1. Uncollected Funds Are Not Guaranteed Income
- Uncollected dues and fines are not cash in hand.
- There’s no guarantee these amounts will ever be paid, especially if homeowners are delinquent, disputing the charges, bankrupt, or in foreclosure.
- Budgeting based on anticipated collection is speculative and can lead to shortfalls.
2. Creates Artificial Surplus in the Budget
- Counting on unpaid fees inflates the revenue side of the budget.
- This can result in underestimating the need for assessments or reserves, giving a false sense of financial health.
3. Can Lead to Cash Flow Problems
- If SHPOA plans expenses based on money it hasn’t actually received, it may face cash shortages when bills come due.
- This can delay maintenance, vendor payments, or essential services.
4. Violates Accounting Best Practices
- Proper budgeting uses actual expected revenues, not speculative income.
- HOAs typically use cash-based accounting, which only considers money that has actually been received.
- Including unpaid assessments violates this principle and can raise red flags during audits or reserve studies.
5. May Result in Special Assessments or Increased Dues
- If SHPOA overestimates income, it may later need to impose unexpected special assessments or raise dues to cover the gap—leading to homeowner frustration and possible legal challenges.
6. Legal and Fiduciary Risk
- Board members have a fiduciary duty to manage the SHPOA’s funds prudently.
- Budgeting with uncollected fees could be seen as mismanagement or even negligence, opening the door to lawsuits or director liability claims.