March 18, 2014
UNDERSTANDING ANNUAL FINANCIAL REPORTING REQUIREMENTS FOR ASSOCIATIONS
By: John H. Stroemer, CPA, CFST, CAM, GRI – Managing Partner
The annual financial reporting requirements for condominiums and homeowners’ Associations in the State of Florida can be found in the Florida Statutes. Chapter 718 of the Florida Statute pertains to Condominium Associations, while Chapter 720 pertains to Homeowner Associations (HOAs). Whether your Association is a condominium or a HOA, the reporting requirements are similar for both. You should consult the specific statute for a more detailed discussion.
The annual requirements vary based on the number of units/parcels in your Association, as well as the dollar amount of total annual revenues. However, keep in mind Association by-laws should also be considered in relation to this annual requirement.
Required Financial Reports
A condominium that has fewer than 50 units and a HOA with fewer than 50 parcels, regardless of the Association’s total annual revenues (accrual basis), may prepare a report of cash receipts and expenditures with required reserve information. If your Association is on an accrual method of accounting, the books will need to be converted to the cash basis.
A condominium with more than 50 units and a HOA with more than 50 parcels must look at total annual revenues to determine their reporting requirements. The financial reporting requirements for these Associations include a complete set of financial statements (including footnotes) and must be prepared in accordance with Generally Accepted Accounting Principles. This generally will take more time to complete and must include the many financial disclosures that are typically needed when a complete set of financial statements are prepared.
CPA Levels of Service
The level of CPA service performed on your year end financial statements is based on the total annual revenue of your Association. The breakdown is as follows:
The important concept to understand here is the distinction between the three levels of service must be rendered by a CPA firm. If you place a complete set of compiled, reviewed and audited financial statements side by side, they would appear to be almost identical. Why? Each is prepared in Accordance with Generally Accepted Accounting Principles. Those principles apply no matter what service level is provided by a CPA firm.
What is Different is the Accountant’s Report
Some Common Misconceptions
In practice, the term audit can mean many things to many people. Some common misconceptions (we hear all the time) include:
An understanding of the levels of service required by the statutes is only the starting point for management and board members of an Association. To make informed decisions related to the governance of your community, it is important to understand the services provided by the CPA firm. If you have any additional questions, please feel free to contact our office at 1-855-STROEMER.