Moving Communities Forward
Official Publication of Advance HOA Management, exclusively for board members
Board Newsletter | Issue 8
Published May 2025
Investment Accounts and Outside Bank Accounts
What You Need to Know
Managing your community’s funds is a key part of our duty as your managing agent at Advance HOA Management (“AHOA”). Every community will have a basic operating bank account and a basic reserve bank account. However, many communities have large reserve accounts which should be managed with additional financial tools and accounts. The goal of this article is to provide an overview of our standard procedures for your community bank accounts and how it relates to our relationship with First Citizen’s Bank (“FCB”) and the role the board plays in reserve account and bank accounts outside of FCB.
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To facilitate the accounting services, we provide a banking relationship with FCB under a Master Signatory agreement. AHOA’s accounting and management systems are fully integrated with FCB, allowing for efficient handling of accounts payable, receivable, and monthly reconciliations. You can view the balance in all FCB bank accounts directly in your Board Portal in real time.
Accounts facilitated by AHOA through FCB include:
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Operating Accounts - Checking accounts used for day-to-day revenues and expenses.
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Reserve (Savings) Accounts - Money market accounts used for major repairs and capital replacements.
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ICS (Insured Cash Sweep) – Fully liquid money market accounts that distributes funds across multiple banks to maintain FDIC insurance coverage. We automatically move reserve funds to ICS accounts when funds reach FDIC limits to protect your community.
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Certificates of Deposit (CDs) – Standard CD investments held at FCB. Rates vary.
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CDARS (Certificate of Deposit Account Registry Service) – Laddered CDs offering FDIC protection and various term lengths.
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Investing Your Reserve Funds
If your community has significant reserve funds and wants to understand more about the financial products available to safely invest your funds while driving a return on the investment, please ask your community manager for more information. Our accounting team or FCB team members would be happy to meet and educate your board on options and create a plan. If an existing CD is up for renewal, your community manager has access to up-to-date rate sheets to help the board determine how to reinvest these funds.
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Handling Accounts Outside FCB
If your community maintains bank or investment accounts outside of FCB, AHOA cannot directly manage those accounts. This means the Board of Directors is responsible for all administrative actions involving these accounts, including:
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Fund transfers
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Updating signature cards
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Giving instructions on renewals or investments
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That said, AHOA is available to assist and support as needed. Here’s what you should know:
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Monitor Your Balance Sheet
Review the financials monthly and pay attention to CD expiration dates—these are noted on your balance sheet.
2. Understand CD Renewal Dates
CDs, whether at FCB or an outside bank, typically auto-renew at maturity for the same term at current rates unless directed otherwise.
3. Laddered CDs at FCB
These also auto-renew for a one-year term unless specific instructions are given in advance.
4. Communicate Renewal Instructions in Writing
Any changes or instructions regarding maturing CDs must be submitted in writing to your community manager, who will inform the accounting team. For example, if the board prefers a longer term or a higher- yield option, make that request in advance.
5. Request Rate Sheets
FCB rate sheets are available upon request from your community manager.
6. Keep Signer Information Updated
Board members are signers on outside accounts. If a signer resigns, it is the board’s responsibility to notify the bank and update signature cards. You may ask your manager to include current signer names in the monthly management report.
7. Brokerage Account Oversight
If your community holds funds with brokers (e.g., RBC Wealth, Merrill Lynch), any withdrawals must be directed by the authorized board member(s). Notify your community manager of transactions so the
accounting team can track and reconcile activity properly.
8. Manual Reconciliation of Outside Accounts
AHOA manually reconciles these accounts upon receiving the respective bank or investment statements. Note that some institutions only issue statements quarterly. Delayed receipt of bank statements provided by the Board of Directors will delay completion of your monthly financial statements.
9. Additional Reconciliation Fees
For outside accounts with transactional activity (beyond interest), a $20 fee per reconciliation will apply.
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​If you have any questions about your community’s investment accounts, please contact your assigned community manager, who will coordinate with the AHOA accounting team.
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The Covenant Enforcement Process
A Summer Season Reminder
As we approach the summer season, we anticipate an increase in covenant enforcement activities. In preparation, we would like to remind you of the current enforcement process as per your community’s Enforcement Policy, which is governed primarily by HB22-1137 (enacted in 2022), as well as relevant provisions of the Colorado Common Interest Ownership Act (CCIOA) and Title 13 of the Colorado Revised Statutes.
General Guidelines: Please keep the following principles in mind as you oversee covenant enforcement:
• Consistency: Apply all rules uniformly to ensure fairness and avoid potential liability.
• Impartiality: Treat all homeowners equally, without bias or favoritism.
• Collaboration: Work closely with your assigned community manager to maintain community standards and ensure compliance with procedures.
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Violation Process and Timeline: When a violation is identified, a photograph and description of the issue are uploaded into CommunityLink. The community manager then reviews and initiates the appropriate enforcement action according to the following sequence:
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1. First Notice of Violation (Sent via First-Class Mail, Email, and Certified Mail)
o Provides 30 days to cure the violation.
o Fines may begin accruing after 30 days if not cured.
o A follow-up inspection must occur within 7 days of the 30-day period ending. If not cured, fines may be imposed, and the Second Notice may be issued.
2. Second Notice of Violation (Same delivery method as above)
o Adds another 30-day cure period.
o Fines continue if the violation remains uncured.
o Legal referral is permitted at this stage if desired.
3. Third Notice of Violation (Same delivery method as above)
o Adds a final 30-day cure period.
o Fines continue if not cured.
o Legal action may be pursued.
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Important: Legal action may not be initiated until two full 30-day cure periods have passed.
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Cure Confirmation: If an owner corrects the violation and submits visual proof, the community manager will confirm resolution. A Notice of Cure will then be issued, summarizing any applicable fines. This notice will be sent via regular mail and email (certified mail is not required).
Content of Violation Notices (excluding courtesy notices): Each violation notice must include:
• A clear description of the violation.
• Required corrective action.
• Potential fines.
• Instructions for requesting a hearing.
• The deadline to request a hearing.
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Hearings:
• The owner must request a hearing within the applicable cure period.
• Hearings must be held in Executive Session.
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Fine Limitations:
• Fines may not exceed $500 per violation, unless related to a public health or safety issue.
• An association may not foreclose on a home due to unpaid covenant violation fines.
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Language Accessibility: Homeowners may request to receive notices in an alternate language.
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Health and Safety Violations: If a violation poses a health or safety risk, the Association may issue a Health and Safety Notice requiring correction within 72 hours. These notices follow a separate policy with specific language requirements.
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Mailing of Notices: All notices are mailed to the property address on record. If the owner has designated an alternate mailing address, notices will be sent to both addresses.
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We appreciate your continued commitment to ensuring our communities remain well-maintained and compliant with governing policies. Your cooperation with the enforcement process and your partnership with community management are essential to our shared success. Please don’t hesitate to reach out with any questions or if you need further clarification.
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Board Member Conflicts of Interest
Identifying and Managing the Actual and Potential
Serving on a homeowners’ association (HOA) board is a meaningful way to contribute to your community. Whether motivated by a desire to be involved in decision-making or by the challenge of leadership, board members quickly discover the significant responsibility that comes with the role. Among these responsibilities is the need to identify and manage actual or potential conflicts of interest.
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What is a conflict of interest?
A conflict of interest arises when a board member’s personal or professional interests could interfere with their duty to act in the best interest of the association. Under the Colorado Common Interest Ownership Act (CCIOA), a conflict typically involves situations where a board member’s decisions could be influenced by personal gain—such as when the association considers a contract with a business owned by the board member or a family member, or where the board member has a financial interest.
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All associations governed by CCIOA are required to have a Conflict of Interest Policy. This policy outlines what constitutes a conflict, how such conflicts should be disclosed, and the procedures to follow when they arise. For instance, a conflict might exist if a board member is perceived as favoring or opposing a decision due to personal affiliations rather than the merits of the issue.
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Please refer to your policy in the event you are confronted with a conflict or your legal counsel for guidance.
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Why is this important?
Conflicts of interest can erode trust and compromise the integrity of board decisions. To maintain transparency and accountability, it is vital that all board members review and understand their association’s Conflict of Interest Policy. When in doubt about whether a situation presents a conflict, it’s always best to consult with legal counsel.
Board members have a duty to act in good faith, with loyalty to the association, and in the best interest of the community. Maintaining that trust is foundational to effective governance—and managing conflicts appropriately is a key part of that responsibility.
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Insurance Basics for Board Members
Is Your Community Adequately Insured?
As part of any Board’s fiduciary duty is the duty to ensure that the community is adequately insured. We hope the summary below will provide you with a stronger grasp of what insuring your community is all about. We encourage all board members to set up a time, at least annually, with your insurance broker for a complete overview of your insurance policy.
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How has the insurance market changed and what is the impact on community associations?
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Since 2019, insurance has increased an average of 52%. Rates are increasing due to the number of natural disasters (fire, flood, hail), inflation and profitability struggles within insurance companies, hardening reinsurance market, properties being underinsured and need to catch up (Marshall fire showcased this), the number of claims made by the Association, and the location of the property. This has impacted the availability for Associations to obtain insurance coverage because many carriers have backed out of the Colorado insurance market. This means that fewer carriers are willing to insure communities and the market is becoming more consolidated amongst a small group of carriers. Ultimately, these factors have contributed to huge increases in premiums.
What insurance should Associations carry?
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Associations are required by their governing documents and state law (Colorado Common Interest Ownership Act) to have certain types of insurance. The main types of insurance coverages and recommended limits (unless specified in the governing documents) are as follows:
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• Property Insurance: Association must maintain property insurance on the common elements for broad form covered causes of loss. This insurance must be for not less than the full insurable replacement cost of the insured property, less applicable deductibles. Recommended coverage limit depends on value of property. In Condominium and Townhome communities, property may include the structures and up to a certain point inside units, such as drywall.
• Replacement Cost vs. Market Value: Building limits, and therefore property coverage limits, are based off replacement cost value, not market value. Replacement cost is typically 70% of market value. Replacement cost refers to the estimated amount of money required to replace or rebuild a damaged or destroyed property with a similar item of comparable quality and functionality.
• Actual Cash Value (ACV) vs. Replacement Cost Value (RCV): Actual cash value is the current value including depreciation. Replacement cost is not subject to depreciation. The Association needs replacement cost value.
• Deductibles:
• There are typically two types of property deductibles, (1) wind and hail and (2) all other perils (like fire).
• Wind and hail deductibles are typically a percentage of the building limit where all other peril deductibles are typically a flat rate.
• Unless prohibited by the governing documents (i.e., the deductible is specifically stated as a common expense), the deductible for any loss could be assessed to either the owner receiving the work or the owner whose unit the problem originated. Review your governing documents to be sure.
• For Condos in particular, consider creating an Insurance Deductible Policy which outlines the entire process in the event of damage/claim.
• Liability Insurance: Association must maintain commercial general liability insurance against claims and liabilities arising in connection with the ownership, existence, use or management of the common elements. Recommended coverage limit of $1,000,000 each occurrence; $2,000,000 aggregate.
• Fidelity Insurance: This type of insurance covers misdeeds by officers, directors, and Association employees. CCIOA requires Association’s maintain fidelity insurance of at least two months of operating expenses, plus reserves.
• Non-Owned Automobile Liability: Even if an Association has no automobiles, a Board member or committee member driving while on Association business is covered if the Association has such coverage. This can be secondary to the driver’s primary coverage. Recommended coverage limit of $1,000,000.
• Umbrella: Extra layer of insurance that provides additional protection beyond existing limits of other policies. Recommended coverage limit of $5,000,000.
• Workers Compensation: Statutory coverage for employees who are injured or become injured or ill ‘in the course and scope’ of their job. This is important coverage even for communities that do not have employees. It is important to have a policy that includes coverage for board members and volunteers.
• Directors and Officers (D&O): D&O policies should cover some but not all negligent acts that allege mismanagement of association affairs. Recommended coverage limit of $1,000,000.
• Additional Important Endorsements: These are optional but important for certain items that may be excluded in the standard policy. Examples are equipment breakdown, ordinance and law, and sewer & drain backup.
• Flood: If located in a flood zone, lenders will often require the association to obtain flood insurance.
Consider additional coverages that might be applicable to your Association to avoid any potential gaps in coverage and avoid large special assessments for uninsured losses:
• Auxilary Structures: Auxiliary structures such as fences, signs, pools, carports, and similar items, may not be covered under a standard comprehensive or all risk casualty policy unless they are specified. The Board should be sure that auxiliary structures are covered, and that, if necessary, their values are included in computing the total amount of insurance to be carried.
• Ordinance and Law: Normally, insurance would not cover the extra costs to bring the building up to code or to add additional parking spaces, if that is what is required. These extra costs can be insured by special endorsement to cover changes in building ordinances since its original construction.
• Flood Insurance: Whether the HOA carries flood insurance or individual unit owners are responsible depends on the specific provisions of the HOA's governing documents and the location of the community within a flood zone.
• Sewer and Drain Back Up: This endorsement covers damages caused by the backup of sewers or drains, or overflows from a sump pump. It's an important addition given that such backups can lead to significant water damage inside homes or clubhouses.
• Service Line Coverage: This endorsement covers the cost of repairing or replacing damaged utility lines, such as sewer pipes or power lines, which aren't typically covered under standard policies.
• Equipment Breakdown / Boiler and Machinery: This endorsement will cover not only damage to a boiler and structures damaged by explosion of the boiler, but it will also cover sudden and accidental breakdown of other machinery such as pumps, compressors, heating/cooling equipment, motors, fire suppression systems, electrical systems, elevators, and similar items.
What insurance should the homeowner carry?
Typical policies for homeowners are listed below. Owners must work with their own insurance brokers to ensure they are properly covered.
• HO-3 or HO-5 Policy: Typical homeowners’ insurance for those who own a single-family unit.
• HO-6 Policy: Homeowners’ insurance for those who own a condominium or co-op unit. This policy can cover liability claims, damage to condo unit and belongings, and additional living expenses for displacement. This policy also includes loss assessment (owners should confirm their loss assessment coverage does not contain exclusions or restrictions on deductible recovery assessments) and it is recommended that owners obtain $50,000 in coverage.
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