what is an itemized accounting of the common expenses?

Hello everyone,

In response to my request for the year end financial accounting (as referenced below), I have received (on 10/8; my original request goes back to May 2009) the “Profit and Loss Summary 12/31/2009” and the “Balance Sheet 12/31/2009” for my condo HOA (2 pages total).

I question whether these 2 pages meet the requirement under the IL Condo Act. How would you interpret what is stated in the Act (i.e., what should the BOD provide to the HOs, in your opinion), or, if you are in IL and the IL Condo Act applies, would does your BOD provide to the HOs?

Also, is there an implied timeline for providing this info to the HOs (i.e., when should it be provided)?

Reference (this is stated in our By-Laws as written):

Sec. 18. CONTENTS OF BYLAWS. The bylaws shall provide for at least the following:

(7) that the board of managers shall annually supply to all unit owners an itemized
accounting of the common expenses for the preceding year actually incurred or paid, together with an indication of which portions were for reserves, capital expenditures or repairs or payment of real estate taxes and with a tabulation of the amounts collected pursuant to the budget or assessment, and showing the net excess or deficit of income over expenditures plus reserves;

http://www.ksnlaw.com/E02E82/assets/files/Documents/IllinoisCondominiumPropertyActJune2008.pdf

Note: the BOD does not mail this info to the HOs each year. I have requested it each year and until this year, received the year end financial report developed by an outside auditor (a report providing the details for each category of expenses and income as shown in the budget, as opposed to a general summary*). Then, with recent mailing of the 2010 (proposed) budget to the HOs, these 2 pages were included with it. (I still have not been sent the year end financial report which I requested vrepeatedly going back to May.)

*For example: The balance sheet I received lists the following under “expenses”:
administrative, maintenance, taxes/insurance. In contrast the year end financial report breaks these expenses down into each “budget pot”: landscaping contract, landscaping replacements, snow contract, snow removal, de-icing agents, carpentry repairs, siding, roofs, gutters & downspouts, concrete repairs, MC contract, etc. – the same as shown in the budget.

Your thoughts on this would be most appreciated!
Bonnie

Hi Mary,

Thank you for your response!

Your question and my answers (and hopefully things):

Q: “Is your assn's fiscal year the calendar year? If so, why would you request the annual accounting in May?

A: Yes, our fiscal year is the calendar year. I requested the annual accounting in May because I was expecting to receive the end of year financial report from the external auditor as I had been provided previously; I knew that the Board would need time to review it and get it finalized before I could receive it – based on past experience, the May request.

Q: “Also, how can the board provide you with the 12/31/09 financial statements if it's only the middle of October 2009? Or did you mean to say they provided you with the 2008 year-end statements?”

A: oops – yes - I meant 12/31/2008.

Q: “If you bylaws read the same as state law, that means each member should recieve a copy of the year-end financial statements which would be a copy of the balance sheet and the statement of income and expenses (or profit and loss). The items you state as being shown on the balance sheet would actually be shown on the income and expense statement. The balance sheet only shows assets, liabilities and equity.”

A: I received the “12/31/2008 balance sheet” which shows figures (totals) for current assets, liabilities, and equity (about 12 lines of info), as you stated.

I also received the “profit and loss summary” dated 12/31/2008, which has about 20 lines of info.

It lists on the left side:

Income: assessments, financial, other - added together for the total income.
Expenses: administrative, operating, maintenance, taxes/insurance – some totals and ends with everything added together for the “operating net income”.
Lines for: Total reserve expenses, reserve net income, total net income, excess revenue(deficit).

Across the top of the page it has columns for:

Current actual, current budget, current variance, YTD actual, YTD budget, YTD variance, total budget and balance.

Q: “To meet the requirements of your bylaws and state law you would have to receive a copy of the financial statements for the operating and reserve accounts. If a financial statement is not prepared for the reserve accounts then a separate accounting showing how much was deposited into the reserves and how much was removed from the reserves, and for what, would have to be prepared and provided to the members. It's not uncommon for the board to send a budget which shows a summary of the accounts instead of all the accounts especially if the list of accounts is rather long. For example: the budget would show the total amount for "General and Administrative" instead of showing each account under that heading.

A: In reference to the required “itemized accounting of the common expenses for the preceding year actually incurred or paid, together with an indication of which portions were for reserves, capital expenditures or repairs or payment of real estate taxes and with a tabulation of the amounts collected pursuant to the budget or assessment, and showing the net excess or deficit of income over expenditures plus reserves” – I am not referring to the budget.

My question is whether the “itemized accounting” we were provided meets the requirement in the Act and our By-Laws.

IMO, for the “itemized accounting”, I would expect to receive under “operating expenses” and “maintenance expenses” not just a single figure, but a listing of those expenses as described in our budget – not generic categories, but an accounting of how much was spent on landscaping replacements, roofs, carpentry repairs, de-icing agents, snow removal, etc.

Thank you!
Bonnie

At our Annual Meeting, the treasurer give a one page summary of all accounts. On the back, each account is then itemized out, and the homeowners can see all the actual expenditures within each account.

The treasurer goes thru the report and answers all questions. But I have to say, taking time at an Annual Meeting to talk about the heating bill for the community center gets to me. But it's just one time per year UNLESS people want to attend the board meetings and get the month to month report.

Bonnie,

Because the requirement is to provide an "itemized accounting" I would think that means each line item should be shown on the year-end financial statement. For example: If "operating income" is made up of "assessments" and "Misc" Income, each of those items should be shown on the income statement. Likewise if "General and Admin" expenses is actually made up of 10 different accounts, all those accounts should be shown individually on the income statement. If you received an income & expense statement that only shows totals for each category, then I would ask for another statement showing the totals of each line item as shown on the actual budget, i.e. each account in the "general & admin" category; each account in the "landscape exp" category; each account in the "maint" category, etc.. Likewise for the balance sheet -- every asset account; not just toal assets; every liability account, not just total liabilities; every equity account, not just total equity.

Bonnie I don't know if this will help or not but at every BOD meeting the H/O in attendance (they will also email it) receives a Balance Sheet showing the amount in all of the cash accounts:
Checking/Savings
Money Market
Petty Cash and an itemized list of all the CD's in reserves and what bank they're at vs. Liabilities and Equity

Along with a monthly and YTD vs. Annual Budget Profit and Loss Statement with the following accounts:

Assessment Income
Clubhouse Income
Garage Income
Late Fees

Total Income

Expense
Audit Fees
Bank Fees
Board Approved Events
Building & Light Maintenance
Clubhouse Maint. & Repair
Common Area Cleaning
Common Gas & Electric
Federal Taxes
Insurance
Landscape Extras
Landscape Maintenance
Legal
Management Fees
Pond Maintenance
Pool Maintenance
Postage, Printing, Copies
Reserves
Snow Removal
Trash Removal
Water & Sewer

Total Expense

Net Income

And a list of delinquencies without the names or unit numbers.

Attached is an example of a cash flow/budget chart which we developed and provide to our clients. This chart is part of the monthly financial report with the Balance Sheet and Income Statement. The chart is emailed with the other financial reports to all Board members. The financial reports are also posted on HOA websites in a portion "for members only".

We believe all operations need to be as open and available as practical to all members. And the financials need to be in a format which can be understood by all member, i.e., they don't need to be an accountant to understand