What Every Board Member Should Know About Financial Reports
Managing and overseeing an association’s finances is one of the board’s most important responsibilities. To successfully fulfill this duty and sustain the financial well-being of your community, you must understand financial reports and their importance to the success of your association. Read on to learn everything you need to know about financial reports.
What’s a financial report?
A condominium association's financial report consists of the key economic information that'll help board members manage operations and make good decisions. The following are included in a financial report:
- Balance sheet
- Statement of income and expense
- General ledger
- Cash disbursements ledger
- Accounts payable report
- Account delinquency report
- Bank reconciliation
Who prepares the financial report?
In most cases, the community association manager (CAM) will prepare the financial report and provide additional relevant documents for the board to review. The CAM will send these reports to board members at least five days before the board meeting where they're finalized.
How often do we receive a financial report?
Financial reports are prepared monthly, typically in the middle of the following month after all balances post. It’s very important to monitor financials consistently on a monthly basis, as they indicate the financial health of an association and inform ongoing decision making.
What should I look for in the financial report?
Because condominium associations are nonprofits, the income and balance sheet must balance to zero—it can’t be negative or positive. The following are things you should also look for to ensure your association is in good financial standing:
- There isn’t a decrease in the amount of cash on hand.
- There aren’t variances between expenses vs. budgeted items.
- Vendors are getting paid the agreed-upon amount.
- There are sufficient funds in your reserves for any capital improvement projects.
- There isn’t an increase in owed bills or assessments.
Who can access the report?
Due to the sensitive and personal data that can be included in the report, management companies will typically provide two different financial reports—one for board members and one for homeowners. The board member report will include all financial information, and then members will work together to determine what’s appropriate for all homeowners to see before sharing.
Where should these reports be stored?
Both your condominium association and management company should securely store these reports indefinitely; however, requirements vary by state. Many associations store these documents both in print and digitally, using an app like TownSq.
While financial reports can be long and dense, it’s important they’re thoroughly reviewed on a monthly basis. Doing this will ensure you’re fulfilling your fiduciary duty, protecting your association, and it'll help prepare your community for a strong future.