Ask the HOA Expert

Question: Which accounting method is preferred for HOAs, the Cash Method or the Accrual Method? Currently, we use the Cash Method and it seems to distort the actual financial situation. We're showing a profit when, in fact, we're losing money.

Answer: Accountants recommend the Accrual Method because it shows a more timely and accurate picture of income and expenses. With Accrual accounting, income is posted when the goods are delivered or services rendered; expenses are posted when the bill is incurred. But few folks handle their checkbooks like this. With the Cash Method, income is posted when received and expenses are posted when paid. But this method can cause income and expenses to fall outside the budget time frame to which they apply (monthly, quarterly or yearly).

While Accrual is the most accurate way to track finances, it is more labor intensive since more transactions need to be recorded. For example, income must be reported when earned and when it is received. The good news is that computers and software have simplified the accrual accounting process. In the final analysis, the board needs to adopt an accounting method which it can understand and deal with. Those that have used the Cash method forever will have a difficult time changing.

Question: What are the duties of a board appointed Nominating Committee?

Answer: The Nominating Committee is appointed by the board to identify candidates for election. The committee is usually charged with these tasks: