Homeowner Association fees help to maintain the property of community residents and to improve the overall quality of the surrounding environment. It is important to understand the financial reports of your HOA in order for you to keep track of your contributions and the overall use of HOA money.
Listed below are the basic documents that are included in most HOA financial reports along with an explanation of what each document means.
A balance sheet is a financial document that shows the amount of money that is present in your accounts. It monitors the expenditures and income of your account over a specified period (in this case on the month).
Understanding how to read a balance sheet allows you to compare the expenditures that your HOA incurred against the income that it collected.
An income statement is a more focused financial document that specifically tracks all the income that has been received by your HOA. Income can come from investments, payments from prior services offered, among others. The primary purpose of the income statement is to show if the HOA made a profit or loss based on the activities that they carried out.
Accounts receivables show all the money that is owed to the HOA and has not yet been collected. Accounts receivable include collections, credits from vendors and any other payments for services offered by the HOA. Understanding the account receivables document can give you a better understanding of the activities that your HOA has been engaging in.
The bank statement, as you are probably already aware, shows all the transactions that have been carried out on your HOA’s bank account. The HOA bank account is probably where the majority of the cash flow is maintained, and therefore it is important to keep track of the bank transactions and overall balance.
In conclusion, understanding your HOA’s monthly financial reports gives you more independence and control over the activities of your HOA. You can carefully follow up on payments and expenditures, suggest areas of improvement, and be more involved in decision making. In the end, you are protecting your homeowner association's funds and serving your fiduciary responsibilities to the highest level.