Arizona HOAs are nonprofit corporations, established by state statute and respective governing documents. HOAs must comply with various statutory requirements, primarily the Arizona Planned Community Statutes (A.R.S. §33-1801 through A.R.S. §33-1818) and Nonprofit Corporation Act provisions.
One critically important requirement is maintaining association records. Records are typically maintained by the property management provider and are subject to homeowner inspection upon request. However, many HOA members are unaware of what they can see, what they can’t see, and why.
Association records can include an extensive array of items. Some examples include electronic records, faxes, correspondence, photographs and emails. There are internally created records, such as agendas, minutes, financials, policies, owner histories and property maintenance records, and externally created ones like contracts, bids, quotes, bank account statements and reconciliation reports, legal opinions, training, applications, requests, etc.
Associations must retain records for designated periods (which differs depending on the type of record involved), and with specific exceptions, a member of the association may inspect them or request copies. By statute (A.R.S. §33-1805), the HOA may withhold records from disclosure to the extent the portion withheld relates to any of the following:
- attorney-client privileged information
- pending litigation
- executive-session meeting minutes
- personal, health or financial information regarding an individual member or employee of the association or an individual employee of a contractor of the association
- records relating to the job performance of, compensation of, health records of or specific complaints against an individual employee of the association or an individual employee of a contractor of the association
Two commonly requested types of documents are financial records and meeting minutes. Minutes and agendas, of all meetings except executive sessions, are subject to inspection, but regular (open) board minutes are not typically shared in draft form because they are subject to board revision until approved at a duly called meeting.
Financial records and reports are typically provided monthly to the board. They include a balance sheet, budget vs. actual income and expenditure comparisons, reserve account balances and item expenditures, bank statements and reconciliation reports, etc. Financial reports convey transparency and provide insight into the overall health and stability of the association. They are also excellent planning references for annual budget preparation, changes in contracted services, asset acquisitions that impact reserves, and setting assessment rates.
Part of comprehensive and transparent financial review should include itemized breakdowns. Other financial records that should be available are reconciliations of board or committee events, programs, or activities. For example, HOA annual meetings and board elections have a variety of costs such as postage, copies, meeting notices, candidate statements, ballots, refreshments, reports, and so forth. The HOA budget could have a designated line item for “annual meeting”, or costs could be posted under line items such as postage, copies, printing, etc. In either case, there should be funds budgeted to cover expenditures. After the meeting, a reasonable expectation includes a post-event reconciliation that itemizes budget versus actual costs with specific explanations on which funds were used and in what amounts.
HOAs often create standing or ad hoc committees to execute community events or programs. There may be designated line items or board-approved budget requests. Again, a post-event reconciliation should be required, reported and available for inspection.
Except for executive session items and information of a personal or confidential nature, a basic rule of thumb is: if you want to see something, ask. Reasonable and permitted document review should be expected and facilitated. In fact, A.R.S. §33-1805 requires an HOA to “fulfill a request for examination” within ten business days of a request. Requests to inspect or review records should be specific, as it’s impractical to say, “show me everything.”
Many HOAs may provide a community website where certain records, like governing documents, meeting agendas, etc. are posted. Inspecting documents and records is a prudent part of checks and balances of your board, committees, and community. Now that you know, maybe it’s time to take a closer look.