HOA Financial Reports: What the HOA Board Should Know CSM

August 30, 2022

HOA Financial Reports: What the HOA Board Should Know CSM

The frequency of preparation of HOA financial statements may vary depending on state laws, community bylaws, and the size of the association. For any title professional looking to transition from basic assessment of HOA financial statements to strategic advising, this guide is your go-to resource. Get familiar with income statements, balance sheets, and reserve studies to deliver transparent, actionable insights that build trust with your clients.

Accounts Payable Report

The deliverables of an HOA statement are managed through a continuous effort to maintain the community and ensure its financial stability. The HOA relies on regular funds from its members to fulfill its responsibilities. However, there are instances where some members may fail to contribute their dues, either due to financial limitations or a disagreement with the fee charged.

Professional Financial Management for Homeowner Association (HOA) & Condo Accounting & Remote Services

While a large number of associations use the calendar year (January-December) as their fiscal year, a business can elect to use any other twelve-month period such as June-May as their fiscal year. The Income Statement is a formal financial statement that summarizes the association’s operations (revenues and expenses) for a specific period of time usually a month or year. Reliable, consistent, and transparent financial statements not only help the HOA board of directors make well-informed decisions.

How Often Do Financial Statements Need to be Prepared?

To effectively manage the deliverables of an HOA statement, it is essential for the association to thoroughly understand the rights and limitations imposed by the state law. By familiarizing themselves with these regulations, the HOA can ensure that they are taking appropriate actions within their granted authority. hoa accounting This comprehensive understanding helps to maintain a clear view of the actions that can be taken and those that are prohibited in pursuing resolution when members fail to meet their financial obligations. The note of the last payment in an HOA statement serves as a record for both the HOA and the homeowner.

It shows its assets, liabilities, and owners’ equity (essentially, what it owes, owns, and the amount invested by shareholders). An ability to understand the financial health of a company is one of the most vital skills for aspiring investors, entrepreneurs, and managers to develop. Armed with this knowledge, investors can better identify promising opportunities while avoiding undue risk, and professionals of all levels can make more strategic business decisions. Equity reflects the difference between the association’s assets and liabilities and represents the association’s members’ net worth or ownership interest.

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The Cash Ledger helps monitor spending patterns, verify that funds are used appropriately, and ensure that all expenditures align with the approved budget. These indicators help present the severity and extent of non-payment issues within the community. They also highlight potential financial risks and the effectiveness of the HOA’s collection efforts. The Comparative Income and Expense Report is crucial for evaluating the financial performance against budgeted expectations, highlighting areas of fiscal health or concern within the community. What this means is that the HOA should not have a positive or a negative balance, the balance of the HOA should be zero. We expect to offer our courses in additional languages in the future but, at this time, HBS Online can only be provided in English.

It essentially shows whether or not the HOA was able to meet its financial obligations with the funds it has accumulated over a set period of time. The income statement consists of the HOA’s revenues, expenses, and reserve contributions. Totaling all of these numbers will arrive at a net profit or loss for the association. The Comparative Income and Expense Report provides valuable insights into the HOA’s financial health and management over time.

This comprehensive understanding helps to maintain a clear view of the actions that can be taken and those that are prohibited in pursuing resolution when members fail to meet their financial obligations.
For smaller, self-managed associations, there might be trouble getting financial statements completed on time.
Large associations with many accounts or complex budgets often choose to prepare statements every year.
If only one person understands these reports, then it would be easy for that person to cook the books and steal money from the HOA.
CINC’s accounting software offers integrated banking features and repetitive task automation.

Board members have a responsibility to understand financial interim statements to guide the association’s financial course. Therefore, it’s important for all board members to know https://www.bookstime.com/ how to understand and analyze financial reports. This way, they can prepare the association for maintenance, repairs, homeowner bankruptcy, and even financial dishonesty.