Every state regulates elements of how HOAs operate, and in California. Those regulations include which public documents need to be created annually by the HOA board. There are very detailed and specific requirements and should become familiar with the ins and outs of what is needed. Making sure these documents are created correctly and on time is an important function of the HOA board. If your HOA falls out of compliance by not following state requirements, there can be serious consequences. Such as the inability to pursue court action for delinquent dues or damage to the association’s credit score.

So what documents need to be created and submitted to homeowners and the Secretary of State every year? There are actually quite a few documents, but they generally fall into three categories: budget, policy, and miscellaneous. We’ll go through the highlights of each category to help get you started.

The Annual Budget Reports

Obviously, the finances of an HOA are significant to every homeowner. They want to be assured the community will run smoothly and to know if substantial fee increases are likely. The state and homeowners need to see all of the financial information relevant to running the HOA. They want to see that anticipated costs will be covered, with a healthy reserve fund left. Which brings us to our first category of documents – the budget. 

Thirty to ninety days before the start of the new fiscal year, a collection of documents related to the budget must be provided. 

This includes:

  • Either a full budget or a summary – showing anticipated revenue and expenses on an accrual basis;
  • A summary of the reserve funding plan, along with details such as assessments, borrowing, or other mechanisms used to fund the reserve;
  • A statement on whether the board will not undertake repairs or replacement of any major component with a remaining life of 30 years or less. If none will be taken, an explanation for the deferment needs to be included;
  • Any outstanding loans, and relevant details such as balance, payee, term, etc.
  • A statement as to whether any special assessments are needed, such as for repairs or to ensure adequate reserves, and details about that assessment;
  • A summary of the HOA’s insurance;
  • Also, for condominiums only, FHA/VA Certification.

Because these documents can become complicated, many HOA boards hire an accountant to help with at least some of them. State law can get very specific about what goes into them, even down to the font-size. To both calculate some of the more complex elements, and ensure you are wholly following the state requirements, it might be worth it to have an expert’s assistance.

The Annual Policy Statement

Also 30 to 90 days before the start of the fiscal year, the HOA board must disclose the organization’s official policy statement. The collection of documents describing the policies which govern the HOA. These policies are the backbone of running Homeowners Association. They describe everything from process to collecting fees to dispute resolution. State law will tell you every single thing that needs to be included, but it at least must have:

  • The name and address of the person designated to receive official communications for the HOA; 
  • Procedures for the HOA to resolve disputes—both an internal dispute resolution process and a summary of provisions for an alternative dispute resolution;
  • Policies for topics such as rules enforcement, assessment collections, penalties, enforcement of liens or other legal remedies when a homeowner is failing to pay assessments;
  • The rights of your HOA members, such as the right to receive general notices via individual delivery and receive copies of meeting minutes;
  • Also included must be a description of how members can request to have notices sent to 2 additional addresses;
  • What procedures and requirements your HOA uses to approve or deny physical changes (architectural, landscaping, etc.) to property; and
  • The location, if any, for posting general notices.

The board must deliver a summary of these documents — or if requested, a full set — to each member of the HOA. In addition to filing them with the Secretary of State.

Other Annual Documents Needed

Under the “miscellaneous” category, there are several other documents the board must prepare and release:

  • The board must send a notification requesting updated contact information from association members, at least 30 days before sending out the annual budget report;
  • Within 120 days of the close of the fiscal year, the HOA must distribute a review of the HOA’s financial statement prepared according to Generally Accepted Accounting Principles (GAAP) by a certified public accountant;
  • Statements of information that must be filed with the Secretary of State.

Conclusion

California is particular about how to prepare annual reports for Homeowners Association Boards. Two of the most critical categories of documents are the budget and policies of the association. State law provides details about what information must be included and how the documents need to appear, and who needs to receive them. Becoming familiar with and following the law will ensure your HOA stays in compliance.