For a crystal-clear picture of how an association is doing, there are few better lenses than the community's budgets and financial reports. From an investment perspective, they show the association board, property managers, the unit owners/shareholders and tenants whether the property is solvent or not. If the numbers add up and monies coming in and out balance, you can safely assume everyone is doing their job, and upholding their financial and fiduciary duty to the community. If the property is in the red, it’s important to determine why that is, and what needs to be done differently to turn the situation around and restore solvency.
Maintaining and updating the accounting of their property is one of the primary responsibilities of a board—one that is all-too-frequently neglected, according to the pros.
“They key thing that I tell the boards is that they are management and they're in charge,” says John H. Stroemer, CPA of Stroemer & Company, PA in Fort Myers. “Just because they hire management companies doesn't mean they can wash their hands of their responsibility. The management company is nothing more than an agent that performs a task for the board—the board still has responsibilities over governance issues and they should review the financial statements on a monthly basis.”
It’s important to understand each financial document and its purpose so you can have a better understanding of exactly what’s going on in your association. So here’s a little Financial Paperwork 101.
Financial statements show the income and expenses for an association. Cindy D'Artagnan, CPA, an accountant also based in Fort Myers explains that there are several basic documents which Florida associations should have and update, most on a monthly basis.