voting. The submission receiving the most votes will be the 2021 November/December cover art. Closing Date: JulyLos 31, 2021Chapter CAI-Greater Angeles

2021 BOARD OF DIRECTORS

NEWSWORTHY

OFFICERS Teresa Agnew, President Roseman Law, APC, 818-380-6700 Alexandria Pollock, CMCA®, AMS®, PCAM® , President Elect BuildingLink.com, LLC, 310-925-9001 Isaac Camacho, Vice President Accurate Termite & Pest Control, 310-837-6483 Angelique Madrigal, Secretary Ross Morgan & Company, Inc. AAMC®, 818-907-6622 Brian Fleming, CMCA®, AMS®, Treasurer FirstService Residential AAMC®, 310-981-9924 x49924

DIRECTORS Gary Burns, Mulholland Heights HOA, 818-326-2000 Matt Davidson, CCAM-HR®, CMCA®, AMS®, Action Property Management AAMC®, 800-400-2284 Angelique Madrigal, Ross Morgan & Company, Inc. AAMC®, 818-907-6622 Matt Meadors, CMCA®, AMS® HOA Organizers, Inc., 818-778-3331 Kim Province, Advanced Election Services, 714-783-8646 Erik Rivera, CMCA®, AMS®, PCAM®, Manhattan Pacific Management, Inc., 844-511-0644 Diane Schoolsky, Lingate HOA, 323-640-1277

CHAPTER EXECUTIVE DIRECTOR Joan Urbaniak, MBA, CMCA®

6 Budgeting Best Practices: Purpose & Preparation 8 Building a Budget 12 How to Have Fun with an Investment Policy 14 What is the Difference Between a Financial Statement Review and Audit? 17 Emergency Assessments 18 Why Am I Paying for Amenities I Cannot Use? 20 Association Budgeting—Thoughts From a CPA 24 Financial Stability

HAPTER UPDATE C 2 Note from the Editor’s Desk 3 Message from the President

NOTEWORTHY 22 News From Sacramento IBC Joansing Around Los Angeles BC Executive Retreat 2021

2021 COMMITTEE CHAIRS

FYI

COMMUNITY EXPO Michelle Caldwell, ePipe Pipe Restoration Jennifer Silva, Dunn-Edwards Paints

COMMUNITY OUTREACH Angelique Madrigal, Ross Morgan & Company, Inc. AAMC® Patti Specht, ServiceMaster Recovery by C2C Restoration

4 26 28 28

2021 Upcoming Events Membership News Advertisers Index Advertising Information

EXECUTIVE RETREAT Alexandria Pollock, CMCA®, AMS®, PCAM®, BuildingLink.com, LLC FINANCE Nels Atha, CMCA®, AMS®, PCAM®, Common Interest Services, Inc. GOLF TOURNAMENT Julia Gomes, Accurate Termite & Pest Control Jeff Koscher, BluSky Restoration Contractors, LLC HOA EDUCATION Leslie Barton, CMCA®, PRECISION PAINTING Laura Aguilar, CMCA®, AMS®, Beven & Brock LEGISLATIVE SUPPORT Erik Rivera, CMCA®, AMS®, PCAM®, Manhattan Pacific Management, Inc. MANAGER EDUCATION Helen Cook, CMCA®, AMS®, HOA Organizers, Inc. Martha Perkins, CMCA®, AMS®, Action Property Management AAMC®

Our thanks to the Focus Magazine Committee: Co-chairs: J amilla Davis, Dunn-Edwards Paints Jennifer Schuster, Valley Alarm Sean Allen, Esq.,Roseman Law, APC Suvany Cowie, West Hills West Creek HOA Elaine Gower, The Naumann Law Firm, PC Joshua Grass, Fenn Termite & Pest Control Miranda Legaspi, Platinum Security Jocelle Maliwanag, American Heritage Landscape Lesley Millender-Irwin, CCAM®, CMCA®, AMS®, PCAM®, Excelsior at the Americana at Brand HOA Diane Rossiter, CMCA®, AMS®, Bell Canyon Association

MEDIATION SERVICES Steven A, Roseman, Esq., Roseman Law, APC MEMBERSHIP Mimi Cortes, SAX Insurance Agency Tracy Robinson, CCAM®, PMP Management AAMC® PROGRAMS/LUNCHEONS/WEBINARS Sascha Macias, CMCA®, AMS®, PCAM®, FirstService Residential AAMC® Neda Nehouray, CMCA®, AMS®, PCAM®, HOA Organizers, Inc. PUBLICATIONS Jamilla Davis, Dunn-Edwards Paints Jennifer Schuster, Valley Alarm SOCIAL Ashley Hibler, McKenzie Rhody LLP Michael Valenzuela, Vista Paint Corporation SOCIAL MEDIA Alana Walker, Reconstruction Experts, Inc. Scott Mikelonis, PMP Management AAMC® WINE NIGHT Pamella De Armas, Silicon Beach Insurance Services Elaine Gower, The Naumann Law Firm, PC

CAI-Greater Los Angeles Chapter

This publication seeks to provide CAI-GLAC’s membership with information on community association issues. Authors are responsible for developing the logic of their expressed opinions STAY CONNECTED: and for the authenticity of all facts presented in articles. CAI-GLAC does not necessarily endorse or approve statements of fact or opinion made in these pages and assumes no responsibility for those statements. By submission of editorial content to CAI-GLAC, the author acknowledges and agrees to abide by the editorial and policy guidelines. Copyright © 2021. All rights reserved. Reproduction in whole or in part without written permission is prohibited. CAI is a national, not-for-profit association created in 1973 to educate and represent America’s residential community association industry. National Office Address: 6402 Arlington Blvd. #500, Falls Church, VA 22042 Tel: 888/224-4321 • Web Site: http://www.caionline.org

1010 N. Central Avenue, #316 Glendale, CA 91202 Office: 818-500-8636

July/August 2021 | www.cai-glac.org 1

NOTE

FROM THE EDITOR’S DESK

HELLO READERS!

ISSUE INFORMATIVE AND THAT YOU TAKE THE INFORMATION

2020 – 2021 has been intense. We have been consumed by our work, the challenges we faced, and keeping our clients happy. Though this issue is devoted to budgets in the HOA world, I hope you are taking the time to budget other important things into your life.

YOU’LL LEARN AND APPLY IT TO YOUR WORK.

As Audre Lorde expressed,

THANK YOU FOR TAKING THE TIME TO READ OUR JULY / AUGUST ISSUE. OUR GREATEST HOPE IS THAT YOU FIND THIS

As you peruse, you will see this issue is dedicated to finances and budgeting, where we contacted managers and CPAs to share their expertise with us. Articles range from Best Budgeting Practices, Investment Policies and Audits vs. Reviews to Emergency Assessments. Also, we answer the question that many of you were probably asked in 2020: “Why am I Paying for Amenities I Cannot Use?” Lastly, we asked a couple of managers to share their tips for budget season.

2021 CAI ANNUAL CONFERENCE & EXPOSITION

AUG. 18–21 | LAS VEGAS

“ Self-care is not self-indulgence, it is self-preservation.” It is so important that we are taking care of ourselves— physically, emotionally, and mentally. I hope everyone has a wonderful Summer! Co-editor Jamilla Davis Dunn-Edwards Paints

www.caionline.org #WeAreCAI

SEE MORE DETAILS AND REGISTER AT WWW.CAIONLINE.ORG/2021ANNUALCONFERENCE

www.cai-glac.org | July/August 2021

CAI-Greater Los Angeles Chapter

MESSAGE

FROM THE PRESIDENT

HELLO FELLOW CHAPTER MEMBERS! SUMMER IS UPON US AND AS THE SEASONS CHANGE FROM COOL SPRING TO JUNE GLOOM TO JULY WARM SUMMER NIGHTS, ON JUNE 15th LOS ANGELES COUNTY EXPERIENCED “BEYOND THE BLUEPRINT” WHEN GOVERNOR NEWSOM OPENED CALIFORNIA. WHAT DOES THIS MEAN FOR OUR CHAPTER? OUR COMMITTEES ARE DILIGENTLY WORKING ON “IN-PERSON” SOCIAL EVENTS AND HYBRID EDUCATIONAL EVENTS. THE SILVER LINING TO COVID-19 WAS THE ADDITION OF A NEW VIRTUAL WORLD FOR OUR CHAPTER. ALTHOUGH MANY MAY HAVE EXPERIENCED SOME ZOOM FATIGUE, OUR NEW “ZOOM” EXPERIENCE HAS BEEN A LIFESAVER. FOR MANY, THE ONLY WAY TO CONNECT WAS THROUGH A VIRTUAL PLATFORM. IT GAVE US AN OPPORTUNITY FOR QUALITY TIME WITH OUR FAMILIES, NOT SITTING IN L.A. TRAFFIC AND THE ABILITY TO PARTICIPATE IN BOARD MEETINGS IN A SAFE ENVIRONMENT. AS WE MOVE INTO A NEW SEASON OF POSTCOVID, MANY THANKS TO MY FELLOW CHAPTER LEADERS AND OUR PROGRAMS COMMITTEE WHO WILL BE PROVIDING HYBRID (IN-PERSON WITH LIVESTREAMING) PROGRAMMING FOR OUR EDUCATIONAL LUNCHES. FOR THOSE ABLE TO MEET IN PERSON, OUR BUSINESS PARTNERS ARE READY TO SAY “HELLO” AND MEET ON THE TRADESHOW FLOOR. THE GREAT THING ABOUT VIRTUAL—MANY MORE OF OUR CHAPTER MEMBERS WILL HAVE ACCESS TO LIVE PROGRAMMING.

day of education tailored to management company executives. On August 4th, we will be holding our first in-person Managers Workshop at the Skirball Cultural Center and our first Chapter luncheon on September 22nd at Skirball. Save the date, mark your calendars and stay tuned for more details on this special program as we celebrate each other and our theme “Rise Together.” Follow us on our social media platforms, our website www.caiglac.org, and look out for email blasts from the Chapter for more information. As I read through the articles for our July/August publication on the topics of budgeting and financial health, I wanted to commend your board of directors and chapter staff on being financially creative. We approached the year with conservative decisions on spending, downsized our office, maintained our full staff, and were proactive in procuring a PPP Loan, which helped us ensure strong financial stability. In closing, thank you for embracing our chapter theme “Rise Together,” which is to support, motivate and inspire one another. We continue to ask each of you reach out to at least one person in the Chapter—someone who you might only see at a luncheon, a friend in the industry that you miss—or go through the Membership Directory and reach out to a fellow chapter member to find out how they are doing. Take care, and we look forward to seeing many of you in the upcoming months. I will come around and say “hello” to each of you! Be well, 2021 Chapter President Teresa Agnew Roseman Law APC

As Vin Scully says, “It’s time for Dodger Baseball.” Our first inperson social event will be our Dodger Night held on Friday, July 23rd. Grab your Dodger Blue gear and join us at Dodger Stadium for networking, Dodger dogs and popcorn as we cheer on our men in blue! Our Executive Retreat will be held on July 30th at Calamigos Ranch in beautiful Malibu. We are taking advantage of this stunning setting and venue to present an informative

CAI-GLAC does not necessarily endorse or approve statements of fact or opinion made in these pages and assumes no responsibility for those statements. Authors are responsible for developing the logic of their expressed opinions and for the authenticity of all facts presented in articles.

CAI-Greater Los Angeles Chapter

July/August 2021 | www.cai-glac.org 3

HOA EVENING EDUCATIONAL WEBINAR – 7:00 p.m.

Via ZOOM

2021 CAI-GLAC Super Sponsors

BOARD LEADERSHIP WORKSHOP (PART 1) – 9:00 a.m.

Via ZOOM

¢ PLATINUM

EDUCATIONAL WEBINAR – 11:00 a.m.

Via ZOOM

CHAPTER BOARD OF DIRECTORS MEETING – 8:30 a.m.

Chapter Office

DODGER GAME – 5:00 p.m.

Dodger Stadium

BOARD LEADERSHIP WORKSHOP (PART 2) – 9:00 a.m.

Via ZOOM

EXECUTIVE RETREAT – 9:00 a.m.

Calamigos Ranch, Malibu

MANAGERS WORKSHOP – 11:00 a.m.

Hybrid – via ZOOM and Live at Skirball Cultural Center

HOA EVENING EDUCATIONAL WEBINAR – 7:00 p.m.

Via ZOOM

HAPPY HOUR MIXER – 4:00 p.m.

Location TBD

2021 UPCOMING CHAPTER EVENTS

29-30 AUGUST

9,11,13 CID LAW WEBINAR – 9:00 a.m. 18-21

SEPTEMBER

Via ZOOM

CAI NATIONAL CONFERENCE

Las Vegas

CHAPTER BOARD OF DIRECTORS RETREAT

Location TBD

BOARD LEADERSHIP WORKSHOP (PART 1) – 9:00 a.m.

Via ZOOM

BOARD MEETING/COMMITTEE CHAIR STRATEGIC PLANNING – 9:00 a.m.

Location TBD

BOARD LEADERSHIP WORKSHOP (PART 2) – 9:00 a.m.

Via ZOOM

EDUCATIONAL LUNCHEON – 11:00 a.m.

Hybrid – via ZOOM and Live at Skirball Cultural Center

CMCA REVIEW – 8:30 a.m.

Via ZOOM

COMMUNITY EXPO

DoubleTree By Hilton – Culver City

Events subject to change, see website for possible updates.

Berding | Weil Critter Busters, Inc. Dunn-Edwards Paints Manhattan Pacific Management, Inc. Pacific Western Bank PRECISION PAINTING The Naumann Law Firm, PC Whitestone Industries

PHOTO BY HTTPS://UNSPLASH.COM/@PAWEL_CZERWINSKI?UTM_

JULY

¢ GOLD Association Reserves-CA/Los Angeles BEHR PAINT COMPANY Diversified Asphalt Products Fenton Grant Mayfield Kaneda & Litt, LLP Life Specialty Coatings Popular Association Bank ProTec Building Services Securitas Security Services USA, Inc. Sherwin-Williams Paint Company Tinnelly Law Group Vista Paint Corporation ¢ SILVER ADAMS | STIRLING PLC ADCO Roofing & Waterproofing CertaPro Painters of Pasadena CIT-Community Association Banking Division General Pavement Management, Inc. GNG Vinyl Fencing, Inc. Nu Air Services, Inc. Oakridge Landscape Owens, Moskowitz & Associates ProAM Construction Riley Pasek Canty, LLP Segal Insurance Agency, Inc. Select Painting & Construction, Inc. Silicon Beach Insurance Services ¢ BRONZE ALLBRIGHT 1-800 PAINTING Alliance Association Bank Centurion Group Beaumont Tashjian Enhanced Landscape Management Ferris Painting, Inc. Landsystems—A Monarch Landscape Company Poindexter and Company, CPAs Reserve Studies Incorporated Wolf, Rifkin, Shapiro, Schulman & Rabkin, LLP We thank our 2021 sponsors who have made a substantial contribution to ensure our continued success this year.

www.cai-glac.org | July/August 2021

CAI-Greater Los Angeles Chapter

REPRESENTING COMMUNITY ASSOCIATIONS IN

ALL AREAS OF REAL ESTATE LAW

• Drafting and enforcement of Bylaws and CC&Rs • General litigation, including mediation and arbitration of disputes with owners • Construction defect litigation • Insurance bad faith litigation • Collection of delinquent assessments • Providing general business advice to homeowners associations.

11400 West Olympic Boulevard Ninth Floor • Los Angeles, CA 90064 (PH.) 310.478.4100 • (FAX) 310.478.6363 www.wrslawyers.com CAI-Greater Los Angeles Chapter

July/August 2021 | www.cai-glac.org 5

Budgeting Best Practices: Purpose & Preparation

By Russell Hoffman, CMCA®, AMS®, PCAM® One of the most important tasks before an HOA Board is the development of a prudent and balanced annual operating budget for the ensuing fiscal year. The Executive Team at Valencia Management Group, led by Russ Hoffman, was invited to share an overview related to best practices in the development and use of Homeowners Association Budgets. Like any business or corporation, homeowners associations require funds to ensure they can effectively operate. The annual budget requirements determine the monthly amount to be assessed to each ownership interest, and the approved budget sets the tone for the entire year relative to the Association’s expenditures. To that end, the goal of any successful HOA operating budget should be threefold: 1. Assure that the Association’s projected revenue is adequate to pay for all essential obligations which satisfy legal and governing document requirements and contribute to quality of life within the community. Because this revenue is primarily generated through the levying of regular, monthly assessments to the membership, the utmost care should be taken to avoid imposing or collecting assessments which exceed projected necessity. 2. Serve as a valuable strategic planning tool to guide Boards of Directors in their decision-making process throughout the fiscal year. The Association’s approved annual budget should be consulted regularly as to the feasibility of a proposed expenditure. In their reports to Boards, Management Teams are encouraged to provide summary information related to expenditures to-date vs. budgeted amount remaining in any given category. 3. Ensure reserves are maintained at a level sufficient for repair, restoration, or replacement of common area assets in accordance with the Board’s most recentlyapproved Reserve Study and adopted funding plan. The generally-accepted threshold for an adequate reserve fund is 70% or higher of the property’s calculated deterioration. Equipped with a well-thought-out and comprehensive budget, Boards are better able to make well-informed decisions on behalf of the Association throughout the year. Spending funds in a judicious

www.cai-glac.org | July/August 2021

manner and in accordance with the established budgetary plan helps to eliminate the risk of overspending, which could lead to serious, long-lasting financial troubles for the community. Creating an HOA budget is one of the major responsibilities of the HOA Board of Directors, but with adequate preparation and an organized, systematic approach, it is relatively simple to develop a clear and accurate annual budget that both reflects and protects the Association’s financial interests. Although effective budget development is not something that you can do in a few minutes or even a couple of hours, the process is quite simple with some preparation. Begin by ensuring that the following items are available for easy reference: l Annual budget data for previous 1-2 years l Monthly financial statements (last month to-date and last fiscal yearend statements are especially helpful) l Current Reserve Study l Vendor Contracts RECENT UTILITY BILLS/STATEMENTS In addition to these tangible components, it is important to also consider and define the Association’s broader financial objectives. What does the Board of Directors hope to accomplish in the next fiscal year or soon thereafter? If the goal is to undertake capital improvement projects to upgrade or augment existing facilities for example, that should be budgeted for. If reserve levels are inadequate, the budget may instead be focused on strengthening reserves. Following the 10 best practice steps below will contribute greatly to a stress-free budgeting season for management professionals and boards: 1. Understand mandatory versus discretionary expenses. (i.e., governmental fees and utilities are mandatory, while items such as wi-fi and refreshments at the annual meeting are discretionary; when revenues fall short of expenses, discretionary items require extra scrutiny and evaluation by the Board). 2. Review historical budget data. Analyze a minimum of two years, if possible, along with the current year-to-date information from the most current financial statement. CAI-Greater Los Angeles Chapter

3. Compile information within an organized spreadsheet. It is useful to establish basic expense classifications, such as Administration, Utilities, and Maintenance, and to then categorize detailed line items beneath them. Annual contract amounts should each be listed as separate line items (e.g., Management Contract, Landscape Contract, Janitorial Contract); and any closely-related expenses which are variable should be listed adjacent to but distinct from their counterpart items and plainly described. Establish a minimum threshold for budget line items based on the size of your budget. This could be $500 to $1,000 or more. Place all other small items which fall beneath those threshold amounts together as miscellaneous expenses. Example: BASIC EXPENSE CLASSIFICATION DETAILED LINE ITEM(S) RESERVE CONTRIBUTION

$XX,XXX

ADMINISTRATION Management Contract Management Extras Miscellaneous

$XX,XXX $X,XXX $XXX

UTILITIES Electricity Gas Water

$XX,XXX $X,XXX $XX,XXX

MAINTENANCE Landscape Contract Landscape Repairs Janitorial Contract Janitorial Supplies

$XX,XXX $X,XXX $XX,XXX $X,XXX

4. Review (and follow) Reserve Study Recommendations. The reserve study will determine the necessary annual reserve contribution as indicated in the funding plan which was most recently adopted by the Board. The Reserve Study also shows the balance currently in the reserve fund versus the estimated life remaining for the common area components for which the Association is responsible. This is a valuable tool in anticipating upcoming expenditures. IMPORTANT NOTE: The reserve contribution should be incorporated into the proposed budget as an item of absolute priority; it is recommended, in fact, that this amount be input before any other line item. The #1 mistake made by associations in the budgeting process is failing to follow the reserve study and instead choosing to allocate whatever is left over to reserves. 5. Review Existing Vendor Contracts. All service contracts should be carefully reviewed to determine whether there are any scheduled price increases or escalations which will take effect in the coming year and account for those. 6. Contact Service Providers. Reach out to all regular Association vendors and service providers for information regarding any anticipated increases not contractually accounted for. This includes utility companies and insurance brokers. There are many economic factors which drive pricing and inflation, and it is important to prepare for these fluctuations. CAI-Greater Los Angeles Chapter

Ascertain whether there will be any capital improvement projects in the upcoming year. If so, corresponding line items should be added. 8. Start filling in the “Proposed Budget” column of the spreadsheet. Use the information obtained in steps 3 thru 6 above. 9. Complete remaining line items. With the basic items documented and a general framework completed, now comes the “art” of creating a budget as all other line items are added, each with projected estimated costs based upon the Association’s recent history. Without solid rationale for changes (e.g., installation of water saving sprinkler systems which will predictably reduce water usage), estimated expenses and costs should always follow reasonable historical trends. The Consumer Price Index (CPI), published monthly by The Bureau of Labor Statistics, is the best indicator of inflation. The indicator provided is typically slightly lower than the CPI for homeowners associations because the costs of primary HOA services (i.e., utilities, insurance, and landscape) typically grow at a rate above the CPI, while clothing and food, which are also part of the index, grow at a slower pace. Underestimating expenses will erode the funds in an Association’s operating account quickly and is a practice which should be avoided. When reviewing the year-to-date financial statement at the beginning of this process, ascertain the status of the Association’s operating account. Is it properly funded, underfunded, or overfunded? Consider what may account for these conditions. Expect the unexpected. Keep in mind that some homeowners might be delinquent or default on their payments. This should be accounted for with a specific line item for bad debt. 10. Check all spreadsheet formulas for proper function. Double-check entries for accuracy and ensure that revenues and expenses inclusive of necessary reserve contributions balance out. A balanced budget is achieved when the total expected revenues are equal to the total planned spending. Understanding what is involved in the development of budgets and how to leverage them into an effective management tool through the fiscal year is a critical best practice. Not only does it promote smooth day-to-day Association management, but it contributes greatly to increased property values over time, ensures preparedness for unexpected, and creates a solid foundation for future planning.

Russell Hoffman formed Valencia Management Group in 1994 along with Leonard McKinley CPA, to provide community association management services to the Santa Clarita Valley and surrounding areas. He is active with CAI-GLAC, having served on the Board of Directors and as Co-chair of the Satellite Programs Committee. Russ is currently a member of the Chapter’s Legislative Support Committee and can be reached at rhoffman@valenciamgmt.com.

July/August 2021 | www.cai-glac.org 7

Building a Budget

Role & Responsibilities of the Board and Board Treasurer By Artemis Avetisyan, CMCA®, AMS®

homeowners association has three major official positions per Corp. Code §7213(a) and a board treasurer is one of them. Just as all the board members have diverse duties for the proper functioning and enforcement of community guidelines, the treasurer holds a critical position within the community. The core purpose of this article is to provide information about the tasks and financial goals of the HOA board members and the process of building a budget. Before diving deep into the duties of board members and their responsibilities, it is important to know why an HOA Board is created. The HOA Board usually consists of volunteer leaders who hold the ultimate responsibility of operating the community association on behalf of its owners. They are assigned to maintain, protect, preserve, and enhance the common areas and the values of owners’ homes/units. It is the fiduciary duty of the Board to act in the best interest of the community and for the benefit of the association as a whole. The community governing documents define formal roles and responsibilities in the budget process. The budget is an annual financial plan for the HOA. It provides an estimate of community’s revenue and expense. It is worth mentioning that the Treasurer does not have unlimited authority over the association’s monies; however, he is bound to fulfill all the duties regarding the funds disbursement, billing, and budgeting. Although the Treasurer’s duties vary from association to association, the primary responsibilities remain the same. The Treasurer is the officer responsible for ensuring that the draft budget is prepared, reviewed, and approved by the board.

www.cai-glac.org | July/August 2021

Some of the Treasurer’s key responsibilities include the following: ¡ Acting as the financial voice of the Board and the community. ¡ Serving as the Board’s liaison to the association’s auditor. ¡ Ensuring the implementation of an annual operating budget. ¡ Storing and keeping the financial documents of the association and checking them for accuracy. ¡ Making sure that invoices are paid on time and tax returns are filed on time. ¡ Checking whether or not the reserve study is prepared. ¡ Overseeing the investments and deposits. ¡ Serving as a responsible person when it comes to submitting the reports of financial transactions to the Board. ¡ Handling everything related to the approval of transactions, including the approval of the purchase, authorization of salary, and the signing of checks. However, the Board Treasurer cannot make checks payable to cash. The Treasurer also controls the approval of invoices. ¡ Reviewing all the bank reconciliations monthly. He also keeps the record of all the missing checks/gaps and keeps track of everything to add in the year-end financial review. ¡ Reviewing all the financial statements, invoicing, and contracts to ensure maximum satisfaction from the Board’s perspective. Since one of the most important tasks of the Treasurer is to prepare the budget, attention to detail, ability to read and understand contracts and a solid understanding of financial statements and line items are essential. Since the budget is a financial plan for managing the community association, developing the budget takes a lot of work! No two associations are the same, and changes in the economy and the condition of common elements can make one year look quite different from the previous years. When using the budget development financial planning tool, the Treasurer must identify budget line items and their related level of service by distinguishing between obligation, need and expectation. In most cases the Treasurer will work with the manager/management company’s finance team to prepare a draft budget first. It is also important for the Treasurer to consult with the rest of the board and invite owner input as well. Some of the steps that the Treasurer should follow in preparing the budget are: ¡ Check with vendors to find out what the expected increases will be in their contracts, such as termite contract, insurance, pool, management, etc. ¡ Check legal documents to find out what rules apply to an increase in assessments. ¡ Use year-to-date totals and project the actual totals through the end of the year. ¡ Add recommended categories in the draft/proposed budget, such as starting association website. CONTINUED ON PAGE 10

CAI-Greater Los Angeles Chapter

July/August 2021 | www.cai-glac.org 9

Building a Budget CONTINUED FROM PAGE 8

¡ Calculate and include transfers to reserves per reserve study recommendations. ¡ Review annual budget from previous years by checking past projections and compare them to the actual expenses it helps to identify trends. ¡ Review financial statements to determine whether to make adjustments in case more money is being spent than earned. ¡ Evaluate utility expenses: water, gas, electricity. ¡ Double-check the community’s governing documents.

Budgeting Methods There are two types of budgeting methods: zero-based budgeting and historical trend budgeting. In zero- based budgeting all items are set to zero and the amount of funds allotted to each must be justified. On the other hand, for historical trend budgeting, existing line-item amounts are used as the starting point, based on financial reports, existing contracts, and bills from the past year. Both methods can also be combined to create a more effective approach.

Board Approval

Once all the information is gathered and numbers are obtained, it is time to get approval by scheduling an Open Board Meeting

to review and approve the draft budget. Board members do not have individual power; the decision-making ability rests with the full Board. The Board confirms whether the budget includes all the basic budget elements, including the pro forma operating budget, the statements regarding the funding of the reserves and their calculation, etc. Approval of the budget is necessary for any increase in assessments up to 20%. Approval requirements are found in Civil Code 5605. After all the Board members agree with the budget and approve it, the next step is for the Board Treasurer to develop the annual budget report. Please check Civil Code 5300(b) for the list of documents the annual budget report must contain. The HOA Board must share the approved budget with the homeowners. After all, they would want to know how their money is being spent. In California, HOAs must issue an annual budget report within 30 to 90 days prior to the end of the fiscal year (Civil Code 5300(a)). Failure to distribute the annual budget within that period voids any increase in regular assessments approved by the Board. In this case, any increase must be approved by majority of quorum of members per Civil Code 5605(a). Artemis Avetisyan, CMCA®, AMS®, is a community manager at Ross Morgan & Company, Inc. AAMC. She is a past board member at Woodside South HOA, is a licensed realtor and has been managing communities for six years. Artemis can be reached at artemis@rossmorganco.com.

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CAI-Greater Los Angeles Chapter

TAKE ME OUT

TO THE BALL GAME

Join Us for Our Second L.A. Baseball Networking Mixer at Dodger Stadium CAI-GLAC

Dodgers Night Dodgers vs. Rockies

FRIDAY, JULY 23, 2021

5 – 7 pm At historic 76 Gas Station right outside the Center Field Gate 7 – 9 pm Watch the Game in field level seats behind Third Base TICKETS

EARLY BIRD SPECIAL $125 pp until 6/30

Dogs, drinks and prizes! Get your tickets now!

$145 pp after 6/30 Includes game ticket, 5-7 p.m. buffet and bar… plus special post-game fireworks spectacular! Parking not included. Limited number of seats available!

Register Today Online at www.cai-glac.org Sponsorships still available. Call Chapter Office at 818-500-8636 CAI-Greater Los Angeles Chapter

SPONSORS DODGER BLUE EVENT SPONSOR Guard-Systems, Inc. SEAT CUSHION Diversified Asphalt Products Dunn-Edwards Paints Guard-Systems, Inc. The Miller Law Firm Valencia Management Group Vista Paint Corporation BOTTOMS UP BAR Nu Air Services, Inc. BluSky Restoration Contractors, LLC BALLPARK SNACKS American Heritage Landscape

July/August 2021 | www.cai-glac.org 11

How to Have Fun with an Investment Policy Diane Rossiter, PCAM

First, you fold the policy into a paper plane, and see how far it can fly. Origami is also entertaining. Now that I have captured your attention with a blatant appeal to the human weakness to choose fun over serious subjects, association boards and managers already know or need to understand that an investment policy is not just for fun, but an indispensable tool to provide guidance and protection for an association’s fiscal assets. Typically, the major portion of an HOA’s cash assets available for investment is in the replacement/reserve fund. Let’s review the basic outline for the investment policy game.

Association’s assets, and ensure that funds are available when needed. As an important note, policies are not set in stone. Associations, laws, investment options, staff and board members all change over time, and policies need to be revised from time-to-time. So long as it is done with professional guidance and knowledge, it will help the policy continue to serve the community and Board effectively. The main rules of an investment policy are: Safety – this includes safety of income and safety of principal. Income safety means that the return on the investment is paid in the amount and timing expected. Principal safety refers to protecting the original amount invested. Liquidity – is accessibility to funds, that money is available when it is needed without penalty. Yield – an archaic word no longer is use by HOAs. But in the old days, the 20th century, this is the return earned on an investment. Investment Policy Strategy The investment policy strategy is the approach the Board uses to unify the main elements of the policy—what methods and investment options are suitable in accordance with the rules. Approaches such as laddering (structuring investments so that they mature in successive periods and funds are available when needed), the specific types of investments that can be utilized, if a professional investment advisor will be used, and if non-interest-bearing accounts will be used and under what conditions. Here’s a quick brainteaser to find out how well you understand the rules of an association investment policy. Check the investment vehicles that follow the rules.  CDs

 Savings accounts

 Bitcoin

 Penny stocks

 Money market funds

 Insured municipal bonds

 Treasury bills & notes

 Picasso painting

Investment Policy Development Start with checking the law concerning HOA investments and accounts and the association’s governing documents, generally the Bylaws. These provide the minimum standards for the policy. In California, Civil Code §5155 specifies that, “the board shall exercise prudent fiscal management in maintaining the integrity of the reserve account.” If your governing documents contain requirements for investments, those need to be incorporated into the policy as well. These provide a very minimalistic baseline, just the foundation with which to develop a complete investment policy for the HOA.

Tactics Policies should encompass the details as well, if all investments must be insured, if all employees and Board officers must be covered by fidelity/crime coverage, how many signers are required on specific accounts, how often the Association’s investment portfolio will be reviewed by the Board, which employees or Board members are tasked with implementing and overseeing the policy’s implementation.

The Board should utilize its professionals, such as the accountant, banker, attorney, manager, and Association volunteers and Board members who have applicable finance, accounting, etc. experience. The written policy will specify the methods and instruments the Board can use to invest funds, which are safe, increase the

Beginning the Game Once an Investment Policy has been developed, it is presented to the Board for approval and execution. Preparations, including determining the total amount of funds appropriate for investment, and the timeline for when and how much money will need to be accessed for planned expenditures,

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Playing the Game This is really the easiest part, and the reason why an Investment Policy is so valuable. All that is needed, is to follow the policy. Most of the effort and thought are in the development of the Investment Policy. You can call it a game or a map, or a policy. As long as the policy is followed, it eliminates the potential for confusion, wasted opportunities and revenue, and excess Board time. It also simplifies the process that ensures that funds are available when needed, the Board is kept informed on the Association’s investment performance, and its funds are safe.

START

CD MM

Now, what’s more fun than that? END

and thus the amount of time funds can be invested and when liquidity is necessary. These are not only preparatory tasks, but ones that must be repeated regularly, based on the schedule provided in the policy, as funds are added to the account, like monthly contributions from assessments, and outlays for replacing worn out reserve study components. As total funds decrease and increase, as planned expenses are added or deducted and the timing of expected costs changes, the mix of investments must correspondingly be updated.

ANSWERS (Just in case you weren’t sure)  CDs

 Savings accounts

 Bitcoin

 Penny stocks

 Money market funds

 Insured municipal bonds

 Treasury bills & notes

 Picasso painting

Diane Rossiter, PCAM, is the General Manager of Bell Canyon Association. She can be reached at gm@bellcanyon.com.

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1-800-410-5444 For helpful tips and examples of our work: CAI-Greater Los Angeles Chapter

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ICE I N V OI N V O I C

WHAT IS THE DIFFERENCE BETWEEN A FINANCIAL STATEMENT REVIEW AND AUDIT? By Ronald S. Stone, PhD, CPA, CFE

TOTA L TOTA L

REVIEW

A review of an association’s financial statements consists of inquiries of association and property management personnel and analytical procedures applied to the financial data. Analytical procedures include comparing actual amounts to the prior year’s actual results, comparing actual amounts to budgeted amounts, and/or comparing actual amounts to industry ratios, if available. Examples of inquires of management and analytical procedures are described in Statements on Standards for Accounting and Review Services (SSARs) issued by the American Institute of Certified Public Accountants (AICPA). The CPA’s review report provides “limited assurance” that he or she is not aware of material modifications that should be made to the financial statements in order for them to be in accordance with GAAP.

AUDIT

An audit is a closer examination of amounts in an association’s financial statements. The CPA plans and performs

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CPAS PROVIDE A RANGE OF SERVICES FOR HOAS. AMONG THE SERVICES AT YEAREND ARE FINANCIAL STATEMENT REVIEWS OR AUDITS AND PREPARATION OF FEDERAL AND STATE TAX RETURNS. WHETHER IT IS A REVIEW OR AUDIT, THE ACCOUNTANT SHOULD POSSESS A LEVEL OF KNOWLEDGE OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) AND FAMILIARITY WITH ACCOUNTING PRACTICES AND PROCEDURES UNIQUE TO HOMEOWNERS ASSOCIATIONS. WHAT IS THE DIFFERENCE BEEN A REVIEW AND AN AUDIT? work to obtain “reasonable assurance” about whether or not the financial statements are prepared in accordance with GAAP and are free from material misstatement. An audit does not give “absolute assurance”, as this would require testing every transaction, which is impractical. Audit procedures are described in Statements of Auditing Standards (SASs) which are also issued by the AICPA. First, the CPA obtains an understanding of the association’s and/or management company’s internal accounting controls and assesses fraud risk. Then the CPA develops procedures to corroborate amounts and disclosures in the financial statements by obtaining audit evidence through inquiry, physical inspection, observation, and third-party written confirmation. Two examples of third-party written confirmation are: confirming bank balances and loans, if any, directly with the bank, and inquiries of the association’s attorney(s) regarding possible or actual litigation involving the association. As a result of the work

required to be performed, an audit is usually substantially higher in cost than a review.

WHICH TO SELECT?

Take a look at your association’s Bylaws and CC&Rs. Unless the governing documents require an audit, a review of the financial statements of the association should be prepared in accordance with GAAP by a licensed CPA for any fiscal year in which the gross income to the association exceeds $75,000 (Civil Code section 5305). A copy of the financial statements, required disclosures, and the CPA’s review report should be distributed to association members within 120 days after the close of each fiscal year. Ronald S. Stone, PhD, is a licensed CPA who has been performing audits and reviews of homeowners association financials for more than 30 years. Specializing in forensic audits, he can be reached at rstonecpa@gmail.com.

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Emergency Assessments ¢¢¢ By Marc Binenfeld

AT SOME POINT OR ANOTHER YOUR HOMEOWNERS ASSOCIATION WILL BE CONFRONTED WITH THE NEED FOR A SPECIAL ASSESSMENT. LET’S BE CLEAR THAT IT IS BEST TO AVOID THEM, BUT LET’S TALK ABOUT WHAT HAPPENS WHEN THE INEVITABLE IS KNOCKING AT YOUR FRONT DOOR. The need for an emergency assessment can be the result of a natural disaster, such as a flood or an earthquake or perhaps a fire. Just as common, unfortunately, is the lack of good financial planning. A sudden, unexpected event such as an earthquake and the resulting damage, can blow a large hole in your operating budget. Since it is the board’s responsibility to maintain the property, the options available to the HOA are few when it comes to paying for required repairs. The 5% (of the Operating Budget) cap on Special Assessments without a vote of the ownership gives very limited relief. One option is borrowing from current reserves. Reserve funds that are allocated per the reserve study are available to the HOA for other purposes, such as an unexpected event. Borrowing is allowed. But the funds must be paid back. The amount that the board borrows must be disclosed to all the owners. Paying it back into the reserves is generally done in the next operating year and, therefore, must be incorporated into the next year’s budget.

on the creditworthiness of the client. In the case of an HOA a good credit risk is one where receivables are low and where the HOA is in compliance with state and federal government filing requirements. In a traditional business loan, collateral is pledged (cash, property, etc.) to secure the debt. With an HOA there generally is no property to pledge since all the common areas are indivisibly owned by the HOA. Most banks will require, as proof of repayment ability, that the HOA pass a Special Assessment. This Special Assessment takes the place of traditional collateral. A traditional bank loan can be costly to set up in legal and administrative fees, closing costs and most of all, interest. A variation on the borrowing money theme has led some boards to consider funding emergency repairs entirely via Special Assessment, bypassing the complexities of a bank loan. This plan works only if the HOA can raise the funds quickly enough to match the financial obligation time horizon for the necessary repairs. The logistics of assembling, packaging, promoting and ultimately passing a Special Assessment are best addressed in another FOCUS column. To inoculate the HOA from the need for special assessments, a board must plan for unknown events. It is not enough to merely fund the reserve according to the experts’ recommendations. As a planning tool the board should have a contingency line item in its operating and/or capital budget. Marc Binenfeld is the owner and CEO of Metropolitan Property Services, a full-service management company headquartered in Culver City. He can be reached at marc@metroproperty.services.

Another option available to the homeowners association is borrowing from a financial institution. There are several specialty financial institutions that lend to a HOA. In general, a bank will lend based

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Why Am H I Paying for Amenities I Cannot Use?

OA living is a lifestyle that includes recreational amenities such as hot tubs, saunas, fitness centers, clubhouses and sparkling swimming pools. When a serious threat to public health was declared, a large portion of the country began to close down. This included all HOA amenities that homeowners were accustomed to using. And with not knowing how long the mandated closures would be in place and which direction COVID-19 would take, homeowners were left with an obvious question: why am I paying for amenities I cannot use? As a result, many homeowners were seeking to reduce assessments due to amenity closures. However, even though the facilities were closed, they still required some level of maintenance or service during the pandemic. For instance, community pools still required cleaning and chemicals, and common area utilities for areas such as pools, gyms, and garages were still in service. Insurance requirements would not change for the communities, and associations may only see very slight decreases in budgeted line items for same.

¢¢¢ By Michelle Anderson, CMCA®, AMS®

Though associations may have seen slight decreases for electricity usage for gym facilities and such, the cost in water usage significantly increased with most homeowners now working from home. Yes, communities considered special assessments even during the pandemic. Additionally, associations were faced with increased delinquencies due to the impact on homeowners who were laid off as a result of COVID-19. According to a CAI survey, more than 90% of

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homeowners were paying their HOA fees, though payment plans for some associations were up by as much as 20%. To accommodate, some HOAs waived late fees, removed violation fees, and worked with homeowners on their assessment payments. Suffice to say, it would be easy to suggest that 90% of the population continued to maintain employment, whether they were essential service workers, or continued employment working remotely. Perpetuating HOA assessment payments without discounts likely had little impact on homeowners during facility closures, though the same may not be said for those faced with unemployment.

uring the pandemic, the cleaning of common areas increased, and additional costs were added in purchasing sanitizing stations and “ramping up” janitorial for lobbies, elevators, and commonly-used ingress/egress points. Now that facilities are working towards opening at limited capacity, areas like the pool will need pool monitors to ensure capacity limits. Costs for these services were typically not budgeted for and even more reason to keep assessments the same. As the world continues to open back up, associations will follow suit because they are eager to have amenities back in full service for homeowners and residents. This has been an unprecedented time that left many scrambling, trying to figure out how to navigate through day-to-day life. The question remains, should associations offer assessment discounts considering the COVID-19 Pandemic? The short

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answer is no. Associations operate on a “zero-based budget,” and each homeowner agreed to pay for amenities and services when they purchased into the association. HOA assessments are the only source of income for the association. If an association chose to borrow from reserves to cover operating expenses in order to offer assessment discounts, the association would still need to pay back the borrowed funds as outlined in Civil Code. They could be setting themselves up for failure in the long run. Offering additional discounts could lead to an association’s operating account “running dry.” And with some communities faced with mid-year increases, special assessments, and fixed expenses during 2021, the option for offering discounts just isn’t there. How will community associations handle the next COVID-19 type situation? They certainly will be prepared in handling closures and working towards opening at limited capacities for same. For the most part, associations adapted well and handled assessment collections as best they could. Many board members worked diligently, with the best intentions, putting the best interests of the community at the forefront of decision making. While assessment discounts on amenities were typically not offered, associations worked with homeowners who struggled to pay monthly assessments. Michelle Anderson, CMCA®, AMS® is the Director of Community Management for PMP Urban in Los Angeles and has 18+ years of professional community management experience. She can be reached at manderson@pmpmanage.com.

Coaching to Credentials

Manager Mentor Program Would you like to be able to talk to another manager about their educational path and experience—get their advice about next steps? CAI-GLAC is proud to offer the Coaching to Credentials Manager Mentor Program as a resource to our community manager members. Our goal is to encourage you to achieve CAI designations—ultimately the PCAM® designation. Through the program, an experienced professional manager is paired with a manager newer to the industry or one looking simply for guidance. The scope and duration of the mentoring relationship is determined between the mentor and the protégé. A Mentor can: l Help to identify your specific goals. l Provide career guidance. l Provide vision and insight. l Offer support and advice about CAI courses. l Explain the value of credentials. l Motivate you to progress to the next level of professionalism. For additional information about the CAI-GLAC Manager Mentor Program, please contact the Chapter Office at 818-500-8636.

July/August 2021 | www.cai-glac.org 19

ASSOCIATION BUDGETING – THOUGHTS FROM A CPA  By Jeremy Newman, CPA

Budgets!! Is it that time of year again? Why does it feel like there is so much to do? Are you starting from scratch every time you prepare your association’s budget?

■ Vendor feedback about price changes, scope changes,

recommendations.

■ A list of things that changed in the current year when

Start early and work continuously throughout the year to take the sting out of budgeting.

■ ■

Your annual budget process should be a fluid year-long continuous collection of decisions, document gathering and projections. Why wait until your community manager says it is time to start the process?

■

At our firm, we recommend association boards retain a permanent budget file containing governing documents, prioryear and current-year budgets (including detailed calculations and supporting documents), current-year activity, information, documents, notes, minutes, conversations with vendors, recommendations, cash flow analysis, hopes, fears, surveys, reserves projections and deferred maintenance information. There are many other things to consider as well!

■

■ How much cash to do you have now? ■ How much cash will you have by the beginning of the next ■ ■ ■ ■ ■

year? What does your reserve study show? Do you have deferred maintenance? Are your owners complaining about the condition of common areas? Are the common areas and components appealing to current and prospective owners? What are the economics of your owners?

As with any governing group, spending aspirations generally far outweigh cash projections. Are you back to square one, doing the same type of budget as in previous years? Not an easy task. As with most things, starting the process early is vital to the success of the project. Maintain a file that is continuously open for documents and information so when you reach “budget season” you are ready. You have most of the information you need. What might you keep in the file? Some thoughts… ■ Committee and Board meeting minutes. ■ Vendor contracts.

20 www.cai-glac.org | July/August 2021

■ ■

■ ■ ■

compared to previous years, including what was budgeted for the current year. Ideas, thoughts for next year. Comments from owners. Maintain a file or list of requests, complaints, and suggestions from your constituents. What do people want and/or expect? Use fees records: clubhouse rental, other rentals, move in/ out fees, laundry income. Is there scope to increase rates? What is the cash position each month? Does the association contribute to reserves every month? Is there a fundamental financial challenge making reserves contributions? Does the association have any assessment collection issues that are significantly impacting cash flow? Maintain a receivables status log. Photos of common areas, structures, and projected repair/ replacement costs. Notes comparing the latest reserve study cash needs and timing of expenditures to actual results. Maintain a separate Excel schedule. Which areas or accounts from last year’s budget have seen actual revenues and expenses vary considerably from projections. Why? What does the item look like going forward?

Revenues Revenues include monthly assessments; compliance income such as late fees, violation fees, delinquent account interest income; bank interest income; ancillary income such as rentals, services, and per-use fees. Understand the nature of each revenue stream. Basis of accounting: Make sure you know how revenues are recorded in the monthly financial statements you are reviewing and relying on to help with future revenue projections. Under the cash basis, what is recorded is what was received. Under the accrual and modified accrual bases, your revenues are what was billed, not necessarily what was received. Keep an eye on your receivables to see how much is still to be collected. Is it all collectible?

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Are compliance fees collectible or does the Board end up writing off balances or simply being unable to collect? Actual revenues presented on your association’s income statement may not be 100% collectible. If compliance fees are recorded on the accrual basis, when they are billed to owners, are they collectible? Close analysis of the aged receivables report, owner ledgers and collection efforts are required to determine collectability and conversion to cash. Cash is what you are looking to maximize to be able to afford your expenses wish list.

preserve cash. Understand state and governance restrictions on increasing assessments. You may need to obtain member approval for a special assessment to fund an operating deficit.

Amounts Owed from the Operating Fund to the Reserves Fund

Operating expenses are the day-to-day expenses associations incur to keep operations moving. Utilities, management fee, legal fees, landscaping, security, pool maintenance, pest control, repairs, and maintenance (non-reserve study), administrative expenses.

When funds borrow from each other, Boards should and are generally required to prepare and document a plan to repay balances. Boards should budget for repayments. Perhaps the operating fund owes the reserves funds for unpaid budgeted assessments contributions, but operating cash is so low the operating fund is unlikely to be able to repay the amount it owes to reserves. Perhaps it is time to recalibrate. Discuss treating the unpaid balance as a non-cash transfer between the funds. You should review any state or governing document requirements.

Did you have any surprise expenses during the current year? Should you budget for such expenses again for next year? Ensure your budget permanent file includes sufficient detail of these expenses for you to make good decisions about next year. Perhaps you need to include a contingency percentage or amount in various expense categories for the unexpected.

There are so many things to consider when preparing your association’s annual budget. It is very challenging to complete the process over a few short months. Find a system of retaining documents, ideas, thoughts, suggestions, requests, calculations, information that will help you throughout the year and at budget preparation time.

Expenses

Cash Flow Knowing the status of your association’s available cash balances is paramount to understanding how much money you will need for next year. If cash is low and delinquencies are high and increasing, there will be increased pressure to reduce costs and

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Jeremy Newman CPA is the owner of Newman Certified Public Accountant PC, a company focused 100% on Association Audits, Taxation and Consulting. He can be reached at jeremy@hoacpa.com.

July/August 2021 | www.cai-glac.org 21

NEWS

FROM SACRAMENTO

NEWS FROM THE FRONT Mid-Session Legislative Update ¢¢¢ By Thomas M. Ware II, Esq. CCAL

his year, the legislature is making up for last year’s COVID slowdown. There were twenty bills introduced this year that impact CIDs. Currently, nine remain viable.

AB 502 – Election by Acclamation (CLAC Position: Support) AB 502, if enacted, will permit all homeowners associations to elect directors by acclamation provided that: 1. The association opens candidate nominations 90 days prior to the close of nominations; and 2. The association provides a “reminder notice” at least 30 days prior to the director candidacy submission deadline. AB 1101 – AB 2912 Clean Up (CLAC Position: Support) In 2018, AB 2912 was passed with the goal of protecting HOA finances by, inter alia, requiring: Boards to pre-approve all transfers of greater than $10,000 or “5% of the HOAs total combined reserve and operating accounts, whichever is lower;” and obtain “fidelity bond” coverage to insure against theft by directors, officers, management agents, and management company employees. AB 1101 clarifies that “crime insurance” or “employee dishonesty policies,” in addition to fidelity bonds, will satisfy the statute’s insurance requirements. AB 1101 seeks to eliminate confusion as to when pre-approval of transfers is needed by eliminating the amorphous 5% transfer threshold. Written approval of transfers of $10,000 or more will be required for HOAs with 51 or more units. A lower threshold of $5,000 or more is required for smaller CIDs. AB 1101 also permits Managers to deposit HOA funds in credit union accounts protected by the National Credit Union Insurance Fund. SB 9 – L ot Splitting – Duplexes (CLAC Position: Oppose Unless Amended) SB 9 would require a municipality to treat a proposed housing development containing “no more than 2 residential units” as “single family residential housing.” The municipality would have to ministerially approve a duplex in a single-family housing zone. SB 9 is silent as to the impact of pre-existing CC&R restrictions prohibiting such a subdivision. There are concerns that SB 9 could be construed as constituting public policy in favor permitting construction of duplexes in CIDs. The author of the bill, Senator Atkins, represented during a policy committee hearing that the bill is not intended to invalidate CC&R restrictions. CLAC is seeking amendments confirming the stated intent.

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SB 10 - Lot Splitting - Ten Units Or Less (CLAC Position: Oppose) SB 10 seeks to permit a municipality to ministerially authorize developments of up ten units or less in areas zoned for single family housing. The bill also will invalidate CC&R restrictions that prohibit or unreasonably restrict such an authorized development. The bill does not reconcile the impact of constructing a tenunit structure in single family home planned use development on infrastructure use and maintenance, assessment allocation, and the requisite governing document amendments that will be needed to accommodate such subdivisions. SB 391 – E mergency Powers and Procedures (CLAC Position: Support) SB 391 will allow, subject to certain notice requirements, HOAs to conduct virtual meetings without a physical location during a state of emergency. SB 432 – Elections (CLAC Position: Neutral) SB 432 seeks to clean up 2019’s SB 323 election law. It permits HOAs to adopt rules permitting director term limits. CLAC has submitted additional cleanup requests. AB 611 – Safe At Home (CLAC Position: Support) Pursuant to the Safe at Home program, victims of domestic violence, sexual assault, stalking, human trafficking, or elder or dependent adult abuse may designate the Secretary of State as their agent for service of process and receipt of mail. The person’s actual address is confidential. This bill would require CIDs to use the Secretary of State address for association communications and to withhold or redact information from membership lists that would reveal the victim’s name, community property address, or email address. SB 392 – Document Delivery (CLAC Position: Support) This bill will permit an association to deliver designated HOA documents by email unless the member has not provided a valid email address to the association or has revoked consent to receiving documents by email. A requirement that certain CIDs maintain websites recently was removed from the bill. AB 1584 – O mnibus Bill - AB 3812 Clean Up – (CLAC Position: Support) AB 1584 is an omnibus bill seeking to clean up several noncontroversial issues. Included in this bill is clean up of a portion of last year’s AB 3812 that prohibits CIDs from adopting or enforcing rental prohibitions but permits 25% rental caps and prohibiting short term rentals of 30 days or less. AB 3812 required CIDs to amend their governing documents by no later than December 31, 2021. AB 1584 permits such amendments to be made without member approval pursuant to a process similar to adopting an operating rule. The Association will have until July 1, 2022, to conform its governing documents. Whew! That was a lot. If you need any further information, feel free to reach out to CLAC at legcochair@caiclac.com. Thomas M. Ware II Esq. CCAL is a partner in the law firm of Kulik Gottesman Siegel & Ware LLP, and a Fellow of the College of Community Associations Lawyers (CCAL). He currently serves as one of CAI-GLAC’s California Legislative Action Committee Delegates and is CLAC’s Legislative CoChair. He can be reached at tware@kgswlaw.com.

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OUR THANKS TO CAI-CLAC 2021 CONTRIBUTORS January 1 – April 30

GOAL:

Channel View Terraces HOA 101 S. Manhattan Place HOA Culver Centrale HOA 11767 Sunset Boulevard Association El Segundo Peppertree HOA 122 Guadalupe HOA $26,016 Flower Street Lofts HOA 1242 Berkeley Street HOA Gorham Park HOA 1827 Greenfield HOA Grand Lofts HOA 2050 Artesia HOA Harbor Ridge HOA 2138 Stewart Street HOA Hermosa Surf Condos, Inc. 253370-72-1/2 Malibu Road HOA Hilllcrest Meadows HOA, Inc. 446 San Vicente HOA Irena Vista OA 515 San Vicente HOA as of Kelton Arms COA 720 Shoreham Drive HOA 4/30/21 Kester Villas HOA 909 El Centro, Inc. $8,780 La Palma Estates HOA ALI Condominiums HOA Lawford HOA Aliso Village HOA Longfellow Armour Lane Condominium witkinad new size_Layout 1 1/28/13 5:04 PM Page 1Village OA Los Cerros HOA Avis HOA 34% Oakbridge HOA Avocado Glen HOA of goal Oak Hill Condominium HOA Berkeley Townhouse HOA, Inc. Oak Street HOA Blossom Vanderbilt HOA Ocean West COA Bodger Park Condominiums HOA Pacific Bougainvillea, Inc. Border and Lincoln Villas HOA Pacific Colony HOA California Ave HOA Pacific View Condominiums HOA Casa de Suenos CA Park Crest HOA Casa Loma Association, Inc. Polynesian OA Casita De La HOA Primera Terra HOA Catalina Plaza HOA

Seascape-Redondo HOA, Inc. Seasons West HOA Sequoia Village HOA Silver Spur Court HOA SiSi Villas HOA South Bay Estates HOA South Hermosa Townhomes HOA Spencer Estates HOA Textile Building OA The Granvillas HOA Inc. The Vista Pacifica HOA Toluca Hills Apartment Corporation Villa Capri Townhomes HOA Villa Del Sol Villas HOA Villa Redano HOA Villa Serena HOA Villagio at Brentwood HOA VIP Goshen HOA Virgil Courts HOA Vista Catalina HOA Vita Bella HOA Vogue Condominium Association, Inc. Westside Townhouses HOA Wilshire Selby Towers East CA

What is CLAC? THE CALIFORNIA LEGISLATIVE ACTION COMMITTEE (CLAC) IS A VOLUNTEER COMMITTEE OF THE COMMUNITY ASSOCIATIONS INSTITUTE (CAI) CONSISTING OF HOMEOWNERS AND PROFESSIONALS SERVING COMMUNITY ASSOCIATIONS. CAI IS THE LARGEST ADVOCACY ORGANIZATION IN AMERICA DEDICATED TO MONITORING LEGISLATION, EDUCATING ELECTED STATE LAWMAKERS, AND PROTECTING THE INTERESTS OF THOSE LIVING IN COMMUNITY ASSOCIATIONS IN CALIFORNIA.

ABOUT THE ORGANIZATION  Is a non-profit, non-partisan committee composed of two Delegates and one Liaison from each of the eight CAI California chapters.  R epresents over 13 million homeowners and property owners in more than 52,000 associations throughout California.  Comprises association homeowners, board members and the professional business partners that service them.

Experience professional delinquent assessment recovery.

 Is NOT a PAC (Political Action Committee) and makes no financial campaign contributions.  Depends solely on the donations of the community associations, their boards of directors and those who serve HOA members.

CLAC’S MISSION To safeguard and improve the community association lifestyle and property values by advocating a reasonable balance between state statutory requirements and the ability and authority of individual homeowners to govern themselves through their community associations.

CAI-Greater Los Angeles Chapter

888-845-8808 www.witkinandneal.com July/August 2021 | www.cai-glac.org 23

WE ASKED COMMUNITY MANAGERS FOR WORDS OF WISDOM REGARDING HOA FINANCIAL STABILITY…

Financial Stability §\nee 1957

■s· ��•

•�·

�(t �� itQd General

R.W. STEIN PAINTING, INC. �

Painting and General Contractor Since 1957

Exterior/Interior Painting: • Brush-Roller-Spray • Hydrowashing Other Services: • Waterproofing • Elastomerics • Deck Repairs & Coatings • Earthquake Damage • Carpentry • Wrought Iron Welding • Color Matching • Wood Refinishing

Specializing in Condominiums

✓ We are a Painting and General Contractor ✓ No subcontracting is necessary ✓ Fully licensed and insured ✓ Free board member consultation ✓ Member and past-president of PDCA

Call for FREE estimates:

Toll-Free: 800-878-4702 Telephone: 818-951-1817 • Fax: 818-353- 7746 E-mail: Bob@rwsteinpainting.com • Website: www.rwsteinpainting.com CA State Licenses: #234566 B, C33

www.cai-glac.org | July/August 2021

CAI-Greater Los Angeles Chapter

smacdonald@farmersagent.com www.farmersagent.com/smacdonald License #:0573169

CAI-Greater Los Angeles Chapter

July/August 2021 | www.cai-glac.org 25

WELCOME

NEW CAI-GLAC MEMBERS! AS OF JUNE 15, 2021

BUSINESS PARTNERS Command Guard Services Sky Edifice Painting Troy Roofing

CAI National CAI National CAI National

COMMUNITY MANAGERS Drew Brown HOA Organizers, Inc. Jerry Bruno Chris Cory FirstService Residential AAMC Cassandra Dyer FirstService Residential AAMC Carla Gudenkauf HOA Organizers, Inc. Mary Ishida Partners Community Management, Inc. Sarah Sapien Management Professionals, Inc. AAMC Gwyn Grenrock HOA Organizers, Inc. HOA VOLUNTEER LEADERS Charles McAfee Pamela Graves

Neda Nehouray, CMCA®, AMS® CAI National Sascha Macias, CMCA®, AMS®, PCAM® Sascha Macias, CMCA®, AMS®, PCAM® Neda Nehouray, CMCA®, AMS®

RELY ON THE EXPERTS TO BUDGET RESPONSIBLY WITH A RESERVE STUDY Avoid Surprise Expenses, Make Informed Decisions, Save Money, Protect Property Values

For more information, samples or a free bid contact us at: www.reservestudy.com cserrano@reservestudy.com (818) 222-0248

David Mayemura, CMCA® Michael Huffman, CMCA®, AMS®, PCAM® Neda Nehouray, CMCA®, AMS®

CAI National CAI National

Certified Public Accountant A Professional who understands Community Associations Member of CAI, American Institute of CPA's and California Society of CPA's Post Office Box 4488 Ventura, California 93007

info @ officialHOAelections.com - 805-214-8018

Phone: 805 659-3600 Fax: 805 659-1136 Email: mark@poindexterandco.com Web: www.poindexterandco.com

We are here to help with your next election

VINYL FENCING PATIO COVERS

Artur Zakarian Tel:1-877-31-VINYL Cell: 818-423-4191 Fax: 323-276-1114 2424 North San Fernando Rd Los Angeles, CA 90065

Official HOA Elections is here to help with Election of Directors, Removal of Directors, Special Assessments, Amendments or Grants of Exclusive Use Common Areas.

FENCE DECKING RAILING GAZEBOS PATIO COVERS GATES

Lic#884502

HOA@GnGVinyl.com www.GnGVinyl.com

www.cai-glac.org | July/August 2021

CAI-Greater Los Angeles Chapter

OUR THANKS TO RENEWING MEMBERS! AS OF MAY 31, 2021

BUSINESS PROFESSIONALS Advanced Painting Contractors, Inc. Allied Trustee Services Antis Roofing & Waterproofing Aqua Creations Association Lien Services Association Services Network AssociationStudies.com Axis Construction Consulting Beaumont Tashjian Bergeman Group Best Alliance Foreclosure & Lien Services CINC Systems Cline Agency Insurance Brokers Cornerstone Managing Pertners Diversified Asphalt Products, Inc. Fenceworks, Inc. Insurance Services of the West Khatri International, Inc. Law Offices of Jeanne McDonald Mackey Construction McCaffery Reserve Consulting McKowski’s Maintenance Systems, Inc. Naumann Law firm, PC Newman Certified Public Accountant PC NFC Amenity Management Nu Air Services, Inc. Owens, Moskowitz and Associates, Inc. Patio Guys Porter & Lasiewicz, CPAs Precision Concrete Cutting PRECISION PAINTING Reserve Studics Inc. Rick’s Rain Gutters SAX Insurance Agency Scott Litman Insurance Agency, Inc. Servpro of Burbank The Judge Law Firm TriTech Restoration & Construction Company, Inc. Union Bank HOA Services COMMUNITY ASSOCIATIONS Briarwood Homeowners Association #2, Inc. Cabrillo Villas Owners Association Castlegate Homeowners Association Encino Oaks Homeowners Association Fusion at South Bay Community Association Mira Verde Homeowners Association Montecito Homes HOA Renaissance Owners Association Solera at Kern Canyon HOA Studio Village Townhouses OA, Inc. The Village Condominium Owners Assn. Village Court Del Amo HOA, Inc. Village Palos Verdes Homeowners Assn.

CAI-Greater Los Angeles Chapter

COMMUNITY MANAGEMENT COMPANIES Action Property Management AAMC Bayview Property Management Cardinal Property Management AAMC Classic Property Management, Inc. CT Prop Management, Inc. HOA Made Easy Management Company HOA Management of Santa Clarita HOA Organizers, Inc. Jenkins Properties Management Company, Inc. Lordon Management Management Professionals, Inc. AAMC Optimum Professional Property Management, Inc. Pacific Real Estate & Management, Inc. Tandem Property Management COMMUNITY MANAGERS Larry Andrick HOA Organizers, Inc. Carolina Badillo, CMCA® HOA Organizers, Inc. Michael Black Cynthia Brown, CMCA®, AMS® Encino Towers HOA Marcia Coppola, CMCA®, AMS® HOA Organizers, Inc. Anthony Corcoran The Ocean Terrace HOA Gilda Curry Scott Management Company Warren Davidoff, CMCA®, AMS®, PCAM® Ross Morgan & Company, Inc. AAMC Lyndsie Dellefield, CMCA®, AMS® PMP Management AAMC Dean Driscoll, CMCA®, AMS® Action Property Management AAMC Kelle Ellerbroek, CMCA® Marla Fernandez, CCAM®, CMCA® Vero COA Antoinette Ferraro Beverlywood HOA Sherri Giles Village Green Owners Association Jon Greenberg ONIT Property Management, Inc. Justin Hargrove, CMCA® Wilmore Condominium Association Anna Harris PMI-Antelope Valley Gregg Landis Bel Air Glen HOA Francis Langlois Luma HOA

Maria Lelea Scott Management Company Amanda Mintz Charity Okonkwo Santee Village HOA Christopher Pettis, CCAM-HR® Wilshire House Darcella Reeves Briarwood HOA #2, Inc. Doris Sanabria Coro Community Management & Consulting Deborah Schneider, CMCA®, AMS® Bali Management Group, Inc. Robert Sides, CCAM-HR®, AMS®, PCAM® Regatta Seaside HOA Laurene Siegel Cove Community Association Cheryle Stites, CMCA®, AMS® Bali Management Group, Inc. Bonnie Stoeppelman, CCAM® Sharp HOA Christine Taylor, CMCA®, AMS® HOA Organizers, Inc. Connie Vohden, CMCA®, AMS®, PCAM® Community Association Specialists, Inc. Sherwin Watson, CMCA® Carlton Square HOA Cari Williams, CMCA®, AMS® Ross Morgan & Company, Inc. AAMC. COMMUNITY ASSOCIATION LEADERS Marilyn Balduff Nancy Braden-Park John Debord Jane Eiduson Laura Evens Phyllis Kramer Cheryl Perkins Lillian Schneider Stewart Sexton Maria Zarro

PLEASE NOTE ☛

CAI-GLAC Directory Correction Please correct the email and website for Official HOA Elections: Email: will@officialHOAelections.com Website: www.officialHOAelections.com

July/August 2021 | www.cai-glac.org 27

ADVERTISERS INDEX 15 Action Property Management 13 ALLBRIGHT 1-800-PAINTING 18 AIPM 26 Association Reserves–CA/Los Angeles 19 CIT–Community Association Banking Division 28 Ferris Painting, Inc. 26 GNG Vinyl Fencing, Inc. 26 Official HOA Elections 25 Macdonald Insurance Agency 21 Optimum Professional Property Management Inc., ACMF®, AAMC® 10 Pacific Utility Audit 26 Poindexter & Company 28 Popular Association Banking 24 R.W. Stein Painting, Inc. 10 Reserve Studies Inc. 15 Select Painting & Construction, Inc. 17 Segal Insurance Agency, Inc. 9 Shaw, Moses, Mendenhall & Associates Insurance Agency 23 Witkin & Neal, Inc. 5 Wolf, Rifkin, Shapiro, Schulman & Rabkin LLP

ADVERTISING INFORMATION Dimensions & Rates:

Artwork must not exceed the exact dimensions of that size ad. For more information, call the Chapter office: 818-500-8636. Ad Size

Ad Dimensions

Members

Non-Members

⅛ page

3½" wide x 2" high (Horizontal)

$200

$400

¼ page

3½" wide x 4¾" high (Vertical)

$300

$600

½ page

7½" wide x 4¾" high (Horizontal)

$425

$850

Full Page

7½" wide x 9.75" high (Vertical)

$800

$1,400

Payment: Rates are subject to change without notice. By credit card, check or cash. Minimum three-insertion contract. Rates subject to change without notice. Advertising Sales: Please contact the Chapter office for advertising specifications and deadline information at: 818-500-8636.

Talk to us about your community association needs. We can help. Popular Association Banking exclusively serves the community association industry. We offer:1 • Financing for building repairs and capital improvements. • Competitive fixed rates with terms up to 15 years. Plus, your deposits are eligible for multi-million dollar FDIC insurance with ICS® and CDARS®.2 Contact our Southern California Relationship Manager today! Larry Hooper, V.P. Office: 714.864.5171 Cell: 949.842.6161 Toll free: 800.233.7164 LHooper@popular.com

Lic. #872494 7228 Remmet Ave. Canoga Park CA 91303 www.FerrisPainting.com

www.cai-glac.org | July/August 2021

www.popularassociationbanking.com

CAI-Greater Los Angeles Chapter

Joansing Around Los Angeles Help CAI-GLAC grow its social media presence!

All you have to do is cut her out and take FLAT JOAN with you to your office or the places you visit. Take selfies with Joan and post to social media with a description where you are, what you are doing, who you are with—include friends, colleagues, celebrities. Let us know where she’s visited.

You have been chosen to participate because of your active involvement on social media. Here is FLAT JOAN— a flat paper version of our very own, Joan!

Make sure you TAG US AND HASHTAG! Instagram = @caiglac Facebook = @caiglac #Jonesing4Joan #caiglac

Be creative. Accessorize for the weather. The sky is the limit.

CAI-GLAC 1010 N. Central Ave., #316 Glendale, CA 91202

Change Service Requested

JULY 29 EVENING RECEPTION and JULY 30 EVENT LEADERSHIP EVENT EXCLUSIVELY FOR MANAGEMENT COMPANY CEOS, EXECUTIVES AND SENIOR SUPERVISORS

CALAMIGOS RANCH

327 Latigo Rd. • Malibu, CA 90267

NEW THIS YEAR! “Meet the Speakers” Evening Reception

COST $250 per person REGISTER at www.cai-glac.org

Thursday, July 29 6:00 p.m. Calamigos Malibu Beach Club • 26025 PCH • Malibu, CA 90265 Registered Attendees No Extra Charge

FRIDAY, JULY 30 SCHEDULE

RETREAT GRACIOUSLY SPONSORED BY

For Special Room Rates Call CAI at 818-500-8636

9:00 a.m. Breakfast/Networking 9:30 a.m. MORNING SESSIONS Leadership Challenge Keynote Address 12:00 p.m. Lunch 1:00 p.m. AFTERNOON SESSIONS Real Estate Economic Forecast 2021 California Employment Law Updates Building Your Bench: How to Maximize the Use of Interns Strategies and Metrics That Can Shape Your Company 5:00 p.m. Networking Reception

Accurate Termite & Pest Control Alliance Association Bank Association Services Network Axela Technologies Beaumont Tashjian Berding | Weil BuildingLink.com, LLC CIT-Community Association Banking Division

City National Bank Fenton Grant Mayfield Kaneda & Litt, LLP iMail Tracking, LLC Insurance Services of the West The Naumann Law Firm, PC Tinnelly Law Group Union Bank HOA Services Whitestone Industries