How to Read your HOA's Financial Report
Many states require association boards to submit financial reports to association members—or, at least, make them available on request. A financial report includes information that association board members use to plan the community’s annual budget and direct its financial operations. Examining the association’s financial reports shows you how your money—and your neighbors’—is being used.
The following may help you understand what your association report contains:
Start with the summary. The year’s financial highlights—what was earned, what was spent and what remains available in reserves—is usually summarized in simple language in the first page or two of the report.
Read essential financial data. Pay attention to the association’s cash position and reserve fund balances, which will be indicated separately from the operating funds.
The financial report should be separated into the following parts:
The balance sheet includes the association’s assets (income and reserves) and liabilities (what is owed) at a specific point in time.
The income statement indicates what money the association can expect from regular and special assessments and other sources like clubhouse rental or interest from investments.
The statement of cash flow is a summary of anticipated income and expected expenses than may include utilities, maintenance contract payments—landscaping, pool, trash pickup, elevators—as well as insurance costs, payroll and taxes.
You can also review marketing information if available. Prospective buyers often ask to see an association’s financial statements, so basic marketing data about the community may be included in the report. This information can be valuable in marketing your own home if you decide to sell.