Get 1 year of free community web site hosting from Community123.com!
Sunday, April 05, 2020











HOATalk is a free service of Community123.com:

Get 1 free year community website and email newsletter hosting from Community123.com!
Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.
Subject: Wrting off Bad Debts?
Prev Next
Please login to post a reply (click Member Login on the menu).
Author Messages
FrancescaM
(Washington)

Posts:264


01/21/2009 3:17 AM  
This is a term I have not heard before. Our Boards atty advised us that we can use this as a line item to anticipate bad debts... homeowner's who have not paid up obviously.

Had anyone else heard this?


GeorgerwilliamsW
(Indiana)

Posts:975


01/21/2009 5:10 AM  
Posted By FrancescaM on 01/21/2009 3:17 AM
This is a term I have not heard before. Our Boards atty advised us that we can use this as a line item to anticipate bad debts... homeowner's who have not paid up obviously.

Had anyone else heard this?
This was just recently discussed in another thread:

http://www.hoatalk.com/Forum/tabid/55/view/topic/forumid/1/postid/64955/Default.aspx

Writing off an uncollectable (i.e., bad) debt is part of doing business for an association, just like it is for any business. It is a cost of doing business. It is (essentially) an expense item, although it may be shown as a offset to income.

Your association budget should have either an allowance for uncollectable fees on the balance sheet, or an offset for uncollectable fees on the income/expense statement (i.e., budget). In business it is called "Allowance for doubtful accounts" and is an estimate of the amounts of accounts receivable that will not be collected. It is essentially, just like any other expense (but is shown as an offset on the income or asset side).
RogerB
(Colorado)

Posts:5067


01/21/2009 8:17 AM  
Posted By FrancescaM on 01/21/2009 3:17 AM
This is a term I have not heard before. Our Boards atty advised us that we can use this as a line item to anticipate bad debts... homeowner's who have not paid up obviously.

Had anyone else heard this?


Yes, Frances. Bad debt needs to be accounted for in the financial reports. How it is done depends on the type accounting used - accural, modified accural, or cash basis. Bad debt should be shown only after the Board determines the funds can not be effectively collected and declares it.
GeorgerwilliamsW
(Indiana)

Posts:975


01/21/2009 9:30 AM  
Roger has added something important here. An association budget, wisely prepared, should have an offset that estimates the amount of uncollectable fees. (See the previous thread I referenced early.) Such a offset is a conservative accounting procedure that helps assure that the association will not budget for expenditures greater than the revenues it reasonably expects to receive.

However, uncollected fees remain on the books as an asset unless and until the board determines that (1) the fees are likely never to be collected, or (2) only a portion of the amount outstanding is likely to be collected. It is up to the board of directors--and only the board--in a homeowners association to vote to write off such non performing assets.
FrancescaM
(Washington)

Posts:264


01/21/2009 8:43 PM  
Posted By GeorgerwilliamsW on 01/21/2009 9:30 AM
Roger has added something important here. An association budget, wisely prepared, should have an offset that estimates the amount of uncollectable fees. (See the previous thread I referenced early.) Such a offset is a conservative accounting procedure that helps assure that the association will not budget for expenditures greater than the revenues it reasonably expects to receive.

However, uncollected fees remain on the books as an asset unless and until the board determines that (1) the fees are likely never to be collected, or (2) only a portion of the amount outstanding is likely to be collected. It is up to the board of directors--and only the board--in a homeowners association to vote to write off such non performing assets.



Thank you for wonderful feedback and advice... it's much appreciated!!
RobertR1
(South Carolina)

Posts:5164


01/22/2009 2:17 AM  
Francesca,
First are you HOA or Condo? If condo make double sure your read your documents about collection of assessments.

George and Roger look at this "bad debts" business as an accounting entry to account for money, and no doubt they are the experts here. Me, I tend to look at it like a community problem and your documents or state statute may have provisions that direct what should be done if you are non-profit and are licensed by the state. Just consider checking that out before you write off anything, sort of a double CYA when a member might want to know why your BOD took the action.
MaryA1


Posts:0


01/22/2009 6:57 AM  
Francesca,

At this time when bank and mortgage co foreclosures are at an all time high, it's wise to allow for bad debts. My assn PM keeps on top of all the bank and mort. co foreclosures and presents the info to the board each month so they can make a determination of the amount of delinquent assessments that should be written off. The budget carries a line item for bad debts. The rate of foreclosures in our assn is at about 2%, as compared to approx. 10% for our city.
Please login to post a reply (click Member Login on the menu).
Forums > Homeowner Association > HOA Discussions > Wrting off Bad Debts?



Get 1 year of free community web site hosting from Community123.com!

Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.







General Legal Notice:  The content of forum messages are from the posting member and have not been reviewed nor endorsed by HOATalk.com.  Messages posted by HOATalk or other members are for informational purposes only, are not legal or professional advice and do not constitute an attorney-client relationship.  Readers should not act upon this information without seeking professional counsel.  HOATalk is not a licensed attorney, CPA, tax advisor, financial advisor or any other licensed professional.  HOATalk accepts ads from sponsors but does not verify sponsor qualifications nor endorse/guarantee any sponsor's product or service.
Legal Notice For Messages Posted by Sponsoring Attorneys: This message has been prepared by the sponsoring attorney for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Readers of HOATalk.com should not act on this information without seeking professional counsel. Please do not send any sponsoring attorney confidential information unless you speak with the sponsoring attorney or an attorney from the sponsoring attorney’s firm and get authorization to send that information to them. If you wish to initiate possible representation, please contact an attorney in the firm of the sponsoring attorney. Sponsoring attorneys that post messages here are licensed to practice law in a specific state or states as indicated in their message signature or sponsor’s profile page. (NOTE: A ‘sponsoring attorney’ is an attorney that is a HOATalk.com official sponsor and is identified as such in the posted message or on our sponsor page.)

Copyright HOA Talk.com, A Service of Community123 LLC ( Homeowners Association Discussions )   Terms Of Use  Privacy Statement