How to Read Your HOA’s Financial Statements

HOA Money · Board Basics

To read your HOA’s financial statements, start with three reports: the balance sheet (what you have and owe), the income statement (money in and out) and budget vs actual (how you’re doing against plan). Add the list of who owes money and the bank reconciliations, and a board can spot almost any problem early.

The four reports every board needs

Plus the bank reconciliations, which prove the numbers match the bank.

Reading the balance sheet

• Cash: operating and reserve accounts, listed separately. Does it match the bank statements?
• Accounts receivable: what owners owe. Is it growing?
• Prepaid assessments: owners who paid ahead. This is money owed back in services, not extra cash.
• Accounts payable: bills not yet paid.
• Fund balances: the operating and reserve equity. A negative operating balance is a warning sign.

Reading the income statement and budget vs actual

• Start with total income vs budget. Are dues coming in as planned?
• Then total expenses vs budget, year to date.
• Look at the three biggest lines. In mountain communities, that’s usually insurance, snow removal and utilities.
• Check that the reserve transfer happened every month.
• Ask about any line that’s more than about 10% off budget.

Reading the aged receivables

• How many owners are 30, 60 and 90+ days late?
• Is anyone on a payment plan, and are they current?
• Colorado now has strict collection steps. See delinquent dues in Colorado.

Five questions to ask at every meeting

1. Are all bank accounts reconciled through last month?
2. Does the reserve balance match the reserve bank account?
3. Why are the biggest variances off budget?
4. Who is more than 60 days behind?
5. Are there unpaid bills we don’t know about?

Your right to see the numbers

Every board member is entitled to the association’s financial information, including detailed monthly expenditures (C.R.S. 38-33.3-303(1)(b)). Owners can inspect many records too (C.R.S. 38-33.3-317).

We send boards a clean monthly package with all of these reports. See our HOA accounting services and pricing.

Common report mistakes to catch

• Reserves shown as one number with no tie to the bank account.
• Prepaid dues counted as extra income instead of a liability.
• Insurance paid once a year showing as one giant expense, instead of spread over the year.
• No year-to-date column, so seasonal costs look alarming.
• Owner balances that don’t add up to accounts receivable on the balance sheet.

A simple monthly routine

1. Reports arrive by the same date every month.
2. The treasurer reviews them and flags questions.
3. The accountant answers in writing before the board meeting.
4. The board reviews the summary and the delinquency list at the meeting.
5. Minutes note that financials were reviewed.

Related: operating vs reserve funds and cash vs accrual accounting.

What owners should look for

Owners usually see the annual budget and year-end numbers, not every monthly report. When you get them, check three things: whether the association finished the year near budget, whether the reserve balance grew, and whether delinquencies are rising. If any of those look off, ask the board at the next meeting. Clear, honest answers are a good sign. Vague ones are worth following up on.

Buyers can ask for the same documents before closing, along with the status letter that shows any balance on the unit.

This is accounting education, not legal or tax advice.

FAQ

What financial statements should an HOA board get each month?

At minimum a balance sheet, an income statement compared to budget, a list of who owes money, and the bank reconciliations for every account.

What should I look at first?

Cash in each bank account, the reserve balance, and the budget vs actual totals for the year so far.

What is a budget variance?

The difference between what was budgeted and what actually happened. Big variances need a short explanation from the manager or accountant.

Can owners see the association’s financial statements?

Owners can inspect many association records under C.R.S. 38-33.3-317, and CCIOA requires an annual disclosure to owners under C.R.S. 38-33.3-209.4.

Sources

• C.R.S. 38-33.3-303 (board access to information)
• C.R.S. 38-33.3-317 (association records)
• C.R.S. 38-33.3-209.4 (public disclosures)