Compiled Financial Statement

An association that meets the criteria of this paragraph shall prepare or cause to be prepared . . .

shall prepare = do it yourself

cause to be prepared = have someone else do it

This reads as either/or to me ...”shall prepare or cause to be prepared” terminology in (a), but then, below, it says “shall prepare” as the statute puts more content into the general requirement. I think all the verbiage simply means either do it yourself or get someone to do it. Pretty broad, in other words.

(a) An association that meets the criteria of this paragraph shall prepare or cause to be prepared a complete set of financial statements in accordance with generally accepted accounting principles as adopted by the Board of Accountancy. The financial statements shall be based upon the association’s total annual revenues, as follows:
1. An association with total annual revenues of $150,000 or more, but less than $300,000, shall prepare compiled financial statements.
2. An association with total annual revenues of at least $300,000, but less than $500,000, shall prepare reviewed financial statements.
3. An association with total annual revenues of $500,000 or more shall prepare audited financial statements.
(b)1. An association with total annual revenues of less than $150,000 shall prepare a report of cash receipts and expenditures.

Shelia,

I truly do not know if any members are qualified to prepare such a report at this time. We have a number of absentee owners and investors I have never met nor do I know what their business background is. As you suggest, we could give it a try, have it reviewed by an accountant and use it as a template in the future. But this expense will require a vote by all members. I will ask a couple of accountants for a preliminary quote. Thank you for that suggestion.

I have never seen a Compiled Financial Statement for a not-for-profit corporation such as HOA. Nor do I know if such statement must also comply - or be in the harmony- with the provisions in By-laws. which specifically state that we must keep the following funds:

1. Operating Fund
2. Operating Contingency Fund
3. Reserve Fund for replacement and deferred maintenance
4. Improvements (covers improvements on the common property)
5. Pool Fund (required by Florida Law)

Believe it or not, we do co-mingle money for years now. Also, the Budget nor Financial Statements - now prepared by the Treasurer- never show beginning and ending bank balances so the owners really do not know how much cash we have on hand. This is why several owners now want to know how our money is allocated and what measures should be taken to manage the financials correctly. Hopefully, I am explaining the problem somewhat clearly.

George,

I think the problem is with unsystematic or haphazard record keeping only. To get it in line will require a lot of changes and work. We just need to figure out how to do it correctly and that alone may not be a cake walk or, may require professional advice=money.

Shelia, I agree and wish I could shed more light on this. Our Treasurer - is an investor-and does not live in Florida. And, it may be difficult for him to understand how to manage the financials. Over the years, I have tried my best to explain that he needs to comply with our documents but ...

Our By-laws (written in 1983) state this:

At the Annual Meeting of the Association, the members present shall determine by a majority vote whether an audit of the accounts of the Association for the year shall be made by a Certified Public Accountant, a Public Accountant, or by an auditing committee consisting of not less than three members of the Association, none of which shall be Board members. The costs of audit shall be paid by the Association.

I guess the intent is for the members to determine how the so called 'audits' should be performed since the members (or outside firms) actually 'audit' the board. That makes sense to me. Do you agree?

An old thread that still gives good info (although some of the links in the thread no longer work):

Subject: Financial Audits, Reviews or Compilation Which do you use?

Keep in mind that an audit can cost 10K or more.
A financial review (which still provides an opinion of the finances) a little less.
A compilation of your financial paperwork will be less expensive but will not provide an opinion if the Association is doing thing properly or not.

QuickBooks may become your best friend.

There are 'others', this is the one 'my' association uses.

Geno,

the Statute allows for the Association to prepare Compiled Financial Statement so hiring an outside accountant may require membership vote. I have talked to my accountant who is a CPA and he told me that there are several ways to do a compilation and asked for a guidance before giving us a quote. For instance, he wanted to know if we want to include supplemental cost estimates/schedules for future repairs and replacements on common property such as concrete repairs, road resurfacing, concrete repairs, roofs replacements, etc.

That would depend on your documents. You have to prepare that annual financial statement and most boards don't need to go to the membership for approval of expenditures required by law.

FS 720.303(7)(a) says, "An association that meets the criteria of this paragraph shall prepare or cause to be prepared a complete set of financial statements in accordance with generally accepted accounting principles as adopted by the Board of Accountancy."

If you have someone in the community who is qualified to certify that statements comply with GAAP then you might get them to do it at no charge. Otherwise you have to go outside the organization. "We didn't do it because membership voted not to spend the money," isn't a defensible position where legal obligations are concerned.

FS 720.303(7)(c) says a membership vote can compel a higher level review than what's called for by the revenue thresholds. Maybe that's what you're referring to with regard to a membership vote. Otherwise, unless your governing documents call for it, the members should have no say. The only decision should be the board's on who to hire and how much of a special assessment is needed to pay for it if need be.