|
YEAR
END FINANCIAL REPORTING
By
Eric Glazer, Esq.
Published
December 17, 2012
Every
once in a while, despite it being a boring topic, we need to
discuss portions of the law that if not followed, can get your
association in big trouble.
Today is one of those days.
Heading into the final days of the fiscal year for most
associations throughout the state is the perfect time to talk
about the statutory requirement for both condominiums and
homeowner associations to comply with the mandatory year-end
financial reporting requirements.
Both
statutes state:
Within
90 days after the end of the fiscal year, or annually on a date
provided in the bylaws, the association shall prepare and
complete, or contract for the preparation and completion of, a
financial report for the preceding fiscal year. Within 21 days
after the final financial report is completed but not later than
120 days after the end of the fiscal year or date as provided in
the bylaws, the association shall mail to each unit owner or
hand deliver to each unit owner, a copy of the financial report or
a notice that a copy of the financial report will be mailed or
hand delivered to the unit owner, without charge, upon
receipt of a written request from the unit owner.
In
English…most association's fiscal year ends on December 31st.
So, by April 1st the association must have at least
contracted for the preparation of the year end financial report.
By May 1st, the association the association can mail the
report to all owners or mail them a notice that they can get a
free copy of the report by asking for it in writing.
The
type of financial report to be prepared by the association
varies and depends upon the association's budget.
The higher the amount of the budget, the more detailed
the type of financial report to be prepared.
For example:
An
association with total annual revenues of $100,000 or more, but
less than $200,000, shall prepare compiled financial statements.
This is basically a glorified disclaimer by the accounting firm
as to the accuracy of the finances as presented to the CPA by
management or the Board.
An
association with total annual revenues of at
least $200,000,
but less than $400,000, shall prepare reviewed
financial statements.
In a review report, the CPA expresses a “limited
assurance” — not an opinion — of the reasonableness of the
financial statements.
An
association with total annual revenues of $400,000 or more
shall prepare AUDITED financial statements. A financial
audit provides the highest level of financial statement
assurance. An audit normally takes considerably more time
than either a compilation or a review.
An association with total annual revenues of less
than $100,000 and An association that operates fewer than 75
units in a condominium and 50 parcels in an H.O.A.
regardless of the association's annual revenues,
shall also prepare a report of cash receipts and expenditures.
Suppose
a Board wants to prepare a financial report that gives the
owners more detail than what they are required to receive?
For example, the Board wants to provide an audit when
only a compilation is required.
In a condo - An association may prepare, without a
meeting of or approval by the unit owners: a more detailed year
end financial report than what is required by law.
In an HOA – 20% of the owners can petition the Board
for a greater report, a meeting must then be held within 30
days, and then upon approval of a majority of the voting
interests of all parcel members, amend the budget or pass a
special assessment to pay for the increased financial report.
Suppose
however that the Board wants to provide the owners with a less
detailed financial report than the owners are entitled to by
law? For example,
the Board doesn't want to spend money on an audit and only wants
to provide a compilation? In
a condo and an HOA ------Only If approved by a majority of the
voting interests present at a properly called meeting of the
association, an
association may prepare a less detailed financial statement than
what is required by law.
Bottom line….associations are required to
comply with the above. If
they don't, they can incur financial penalties, find themselves
sitting at the defense table in either an arbitration proceeding
or court proceeding and wind up paying attorney's fees to the
complainant. And
yes……that will have to be disclosed in next year's financial
report.
|
