An HOA Accounting Guide For HOA Board Members HOAM

These statements typically include the income statement, balance sheet, and cash flow statement, providing a comprehensive overview of the association’s financial health. A financial audit is an in-depth study of an association’s financial reports. The goal of an audit is to give an HOA an independent and objective evaluation of the financial reporting process used, and give the association assurance that its financial statements are accurate and complete. If there are irregularities, an audit can help the HOA identify and fix small problems early on before they turn into bigger issues.

What Is HOA Accrual Accounting?

In some states, it is a legal requirement for HOAs to maintain and submit regular financial statements. It is a good idea to keep detailed records anyways as they will be extremely beneficial for all other aspects of homeowner’s association management. But, as an HOA board member, hoa accounting you should do your part to at least understand the basics of accounting and financial management. After all, even experienced professionals aren’t invulnerable to committing mistakes. By familiarizing yourself with accounting, you can safeguard your association’s finances.

HOA Account Managing vs. Self-Managing

• This could be either your HOA management company or a Certified Public Accountant (CPA).
• Any CPA you choose to look over your records is required by professional standards to issue you one of three different reports.
• Board members are also encouraged to stay in contact with vendors that they regularly work with.
• When it comes time for an HOA, community association management company or specialized accounting business to update their approach, the actual process is relatively straightforward.

That way, it can depict your HOA’s financial standing for both the month and the year thus far. A General Ledger serves as your method of tracking all financial transactions. Assets, liabilities, equity, revenue, expense, gain, and loss — anything related to money. For a homeowners association, it usually consists of retained earnings and the reserve account’s remaining balance. Listed under assets are cash, accounts receivable (amounts people owe you), inventory, fixed assets, and the like.

What Is an HOA Audit?

Far too many associations have made the mistake of deducting from their operating fund when they meant to deduct money from their reserve fund. It might seem like a small error, but it can throw your whole accounting setup into chaos. If you have an HOA management company, they may offer audits as part of their HOA accounting services. A majority of experts and accountants agree that the Accrual Basis is the best accounting method to use.

• The optimal level of internal control is when no one person has responsibility or access to more than one function of the financial operation.
• However, the accuracy of the reports cannot be verified easily by comparing the totals to the amounts reported on the Balance Sheet.
• As an example, if the board approves a $50,000 roofing contract, it will not show up on monthly reports until the check is written.
• Board members are community volunteers who likely don’t have the 20-plus hours needed every week to oversee the HOA’s daily operations.
• In some cases, the organization managing accounting and budgeting for an HOA won’t be the board itself, but rather an accounting firm called in for financial assistance.

Slatter Management provides accounting services to homeowners associations and condos. The company’s services include accurate financial reporting, timely AR and AP management, and convenient payment methods. Beyond that, HOAs can also expect a same-day deposit of collected receipts, account reconciliations, tax services, and payroll services. With FS Residential, homeowners associations can look forward to financial reports prepared in a timely and accurate manner. The company also provides board access to financial information 24/7 with the help of a secure program.

Income Statement

In the end, you want to make your community a beautiful and financially sound place to live for all residents. Fidelity bond coverage should apply to anyone who may handle HOA assets or funds, including HOA employees and board members, property managers, association management company staff, and bookkeepers. Third-party fraud or forgery may also be covered if money was lost due to the actions of someone working outside the scope of association business. Learn everything you need to know here about HOA financial management — from HOA accounting terms to fidelity bonds to the benefits of association audits.

Here’s what HOAs in Florida can’t do to you anymore as of Monday, July 1