While this data isn’t subject to member inspection rights, boards must still maintain accurate records to ensure compliance and handle updates appropriately. The question of vendor contracts often creates particular confusion for boards. While North Carolina law doesn’t explicitly require disclosure of these documents, many associations choose to make them available in the interest of transparency. However, boards should carefully consider how to balance member information rights with vendor privacy and competitive considerations. Rather than adopting a one-size-fits-all approach, consider developing a nuanced policy that protects both transparency and business relationships.
Budget vs. Actual
To do this, a unit cost is multiplied by estimates for the coming year to calculate the total estimated costs of labors and services. Budgeting makes it possible to determine which costs are reasonable and which are not,. However, no matter what you do, keep track of your financial information with digital files so everything is easily accessible in one place. Asking your residents for feedback on budgetary priorities might unleash a flood of comments, not all of which will be helpful or useful.
Add and Deduct from the Right Accounts
Integrated systems ensure that financial data is updated in real-time across all aspects of HOA management, reducing discrepancies and improving accuracy. If you elect the Modified Accrual Basis, amounts for Assessments Receivable and Prepaid Assessments will agree to the amounts on the Balance Sheet, the same as the Accrual Basis. However, the amount of the unpaid invoices in the Accounts Payable Report, if provided, would not be on the Balance Sheet because these expenses are recorded on the Cash Basis, not the Accrual Basis.
Professional Financial Management for Homeowner Association (HOA) & Condo Accounting & Remote Services
Do your research and speak to a qualified accountant if necessary to ensure you’re using the best accounting method for your HOA. In this system, income and expenses are immediately recorded the moment they are incurred instead of when payment is received or made. This means that the HOA can record all transactions as they occur to get an accurate picture of their finances. It is equally important to check state laws to see which accounting method you should ultimately use. Some states are more specific when it comes to HOA accounting, while others have no such laws.
- You should also make sure that checks made out to your HOA go directly into the proper bank account.
- Accounting is arguably one of the most challenging aspects of managing an HOA community.
- For smaller, self-managed associations, there might be trouble getting financial statements completed on time.
- HOAs should make association records available to all homeowners as stipulated in state laws and your governing documents.
Turn to ACCU, Inc. for HOA Accounting Services and Financial Consulting
A review includes everything described above in compilation, but also includes a more analytical look at your association’s financial records. This report comes with “limited assurance.” The CPA guarantees that there is no material modification needed upon your receipt of the report. A CPA will compile your financial records and apply basic accounting principles to make sure your financials have been kept properly. If necessary, they may take extra steps to adjust HOA Accounting any entries before compiling and preparing your financial reports. You will then receive the report, but it will come with “no assurance.” In this kind of report, the CPA cannot expressly make any guarantee as to the accuracy of your financials. This basis of accounting remains a popular choice among homeowners associations across the country.
- While both cash and accrual accounting have their merits, many HOAs find that accrual accounting provides a more comprehensive and accurate picture of their financial health.
- You may be skeptical of working with a company not located in your area.
- HOA accounting is the financial backbone of any homeowners association.
- Your homeowners association’s equity is the balance of the reserve account.
- We selected one of the few national banks that specializes in HOAs and Condo banking to work with.
Discover Why Community’s Have HOA Audits and the Services Available
However, you must note that it doesn’t conform with the Generally Accepted Accounting Principles, also known as GAAP. The first method of accounting is the Cash Basis, which records income and expenses only when actual cash is tendered. By understanding the different types of accounting used by HOAs and how they work, HOA members can be sure that their dues are paid on time and accurately, helping them run a successful HOA.
What Are the Top Benefits of Integrated Accounting for HOAs?
- This report is used to “prove” that the cash assets shown on the association’s books and balance sheet agree with what the bank statement shows.
- Accurate and regular financial statements are the foundation of sound HOA accounting.
- Many board members misunderstand their role when it comes to homeowners association accounting.
- Many California HOAs use the modified accrual basis as it offers some benefits of the accrual method with advantages of the cash method.
- While accrual accounting is the most common, it’s worth noting that some smaller HOAs might use cash basis accounting due to its simplicity.
However, liability accounts like “Accounts Payable” will continue to be absent. If you have a separate Accounts Payable Report, you have no way of verifying the amounts against the Balance Sheet. On the other hand, when recording expenses, the timing follows the Cash Basis. As such, you must record expenses when they are paid and actual cash is tendered, regardless of when they are incurred. The software is easy to use and offers a wide range of customizable options, making it ideal for both bookkeeping for small HOA accounting and larger communities. If your HOA is looking for a robust accounting system, QuickBooks may be the right choice.
Maintaining Reserve Funds for Future Expenses
They may take certain steps to correct entries before preparing the report. You’ll get a no assurance report, which means that the CPA cannot guarantee that the financials are accurate. This report, also called the check register, shows board members the HOA’s written checks. The key is to ensure that your HOA or condo association is receiving the most efficient features and services for its needs. When you have the most effective systems in place, the financial management service for your HOA or condo ends up paying for itself. Do you currently self-manage your condo community or homeowners’ association?