Financial Statements

I am newly elected Treasurer of a 104 unit condo HOA. I am not a Certified Public Account; however I do have a working knowledge of Financial Statements. Our state requires us to submit availability of an Income Statement and a Balance Sheet annually to our members. This has never been done - and I want to comply.

I have no problem compiling an Income Statement.

I am at a loss regarding the Balance Sheet. I know that a Balance Sheet shows Assets = Liabilities + Member Equity on a given date. I have in possession another HOA's Balance Sheet. It shows Assets comprised of cash in a Checking A/C and cash in a CD minus A/Cs Receivable. OK so far. It shows Liabilities of A/Cs payable + Equity. The Equity consists of Retained Earnings plus the Net Income from the prior year's Income Statement for Total Equity. With regard to our HOA, we do not show Retained Earnings. Previous years' Income Statements have never shown much of a surplus and often have shown a deficit. Dues have not been raised sufficiently.

First Question: As a non-profit entity, are we allowed to have Retained Earnings?
Second Question: Is is common and allowed by GAAP standards to retain earnings of a non-profit entity?
Third Question: Knowing the above, how am I to calculate Equity for our HOA?

For all you CPAs and Accounting Experts - can you help me or does our HOA need to hire someone? I welcome and appreciate any and all input.

104 units sounds large enough to consider professional property management - with the management you should get accounting services.

It isn't likely that you are a non-profit. Florida HOA's are "for profit corporations".
A non-profit is something like a charitable organization and that designation is given by the IRS.

Do you actually know what retained earning are? You might want to Google that.

Also, check this - 1120 H is the form most HOA's file.

https://www.irs.gov/forms-pubs/about-form-1120-h

Just to be clear, I was refuting this statement "Florida HOA's are 'for profit corporations'."

What the state requires is based on your total annual revenues as per FS 720.303(7). You'll have to produce a report of all cash receipts and expenditures OR compiled financial statements OR reviewed financial statements OR audited financial statements, depending on your total annual revenue and, perhaps, on what the homeowners have voted for.

There's nothing in the statutes per se about providing an Income Statement and Balance Sheet. To the extent that the required level of financial reporting does include those things, then yes, you'd have to come up with those and provide them to the homeowners. Alternatively, you can provide notice to the homeowners that copies of the financial statements are available on request and at no charge to the homeowner. Notice that this is separate and apart from the homeowners' right to access the official records of the association. Copies must be provided, if requested, at no charge.

I agree with the suggestions to hire an outside independent CPA. We've had CPAs on our Board in the past and still hired an independent outside accountant to prepare our yearly financial reports. One year we had 2 CPAs on the Board and a third not on the Board but chairing the Financial Committee. The association STILL went to an outside accountant for the yearly financial report.

MaryannC2,

A Balance Sheet is not that complicated to complete. I have prepared hundreds of financial statements including Income Statements, Balance Sheets and Statements of Cash Flows.

The three parts of a Balance Sheet are the Assets, Liabilities and Equity. For Not for Profit HOAs, equity is considered a Reserve Account and a Reserve Account is permitted by FS Chapters 617 and 720. Chapter 617 applies to Not for Profit Corporations and Chapter 720 was adopted in 2000 and applies to Homeowners Associations.

Assets would include any item of value your HOA owns such as Cash, Investments, Accounts Receivables, and Property Plant and Equipment. Assets also include what's called Contra-assets such as Accumulated Depreciation on your Property, Plant and Equipment as well as Allowance for Bad Debts which is used for uncollectable Accounts Receivables. There may also be Prepaid Expenses includes in Assets such as Insurance.

Liabilities include Accounts Payables, Loans, and Unearned Revenue.

Reserves = Assets -Liabilities and is also increased or decreased by any surplus or deficit from your Income Statement.

So,your Balance Sheet would look like this:

ASSETS

Cash
Investments
Accounts Receivables
Allowance for Bad Debts
Property, Plant and Equipment
Accumulated Depreciation

TOTAL ASSETS

LIABILITIES
Accounts Payables
Loans Payable
Unearned or Deferred Income (such as Prepaid Assessments)

TOTAL LIABILITIES

Reserves (Assets - Liabilities)

TOTAL LIABILITIES AND RESERVE ACCOUNTS

Again, your Total Assets must equal your Total Liabilities and Reserve Accounts

Hope this helps.