HOA Accounting Standards the Board Must Set Up

hoa accounting

Even if no such requirements apply to your association, it is one of the HOA accounting best practices to perform an audit or review on an annual basis. In doing so, you can get a better grasp of your financial condition and make more informed decisions. The Accounts Payable Report lists all of your association’s unpaid expenses.

hoa accounting

It lists down all your revenues as well as your expenses, deducting the latter from the former to arrive at your net income or loss. The HOA balance sheet compares your association’s assets against your liabilities and owner’s equity. It gives you a complete look at your HOA’s net worth, including how much money you have in your bank account. This could be either your HOA management company or a Certified Public Accountant (CPA). A comprehensive audit involves the checking of records to ensure they comply with basic accounting principles.

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A General Ledger functions as the master record on which all other reports are based. Due to the complicated nature of this report, many board members find it to be the most difficult to write. Next up we’ll mail out a letter to all your vendors to change their billing address so invoices come to us. Then we will mail out a welcome letter to owners with payment options, our contact info and how owners can set up online access. Next, the timing for notification depends on your current management agreement – has it expired, is it ending at the end of the month?

  • It’s important for any homeowners association to keep up-to-date on their payments to vendors.
  • Not all expenses take place every year, but you should still plan for them to be categorized under the same account regardless of when they occur.
  • CINC’s accounting software offers integrated banking features and repetitive task automation.
  • Boards may request to review interim reports to directly monitor fund balance and proper allocation.
  • In some states, it is a legal requirement for HOAs to maintain and submit regular financial statements.
  • So do the financial needs of the community, as it relates to its goals and its size.
  • However, there are certain universal principles that all association managers should implement for HOA financial reports.

Understand the state and regional laws that apply to your clients’ associations so you can assist them and provide clear, legally approved financial reports. The most common mistake that people make when preparing HOA financial statements is not adding enough detail. Add every detail, no matter how small, so you have a more thorough insight and better decision-making. This software is cheap and helps with most of the basic accounting work that is required of a community. However it is not designed for HOA or Condos and does not offer online functionality for owners to make payments or see community documents.

Accounts Should Be Specific and Future-Proof

It does not, however, use account titles such as Prepaid Assessments or Assessments Receivable. Again, this is due to the nature of the method wherein you only report income once you receive cash. The YTD net income figure on the income statement needs to agree with the net income figure on the balance sheet. Given that funds are essentially having more than one general ledger, the accounts can be designated by the special use of account numbers, each set of numbers representing a specific fund. Alternatively, they can be designated by using certain recording and reporting capabilities and features of the accounting software being used.

hoa accounting

Large associations with many accounts or complex budgets often choose to prepare statements every year. These documents will be available to everyone in the community, most of which do not have advanced accounting degrees. For an HOA financial statement to be effective, proper preparation is key.

Community Members

The members say that HOA Accounting Services is a tremendous improvement over financial services from management companies. CINC’s software has self-contained modules that you can add for maximum scalability as your company grows. CINC’s all-in-one cloud-based system also includes automation, allowing your HOA managers more time to focus on value-added activities.

However, it is important that the association’s Board of Directors (and the manager, if they have one) carefully review this reconciliation AND they compare it with an original bank statement. Most banks will provide an additional original bank statement to the association’s treasurer. The Income Statement is a formal financial statement that summarizes the association’s operations hoa accounting (revenues and expenses) for a specific period of time usually a month or year. While most associations will have both a reserve and an operating fund, many associations may have other funds. For example, there may be a cost center that provides services to only one sub-set of homeowners; those expenses, and sometimes the revenue against them, need to be tracked separately.

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