Embed Size (px)
DESCRIPTION
Basic Financials Education
Citation preview
Lost? You are not alone.
The Roles in Accounting
The Accountant’s Goals
Transparency
Informed Consent
Ascertainable Standards of
Care
The Board’s Duties
Care, Custody & Control of
HOA Financial Assets
Maintain, Protect and Enhance
community values
What is accounting?Accounting is the art of communicating financial
information about an association to
homeowners, community managers, lenders and
prospective buyers.
So how do you tell the difference?
Vs.
The Reports Balance Sheet
Income Statement
Reserve Study
Budget
And many more
Balance Sheet
Asset – owned by the
HOA
Liability – 3rd party
claims on assets
Net Assets – Owners’
claims on assets
A snapshot of one point in time
Balance SheetA snapshot of one point in time
Total $s Total $s
Investments (Reserves)
Prepaid
Equipment
Receivables
Cash
Owners(Equity / Net
Assets / Retained Earnings)
Liabilities –3rd Party(Vendors,Lenders)
Assets Claims
=
Balance Sheet
Net Assets$X
Liabilities
Assets
Net Assets$Z
Liabilities
Assets
Balance Sheet
May 31, 20XXBalance Sheet
June 30, 20XX
∆ Net Assets $Y
Expenses
Revenue
Income Statement
June 20XX
+ =
& Income Statement
Income Statement
Revenues – Income
as it is earned
Expenses – Costs as
they are incurred
Activity for a period of time
Balance Sheet vs. Income Statement
Balance Sheet
A snapshot of one point in
time
Assets = Liabilities + Net
Assets
Income Statement
Reports activity between two
points in time
Revenues – Expenses =
Excess/Shortage
Budget (Page 4)
Includes a projected
income statement
Should include a
reserve provision
Most expenses are
not discretionary
Short term (1 Year) estimate
Budget Variance Report
Budget variance reports help identify potential
problems and track progress throughout the year
Short term (1 Year) estimate
Reserve Funding Methods
0 1 2 3 4 5 6 7 8 9 10
Assessments
Expenditures
Year
1. Prefund
2. Musical Chairs
3. Borrow
Reserve Expenditure
Operating Expenditures
Reserve Study (Page S3)
Components are
repaired or replaced
infrequently
The repair or
replacement is a
significant cost
Long term (30 Year) estimate
Reserve Study (Page S5)
A tool to prevent
avoidable special
assessments
Have a plan and
discuss it with the
owners
Long term (30 Year) estimate
Budget vs. Reserve Study
Budget
Short Term (1 Year)
An estimate of the next year’s
revenues and expenses
Ex. Assessment
revenue, landscaping
expense, utilities
Reserve Study
Long Term (30 Years)
A study of major components
that need to be repaired or
replaced over the next 30
years
Ex. Replace roofs, resurface
asphalt streets, replace
mailboxes
So how do you tell the difference?
Vs.
So how do you tell the difference?
=
A positive net asset balance
A reserve funding plan
without cash shortfalls or
special assessments
Sufficient operating cash to
meet current obligations
Effective assessment
collection practices
So how do you tell the difference?
=
A negative net asset balance
No reserve funding plan
Insufficient operating cash to meet current obligations
Poorly managed accounts receivable
What can you do?
Review your financial statements regularly
Know your reserve funding plan
Review bank statements and reconciliations
Manage delinquent accounts
Ask Questions
