By Eric Glazer, Esq.
It’s time to tell the members of the association all about the
association’s finances, like it or not. Both the Florida condominium and homeowner statutes mandate the
following:
Within 90 days after the end of the fiscal year, or annually on a
date provided in the bylaws, the association shall prepare and complete, or
contract for the preparation and completion of, a financial report for the
preceding fiscal year. Within 21 days after the final financial report is
completed but not later than 120 days after the end of the fiscal year or date
as provided in the bylaws, the association shall mail to each unit owner or
hand deliver to each unit owner, a copy of the financial report or a notice that a copy of the financial report
will be mailed or hand delivered to the unit owner, without charge, upon receipt of a written request from the unit
owner.
In English…most associations end their fiscal year on December
31st. So, by April 1st the
association must have at least contracted for the preparation of the year end
financial report. By May 1st, the
association can mail the report to all owners or mail them a notice that they
can get a free copy of the report by asking for it in writing.
The type of financial report to be prepared by the association
varies and depends upon the association's budget. The higher the amount of the budget, the more
detailed the type of financial report to be prepared. For example:
An association with total annual revenues of $150,000 or more, but
less than $300,000, shall prepare compiled financial statements. This is basically a glorified disclaimer by the
accounting firm as to the accuracy of the finances as presented to the CPA by
management or the Board.
An association with total annual revenues of at least $300,000, but less than $500,000, shall prepare reviewed financial statements. In a review report, the CPA expresses a “limited assurance” — not
an opinion — of the reasonableness of the financial statements.
An association with total annual revenues of $500,000 or more shall prepare AUDITED financial statements. A financial audit provides the highest level of financial
statement assurance. An audit normally takes considerably more time than
either a compilation or a review.
An association with total annual revenues of less than $150,000 and An association that
operates fewer than 50 units in a condominium and 50 parcels in an H.O.A. regardless of the association's annual revenues, shall also prepare a report of cash receipts
and expenditures.
Suppose a Board wants to prepare a financial report that gives the
owners more detail than what they are required to receive? For example, the Board wants to provide an audit
when only a compilation is required. In a condo - An association may prepare, without a meeting of or approval
by the unit owners: a more detailed year end financial report than what is
required by law. In an HOA – 20% of the
owners can petition the Board for a greater report, a meeting must then be held
within 30 days, and then upon approval of a majority of the voting interests of
all parcel members, amend the budget or pass a special assessment to pay for
the increased financial report.
Suppose however that the Board wants to provide the owners with a
less detailed financial report than the owners are entitled to by law? For
example, the Board doesn't want to spend money on an audit and only wants to
provide a compilation? In a condo and an HOA
------only If approved by a majority of the voting interests present at a
properly called meeting of the association, an association may prepare a less detailed financial statement
than what is required by law. This can
only be done for three years in a row and the vote must be taken within that
fiscal year. So, if you didn’t vote
to waive the audit for 2014, it’s now too late to vote.
In a condominium, failure to comply with the year end financial
reporting requirements can subject the association to monetary penalties. The Division will certainly enforce compliance
with the statute. In an HOA, if the
association doesn’t prepare the report, nothing happens unless a unit owner
winds up filing suit.
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