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Getting Comfortable with Condo / HOA Financial Statements

Receiving a financial statement on a monthly basis can be one of the most important management tools in helping you oversee your association's daily operations. The financial information, when complete, will create a road map for ongoing decision making.

Finance Committee meetings of the typical association can be intimidating. Many managers and board members alike dread this particular review process, despite its importance. The uneasiness comes from all of the numbers and pages, the volunteer CPA often found serving as the finance committee, and general questions to be raised. However, when expenses and income are divided for comparison purposes - - and positive as well as negative variances are illustrated - - the process can become much clearer to all.

The following points of interests will help you to create a more user-friendly approach to reporting and understanding the financials of your homeowner association:

  • Financial Report Deadlines - Set a deadline each month for your finance committee to receive its financial statements. The third week in the month is often the best time for your committee to meet (this may vary by association). This gives you plenty of time to receive all of your financial data from the banks and investment firms. The finance committee should have all the information at hand at least five days prior to its actual meeting. Establishing and maintaining consistency in what is expected of the committee and when is very important.

  • Summary of Monthly Financials - Take the time to do a summary of the financials in a format easily understood by all. Break down both income and expenses into current period and year-to-date figures. You will be surprised how the picture of variances in the budget can quickly illustrate issues of concern when the reporting format is concise.

  • Quarterly Variance Report - Break down by main account, sub-account, and account number, each budget item, together with the actual amount experienced. The quarterly report helps you identify and address ongoing trends. The financial picture of your association comes more into focus as you reach your third to fourth variance report within the same 12-month fiscal period.

  • Quarterly Finance Committee/Board Meetings - A quarterly meeting with the Board of Directors and the Finance Committee establishes several things. First, it allows the Finance Committee to update the Board on anything significant that has occurred financially in the past three months. Second, it ensures the Board the opportunity, after updates, to give direction on how to reach the long-term goals of the association. Lastly, it gives management the opportunity to describe short-term solutions to income and expense variances. Quarterly meetings help to assure that the Finance Committee, the Board, and management are on the same page at all times.

  • Rapport with the Finance Committee Chair and the Board Treasurer - Take the time to discuss issues of concerns as well as favorable conditions. Developing one-on-one relationships will make it much easier for homeowner volunteers to these assignments to establish trust with one another. Once trust is established, all parties will have the confidence needed to understand, deliver, and discuss the association's financials.

  • Relationship with the Auditors - Auditors are a very important component in assuring financial integrity. It is in the association's best interest to not only establish a favorable relationship with the auditor but to communicate material financial events to him. Do not be afraid to ask questions of the auditor. The auditor works for the association at large and is there to help assure that records remain in good order for everyone.

Remember, your association is your business. It must receive money, spend money, and save money to survive. The finance committee has a job, the board of directors has a job, and the manager has a job. At the end of the day, everyone is after the same outcome: A well run association with impeccable financial records and money in the bank.

Nicholas J. Mazzarella, MBA, PCAM®, CMCA®, Association Times, August 2005


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