Board approval of Financial Reports

DavidG45 (Delaware)
Posts: 994

Posted:

Every month our Property Management Company provides various financial reports, including a Balance Sheet and Income/Expense statement. Our Board never formally approves of these reports. I am curious if boards typically approve the financial statements at their meetings, or if that is not something they typically bother with.

MaxB4
Posts: 3,513

Posted:

I can only speak for California, but boards, per statute,

Beginning January 1, 2019, boards of directors must review their association's financial records on a monthly basis. (Civ. Code § 5500.) This includes:

a current reconciliation of the operating accounts,
a current reconciliation of the reserve accounts,
the current year's actual operating revenues and expenses compared to the current year's budget,
the latest bank statements for operating and reserve accounts,
an income and expense statement for the association's operating and reserve accounts, and
the check register, monthly general ledger, and delinquent assessment receivable reports.

I am somewhat dumbfounded by the question, "is that something boards even bother with". Why would a management company even bother with except for someone to review?

DavidG45 (Delaware)
Posts: 994

Posted:

Quote:

Posted By MaxB4 on 12/27/2022 8:15 AM
I can only speak for California, but boards, per statute,

Beginning January 1, 2019, boards of directors must review their association's financial records on a monthly basis. (Civ. Code § 5500.) This includes:

a current reconciliation of the operating accounts,
a current reconciliation of the reserve accounts,
the current year's actual operating revenues and expenses compared to the current year's budget,
the latest bank statements for operating and reserve accounts,
an income and expense statement for the association's operating and reserve accounts, and
the check register, monthly general ledger, and delinquent assessment receivable reports.

I am somewhat dumbfounded by the question, "is that something boards even bother with". Why would a management company even bother with except for someone to review?

The question I have asked is, do they formally approve them? As in, a motion passed to approve the financial reports. This is different than simply reviewing them.

MaxB4
Posts: 3,513

Posted:

I have always put them on an agenda for a board to make a motion and approve. I also make sure they have the reports in plenty of time to actually review them. Do they actually review them, I doubt it. Maybe I should give a snap quiz to see if anyone actually did give them a once-over.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

We do not formally approve our monthly financial reports from the MC. The reports are sent to each BOD Member. Our Pres and VP of Finance do review them. An owner can request a copy also and it will be given them within a few days as when somebody reads their Email with the request in it.

KerryL1 (California)
Posts: 14,550

Posted:

I do not think formal approval is required in CA, but might be in DE. Our board reviews them every month at an open meeting. Until the legislation Mx cited, the Board would approve the monthly financials "subject to the year end audit."

JimR24 (Texas)
Posts: 399

Posted:

Quote:

Posted By DavidG45 on 12/27/2022 7:37 AM
Every month our Property Management Company provides various financial reports, including a Balance Sheet and Income/Expense statement. Our Board never formally approves of these reports. I am curious if boards typically approve the financial statements at their meetings, or if that is not something they typically bother with.

Good question John - and here's my thinking on this - may feel differently tomorrow...lol...

To me - because of the nature of financial reports - it might be risky for the board to have a formal approval. Financials are susceptible to changes, audits and adherence to accounting principles and such. So it appears to me that there is nothing wrong with a board not making a formal approval. An acceptance - pending any updates - might be more appropriate. Just saying....

Lovin' life with my honey!
and, President of HOA in Texas

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By KerryL1 on 12/27/2022 9:30 AM
I do not think formal approval is required in CA, but might be in DE. Our board reviews them every month at an open meeting. Until the legislation Mx cited, the Board would approve the monthly financials "subject to the year end audit."

Actually, prior to the recent legislation, boards were required to review their financials on a quarterly basis as that was the minimum boards were required to meet.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By MaxB4 on 12/27/2022 9:42 AM

Posted By KerryL1 on 12/27/2022 9:30 AM
I do not think formal approval is required in CA, but might be in DE. Our board reviews them every month at an open meeting. Until the legislation Mx cited, the Board would approve the monthly financials "subject to the year end audit."

Actually, prior to the recent legislation, boards were required to review their financials on a quarterly basis as that was the minimum boards were required to meet.

Our BOD rarely meets in person as in SC we can do business via phone and Internet (Email). Our Pres and VP of Finance do review the monthly financials. I am the VP and I "glance" at them primarily to look a delinquencies and any not normal expenditure.

JimR24 (Texas)
Posts: 399

Posted:

Quote:

Posted By JohnC46 on 12/27/2022 11:21 AM

Posted By MaxB4 on 12/27/2022 9:42 AM

Posted By KerryL1 on 12/27/2022 9:30 AM
I do not think formal approval is required in CA, but might be in DE. Our board reviews them every month at an open meeting. Until the legislation Mx cited, the Board would approve the monthly financials "subject to the year end audit."

Actually, prior to the recent legislation, boards were required to review their financials on a quarterly basis as that was the minimum boards were required to meet.

Our BOD rarely meets in person as in SC we can do business via phone and Internet (Email). Our Pres and VP of Finance do review the monthly financials. I am the VP and I "glance" at them primarily to look a delinquencies and any not normal expenditure.

Hi John - sure do appreciate the information...and my inquiring mind wants to know. How do you conduct business via phone and email internet without violating Open Meetings laws? Maybe Texas law is different but having Open Meetings (in which all are open to all the membership - and everybody has to be invited) is a BIG issue here. Maybe my newbie-ness is showing off...lol...

Lovin' life with my honey!
and, President of HOA in Texas

JimR24 (Texas)
Posts: 399

Posted:

Quote:

Posted By JohnC46 on 12/27/2022 11:21 AM

Posted By MaxB4 on 12/27/2022 9:42 AM

Posted By KerryL1 on 12/27/2022 9:30 AM
I do not think formal approval is required in CA, but might be in DE. Our board reviews them every month at an open meeting. Until the legislation Mx cited, the Board would approve the monthly financials "subject to the year end audit."

Actually, prior to the recent legislation, boards were required to review their financials on a quarterly basis as that was the minimum boards were required to meet.

Our BOD rarely meets in person as in SC we can do business via phone and Internet (Email). Our Pres and VP of Finance do review the monthly financials. I am the VP and I "glance" at them primarily to look a delinquencies and any not normal expenditure.

Hi John - sure do appreciate the information...and my inquiring mind wants to know. How do you conduct business via phone and email internet without violating Open Meetings laws? Maybe Texas law is different but having Open Meetings (in which all are open to all the membership - and everybody has to be invited) is a BIG issue here. Maybe my newbie-ness is showing off...lol...

Lovin' life with my honey!
and, President of HOA in Texas

CathyA3 (Ohio)
Posts: 6,299

Posted:

Our board does not approve the monthly financial statements, although they review them.

However, other financial reports such as the one prepared by the Treasurer for the annual meeting may require approval since they can contain information that's prepared by the board - for example, summaries of the past year and projections for the coming year.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By JimR24 on 12/27/2022 12:11 PM

Posted By JohnC46 on 12/27/2022 11:21 AM

Posted By MaxB4 on 12/27/2022 9:42 AM

Posted By KerryL1 on 12/27/2022 9:30 AM
I do not think formal approval is required in CA, but might be in DE. Our board reviews them every month at an open meeting. Until the legislation Mx cited, the Board would approve the monthly financials "subject to the year end audit."

Actually, prior to the recent legislation, boards were required to review their financials on a quarterly basis as that was the minimum boards were required to meet.

Our BOD rarely meets in person as in SC we can do business via phone and Internet (Email). Our Pres and VP of Finance do review the monthly financials. I am the VP and I "glance" at them primarily to look a delinquencies and any not normal expenditure.

Hi John - sure do appreciate the information...and my inquiring mind wants to know. How do you conduct business via phone and email internet without violating Open Meetings laws? Maybe Texas law is different but having Open Meetings (in which all are open to all the membership - and everybody has to be invited) is a BIG issue here. Maybe my newbie-ness is showing off...lol...

Hey, Jim -

I suggest starting a new thread to discuss this. The topic may get lost here and you'll be more likely to get useful responses if it's in its own thread. We generally have a lot to say about open or closed meetings. :-)

KerryL1 (California)
Posts: 14,550

Posted:

Agree with Cathy, Jim. JohnC loves to talk about their lack of in-person board meetings.

MichaelT21 (Arkansas)
Posts: 200

Posted:

We do not formally approve financial reports.

In reality, I doubt our Treasurer even opens the documents. I do pay close attention, and find errors, in our financial reporting. I am a big fan of an external audit as our property management company makes a lot of mistakes.

MaxB4
Posts: 3,513

Posted:

I am curious why anyone is complaining that one person is running and making decisions for a community when the other board members don't even bother to review the financial state of a corporation. Just show up at a board meeting, uniformed, and vote blindly.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

JIM
In SC we can discuss all HOA business online/via Email. Voting on things is another issue.

SheliaH (Indiana)
Posts: 6,964

Posted:

We don't, although when I was treasurer, I'd highlight certain things for discussion and also note the delinquent accounts that needed a Board decision. Then, someone would make a motion and we'd go on with seconds and the votes.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

BillD16 (Texas)
Posts: 973

Posted:

Quote:

Posted By SheliaH on 12/28/2022 6:33 AM
We don't, although when I was treasurer, I'd highlight certain things for discussion and also note the delinquent accounts that needed a Board decision. Then, someone would make a motion and we'd go on with seconds and the votes.

What she said. All BOD members get the financials. As Treasurer, I take it as my job to go over them and flag anything unusual for the rest of the Board. Sometimes other BOD members read them, too - the more, the merrier.

BillD

HOA Board ex-President
Austin, Texas USA

“You can’t put too much water in a nuclear reactor”