Association 101│Homeowner Association Terminology... Who's who

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Applicable Civil Rights Laws

- Prohibition against racial discrimination as stated by the Civil Rights Act of 1866

- Equal Credit Opportunity

- Fair Housing Amendments Acts, 1988

- Board is prohibited from discrimination in exercising its 1st right of refusal

- Persons with disabilities (at own expense) must be allowed to make accommodations per

  the Americans with Disabilities Act, 1993       

Accounting Basics

●   Cash Method of Account-income and expenses are only recorded when cash changes hands. Financial   reports only reflect cash transactions. This is a relatively simple system for simple situations. Because all obligations are not recorded until cash changes hands, this method does not provide an accurate portrayal of the financial condition of the association at any given time.

●    Accrual Method of Accounting-keeps track of all financial activities, including revenue as it is earned (as opposed to when it is received) and expenses as the obligation is incurred (as opposed to when it is paid). This makes possible a more accurate determination of the financial condition of the association at any point in time. Also, this is a better method for multi-year tracking of capital reserves credits and deficiencies. The primary disadvantage is the greater complexity and technical knowledge that is needed to maintain the records, understand the reports, etc.

●   Capital Reserves-the Board has the obligation to repair and replace major capital facilities, buildings, and equipment of the association. The ideal method of providing for these future expenses is the establishment of a capital reserves system and budget to assure that such funds are available when needed. With knowledge that the future holds predictable major expenditures for repair and replacement of facilities and equipment, the association could begin the gradual accumulation of funds through a reserve account to meet all or a portion of that expense when it comes due     

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