Accrual Basis vs Cash Basis

While I have a bookkeeping background I honestly have no experience with how most HOA's keep their books. My HOA recently changed management companies and the new MC is using cash based accounting.

Our balance sheets no longer have an Accounts Receivable and show ZERO liabilities despite us having a 80k loan. There is no account for unspent special assessment money or even a reserve account (required by our CC&R's). All money is now a single line item of "Current Assets" and I don't think the A/R is part of that.

When I ask for financials I get a Balance Sheet and Income Statement that are so deficient that I feel they are a material misstatement of our financial position.

I need a reality check. I personally think our new financials are a fantastic way to hide money by a corrupt board. AT the same time I am not convinced our MC is acting with malice. Why aren't our assets more detailed? What happened to our liabilities? How would an auditor react to this type of reporting? Is it fair to expect knowledge of A/R, special assessment spending, reserve account balances etc? How to other HOA report their financial position?

SheliaH our board is utterly, completely corrupt. They agree to not pursue legal collection enforcement actions in trade for votes. The MC seems somewhat incompetant. I asked for the A/R and they refused. I asked for the balance of all delinquent homeowners and they gave it to me. I asked for financials and all I received was an income statement. It's a s**t show.

Trading no collection for votes? How do you know that's what's happening - and why haven't you rallied your neighbors together to vote these people out and replace them with folks who will do what you want? For the 10,000th time, rouge boards do what they do because the HOMEOWNERS will not hold them accountable. If they don't know what's going on, that's part of the problem because as association members, they need to make it their business to know. When you live in a HOA community, it's not enough to pay your assessment and go on with the rest of your day.

From what I can see, there's nothing inherently wrong with accrual-based accounting, provided you know what you're doing and the numbers are complete and accurate. I think you need to get together with your neighbors (the honest ones, anyway) and show them what you have. Hopefully, there are enough of you where you can make changes to the board (by the way, one of the new members may have to be YOU). From there, you can take a really good look at the books with an accountant who can help you determine what system you should be using.

Good luck - sounds like you'll need it!

Amen. I think COAs are even worse than HOAs - they're often advertised as Carefree! Low Maintenance! Living, and buyers interpret that as No Responsibilities Including Understanding What I Bought.

Meh. I’m working to have an official 2018 audit completed despite the legal requirement to have it done in 2019. The responses here confirm my thoughts.

Well, sometimes you need to force a confrontation if that's what it takes to get people to pay attention. It's not the ideal way to do things, but it's better than letting bad situations go on indefinitely.