The REAL Reason for the Corporate Transparency Act and your HOA Board

🥱 Mondays are Hard: The REAL Reason for the Corporate Transparency Act and your HOA Board.

Howdy, and happy Monday folks. Here’s a little something in your inbox on Monday mornings to make you sound smart to your boss in your upcoming meeting about a meeting 😁 

By now, you’ve heard all about the Corporate Transparency Act (at least I sure hope so…please say ‘yes’). Let's face it: when you volunteered to be on the HOA board, you probably imagined enforcing lawn height regulations and debating the merits of beige versus off-white mailboxes. The last thing you expected was to become a key player in preventing financial skullduggery. Enter the Corporate Transparency Act (CTA) – your unexpected ally in community protection.

But let’s quickly recap what is needed from the Board of Directors for every HOA

📑 What Information You'll Need to Gather:

For Each Reporting Individual:

1. Full legal name

2. Date of birth

3. Current residential street address

4. A unique identifying number from:

   • Driver's license, OR

   • Passport

5. An image of the identification document

6. A scanned copy of the ID

Reporting Method: Online through FinCEN's BOI E-Filing System

• Accessible at www.fincen.gov

• Free to file

• Can be completed by the HOA treasurer or a designated board member

• Annual verification of existing information

What if a board member changes?:

• Report any changes within 30 days of occurrence

• New board members must be reported within 30 days of joining

⏩ Let’s cut to the chase, then we will backtrack:

• This is about keeping bad guys off your board (yes, we know YOU are not a bad guy….but Bob who just moved in and really wanted to join the board might be)

• No, they are not checking your credit. But they may cross reference bad-guy lists against your info. If you’re not on one, then all is good.

• No, they are not going to sell your info. 

Now, let’s dive deeper…

🏛 Meet FinCEN: The Financial Crime Fighters

First things first, who the heck is FinCEN? The Financial Crimes Enforcement Network (FinCEN) isn't some shadowy government agency with agents in trench coats. They're the financial world's detective squad, dedicated to tracking down money laundering, terrorist financing, and other financial shenanigans that could harm our communities.

What is a Beneficial Owner? And why should this apply to HOAs with volunteer?

A Beneficial Owner is someone who owns 25% of a business and/or someone who has substantial controlling authority of a business. Yes, your HOA is a business. Therefor, this applies as the board has substantial control over the business….a business that usually controls hundreds of thousands, or maybe many millions of dollars of community funds.

And if you do not agree or like this new rule there are already people out there fighting this rule and its application to HOAs and NPOs. But don’t expect that to happen this year, so you’ll need to follow the rules.

💰 Your Fiduciary Responsibility: It's Deeper Than You Think

As a board member, you're not just a volunteer – you're a guardian of the community's financial health. Your fiduciary responsibility means you have a legal and ethical obligation to act in the best interest of the HOA. Think of it like being the treasurer of a really picky neighborhood club, where every dollar matters.

🛡 Why Your Personal Info Is the Community's Shield

Here's the harsh reality: HOA boards are prime targets for financial predators. Unfortunately, many times from the inside. Maybe not YOU, but maybe a fellow board member….you never know. The Corporate Transparency Act is your community's first line of defense against potential bad actors who view your HOA as an easy mark.

Imagine these scenarios that happen more often than you'd think:

1. The Insider Embezzler: A board member who sees the HOA's bank account as their personal piggy bank. They might:

• Approve unnecessary vendor contracts with companies they own

• Divert maintenance funds into personal accounts

• Create fake invoices for services never rendered

2. The Identity Hijacker: Someone with a dubious financial history who slips onto the board to gain access to sensitive community information and financial systems.

• Does your board or a committee member keep an “offline” list of contact information for the owners in the community?

3. The Long-Con Artist: An individual who deliberately joins the board to slowly siphon funds over time, using complex accounting tricks to hide their tracks.

The CTA's reporting requirements create multiple layers of protection:

• Comprehensive background checks that reveal past financial misconduct

• A deterrent for potential fraudsters who know their information will be documented

• A transparent trail that makes it harder to commit financial crimes undetected

• Verification of board members' identities and financial histories

Real-world statistics are eye-opening:

• The Community Associations Institute reports that HOAs lose approximately $1.5 billion annually to fraud

• Small to mid-sized HOAs are particularly vulnerable, with less sophisticated financial oversight

• Nearly 85% of HOA fraud goes unreported or undetected until significant damage is done

🏡 What This Means for Homeowners

For the average homeowner, this isn't just bureaucratic red tape. It's financial protection that:

• Prevents unexpected special assessments due to financial mismanagement

• Protects property values by ensuring sound financial governance

• Provides peace of mind that board members are who they claim to be

• Creates a documented accountability trail

🖼 The Bigger Picture

This isn't JUST about mistrust – it's about creating a transparent, accountable system that protects everyone in the community. Your momentary inconvenience of filling out forms could save your neighbors thousands of dollars and prevent financial catastrophe.

We hope this helps. If you found this newsletter informative and easy to understand, please forward this newsletter or send hoodey.com to your co-workers or board members

Have a great week!

😎 Cool tools should check out to help you work better:

1. stan.ai - cool AI tools built specifically for the HOA industry. And they might integrate with your software of choice

2. getharvest.com - time tracking software that may help you quantify how many hours you are working on something for your associations. Billable hours??

👔 Gigs