Anytime there’s a change in management and someone new steps into a board position, becoming familiar with the documents and legal processes that come with your HOA’s finances needs to be understood. The principles that guide your finances can be applied to the community, as in don’t spend more money than you have. But there’s also a learning curve to the additional paperwork and processes.

Examine All Documents and Records

You can’t get a complete picture of your HOA’s finances without taking the time to thoroughly examine the community’s past budgets. If the previous board kept detailed records as they should, this will give you an accurate picture of where your finances stand, and then you can begin to ask questions about where costs can be cut back or increased.

Community Documents Guide

  • Balance Sheet– Clearly displays how much money a community has in the bank and how much money is allocated to debts and bills.
  • Income Statement– Details all of the HOA’s bill and expenses for the year.
  • Statement of Cash Flows– Describes the net change in cash based on the operating, financing, and investing activities of the association, and includes the community’s cash receipts and payments.

Monthly Management Reports

In addition to reviewing the balance sheet, income statement, and cash flow, members of the board will have to analyze monthly management reports. This covers accounts receivable, accounts payable, year-to-date budget, bank reconciliation, the amount paid in bills, and copies of bank statements. And, at the end of the year is the annual audit, which reports on the association’s financial state.

Planning Ahead With Reserve Funds

One of the biggest obstacles that HOAs face when striving for financial health is a lack of planning for future expenses. Having a fully-stocked reserve fund, and regularly contributing to it, is the backbone of every HOA or community association. Just because you don’t need a new pool pump or freshly paved sidewalks right now doesn’t mean that those won’t be headaches in a couple of years. Some communities undergo a reserve study, which notes the current state of items, such as elevators and roof shingles, to plan out when replacements will be needed.

Constantly Monitor The HOAs Financial Health

Use the data from the monthly management reports to inform your budgeting decisions. By reviewing the documents each month, you can see where costs are rising and where they can be lowered. By staying up to date on the finances and completing a reserve study, you can easily track when major expenses are expected to occur. And even though you can’t predict all expenses, having a comprehensive understanding of your HOA’s finances will help prepare you for any surprises.

Experienced CPAs Can Help Navigate your HOA’s Finances

Our CPAs have decades of experience with all facets of HOA finances and would be happy to answer questions about any financial document, assess your community’s financial health, or any other financial procedure. If you would like more information on how BJM can help with your HOA’s finances, reach out to us at 678.551.2900 or