Your HOA may have a closet full of records, but do you have the right ones? Which records should you keep for reference and which are required by California law? We’ve gathered a full list of all records your HOA should have on file and how they should be organized.
Records retention is a difficult issue for a lot of HOAs, especially when they lack proper professional guidance as to what records need to be retained. Your HOA may have a closet full of records, but if they are disorganized and no one can find anything when needed, then it may be time for review and organization.
Record retention is especially important because of frequent turnover of the board of directors.Yet if former board members are retaining association records but no one knows about it, then your records aren’t doing any good. To solve this problem, each HOA board needs to establish and follow a record retention policy.
Record Keeping 101: Why, What, Where and How?
You may be wondering, why keep records? Does our HOA have to? And the answer is yes.
Why Keep Records?
There are legal requirements for keeping certain records such as board minutes and tax returns. Board minutes are permanent records and need to be retained indefinitely. Tax returns can be audited up to three years from when they are filed. Because they are not filed until after the year is over, supporting documentation needs to be retained for four years.
Other records need to be retained for their informational value. Take, for example, the last roof replacement your HOA made: what were the specifications, the date of replacement, and the cost and warranty information? Maintenance history and repair records can help to determine when components should be replaced.
Some records need to be retained because of possible future board or legal actions.Say your HOA has a history of repeated rules violation by a resident which may lead to future board action, or a history of water intrusion problems which may lead to a construction defects legal action.
Architectural control records are particularly important. The board needs to be able to identify each architectural change that has ever been approved and, conversely, each change that has been denied, and it should maintain a history of violation notices.
What Records Should Be Kept?
All documents need to be considered. This includes legal, financial, insurance and maintenance records as well as general correspondence. Written documents, computer disks and tapes, equipment specification and instruction books and even pictures all need to addressed. We have compiled a full list of records your HOA should keep, listed in the next section of this article.
Often too many records are retained. Each board member does not have to keep a copy of minutes of meetings as long as the original is properly filed and is available. Detailed monthly financial statements do not have to be retained once annual financial statements have been issued by the CPA. One copy of anything is enough!
Where Should Records Be Kept?
Records should be stored together in a safe, dry area, preferably in a storage closet on site or with the management company. Permanent records such as board minutes should be kept in a fireproof cabinet. It is not uncommon for the management company to retain most of the permanent records and the current records.
How Should Records Be Kept?
Records should be stored in uniform size record storage boxes. If records are to be destroyed after a certain date, write on the box the destruction date. Number the boxes so that they can be kept in order. Keep a separate listing of the contents of each box. It is much easier to look through a ten page listing and find a reference to a box number than it is to sort through ten boxes.
How to Organize Your Records
There is no right or wrong method of organization, but we recommend separating the records by category:
- Legal Records
- Financial Records
- Maintenance/Facilities Records
- Correspondence
- Other
Within each category, records should be grouped into:
- Permanent records
- Retain for four years
- Retain till superseded (Often superseded records in turn should be retained for 4 years.)
- Retain one year
Permanent Records
Here is a list of records that should be filed under the “Permanent” section of your records category.
Legal Records
- Board Minutes and Notices of Meetings
- Executive Session Meeting Minutes
- Membership Meeting Minutes and Notices of Meetings
- Committee Meeting Minutes
-
Original Enabling Documents:
- CC&Rs
- Bylaws
- Articles of Incorporation
- Amended Enabling Documents
- Legal Settlement Agreements
- Client/Attorney Privileged Information file
- Developer Disclosure Statements
- Deeds
- Title Insurance Policies
Financial Records
- Annual Corporate Tax Returns
- Letters granting tax exempt status
- Issuance of tax ID number
- Annual CPA Prepared Financial Statements
- Annual general ledgers
Maintenance Records
- Blueprints
- Building Drawings and details of Additions or Modifications
- Major Component Listings, Specifications and Measurements
Other Records
- Documents requesting Architectural Changes
- Approvals and denials of Architectural Change Requests
- Notice of violations of Architectural Controls
Retain for Four Years
Here is a list of records that should be filed under the “Retain for Four Years” section of your records category.
Legal Records
- Membership Meeting Ballots, Proxies and Check-in Sheets
Financial Records
- Bank Statements and Canceled Checks
- Paid Bills
- Payroll Tax Returns
- Time Cards
- Monthly General Ledgers
- Accounts Receivable Listings
- Deposit slips
- Dues billing and collection documents
Correspondence Records
- “Serious” Correspondence
- Newsletters
Other Records
- Insurance Claims History
Retain Until Superseded
Here is a list of records that should be filed under the “Retain Until Superseded” section of your records category.Superseded documents marked by an asterisk(*) should then be transferred to the “Retain for Four Years” category.
Legal Records
- Contracts: Management & Vendor Services*
- Loan Documents*
- Listing of Rules*
- Interpretations of Rules under specific circumstances*
- Nonarchitectural Enforcement Matters* (ex: Parking Violations. Discard when owner sells unit.)
Maintenance/Facilities Records
- Warranties and Guarantees*
- Funding Studies*
- Equipment Specifications
- Complete details of last replacement of all major components
Other Records
- Original Insurance Policies*
- Employment Contracts*
- Personnel Files*
Retain One Year
Here is a list of records that should be filed under the “Retain One Year” section of your records category.
- Meeting Agendas
- Monthly Financial Statements
- “Light” Correspondence, especially if situation has now been resolved or action completed
Cleaning Out Your File System Annually
At the end of the fiscal year, gather up the current year records. Always take the time to index the boxes prior to adding them to the storage site. At the same time, review the stored record listing sheets for records that have expired and destroy them. Make notations on the listing that the records were destroyed and the date destroyed.
Conclusion
Use common sense in determining what records to keep or destroy. If in doubt contact your professionals—attorney, CPA, association manager, insurance agent, banker, or reserve specialist.
Walt Grady is a CPA and past chair of the ECHO Accountants Resource Panel. Imaged courtesy of marcolm at FreeDigitalPhotos.net.