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.
Review Between Meetings. Some association boards only meet quarterly or miss monthly meetings because of holidays or for other reasons finances need to be reviewed between meetings, making it difficult to meet the statutory requirement to review financial records monthly. Fortunately, Civil Code § 5501 allows the review requirements to be met when:
- Every member of the board reviews the monthly documents and statements (described above) independent of a board meeting and then ratifies the review at a subsequent board meeting, or
- A subcommittee of the board consisting of the treasurer and at least one other board member reviews the records and ratifies the review at a subsequent board meeting.
The ratification must be reflected in the minutes of the board's meeting.
Review Defined. "Review" can be interpreted by its ordinary meaning, “to go over and examine critically or deliberately.” (Websters Dictionary.) Directors should review financial statements critically and ask questions whenever something looks amiss or does not make sense. For example, if the check register shows checks issued to a roofer but no roof work has been authorized, the board should investigate. Embezzlement may be occurring.
Insurance & Transfers. See "Duty to Insure" and "Fund Transfer Requirement."
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