A "Financial Statement" is a report on the financial activities of the association. It identifies all income and expenses for the reporting period.

Annual Financial Statement. At the end of the fiscal year, a CPA prepares a written report of the financial condition of the association. This annual financial statement of the association's assets and liabilities is done on an accrual basis using GAAP as required by Civ. Code §1365(c). The report is either audited or reviewed, depending on which level is called for in the association's governing documents. If an association's documents are silent, at least a review must be performed. Civ. Code §1365(c).

1. Distribution of Statement. A copy of the reviewed or audited financial statement must be distributed within 120 days after the close of each fiscal year. Civ. Code §1365(c). Board members and owners should pay particular attention to any opinions expressed by the CPA in the financial statement.

2. Method of Delivery. As provided for in Civ. Code §1350.7, boards cannot merely notify members that the report is available, they must physically deliver the report to the membership by one of the following methods:

• personal delivery,
• first-class mail,
• email, facsimile, or other electronic means, if the recipient has agreed to that method of delivery,
• by publication in a periodical that is circulated primarily to members of the association,
• a method of delivery provided in a recorded provision of the governing documents, or
• any other method of delivery, provided that the recipient has agreed to that method of delivery.

Monthly Statements. In addition to annual financial statements, boards normally receive unaudited monthly financial statements at their board meetings. They are often generated by the association's management company and may be prepared using accrual or modified accrual accounting. Civ. Code §1365.2(a)(1)(C). Monthly statements typically contain the following records:

• Balance sheet

• Income statement

• Budget comparison

• General ledger

Boards should routinely include full financial reports or at a minimum a summary "Treasurer's Report" in their minutes and then post them for membership review. If the association has a website, the minutes and financial reports should be displayed in a members-only portion of the website.

Board Duty to Review. Boards have a duty to review their association's financial records as prescribed by statute.