Detailed, error-free homeowners’ association (HOA) accounting reports are vital for successful homeowners’ associations. These reports provide a gauge to monitor the organization’s financial health.
They are often prepared by elected financial officers or certified public accountants in smaller HOAs. Larger community associations often use management companies with in-house accounting teams to develop their accounting reports. Despite this, any-sized HOA can benefit from cloud-based accounting software like CINC to prepare reports and automatically submit them to the entities required to have them.
Figuring out where HOA accounting reports should go depends on community association bylaws and state regulations. Generally speaking, HOA, condo, and community association boards should turn in accounting reports to three places:
The HOA board of directors should receive a complete, unredacted report. The board requires access to accounting details to make prudent financial decisions and set goals to maintain a strong economic foundation for the community.
The association board utilizes accounting reports to calculate budgets, track dues, and allocate reserves for new projects and maintenance. Producing thorough reports allows board treasurers or management accounting teams to manage the association’s finances effectively. The more detailed the report, the more useful it is. Up-to-date records allow association financial managers to look over previous fiscal years to spot economic patterns that could impact current budgetary issues and modify them appropriately.
HOA boards also need accurate accounting reports to monitor receivables. This is vital; otherwise, community associations would lose track of delinquent dues and be unable to budget for future projects and structural maintenance.
Accounting reports should also be made available to all dues-paying HOA members. When residents can see where their money is going, there is often a higher degree of community involvement and a sense of organizational teamwork. Financial transparency for the board, the residents, and the association management company engenders a higher level of trust and satisfaction.
Not every report needs to be made public, however. For example, delinquency reports contain sensitive information regarding homeowner payment status; therefore, these should be redacted or remain private. Though, in general, the more detailed and accessible accounting reports are to community members, the better.
Accounting reports can be disseminated to residents in whatever manner is most efficient and convenient. Additionally, using multi-channel communication allows each resident to access reports using his or her preferred method. Potential delivery methods include:
CINC’s dedicated online portal allows community members instant access to association documents, including financial statements and board minutes, at their convenience. CINC portals also provide two-way communication, allowing financial managers to instantly address questions and curb unnecessary back and forth with residents.
Homeowners’ associations are usually classified by the IRS as non-profit entities. State laws in much of the country require non-profit organizations and associations to maintain detailed financial records and regularly report them to the Secretary of State, Secretary of Commonwealth, or corresponding state department. If an HOA does not comply with state and local regulations by submitting financial reports, it could lose its state certificate of “good standing.”