Presenting Your HOA’s Monthly Financial ReportsBest practices for board treasurers and property managers.

Most neighborhoods and their property management companies utilize accountants to prepare the monthly financial statements. As a board treasurer or property manager, you receive a monthly package of financial data that needs to be reviewed with the board. The board members want you to cover the highlights in a brief presentation, so they can react to any pressing items and then move on to other business. This can be quite a challenge for even the most seasoned professionals.

Building credibility with the board

You need to present the results, issues, and opportunities in a format that makes sense to the board, with enough detail to be actionable, but without overwhelming anyone with data. This can be a major credibility builder, so you want the presentation to be “on the money” and also have answers to relevant questions that may be asked.

If you’re already adept at doing this, congratulations! I hope you’ll share your success stories. If not, please keep reading for some advice from a CPA who has been doing this for years.

Five components of an effective financial results presentation

Based on my experience, here are the key updates that the board is (or should be) looking for. Depending on your community size and budget complexity, preparation time should take a couple of hours once you’re familiar with the process. If you’re missing any of the items mentioned below, please follow up with your accountant or property manager.

  • Balance sheet. Confirm that the bank reconciliation balances agree with the amounts listed on the balance sheet. Verify that other numbers listed, like prepaid assessments, match supporting schedules.
  • Bank statements. Confirm that bank account balances match the balances reported on the bank reconciliation. This is also a good opportunity to check for anything unusual on the statements.
  • Income statement. Highlight major revenue and expense variances (compared to the monthly and year-to-date budget), along with the reason. “We budgeted landscaping at a $50K, but we’re trending 20% ahead due to an extra pine straw application” Don’t forget to review variances in revenue as well. “An outstanding debt was paid, generating an extra $5,000 in revenue last month.”
  • Delinquency rate. This is the money that residents owe, normally presented as a percentage of total revenue. “Receivables are now down to 4%, thanks to successful collection efforts over the last quarter.” Consider covering specific issues in a confidential executive session.
  • Reserve account. The reserve balance from the bank reconciliation should be at least the amount listed in the reserve study. You may also want to highlight current and planned major expenditures. “The reserve is funded to 100% of plan. Front entrance landscaping is in process and on budget. We still need to bid out the clubhouse painting, which is listed on the 2017 reserve project list.

When in doubt, point it out

In my experience, it’s better to be overly thorough when reporting financial results. Highlight anything that you consider to be a potential issue or opportunity, recommend the best course of action, and encourage open dialogue. Once you’ve completed the review, consider sharing an update with the rest of the community so all residents know what’s going on financially.

There is no exact way to present financial results to HOA boards, so please share your ideas and best practices. I look forward to hearing from you.

Neal Bach, CPA