Excess Cash - Surplus - Carry Over of cash balance in Operating Bank Account

Kim, with regards to the $30,000 net income it is carried over on the balance sheet and can be used either to increase the reserve fund or remain in the operating fund. A general journal entry can be used to document the transfer of funds from the opertaing account to a reserve account. It is not income in the following year; it is only income in the year booked.

Do you have a long range, 20 or more years, reserve fund plan? Reserves of 15% of annual assessments seems extremely low; I prefer to see a reserve plan which results in 100% funding at the time each capital expenditure is scheduled.

Review IRS 1120-H instructions and determine if you meet the 60% and 90% requirements. Using 1120-H only that portion of the $30,000 net income which came from sources outside the HOA is taxable. Income from assessments, late charges, fines, ect. are not taxable. Interest from investments plus what I call "elective" income are taxable.

Roger, are you a CPA?

It's frustrating that my friends and neighbors don't understand what can go wrong when a Treasurer with total control over a transaction creates fictious entries to make operations look better. I've reviewed the accounting database and it appears to be kosher. Why he presents financial reports is a mystery that concerns me since it creates a false sense of security to our 125 members.

Maybe I am paranoid and skeptical, but with no other board member reviewing banking details - who is running the show? This board member has written checks payable to cash for $26K when we purchased 125 mailboxes, he reimburses himself for expenses. Even our bylaws were changed a few years ago removing the Presdident as cosigner of all checks.

I'll formally request information via certified letter so that I can perform my own review. I hope another CPA or Attorney will comment on this posting.

Thanks gain, Kim

Kim, I am not a CPA; nor am I a degreed accountant. At best I do bookkeeping. But our company has an outstanding, experienced, degreed, accountant and they have answered all of these questions and more in the past when I have asked for help. And I gained experience when I was employed by a fortune 500 company making the big bucks; I got lots of financial training while managing a multimillion dollar monthly budget

A Board member should never create a check payable to themselves and should never create a check payable to cash. At the best this can look suspiciously like theft.

Requiring cosignatures may provide a comfort to the signers but it is a false sense of security. There are several ways to help eliminate theft and cosignatures is not one of them.

In Colorado, the members of the HOA have the right to review most of their HOA's documents. I believe this right should be made available in all HOAs. Perhaps your Board would be willing to form a financial committee and you could volunteer to serve on it. One of this committees duties could be to do a financial review each year.

I definitely know the difference between cash and income since I have 20+ years as a controller responsible for financial reporting on GAAP basis. And a few years SOX internal controls.

Adequate segregation of duties has been conveyed. Thank G-d its a new year with new board members who I hope will seek to review financials rather than sit back and watch one person run the show. The board confirmed a fidelity bond but I still want to see it to believe it!

These entries are bogus and illegal, there was no cash in or out, there was no income attributed with the amounts recorded. This leftover cash is CASH an accumulation of 15 years of income exceeding expenses.

Had the Treasurer not recorded this fictitious entry the results would have shown a loss. Experience and common sense tells me that a cash balance from one year is just that! CASH, to be used going forward or transferred to reserves. No accounting principal would record income again in the following year simply because you have a cash balance remaining in the prior year.

I performed a self review of 2005 and 2006. The board was not happy but atleast they complied and made the documents and data available.It was a very interesting self-review report.

I will do a review again - even without their concurrance. And I formally offered to perform a review for free. Unfortunately they opted to lower the requirement to a compilation. (Note: Most of the audience were former board members)

I am alone in my thoughts and assumptions, but I'm 99.9% confident that they are playing with the numbers by moving them from one year to the next but disclosing whichever numbers look better. THe former president provided me with comparitive financials that revealed the fact that entries were recorded after being disclosed. I bet he felt stupid for giving me the information. (he didnt know one of my review steps is to make sure prior year earnings DID NOT CHANGE. (his bad!)

Unfortunately no one else understands financial reports, they are just happy our dues have not increased much and are quite reasonable compared to other communities. If I provided them with numbers from your community - they would probably not realize the difference.

I've lost trust and have become skeptical since I no longer believe anything unless I can review and verify numbers myself.

I suppose that a Treasurer can use a different accounting standard for Board reports than he uses for the IRS, as long as it is consistent.

I'm not sure if the HOA's reporting method is malicious or just amateurish.

Kim – no one in their right mind would post advice and identify themselves as a CPA or attorney, the professional liability would be too great.

Also what is the “bogus transaction” you referenced?