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 based in part on management representations. This annual financial statement
of the association's assets and liabilities, including any litigation that could have an unfavorable outcome
for an association (pursuant to FASB Statement No. 5, Accounting for Contingencies) and is done on an accrual basis using GAAP as required by Civil Code §5305. If the association's gross income exceeds $75,000, 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 a minimum a "review" must be performed. (Civ. Code §5305.)
Distribution of Statement. A copy of the review of the financial statement shall be distributed to the members within 120 days after the close of each fiscal year. (Civ. Code §5305.) Board members and owners should pay particular attention to any opinions expressed by the CPA in the financial
Method of Delivery. Boards cannot merely notify members that the report is available, they
must physically deliver the report by one of the
following methods (Civ. Code §5305; §4040):
first-class mail, registered or certified mail, express mail, or overnight delivery by an express service carrier;
email, facsimile, or other electronic means, if the recipient has consented, in writing, to that method of delivery.
Quarterly/Monthly Statements. In addition to annual financial statements, boards should receive interim statements either quarterly or monthly.
ASSISTANCE: Associations needing legal assistance can contact us.
To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.